Davies: Partner was unimpressive witness
A Manchester law firm has been ordered to pay damages to a former client after a partner accidentally deleted a key part of a charge on a property.
Ratio Law has to pay £100,000 plus interest, with His Honour Judge Stephen Davies finding [1] that co-founder Gisela Alberici “was not really interested in or paying any attention to the details” of the matter.
HHJ Davies, sitting as a High Court judge in Manchester, recorded that the claimant, MPP (Services) Ltd was an investment company that entered into a joint venture with Lesley Hearne to identify suitable properties to acquire, set up and run as children’s care homes.
After two failed efforts, which had lost MPP about £180,000, the parties sought to turn Ms Hearn’s own house in a care home and they agreed to put a charge on it for that amount, which would be removed if the care home actually opened.
The parties fell out and this did not happen.
Ratio Law admitted that, “as a result of a simple human error” by Ms Alberici, a crucial part of the text included by MPP in the first draft of the legal charge it asked the solicitor to check was removed and not replaced.
The draft charge, which was in the standard CH1 form, said in panel 7: “The borrower… charges the property by way of legal mortgage as security for the payment of the sums detailed in panel 9.” Panel 9 said: “2nd Charge of £180,000 payable within 24 months of the date of this agreement.”
Ms Alberici removed the words “2nd Charge of £180,000” and did not replace them.
“It follows that there was nothing in the legal charge as executed which stated whether any, and if so what, sums were the subject of the legal charge,” HHJ Davies said.
Ratio Law accepted that this was a breach of duty which meant that, after a dispute arose between MPP and Ms Hearne, she pleaded that the charge was void for uncertainty, because it did not identify any sum which was secured by it.
MPP, advised by new solicitors and by counsel, accepted that this defence “was, realistically, unanswerable” and agreed at a mediation to cancel registration of the charge.
The claim against MPP went to trial over various issues, such as the scope of the duty owed, the nexus between the duty and the loss, as well as the assessment of the loss of chance.
HHJ Davies said he found Ms Alberici “an unimpressive witness, on whose evidence I can place little reliance, for a number of reasons”.
These included “her complete lack of concern about ensuring that her witness statement was correct or showing any apparent concern about inconsistencies between her evidence in her witness statement, which she adopted without qualification, and her oral evidence”.
On the substance of the instructions, the judge said his “clear impression from Ms Alberici’s evidence, coupled with the contemporaneous documents, is that she was not really interested in or paying any attention to the details, because as she saw things she was only agreeing to do the bare minimum in order to keep an existing client happy”.
She was expecting the client to complete the blank legal charge and return it to her, “and all that she needed to know was the bare minimum, being the amount secured by the legal charge to calculate the fee payable to register the charge and the identity documents needed for Land Registry purposes.
“This, in my judgment, explains why she read and amended the draft so quickly and so carelessly that she deleted the text in panel 9 and did not spot that she had done so.”
The judge noted that there was “nothing obviously wrong from a legal perspective in the wording” drafted by the client in panel 9.
As well as being a loss of chance case, “I am also satisfied that the risk of the loss of the opportunity to rely on the legal charge to recover the true extent of Ms Hearne’s liability to the claimant was within the scope of the defendant’s duty”.
There was “plainly a sufficient nexus between the loss of that opportunity and the subject matter of the defendant’s duty”.
HHJ Davies went on to find that, but for the error, MPP would have had a good case against Ms Hearne for the money but it was clear she would not have given up the property “without a fight”.
Any competent lawyers would have advised her that her prospects of successfully challenging the legal charge were “fairly poor, but that she would have had grounds for seeking to challenge all matters relevant to the fact or amount of any liability secured by the legal charge”.
The most likely outcome was that the parties would have settled on the basis of Ms Hearne raising enough by remortgage to fund an all-inclusive payment of £100,000, HHJ Davies concluded.