Mortgage Agency Services Number One Ltd (t/a Britannia Commercial Lending) v Cripps Harries LLP

Fraud requires proof of a false representation made knowingly or recklessly, an intention that it be relied upon, actual reliance and loss. Serious allegations are assessed on the balance of probabilities, with inherent probability and the absence of a plausible motive relevant to dishonesty. A solicitor who passes on a client’s information does not thereby represent that it is accurate or that the solicitor has no reason to doubt it; the solicitor must act honestly and in good faith. The meaning and effect of a statement are assessed objectively in context. References to redeeming a mortgage ordinarily concern discharging the mortgage security, not repayment of all unsecured debt. The alleged misstatements were either not made, accurate on their proper construction, or honestly made. The fraud and conspiracy claims therefore failed.

A lender claimed damages from its borrower’s solicitors in respect of an £11.4 million refinancing. It alleged that two employees had dishonestly concealed receivership arrangements, building defects, rent issues, the true redemption position and inaccuracies in tenancy information. The claims were advanced in fraud and conspiracy, with an inducing-breach claim originally pleaded but not pursued at final submissions. The central issues were whether the alleged statements were representations, whether they were false, and whether either employee knew of or was reckless as to any falsity. The court also considered the scope of standard property enquiries and the meaning of mortgage redemption. Damages had been agreed subject to liability.

1. Claim dismissed. The lender failed to establish any actionable fraudulent misrepresentation or conspiracy. The court applied the requirements for fraud identified in EC03 Ltd v Ludsin Overseas Ltd [2013] EWCA Civ 413. It assessed the serious allegations on the balance of probabilities, taking account of inherent probability and motive in accordance with In re H (Minors) [1996] AC 563. Motive was not a legal requirement, but the absence of a plausible motive weighed against deliberate dishonesty.
2. Miss Francis’s answer to preliminary enquiry 3.6 objectively conveyed that the relevant meeting concerned work capable of being viewed as snagging. Some defects went beyond snagging, so the answer gave a false impression. However, she did not know that her shorthand was false, was not reckless as to its truth, and did not intend to mislead. Her other inaccurate statements were explained by inexperience, confusion or carelessness. No conspiracy with the borrower was established.
3. CPSE enquiry 27.1 concerned notices affecting the property by altering rights or obligations relevant after completion. A notice appointing a receiver under an existing mortgage implemented an existing right and did not itself affect the property in that sense. Under enquiry 28, a live dispute about rent collection related to the property, but the omission was not dishonest. The historic defects dispute should have been disclosed, but its omission resulted from an honest misunderstanding.
4. The statement that £11.1 million was required to redeem the mortgage referred objectively to the sum needed to discharge the mortgage security, not to the whole loan debt where part was left unsecured. The court applied the approach to ambiguity in The Kriti Palm [2007] 1 All ER (Comm) 667. The statement was not fraudulent.
5. In relation to the tenancy schedule, the solicitors did not represent that they had no reason to doubt the client’s confirmation. They merely passed on the client’s information and expressly limited their knowledge and liability. This fell within the fourth category identified in Webster v Liddington [2014] EWCA Civ 560. The solicitors had no sufficient knowledge of falsity or rent arrears, and no conspiracy was proved. It was unnecessary to determine the disputed issues of inducement, reliance and causation.

not stated in the judgment.