Who do solicitors owe a duty of care to? Not just the client?

Published 24 May 2023

Mr Haq agreed to sell a property which had a registered charge over it in favour of Bank of Scotland plc (“BoS”) to Mr Attarian for £1.25m. Mr Attarian was purchasing with a mortgage, coincidentally also from BoS, for £1.25m. FLP Solicitors (“FLP”) acted in respect to both the sale and the purchase.

Contracts were exchanged and BoS transferred the mortgage advance; however, this advance was stolen by FLP’s office manager. Mr Haq’s registered charge was not satisfied and separately the transfer, TR1, signed by him had not been witnessed.

At this stage, BoS retained Rees Page (“RP”) and, amongst other things, the following occurred:

• RP received a replacement TR1 required to regularise the title in the knowledge that the solicitor (not part of FLP) who had purported to witness Mr Haq’s signature had not taken steps to confirm his identity.

• RP acted upon instructions from BoS to use the replacement TR1 to register Mr Attarian as proprietor and secure his BoS charge.

As a result of RP’s actions, following his death, Mr Haq’s Estate was liable for his BoS charge. The Estate’s position was that Mr Haq’s signature on the replacement TR1 was forged.

A claim was brought against RP by Mr Haq’s Estate and at the second appeal of a summary judgment in favour of RP the Court of Appeal considered whether the assumed facts created an arguable case that RP owed a duty to Mr Haq, Mr Haq never having been a client of RP.

The judgment summarises the general principles to be applied when considering in exceptional cases whether a solicitor’s duty extends beyond that which is owed to their client and identifies three relevant categories - where:

1. the purpose of the retainer is where the client wishes the solicitor to confer a benefit on a third party e.g. wills cases;
2. a solicitor for one party makes representations on which it is foreseeable that the other party will rely, and on which it does rely;
3. the solicitor steps outside its role as solicitor for one of the parties and has assumed some other role which has widened the scope of its duties.

The AP1 completed by RP confirmed that Mr Haq was acting by a conveyancer, FLP, even though that was not the case by the time of the second TR1. RP could have completed another section of AP1 confirming that one of the parties was not acting by a conveyancer but that section required the person completing it to indicate what evidence of identity they have seen.

The Court of Appeal considered that the AP1 was, at least arguably, inaccurate and that there was a reasonable prospect of the Estate establishing that RP had owed Mr Haq a duty of care to act with reasonable care in completing the form accurately - i.e. RP had arguably stepped outside of their role, albeit the status of the Land Registry as a public body (rather than a commercial business looking after its own interest) was also an important factor in the Court’s assessment.

The case now has to be determined at trial but regardless of the outcome it is a useful reminder that there are exceptional circumstances in which solicitors, are held to owe duties to others, not just their client.