Midland Bank Plc v Cox McQueen (A Firm)
| Jurisdiction | England & Wales |
| Judge | LORD WOOLF, MR,LORD JUSTICE MUMMERY,LORD JUSTICE MANTELL |
| Judgment Date | 26 January 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0126-2 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBENF 98/0034/1 |
| Date | 26 January 1999 |
[1999] EWCA Civ J0126-2
The Master of the Rolls
(Lord Woolf)
Lord Justice Mummery
Lord Justice Mantell
QBENF 98/0034/1
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(BIRMINGHAM DISTRICT REGISTRY MERCANTILE LIST SITTING AT STAFFORD)
(HIS HONOUR JUDGE PERRETT QC)
Royal Courts of Justice
Strand
London WC2A 2LL
MR N STEWART QC and MR H MERCER (Instructed by Messrs Gateley Wareing, Birmingham, B4 6DD) appeared on behalf of the Appellant
MR A NORRIS QC (Instructed by Messrs Pinsent Curtis, Birmingham, B4 6BH) appeared on behalf of the Respondent
Tuesday 26 January 1999
This is an appeal from the judgment of His Honour Judge Perrett QC, sitting as a Deputy High Court Judge, given on 28 November 1997 in the Mercantile List (Birmingham) at Stafford. The Judge dismissed a claim by the Midland Bank ("the Bank") for damages against a firm of Solicitors Messrs Cox McQueen ("the Solicitors").
The claim raises a point of some importance as to the extent of the obligation on solicitors when they are retained by a bank in connection with the execution of a charge by the wife of a customer of the bank and her signature is forged.
The Facts
As the Judge points out in his judgment the relevant facts are not in dispute. From 1970 Mr Dennis George Dukes and his family company were customers of the Bank. His wife, Constance Dukes, was the sole owner of a house known as "Greystones" Symondsbury, Dorset. No-one at the relevant Birmingham branch of the Bank had met Mrs Dukes.
At the beginning of July 1985 the limit on the family company's overdraft at the Bank was increased to £75,000. In return Mr Dukes deposited with the Bank the deeds and conveyance of Greystones. He also deposited a letter of consent which purported to have been signed by Mrs Dukes in the presence of a different firm of solicitors from the defendants. Those solicitors signed an assurance that "the contents of this document have been fully explained to Mrs Dukes and that she fully understands their portent and has signed the documents of her own free will". In fact that document was not signed by Mrs Dukes but by someone else and Mrs Dukes thought the documents were being deposited at the bank for safe keeping.
In September 1987 a well-known firm of estate agents gave Mr Dukes a "desk top" valuation of Greystones of £250,000—£275,000. Mr Dukes used this valuation to persuade the Bank to lend him money on the security of Greystones. The loan was to enable him to pay off the debts the company owed to the Bank. The security for the loan was to be an "all monies" security, that is, a security not only for existing but also for future indebtedness. This involved recharging Greystones. The Bank was well aware that in the case of a transaction of this nature it would be necessary for Mrs Dukes to have independent legal advice before she executed the security. This led to the Solicitors being retained by the Bank, on the nomination of Mr Dukes for whom they had previously acted. On the 18 March 1988 the Bank wrote to the Solicitors in the following terms:
"I refer to our telephone conversation today, and understand that you act for our above-mentioned customer, who will be calling shortly in connection with a loan we are advancing to repay existing borrowings.
I should be grateful if you would also act on our behalf by obtaining the signatures of Mr & Mrs Dukes to the various documents shown below:—
To be signed by Mr Dukes
(a) Facility letter—please have Mr Dukes accept the letter and return the top copy to us, handing the copy to Mr Dukes as his record of the agreement.
(b) Authority to transfer funds to repay borrowing by DGD Investments Limited.
(c) Standing order form to cover interest only on the loan by monthly payments.
(d) Letter of Consent agreeing to the charging of the property as security. Please ensure that Mr Dukes also initials the attached copy mortgage form.
To be signed by Mrs Dukes
First Legal Mortgage over 'Greystones'.
We should be grateful if you would explain the implications of the wording of our mortgage form to Mr & Mrs Dukes, and in particular draw their attention to the "all monies" nature of the mortgage.
After completion of the documents, kindly return them all to us as soon as possible."
The document described as the "First Legal Mortgage" in the letter made provision for Mrs Dukes's signature to be witnessed. It also included the following certificate to be signed by the Solicitors:
"We hereby certify that the contents of this document have been fully explained to Constance Jean Dukes that she fully understands the portent and has signed this document of her own free will."
The documents were returned to the Bank apparently properly completed. Mrs Dukes signature was shown as being witnessed by a legal executive of the Solicitors. The Solicitors invoiced the Bank for the sum of £23.00 for their services. This sum was paid.
Four and a half years later the Bank sought to rely on their charge because Mr Dukes had stopped paying interest. The Bank then discovered that it had not been signed by Mrs Dukes. The charge had been signed by an impostor who had been introduced by Mr Dukes to the legal executive as his wife. When the Bank made its formal demand on Mrs Dukes in July 1992, the sum that was said to be due to the Bank was £255,121.
Initially the Bank brought proceedings against Mrs Dukes but was eventually persuaded that she had not signed the relevant documents. They had in fact been signed in the presence of the legal executive by an employee of Mr Dukes who he had passed off as his wife.
The Bank originally advanced its case under four different heads:
(a) Negligence or breach of the implied duty to carry out the retainer with reasonable care and skill;
(b) Breach of warranty of authority;
(c) Non-performance of the retainer; and
(d) Breach of the warranty contained in the certificate on the charge.
The judge dismissed all the allegations. The Bank does not challenge his decision as to negligence, breach of the implied term and breach of warranty authority. The argument of the Bank on the appeal has primarily been based on the alleged non-performance by the solicitors of their retainer but Mr Nicholas Stewart QC, in his argument on behalf of the Bank, also relies on the breach of warranty. I will deal with these two arguments in turn.
Breach of the Retainer
Mr Stewart advances a clear and succinct argument based on the terms of the retainer. He submits that the terms of the letter of the 18 March 1988 are unqualified. It requires the solicitors to obtain the signatures of Mr & Mrs Dukes to the various documents. The Solicitors did not obtain Mrs Dukes signature but the signature of someone else. Therefore they did not carry out their retainer. This was contrary to the strict obligation which they had accepted to obtain Mrs Dukes's signature.
Mr Alastair Norris QC, on behalf of the Solicitors, accepts that this issue is one of construction of the letter of 18 March. He submits that it would be wholly inappropriate to construe the retainer as placing an absolute obligation on the Solicitors so that they would be liable even though they had exercised the required standard of care. He submits that this is a professional retainer. Members of professions usually render a service but do not guarantee a result. If they are to be required to guarantee a result, clear words need to be used which spell out that this is the obligation. He submits that the nature of the transaction itself, the language of the letter and the mortgage do not suggest that this is other than an ordinary contract for professional services. It does not amount to a contract of insurance. As to the interpretation of the retainer, Mr Norris relies upon the guidance of Lord Hoffmann in his speech in Investors Compensation Scheme Ltd. v West Bromwich BS [1998] 1 WLR 896 (at p.912F-913F). Of the principles which Lord Hoffmann summarises, it is only necessary to refer to the first:
"1.Interpretation is the ascertainment of a meaning which the document would convey to a reasonable person having all the background knowledge that would reasonably been available to the parties in the situation in which they were at the time of the contract."
The features of the background which are of most significance are:
(a) that the retainer was in connection with the Bank obtaining security for a loan which in its commercial judgment the Bank had decided to make to its customer, Mr Dukes. Risks are always associated with entering into such a transaction, even with a customer who is thought to be respectable. This is the type of risk for which a commercial body such as bank would make provision.
(b) on the other hand the Solicitors were being retained in their professional capacity to provide services to the Bank. In the ordinary way solicitors are not required to take commercial risks of this nature. In the provision of services the normal standard of responsibility of solicitors, in the absence of any agreement to the contrary, is to exercise the standard of care which is normally to be expected from a competent member of the profession providing that service.
(c) the Bank would normally be in a better position than the Solicitors to form a judgment as to the customer's trustworthiness.
It is against this background that the question which Mr Norris accurately identified has to be objectively answered in order to determine this appeal. The question is, did the Bank intend to ask for and did the...
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