Manoj Saluja & Anor v Vyman Solicitors Ltd

A solicitor’s duty in a secured lending transaction is defined by the retainer and does not generally extend to making the loan risk-free or policing the conduct of an independent solicitor. Where third-party security is taken, the lender’s solicitor must take reasonable steps consistent with Royal Bank of Scotland Plc v Etridge (No.2) [2001] UKHL 44. The lender’s solicitor may ordinarily rely on the independent solicitor’s proper performance unless circumstances make a particular risk apparent. A professional negligence claim also requires proof that the loss falls within the scope of the duty and was caused by breach. A later fraud does not establish negligence where the defendant took reasonable steps and the fraud was enabled by the independent solicitor’s separate negligence.

Thamesmere Ltd lent £742,000 to Manoj Saluja, secured by a purported third-party legal charge over property owned by Milan Patel’s parents. The defendant acted for Thamesmere on that loan and for Saluja and Gracechurch Ltd on a related onward loan. Shital Shah, a consultant at a firm owned by Milan Patel, advised the purported sureties and witnessed their signatures.

The signatures were later found to be forgeries because imposters had attended Shah’s meeting. Saluja and Thamesmere claimed that the defendant negligently accepted Shah as independent solicitor, and claimed losses arising from the ineffective security and subsequent litigation. The court also considered whether the defendant acted for Saluja on the Thamesmere loan, whether Saluja suffered recoverable loss, and the scope of the defendant’s duty to Thamesmere.

1. Saluja claim. The defendant’s written statement that it was not representing or advising Saluja in relation to the Thamesmere loan was not challenged. An informal general assurance did not retrospectively establish a retainer. The defendant acted as solicitor for Thamesmere alone on that transaction.
2. Saluja nevertheless suffered no loss caused by the ineffective security. His debt to Thamesmere was extinguished by a settlement payment of £150,000, substantially less than the balance he would have owed even if the property charge had been effective. His claim concerning the subsequent Patel litigation also failed because he did not prove that the defendant caused the claimed costs.
3. Thamesmere claim. Applying the staged approach in Manchester Building Society v Grant Thornton UK LLP [2022] AC 783, the relevant issues were scope of duty and breach. The defendant was retained to document and complete the loan and security, not to provide commercial advice or ensure that the loan was risk-free. Thamesmere accepted the risks inherent in the chosen security and declined customary searches and enquiries.
4. Under Royal Bank of Scotland Plc v Etridge (No.2) [2001] UKHL 44, the defendant had to take proper steps to ensure that the third-party sureties obtained independent legal advice. It did so by communicating the purpose and effect of the charge, obtaining a nomination and written confirmation, considering Shah’s professional connection with the borrower, checking his status, and raising the issue with the claimants.
5. The connection between Shah and Milan Patel did not, without more, make Shah unsuitable. Etridge did not require the independent solicitor to be from a different firm, and the lender’s solicitor was entitled to rely on the independent solicitor’s proper performance. The defendant had no duty to check the sureties’ identities or police Shah’s conduct where no specific warning sign made that risk apparent.
6. The general duty to advise on risks which should be obvious to a solicitor but not to a lay client, described in County Personnel (Employment Agency) v Alan Pulver & Co [1987] 1 W.L.R. 916, did not assist Thamesmere. The relevant risk was not apparent, including to the commercially experienced claimants. The claims of both claimants failed, and the breach of trust claim and enforcement costs claim failed consequentially.

First instance decision. No prior appellate decision is stated in the judgment.