Bank’s solicitor “may have owed duty of care” to third party

Nugee: Arguable that solicitor was acting for all parties in filling out form

A bank’s solicitor may owe a duty of care to the seller of the property when filling in Land Registry paperwork to change the register, the Court of Appeal has ruled.

Lord Justice Nugee said there was an argument that, in confirming who was acting for the parties when filling in the AP1 (change of register) form, the solicitor was acting for all parties and had a duty to all of them to act with reasonable care.

The ruling in Ashraf v Lester Dominic Solicitors & Ors [2023] EWCA Civ 4 is part of long-running litigation stemming from the purported fraudulent transfer of the property. The claimant Syed Ul Haq, the seller, died after issuing proceedings and his estate has continued the action.

Back in 2008, Bank of Scotland was both the existing mortgagor of the property and had offered the buyer a £1,125,000 mortgage as well. FLP Solicitors acted for all parties but a solicitor there misappropriated the mortgage monies and was eventually jailed.

The 2008 transfer was ineffective as the TR1 transfer form had not been witnessed, meaning the buyer was not registered as the owner, even though he was living there and paying the mortgage.

The bank instructed Wolverhampton law firm Rees Page to complete registration. It had a new TR1 executed in July 2010 and registered the transfer and charge with the Land Registry a year later.

In box 13(1) of the AP1, Rees Page confirmed that each party was represented by a conveyancer and listed FLP Solicitors for Mr Ul Haq, even though by that time FLP had been intervened in.

This “enables the Land Registry to rely on the fact that such a conveyancer would have taken steps to verify the identity of their client”, the Court of Appeal noted.

Proceedings began in 2016 over claims that the seller’s signature on the TR1 was forged. The latest ruling concerned solely whether Rees Page owed Mr Ul Haq a duty of care in relation to this, which would place it in the small number of exceptions to the general rule that solicitors do not owe such a duty to other parties in a transaction.

Rees Page applied for summary judgment and was granted it by Deputy Master Lloyd, a decision upheld on the first appeal by Mr Justice Edwin Johnson.

The Court of Appeal said the judges below were right to find that Rees Page did not owe Mr Ul Haq any duty of care up to the date when it filled in and lodged the AP1 form.

“When Mr Kilvert [the lawyer at Rees Page] filled in the form and lodged it, he no doubt did so as solicitor for the bank,” Nugee LJ said.

“But in filling in box 13, he was giving confirmations to the Land Registry in relation not just to the bank but to each of the other parties (Mr Ul Haq and [the buyer]). The purpose of seeking such confirmations, as the rubric in box 12 makes clear, is to reduce the risks of property fraud.”

The court acknowledged that Mr Kilvert could not have filled in the other parts of box 13, as he was unable to say that sufficient steps had been taken to verify Mr Ul Haq’s identity, nor that he had evidence of his identity.

“But there is at the lowest a reasonable case to be made that in [filling out box 13(1)] he was confirming that FLP were acting for Mr Ul Haq at the time that he executed the transfer, which would of course have been inaccurate.

“The argument is that in giving such confirmations the solicitor for the applicant is not acting for the applicant alone but stepping outside that role and acting for all parties… and hence owes a duty to all such parties to act with reasonable care in filling in the form accurately. I have come to the conclusion that this is indeed arguable.”

He rejected the suggestion that this confirmation was only for the benefit of the Land Registry and not for the other parties.

“Mr Cousins [for Rees Page] said that Mr Kilvert had thought that what had happened was that the contract had been completed in 2008 and that the replacement transfer was simply finalising the formalities which had not been observed. He also pointed out that when Mr Kilvert filled in box 13(1) he indicated against the bank’s name that FLP had now been intervened on.

“Both these points may assist in explaining his thinking, but they seem to me to go more to the question of possible breach than the prior question whether filling in the form generated a duty of care at all.”

The court decided against ruling whether a duty actually was owed, in part because the successful argument was not clearly taken as a separate point in the estate’s pleadings and not specifically addressed by Mr Kilvert in his evidence.

This did not make it unfair to raise the point at all, however. “It is a point of law that emerges from the facts and once identified seems to me one that it would be wrong to refuse to allow the estate to rely on,” Nugee LJ said.

The court allowed the appeal to the extent of setting aside the summary judgment and permitting the estate’s claim to go forward to trial on this “limited basis”.

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