Mortgage: Lender withdrew offer
A negligence claim against a well-known London law firm over erroneous information it gave to a client’s mortgage lender has been dismissed on the basis of causation.
Master Brightwell ruled that, even if Anthony Gold Solicitors (AG) had been negligent in what it told the lender, this was not the reason the transaction failed.
Clydesdale Bank had offered to lend Taha El Basyouni around £637,000 of the purchase price of £850,000 for the house in Croydon.
He obtained a private short-term loan for the £70,000 needed for the stamp duty, legal fees and additional fees due to late completion; however, AG told Clydesdale that the money was a gift. It corrected the position two days later.
Clydesdale rekeyed the mortgage application and decided it was no longer willing to lend. The claimant was not able to complete what was already a delayed transaction and, having earlier served a notice to complete, the seller rescinded the contract.
The master said the claimant’s case was that, but for AG’s error, Clydesdale might not have rekeyed the application and the sale might have completed before the contract was rescinded.
AG sought summary judgment or a strike-out. Master Brightwell proceeded on the basis that Mr El Basyouni had an arguable case that there was a breach of duty as AG did not deny it initially told Clydesdale the money was a gift.
“It seems to me that when a solicitor instructed in a conveyancing transaction conveys incorrect information to a mortgage lender without a good explanation for doing so, it will generally be at least arguable that there has been a breach of duty.”
However, causation was the problem, the master went on. “I consider that the evidence demonstrates that Clydesdale revoked the mortgage offer because of the use by the claimant of a second loan, which had not formed part of the mortgage application…
“The documents show that the reconsideration took place several days after the bank was corrected about the Torto loan being a loan, not a gift. It seems to me that whether or not the Clydesdale was initially wrongly informed that there was a gift on 18 or 20 February is not material.”
Master Brightwell added that “common sense” suggested that a gift, if acceptable to a lender, would be less problematic than a short-term loan.
“A gift with no expectation of repayment would not have so obvious a potential effect on a borrower’s ability to meet their mortgage obligations as a loan would.
“This is particularly so in the case of a short-term loan which would have required repayment, with interest of a further £15,000, within three months.”
The master concluded that there was no realistic prospect of Mr El Basyouni establishing that any loss was caused by AG’s negligence.
Any liability he might establish at trial would accordingly be for nominal damages only “and in those circumstances it would not be appropriate to allow the claim to continue”.
Master Brightwell granted AG summary judgment.
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