Solicitors negligence and causation.
In the solicitors negligence case of Godiva Mortgages Limited v Khan and Keepers Legal LLP the solicitors, Keepers, were acting for Godiva Mortgages and Mrs Khan in the purchase of a property. The property was to be purchased from Mrs Khan’s brother-in-law.
The purchase price was £495,000. A deposit of £173,250 was paid, and the balance was provided by Claimant of £321,750.
The matter was completed, and the monies were transferred to the seller’s solicitors. Mrs Khan then cancelled her direct debit with the Claimant, claiming that she was unaware the sale had gone ahead. The Seller’s solicitors disappeared, and the completion monies were lost.
The Claimant brought proceedings against Mrs Khan, alleging fraudulent misrepresentation in respect of her application, and being complicit in the fraud perpetrated against it.
A solicitors negligence claim was also made at the same time against solicitors, Keepers, claiming negligence and breach of retainer.
It was claimed the solicitors had failed to report:
- a discrepancy in the borrower’s explanation of the direct deposit of £173,250.
- forged receipts evidencing the direct deposit paid, which did not add up to the exact deposit allegedly paid; and
- the purchase price was reduced by £16,373 on completion, in relation to costs and disbursements.
The Claimant said that these had not been reported, and if they had, they would not have advanced the monies. The court was not impressed.
The Judge held that the firm had acted in breach of contract and duty by failing to report each of the matters complained of to the lender. However, the claim failed as a matter of causation. Causation means that there has to be a sufficient link between the negligent advice given by the solicitor and the loss suffered. The loss must flow as a consequence of the negligent advice. It must be caused by the negligent advice not if it would have happened as in this case any way.
The court felt it wasn’t inevitable that the Claimant would refuse to lend. It was a family sale, with substantial margin of security, and a confirmation from the seller’s solicitor that a deposit had been paid. As a consequence the sale may still have proceeded, and the Claimant couldn’t show that it had suffered any loss as a result of the solicitor’s breach. The position would have been different if there had been an arm’s length sale. The fact was that it was a family sale and the court thought that the sale would have gone ahead in any event.
The case shows the difficulties with such claims. Even when the standard of care fell below what is to be expected it is often causation which is the solicitors escape route.
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