Bristol and West Building Society v May May & Merrimans (A Firm)
| Jurisdiction | England & Wales |
| Judgment Date | 16 April 1996 |
| Date | 16 April 1996 |
| Court | Chancery Division |
Chancery Division
Before Mr Justice Chadwick
Solicitors - acting for borrower and lender - breach of trust
When a solicitor acted for a purchaser and also for the lender providing finance for a property purchase, and received money representing the advance prior to completion, he held that money in trust for the lender. He was in breach of trust if he parted with the money in a manner which was contrary to his instructions or after failure to disclose to the lender facts which his retainer required him to disclose.
A lender would not normally be entitled to summary judgment in a case of non-disclosure, because the lender had also to show that his loss would not have occurred but for the breach, and there was therefore a triable issue as to whether or not he would have proceeded with the transaction if full disclosure had been made.
However, when the solicitor received the money from the lender after a request based on a warranty or representation by the solicitor which he knew, or ought to have known, was likely to be misleading, the solicitor was not entitled to challenge the lender's claim that he would not have proceeded with the transaction but for the warranty or representation. In such a case the lender was entitled to summary judgment.
Mr Justice Chadwick so held in the Chancery Division when giving a combined judgment in cases brought by the Bristol and West Building Society against 13 defendant solicitors, Some of the cases were appeals from decisions of district judges on applications for summary judgement under Order 14 of the Rules of the Supreme Court 1965, others were de novo applications under Order 14.
Mr Michael Burton, QC, Mr Paul Lowenstein, Mr Timothy Higginson, Mr William Bojczuk and Mr Christopher Semken for the society; Mr Nicholas Davidson, QC, Mr Patrick Lawrence and Miss Elizabeth Weaver for the defendant solicitors.
MR JUSTICE CHADWICK said that the actions arose out of loans made between 1988 and 1991 by the plaintiff building society for the purchase of domestic property. During those years the price of domestic property had been rising steeply and there was a widely held belief that it would continue to do so.
The society was an active lender in that market and loans equivalent to 90 per cent or more of the purchase price were not unusual. Several of the borrowers defaulted on repayment, and when the property market collapsed and house prices fell, the proceeds of sale of the repossessed properties were in many cases insufficient to cover the borrowers'...
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