Leeds And Holbeck Building Society V. Alex Morison & Co And Others
| Jurisdiction | Scotland |
| Judge | Lady Paton |
| Date | 25 August 2000 |
| Docket Number | "I/we |
| Court | Court of Session |
| Published date | 25 August 2000 |
| OUTER HOUSE, COURT OF SESSION | |
|
| OPINION OF LADY PATON in the cause LEEDS & HOLBECK BUILDING SOCIETY Pursuers; against ALEX MORISON & CO and OTHERS Defenders: ________________ |
Pursuers: Currie Q.C., L. Murphy; Biggart Baillie
Defenders: Moynihan Q.C., S. Wolffe; Simpson & Marwick W.S.
25 August 2000
Introduction
[1]The pursuers are the Leeds & Holbeck Building Society ("the building society"). They seek damages in respect of alleged professional negligence on the part of a firm of solicitors who acted on their behalf in connection with the granting of a loan of £373,488 to Mr. and Mrs. Prendiville. The building society maintain that their solicitors failed to disclose information material to their decision whether or not to grant the loan. They maintain that, had the information been disclosed, the loan would not have been made.
[2]At a proof before answer, the pursuers led evidence from two of their managers, Mr. Steele and Mr. Bedford, and from an expert witness Professor Robert Rennie. The defenders led evidence from Mr. Grosset, the solicitor concerned, and from an expert witness David Smith, solicitor. The Prendivilles were not led in evidence by either the pursuers or the defenders.
Blanerne House, Duns
[3]In 1986 Mr. and Mrs. Prendiville lived and worked in London. When in Scotland, they saw, liked and bought a large dwellinghouse called Blanerne House, near Duns. They did so with the assistance of a loan, initially from Barclays Bank plc, and subsequently from the Newcastle Building Society. The Prendivilles were interested in tennis, and Mr. Prendiville had a wish to transform Blanerne House into a tennis centre rather similar to the David Lloyd tennis centre at Hounslow. He obtained planning permission dated 21 July 1986 for a sports club with residential accommodation at Blanerne, all as detailed in documents numbers 18/10 to 18/12 of process. He drew up a business plan which was referred to in correspondence in September and October 1986, in letters numbers 31/1 and 31/3 of process.
[4]The Prendivilles' Scottish solicitor was Alan Grosset of Messrs. Alex Morison & Co., Edinburgh. Mr. Grosset also had an interest in tennis. He had been president of the Scottish Lawn Tennis Association in 1983-84, and also a Council Member of the Lawn Tennis Association in London. The Prendivilles had been introduced to him by the Secretary of the Scottish Lawn Tennis Association. Mr. Grosset was aware of Mr. Prendiville's wish to create a tennis centre at Blanerne. However he was more cautious and realistic than his client. He was aware of the difficulties and costs of such a venture, and the problems connected with obtaining the necessary funding. He communicated his views to the Prendivilles. The Prendivilles for their part told Mr. Grosset that, even if their tennis centre project came to nothing, they intended to live in Blanerne House, as they were very pleased with it.
[5]During the period following acquisition in 1986, Mr. Grosset's caution proved well-founded. The Prendivilles did not manage to obtain the necessary funding. They continued to own Blanerne House, and to use it for residential purposes. They carried out some repairs and refurbishment. In this connection, Mr. Prendiville sought in 1990 to remortgage the property. His reasons for doing so were recorded in several letters.
[6]In a letter to Mr. Steele, a branch manager of the building society, dated 7 February 1990 number 18/2 of process, Mr. Prendiville enclosed a mortgage application dated 6 February 1990 number 18/3 of process and wrote:
"Thank you for sending the application in January. I am enclosing it duly completed for our own property at Blanerne.
During the past year we have done an enormous amount of work on the house and this is now very near to completion. For your information I have detailed what has been done and what remains to be done.
The mortgage is currently with the Newcastle Building Society and they have been very good. The reason I wish to re-mortgage with yourselves is so that we can complete the refurbishment. Your non-status percentage is slightly better than theirs and I am therefore asking you to consider an 80% non-status [loan] on the valuation. The valuation is currently £450,000, although I realise you will wish to carry out your own survey. On that basis we would be borrowing £360,000..."
A manuscript list of refurbishment works done and to be done was attached. Mr Steele explained in evidence that a non-status loan is a loan calculated on the basis of the equity of the property, and not on the basis of the applicant's income.
[7]In a letter to Mr. Grosset dated 26 February 1990 number 12/3 of process Mr. Prendiville wrote:
"I am enclosing a map delineating the area I intend to detach for our two houses. I am at Blanerne next weekend so I shall measure the boundaries accurately and let you have them.
I am expecting the formal planning permission in the near future.
I shall be re-financing again on a residential basis very shortly prior to the whole scheme, which involves an additional 20 bedrooms plus bathrooms and leisure facilities, being funded commercially.
So long as it will not entail any lengthy legal delay I would prefer the delineated area to be separated as soon as possible. However if there is any possibility of lengthy correspondence between us and the new mortgagors (probably either the Leamington Spa or the Leeds and Holbeck) let us leave it until the commercial mortgage is done. I shall give you a call to discuss this.
The commercial funding + S.T.B. [Scottish Tourist Board] + S.D.A. [Scottish Development Agency] is planned to be in place within two/three months.
The planning application for the 20 bedroom extension is already submitted. I am doing something which I should have done a long time ago, namely I am employing the services of Aitken & Turnbull, architects, based in Duns, Hawick etc. The partner who is doing the Blanerne work is Andrew Lester. He is very business like.
One last query: do I own the salmon rights on my stretch of the river? Please check this and if I do not own them how do I acquire the rights. Just for information I am enclosing some very recent correspondence with the River Tweed Commissioners."
A planning application was in fact submitted on 30 April 1990. The application related to a bedroom extension and alterations/extension to provide leisure facilities at Blanerne. The application was granted on 27 June 1990.
[8]In a third letter to his London bank, Barclays Bank plc, dated 24 March 1990 number 12/4 of process, Mr. Prendiville wrote:
"I refer to our previous correspondence concerning the refurbishment of Blanerne house.
I am in the final stages of agreeing long term commercial finance for the property and this will be supported by the Scottish Tourist Board and the Scottish Development Agency.
These arrangements will be in place by the end of April/beginning of May.
Concurrently I have arranged a mortgage with the Leeds & Holbeck Building Society to ensure that there is a smooth transition from residential to commercial and that the essential refurbishment continues in the meanwhile.
Alex Morison & Co. have the Leeds and Holbeck offer of advance and this is now being processed ...
Currently I am up to my £10,000 unsecured limit ...
My reason for explaining the details and background to the transaction is to ask you to increase my facility to £22,000 until Monday 16 April ..."
The building society loan
[9]Mr. and Mrs. Prendiville completed two applications in connection with re-mortgaging Blanerne House, dated respectively 6 and 19 February 1990, numbers 18/3 and 18/5 of process. The latter became the effective application, but in each application, in Box 13, the questions and answers were identical and were in the following terms:
"Will any part of the property be let or used for business purposes? - No"
"Will you use the property wholly for residential purposes? - Yes"
There was no mention of Mr. Prendiville's desire to create a tennis centre, nor of his proposed time-table involving commercial funding all as set out in his letters dated 26 February and 24 March 1990. Mr. Grosset did not see the applications or copies of them, and was accordingly unaware of their content.
[10]Mr. Steele, the building society's branch manager in Glasgow, dealt with the Prendivilles' application dated 19 February 1990. He approved it in principle and sent it to the head office in Leeds where it was processed by Mr. Bedford, the New Advances manager. Surveyors (John Sale Ltd.) had, in a report dated 20 March 1989 number 18/6 of process, valued the property as a residential property at £330,000, with a projected value after renovation of about £450,000. These surveyors were instructed by the building society. In a re-inspection report dated 13 March 1990, number 29/3 of process, the surveyors advised the building society that renovation work was continuing, but that six items of work remained to be done, and a retention of £30,000 would be necessary. On the basis of the information available to them, the building society offered a loan of £373,488, comprising a principal sum of £370,000 and a mortgage indemnity guarantee premium of £3,488.
[11]The Offer of Advance dated 16 March 1990 number 32/4 of process stated that the loan was to be a repayment loan (i.e. both interest and capital were to be repaid during the period of loan). The period of loan was to be 18 years. The offer contained certain terms and conditions. In particular, condition 10 provided:
"Special conditions
The attention of the solicitor/licensed conveyancer is drawn to the enclosed booklet "Notes to solicitors and licensed conveyancers, Mortgage Conditions 1988 (England and Wales) and Rules on the additional mortgage conditions for properties situated in Scotland and Northern Ireland ..."
A booklet number 32/1 of process entitled "Additional Mortgage Conditions and Notes to Solicitors...
To continue reading
Request your trial