Angel Solicitors v Jenkins O'Dowd & Barth

Hearing dates: Friday 16 th & Monday 19 th January 2009

His Honour Judge Hodge QC:

This case concerns the enforcement of solicitors' undertakings given in the course of acting on separate sales of three residential properties. It demonstrates both the folly of giving the usual solicitors' undertaking to redeem or discharge existing mortgages and charges over the property which is being sold without having first obtained a redemption statement and the mortgagee's agreement to release the properties from all relevant charges upon payment of an ascertained sum, and also the dangers of any delay in paying over the moneys required to redeem such charges following the completion of the sale.

The Claimants and the Defendants are firms of solicitors who acted for the purchaser and the seller respectively in the course of three residential property transactions as follows: (1) The sale of Flat 2, 56 Croham Road, Croydon CR2 7BB (“ Croham Road”) by Westmede Estates Ltd (“ Westmede”), a company now in administration, to Betty Chipalo. Completion took place on 23 ^rd February 2007 at a price of £235,000. The property was mortgaged to Barclays Bank Plc (“ Barclays”), the 1 ^st Respondent, and the relevant undertaking was given on 15 ^th February 2007. (2) The sale of 29A Woodville Road, Thornton Heath, Surrey CR7 8LH (“ Woodville Road”) by Ellenwell Properties Ltd (“ Ellenwell”), the 3 ^rd Respondent, to Mrs O'Brien-Coker. Completion took place on 23 ^rd March 2007 at a price of £185,000. The property was mortgaged to Close Brothers Limited (“ Close”), the 2 ^nd Respondent, and the relevant undertaking was given on 12 ^th March 2007. (3) The sale of 2 ^nd Floor Flat, 70 Burrage Place, London SE18 7BE (“ Burrage Place”) by Cloudburst Limited (“ Cloudburst”), a company now in administration, to Mrs Ibiene Henry. Completion took place on 25 ^th April 2007 at a price of £175,000. The property was mortgaged to Barclays, and the relevant undertaking was given on 2 ^nd April 2007. In the case of each of the three flats, it was charged to the relevant financial institution by way of an “all-moneys” charge as part security for a loan facility considerably in excess of the value of the individual property.

Westmede, Ellenwell and Cloudburst were all companies owned and controlled by a Mr Grahame Ralph. In the course of acting in each transaction, the Defendants, in their capacity as the seller's solicitors, replied affirmatively to standard form requisitions on title, thereby undertaking to redeem or discharge the existing mortgages and charges, and to send the relevant form of discharge as soon as it was received from the mortgagee. It is common ground that it is implicit in the first part of the undertaking that it was to be performed within a reasonable time. In reply to another requisition, the Defendants confirmed that they were the duly authorised agent of the proprietor of every mortgage or charge on the property which they had undertaken to redeem or discharge. The relevant section of the requisitions on title was headed “Undertakings” and contained an express warning (in bold type) that the reply to those requisitions was to be treated as an undertaking and that “great care must be taken when answering this requisition”. There was a further warning (also in bold type) that these replies should be signed only by a person with authority to give undertakings on behalf of the firm. Despite all of this, there is no evidence before the court that, before giving any of the undertakings, or even completing the relevant sale, the Defendants had approached the relevant mortgagee to obtain any of (1) a statement of the sum which it would be prepared to accept for the release of that property from its security, or (2) its consent to such release on completion of the relevant sale, or, notwithstanding the reply to the later of the above-stated requisitions, (3) its authority to act for the mortgagee on the release of the relevant charge. (Indeed, in the case of Barclays, there is evidence (in the form of an exchange of emails on 7 ^th and 8 ^th November 2006 at page 302 of the application bundle) that, in relation to an earlier sale of a property charged to it, the relevant fee-earner at the Defendants had simply remitted sale proceeds to the wrong bank account without having first sought a redemption figure, and the relevant relationship manager at the bank had implored the Defendants not to do so again.) There is also no evidence before the court that any part of the sale proceeds from any of the three properties was ever paid over to Barclays or to Close. The Defendants' relevant sale files are either incomplete or cannot be located; but the earliest documented reference to a request for redemption figures is a letter from the Defendants to Barclays dated 7 ^th August 2007 (at page 51 of the application bundle) complaining that the Defendants were still awaiting redemption figures for “the outstanding properties”, and asserting that the delay in procuring these was causing the writer (who said that he had funds on client account to meet the outstanding discharges) “acute difficulties”.

Having failed to secure the performance of the Defendants' undertakings to redeem the existing charges without resort to litigation, by a Part 8 claim form, issued on 2 ^nd October 2008, the Claimants invoke the summary jurisdiction of the court to enforce the Defendants' undertakings pursuant to its inherent supervisory jurisdiction over solicitors. This is the hearing of three applications as follows: (1) the Claimants' application, issued on 7 ^th October 2008, for summary enforcement of the undertakings given by the Defendants, and summary judgment on the claim pursuant to CPR 24; (2) the Defendants' application, issued on 22 ^nd December 2008, to add Barclays and Close as parties to the proceedings pursuant to CPR 19.2 (2); and (3) the Defendants' application, also issued on 22 ^nd December 2008, to add Ellenwell, the only (hopefully) solvent seller, as a third party to the proceedings pursuant to CPR 20.7 and CPR 8.7 so that the court may determine whether it is liable to reimburse the Defendants in respect of any sum that they may be ordered to pay Close in order to obtain the discharge of its security over Woodville Road.

The evidence in support of the applications comprises: (1) for the Claimants, the witness statement of Eyo Itam, a solicitor and partner in the Claimant firm, dated 19 ^th September 2008; (2) for the Defendants, the three witness statements dated 19 ^th December 2008 and 9 ^th and 14 ^th January 2009 of Louise Gehrig, who is qualified as a solicitor in the State of Victoria and is employed by the firm of solicitors retained by the Defendants for the purposes of this litigation (Williams Holden Cooklin Gibbons LLP); (3) for Barclays, the two witness statements dated 13 ^th and 15 ^th January 2009 of Karen Marmara, a solicitor with Barclays's solicitors (DLA Piper UK LLP); and (4) for Close, the witness statement of Frank Pennal, a director of Close, dated 14 ^th January 2009. The application directed to Ellenwell is made without notice, and it has therefore served no evidence and is not represented before me.

I heard the three applications last Friday, 16 ^th January 2009. I heard first from Mr Ryan Clement (of counsel) for the Claimants; and then from Mr Paul Parker (of counsel) for the Defendants, both in opposition to the Claimants' application, and in support of the Defendants' applications. I next heard from Mr Adrian Pay (of counsel) for Barclays; and then from Ms Joanne Wicks (of counsel) for Close. Finally, I heard submissions in reply from Mr Parker and then from Mr Clement. I adjourned over the weekend to 10.30 this morning, Monday 19 ^th January 2009, for the delivery of judgment.

Both in their written skeleton arguments and in oral submissions, Barclays and Close each made common cause with the Claimants in support of their application for summary judgment, and in opposition to the Defendants' application for the joinder to these proceedings of Barclays and of Close. Put shortly, it is their case that the relevant undertakings were indisputably given by the Defendants, and they have simply failed to carry them out. The Defendants have no real prospect of successfully defending the claim; and there is no other reason, still less any compelling reason, why the case should be disposed of at a trial. Even if there were a live dispute between the Defendants and either, or both, of Barclays and Close as to the amount required in order to discharge their respective charges, that is of no concern to the Claimants because the redemption sum is not in issue in these proceedings, which are concerned with the summary enforcement of undisputed undertakings to pay whatever sum is required to effect the redemption and release of the relevant charges. But, in fact, there is no real dispute as to the sums required to redeem the relevant charges. All three charges were “all-moneys” charges; and it is not in issue that...