AIB Group (UK) Plc v Mark Redler & Company Solicitors
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Sullivan,Lady Justice Arden |
| Judgment Date | 08 February 2013 |
| Neutral Citation | [2013] EWCA Civ 45 |
| Docket Number | Case No: A3/2012/0742/0836 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 February 2013 |
[2013] EWCA Civ 45
IN THE COURT OF APPEAL (CIVIL DIVISION)
IN THE CONSOLIDATED APPEALS FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION, BIRMINGHAM DISTRICT REGISTRY
His Honour Judge Cooke
1BM30094
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Sullivan
and
Lord Justice Patten
Case No: A3/2012/0742/0836
Jeremy Cousins QC and John Brennan (instructed by Moran &Co, Solicitors) for the Claimant /Appellant
Graeme McPherson QC and Siân Mirchandani (instructed by Mills & Reeve LLP) for the Defendant/Respondent
Hearing dates : 15 th and 16 th October 2012
Introduction
These are consolidated appeals by the Claimant and the Defendant against two orders of HH Judge David Cooke, sitting as judge of the Chancery Division, made on the hearing of various preliminary issues. The appeals are brought with the leave of the judge.
In 2006 the Claimant, AIB Group (UK) plc ("AIB") received an application from Dr Ravindra Sondhi and his wife Dr Salma Sondhi for a loan of £3.3m in order to provide finance for their business. The Sondhis were medical practitioners who ran a number of care homes. The loan was to be secured on their private home. The application form stated that this property was worth £4.5m but was subject to an existing mortgage in favour of Barclays Bank to secure an outstanding loan of £1.5m. AIB agreed to provide the re-finance but required security over the Sondhis' home in the form of a first legal charge.
AIB instructed the defendant firm of solicitors, Mark Redler and Co ("MRC"), to act for it in connection with the remortgage. It supplied the firm with a copy of the facility letter of 4 th July 2006 in which it stipulated the requirement of a "First Legal Mortgage in the Bank's standard form over the Property" and which made it a condition of the loan that "the Applicants' existing home mortgages (if any) must be redeemed on or before the completion of this … facility". The judge therefore found that MRC was aware that AIB required it to obtain a first legal mortgage over the property.
The subsequent history of the transaction is set out in paragraph 7 of Judge Cooke's judgment, based on a schedule of facts which was agreed for the purpose of the trial of the preliminary issues. Because the Defendant's appeal raises issues as to precisely when and in what circumstances the remortgage was completed I propose to set out the relevant parts of the judgment in full and to return later to certain aspects of the transaction in more detail:-
"7. (vi) On 22 July 2006, Mr Mark Redler, the defendant's senior partner, met the borrowers. He was told by them at that meeting that the property was charged to Barclays and that their debt to Barclays was approximately £1.5 million. They told him that they wished to complete the remortgage by 31 July, and expressed a great deal of urgency about doing so. Mr Redler obtained from his clients a signed mortgage document in the form provided by the bank, to be held pending completion.
(vii) On 28 July, a Friday, Mr Redler sent a letter by fax (2/668) to Barclays asking for a redemption statement as at Monday 31 July, stating that it was hoped to complete the remortgage on that day. Barclays' initial response (2/682) sent on the Monday was to return the letter saying that it could not be acted upon unless a correct mortgage account number was quoted. This may have crossed with a further fax from the defendant on the same date (2/683) repeating the request.
(viii) Also on Monday 31 July, the defendant sent the certificate of title in the bank's required form by fax to its securities Department, requesting that the amount of the advance be sent by funds transfer to their client account. The funds were received by the defendant at 13.03 on 1 August.
(ix) The second letter to Barclays did produce a response, in the form of a faxed letter dated 31 July but apparently received on Tuesday, 1 August 2006 (1/407). That letter referred to two account numbers, and attached two documents entitled "Mortgage Valuation Statement", one for each account. The letter made clear that these were not redemption statements, saying:
"Thank you for your request for a balance in respect of the above accounts. The amount quoted is an indication of the current balance outstanding at the date you have requested. This may not be the figure required to effect full redemption.
IMPORTANT INFORMATION
THIS IS NOT A REDEMPTION STATEMENT
For a redemption figure to be issued, you must make a request for a Redemption Statement at least three working days before the intended redemption date. Due to the flexible nature of the mortgage and linked accounts, the amount required to redeem is likely to differ from this quotation.
Should your clients wish to redeem the mortgage, please contact us on 0845 607 6603 to request a Redemption Statement. You will need to provide your client's mortgage account number when you call."
(Emphasis and capitalisation in the original). The significance of making clear that the documents were not "redemption statements" would be that the bank would not be bound to release its charge on receipt of the sum stated, for example if some error should be found, or further liability incurred to it by additional borrowing on a flexible account.
(x) Mr Redler's evidence was that he asked an employee, Miss Brown, to telephone Barclays and obtain a redemption figure. Miss Brown gave evidence, exhibiting a telephone note she made (1/485) recording that she had spoken to someone called Vicky at Barclays and noting "figure to redeem is £1,235,785.07" with the details of the bank account to which it should be sent. She was unable to say whether she had given any mortgage account numbers to Vicky in this conversation. If she had seen the fax referring to the two accounts, she obviously did not notice that the figure given could only have related to one of them.
(xi) In his oral evidence, Mr Redler said that he could only recall seeing one of the pages from the Barclays fax, being the statement relating to the larger of the two accounts. He said that he had telephoned Dr Ravindra Sondhi because the amount was lower than the £1.5 million he had been expecting, and Dr Sondhi had confirmed that it was correct, or at least not told him that it was too low. He could not say why he would only have seen one page of the fax (which had five pages in all) and accepted that if he had seen the whole fax, or read the covering letter, he could not have failed to notice that the figure quoted was insufficient to discharge both accounts.
(xii) In accordance with her instructions from Mr Redler, Miss Brown gave instructions for the amount she had been quoted by Vicky to be sent by telegraphic transfer to Barclays, and for the balance, deducting the firm's costs, to be sent to the borrower, all of which happened on the afternoon of 1 August 2006. The form of mortgage deed was completed with the date 1 August 2006.
(xiii) Mr Redler did not seek to excuse his firm's omissions, which are accepted to have been negligent. At the conclusion of the witness evidence Mr Cousins confirmed that he did not seek to pursue any argument that Mr Redler or the defendant had acted otherwise than in good faith.
(xiv) The result was that the amount sent to Barclays was insufficient to discharge its secured debt and it subsequently refused to do so. It has not been contended before me that Barclays had given any binding assurance that it would release its security. The defendant was not able to procure the registration of AIB's charge until it was in a position to submit a discharge of Barclays' charge. For some time, Mr Redler did not alert AIB to the difficulty that had arisen. He contacted Dr Sondhi who promised that he would return sufficient funds to enable the outstanding amount due to Barclays to be cleared, but failed to comply with this promise over a period of several months. In the meantime, Mr Redler protected the priority of AIB's charge by continuing to renew his priority search at the land registry.
(xv) Eventually, the problem came to light. The evidence before me does not deal in detail with what then happened, though it appears that AIB entered into direct discussions with Barclays. I have no information, for instance, as to whether AIB offered, with or without the assistance of the defendant, to discharge the outstanding sum due to Barclays, or if so why that did not occur. On 28 April 2008, AIB and Barclays entered into a deed of postponement by which Barclays permitted AIB's charge to be registered as a second charge on the property, limiting its priority in respect of its own charge to £273,777.42, plus interest, costs and expenses. That principal amount was somewhat less than the balance outstanding at 1 August 2006 (approximately £309,000) by virtue of repayments that the Sondhis had made in the meantime. AIB's charge was finally registered on 9 May 2008.
(xvi) AIB obtained judgment against the Sondhis for a total exceeding £3.5 million, and an order for possession of the property, on 14 July 2010. It was subsequently sold for £1.2 million, of which just over £300,000 was paid to Barclays in satisfaction of their first charge, and the balance (after costs) of £867,697.78 to AIB on 14 April 2011. Bankruptcy orders were made against the Sondhis on 14 June 2011."
MRC accepts that its failure to notice the full amount of the secured debt to Barclays and as a consequence to obtain a first legal...
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