Bank of Scotland v King

Hearing dates: 13 th November 2007

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Applications

There are three applications before the court. The first is an application dated 31 ^st May 2007, on behalf of the Claimant, for judgment for the relief sought in its Particulars of Claim, on the ground that the Defence and Counterclaim of the Second and Third Defendants has been struck out by reason of their failure to comply with an earlier order. The second application, dated 17 ^th July 2007, is made by the Second and Third Defendants for relief from the sanction of striking out pursuant to the earlier order. The third application, dated 26 ^th September 2007, is made by the Claimant for summary judgment under CPR Part 24 against the Defendants on the grounds that the Defendants have no real prospect of successfully defending the claim and that there is no other compelling reason why the claim should be disposed of at a trial. At the hearing, the Claimant concentrated on its application for summary judgment and I will do the same in this judgment. Accordingly, for the purposes of the summary judgment application, I will take into account all the material before me including the Defence and Counter Claim on behalf of the Second and Third Defendants and the witness statements served on their behalf.

The Facts

The material before the court does not disclose any real dispute as to the primary facts. In so far as primary facts asserted by one party are not admitted by the other party, there is unchallenged evidence which enables me to make relevant findings on the matters which are not admitted.

At all material times, the Second and Third Defendants were the registered proprietors of the freehold title to the residential property at 6 Broadgates Avenue, Hadley Wood, Hertfordshire which is registered at the Land Registry under title number MX370904 (“the Property”). The Second and Third Defendants say that the Property has, at all material times, been their family home where they live with their four children.

In around June 2004, the Second and Third Defendants were in negotiation with the First Defendant for the First Defendant to purchase the Property from the Second and Third Defendants. The documents show that the First Defendant applied to the Claimant bank for a mortgage advance to enable him to buy the Property. On the 23 ^rd June 2004, the Claimant wrote to the First Defendant offering the First Defendant an advance of £1.2 million to be secured by a mortgage on the Property. The solicitors acting for the First Defendant was the firm of Walm Lane of London NW2 and, in due course, that firm was instructed to act as the solicitors for the Claimant, in relation to the charge to be granted by the First Defendant to the Claimant.

In connection with the proposed sale by the Second and Third Defendants to the First Defendant, the Second and Third Defendants instructed the firm of solicitors, Alberts, of Wardour Street, London W1. The headed note paper of Alberts in June 2004 identified a Mr Preedy as the sole partner. The notepaper also identified the Second Defendant as a consultant and his qualifications were stated to include that of being a barrister. The notepaper also referred to a Mr David Arivo as an associate of the firm.

On 24 ^th June 2004, Walm Lane on behalf of the First Defendant wrote to Alberts on behalf of the Second and Third Defendants returning a draft contract approved as amended by Walm Lane. The letter also included a draft transfer in duplicate and requisitions on title.

On 24 ^th June 2004, Alberts wrote to Walm Lane stating that they had been told that the First Defendant had received his mortgage offer the previous day. That was indeed the position and this statement shows that the solicitors for the Second and Third Defendants appreciated that the First Defendant was borrowing a part of the purchase price, with repayment to be secured by the grant of a mortgage to the lender. Alberts' letter of 24 ^th June 2004 sought confirmation that Walm Lane were in a position to exchange contracts and stated that the parties had agreed to complete during the course of the following week.

On 28 ^th June 2004 Alberts wrote to Walm Lane returning the draft transfer approved as drafted by Walm Lane together with replies to requisitions on title. Alberts stated that they had amended the draft contract to reflect a revised sale price. They sought confirmation from Walm Lane that the First Defendant could exchange contracts with completion on 30 ^th June 2004. The draft transfer enclosed with that letter stated that the transferee's intended address, for entry on the register, was to be at the Property. That indicates that the First Defendant was intending to move into the Property following its purchase. The draft transfer stated the consideration for the transfer was £1.5 million. Paragraph 12 of the draft transfer under the words “additional provisions” provided as follows:

“The buyer hereby covenants with the sellers to abide (sic) the schedule of restrictive covenants as contained in the property register.”

Copies of the Land Registry entries have not been provided to me but it seems clear from paragraph 12 of the draft transfer that there were some restrictive covenants registered against the title and the First Defendant was to covenant (in effect by way of indemnity) to abide by those covenants. Paragraph 13 of the draft transfer provides for the transfer to be executed by the Second and Third Defendants and also by the First Defendant, no doubt, because of the provisions of paragraph 12 of the draft transfer.

The replies to requisitions on title which had been provided by Alberts contained a number of relevant statements. Paragraph 4 of the requisitions asked Alberts to specify the mortgages or charges which would be discharged on or before completion. The replies listed six mortgages or charges in favour of (1) Finsbury Park Mortgages Funding Limited, (2) Lombard Central Plc, (3) Barry David Lewis, (4) Barry David Lewis, (5) Mortgages 4 Limited and (6) Jackson Rowe Associates. Paragraph 4(B) of the requisition, in effect, asked for the steps that would be taken on completion in relation to the mortgages or charges. The answer “yes” was given to the question although it is not clear whether Alberts were saying that the charges would be discharged and appropriate evidence handed over on completion or, failing discharge, Alberts would undertake on completion to hand over an appropriate discharge later. My reading of the replies is that Alberts were not promising more than an undertaking to provide for the discharge after completion. Alberts went on to say that if an undertaking was what was given, the undertaking would be in the Law Society standard form.

Paragraph 5 of the requisitions dealt with possession and asked whether vacant possession of the whole of the Property was to be given on completion. For some reason that question received the reply “N/A” i.e. “not applicable”. Paragraph 7 of the requisitions dealt with completion arrangements. The only part of paragraph 7 which had been raised as a requisition by Walm Lane was that Walm Lane sought confirmation that Alberts would comply with the Law Society's Code for Completion by Post (1998 Edition) and that confirmation was given. However, Alberts also answered other questions under paragraph 7 that had not been specifically raised and stated that completion would take place at Alberts' offices and gave the details of the bank account to which completion monies should be directly remitted.

It is convenient at this stage to go to the Law Society's Code for Completion by Post (1998 Edition). The preamble to the Code states that it provides a procedure for postal completion and that before adopting the Code, a solicitor must be satisfied that doing so will not be contrary to the interests of the client, including any mortgagee client. Paragraph 1 of the Code refers to the parties' solicitors agreeing to use the Code. Paragraph 2 states that on completion the seller's solicitor acts as the buyer's solicitor's agent without any fee or disbursements. Paragraph 3 refers to the seller's solicitor specifying before completion the mortgages or charges secured on the property which will be redeemed or discharged. By paragraph 4, the seller's solicitor undertakes to have the seller's authority to receive the purchase money on completion and, again on completion, to have the authority of the mortgagee or chargee (in relation to a mortgage or charge secured on the property) to receive the sum intended to repay it. Paragraph 6 of the Code provides:

“The buyer's solicitor will remit to the seller's solicitor the sum required to complete, as notified in writing on the seller's solicitor's completion statement or otherwise, or in default of notification, as shown by the contract. If the funds are remitted by transfer between banks, the seller's solicitor will instruct the receiving bank to telephone to report immediately the funds have been received. Pending completion, the seller's solicitor will hold the funds to the buyer's solicitor's order.”

By paragraph 8 of the Code, the seller's solicitor agrees to complete forthwith on...