Duty of care is a relatively broad concept which refers to the obligations placed on people to act towards others in a certain way. While solicitors are used to having a duty of care towards their client, it is far more unusual for a solicitor to have to hold a duty of care to someone who is on the other side of the transaction in which they are acting. Where a solicitor does have to accept responsibilities of third parties, this is known as the Al Kandari principle.
A recent Court of Appeal ruling found that there are exceptional cases ‘where solicitors have been held to a duty of care to someone who is not their client’. In this case, Ashraf v Lester Dominic Solicitors & Ors, the duty of care related to the bank’s solicitor potentially owing a duty of care to the seller of the property when they filled in Land Registry paperwork. It is a complex case, with a total of seven defendants being sued for negligence overall.
But why did Lord Justice Nugee decide that the solicitor owed a duty of care to parties other than the solicitor’s client? Keep reading to learn more.
This litigation action had been longstanding, having initially by been brought by the late Mr Syed Ul Haq, who is now deceased. The action originated as far back as 2008 from a purported fraudulent property transfer and continued following Mr Ul Haq’s death.
Two acts of fraud occurred which rendered the property transfer unlawful. The property transfer was ineffective as the TR1 transfer form was not witnessed. This meant that even though the buyer was living and paying the mortgage for the property, the buyer was not in fact officially registered as the owner. The transfer was conducted by FLP Solicitors who acted for all parties; however a solicitor there misappropriated the mortgage money, which led to them being given a custodial sentence.
As the lender for the property transfer, Bank of Scotland then instructed another solicitors firm, Rees Page, to deal with the incomplete registration. In 2010, Rees Page declared that legal completion did take place during the initial property transfer in 2008. They subsequently asked Mr Ul Haq, the seller, and Mr Attarian, the buyer, to sign new documents, which were executed with the original date of completion. The new TR1 transfer form was executed in 2010.
However, following the receipt of the documents, Rees Page had reservations about the legitimacy of the signatures. Despite this, neither Mr Ul Haq and Mr Attarian were clients of Rees Page, and the transfer and charge was registered with the Land Registry using form AP1. A number of boxes and panels had to be filled in, with one of these (panel 13), confirming that each party was represented by a conveyancer. The purpose of this is so reduce the risks of property fraud.
Rees Page listed FLP Solicitors as the conveyancer for Mr Ul Haq, despite the fact that FLP Solicitors had been intervened in by this point. The application was then completed, and Mr Attarian was finally registered as the legal owner of the property.
Following Mr Ul Haq’s death, action was pursued by the claimant on behalf of Ul Haq’s estate. This claim was brought based on claims that a signature on the TR1 form had been forged, and that the bank’s solicitors had been negligent in registering the transfer and charge. The estate subsequently lost the property, and they filed for an alleged breach of duty of care despite the fact that Ul Haq was never a client of Rees Page.
As mentioned previously, it was well-established that solicitors owed duties to their clients alone, and duties of care were not ordinarily held towards those on the other side of the transaction. In exception circumstances it could be held that solicitors owed a duty of care to someone who was not their client, known as the Al Kandari principle.
Given their confidence about their situation and belief that the estate didn’t have any chance of succeeding, Rees Page applied for summary judgment. This summary judgement was granted by the Court on the basis that there was no duty of care to someone who was not the solicitor’s client. The decision was appealed by Mr Ul Haq’s estate. While this was dismissed, the estate appealed once again. It is this appeal that is the subject of this article.
The Court of Appeal confirmed that it was correct that Rees Page offered no duty of care to Mr Ul Haq up to the date they submitted and confirmed the application to HM Land Registry. However, by filling in box 13 of the AP1 form, the solicitor, Mr Kilvert, was also acting on behalf of Mr Ul Haq when the property transfer was executed. The argument is therefore that by giving such confirmation, the solicitor was not solely acting for the applicant, but also other parties. This therefore engages the Al-Kandari principle, where solicitors can owe a duty of care when they step outside of their normal role.
Furthermore, this would mean that the solicitor would also owe a duty of care in filling in the form accurately, something he did not do. The acting Solicitor, Mr Kilvert, mistakenly thought that the contract had been completed in 2008. He therefore believed that the replacement transfer’s purpose was to finalise the formalities which had not been observed.
Despite this, the Court decided against ruling whether the duty was breached. They did however allow the appeal, which included setting aside the summary judgment which Rees Page had applied for. They also allowed the claim against Rees Page to go to trial on the limited basis. This is because Mr Ul Haq’s estate’s case did not rely on the solicitor mistakenly filling in the AP1 form.
This is an important court decision which offers a warning for the steps solicitors need to take to ensure that they do not step out of their normal duty to clients. By filling and confirming Mr Ul Haq ‘s information in Panel 13 of the AP1, the solicitor had taken him on as a client unwisely. This requires him to act in Mr Ul Haq’s interest and fill in the form correctly.
This case also offers an important lesson for the extent to which the Courts are prepared to extend a solicitor’s duty of care. Whether the solicitor intends to represent a third party or not is not taken into account and therefore underlines the risk to assuming a duty of care to a non-client. The forthcoming trial will therefore be one of interest for those involved in conveyancing and property law.
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