A useful reminder of when solicitors owe duties to third parties

Dealing with an appeal from the summary dismissal of a claim, the Court of Appeal considered it arguable that, in the specific circumstances of the Ashraf v Lester Dominic Solicitors [2023] EWCA Civ 4 case, the solicitor had stepped outside his role and acted for all parties.

Background

In Ashraf, the factual scenario was quite unusual. Mr Ul-Haq held the freehold of a property, subject to a registered charge in favour of Bank of Scotland (“the Bank”). In 2008, he agreed to sell his property to a buyer who had also been offered a mortgage by the Bank. FLP solicitors (“FLP”) acted for all parties but one of their solicitors misappropriated the funds. Mr Ul-Haq’s charge was not discharged and the 2008 transfer was ineffective, as the TR1 transfer form had not been witnessed. Therefore, Mr Ul-Haq remained as the registered proprietor.

The Bank instructed a solicitor at Rees Page, Mr Kilvert, to complete the registration. Mr Kilvert sent the buyer a replacement transfer form and mortgage deed in 2010. These were returned to Mr Kilvert apparently signed and witnessed, with Mr Ul-Haq’s signature being witnessed by Mr Kan, a solicitor at another firm. Mr Ul-Haq called Mr Kilvert in 2011. Mr Kilvert explained to Mr Ul-Haq that he had received the signed and witnessed transfer form and he (Mr Kilvert) wanted him to see Mr Kan again and produce evidence of his identity.

Later in 2011, Mr Kilvert applied to the Land Registry on the Bank’s behalf for registration of the transfer and charge, which included an application to change the register in form AP1. In form AP1, a box requires the applicant (in this case, Mr Kilvert) to confirm in respect of each party to the transaction that the party was represented by a conveyancer or that the applicant was satisfied that sufficient steps had been taken to verify the party’s identity or, alternatively, to provide evidence of their identity. Mr Kilvert identified FLP as Mr Ul-Haq’s conveyancer, even though FLP had, by then, been intervened in by the SRA. The transfer was completed, and the buyer was register as the proprietor. Mr Ul-Haq’s charge was not discharged.

Mr Ul-Haq alleged that his signature had been forged. He brought proceedings against Rees Page in 2016, alleging that he had told Mr Kilvert that he had not known the solicitor said to have witnessed his signature on the transfer form (Mr Kan at Lester Dominic) and that he had not signed the transfer form. Mr Ul- Haq died in 2017 and the proceedings were carried on by his estate via the executor, Ms Ashraf.

In the High Court, Mr Justice Edwin Johnson, upholding the initial decision of Deputy Master Lloyd, held that the estate had no real prospect of establishing its factual case and that Rees Page owed Mr Ul- Haq no duty of care. The decision was appealed. The Court of Appeal held that Edwin Johnson J had been correct to hold that the estate had no prospect of establishing its case on the disputed facts. However, the Court of Appeal noted that Rees Page’s confirmations, including that Mr Ul-Haq was represented by a conveyancer,

“ ..enable the Land Registry to rely on the fact that such a conveyancer would have taken steps to verify the identity of their client.”

Nugee LJ went on to say that, whilst in filling in the form and lodging it, Mr Kilvert was undoubtedly acting for the Bank,

“…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…the purpose of seeking such confirmations, as the rubric in box 12 makes clear, is to reduce the risks of property fraud.”

Nugee LJ noted that there are special cases which are exceptions to the rule that solicitors do not generally owe a duty of care to non-clients and that it was arguable that Mr Kilvert had stepped outside of his normal role in filling in the AP1 form, as he indicated that FLP were acting for Mr Ul-Haq in the transaction, which would have been inaccurate.

On that basis, Nugee LJ identified the Claimant’s argument as being that Mr Kilvert was acting for all parties, such as to engage the principle expressed in Al-Kandari v JR Brown & Co [1988] QB 665 (by voluntarily agreeing to hold their client’s passport pursuant to an order of the court, the Defendant had gone outside the role of solicitors for their client and owed the Claimant a duty of care). The Court of Appeal noted that the case was not on all fours with Al-Kandari but rejected the suggestion that the confirmation given by Mr Kilvert was only for the benefit of the Land Registry and not the other parties.

Therefore, it permitted the appeal in part and allowed Mr Ul-Haq’s estate’s claim to proceed to trial, to determine whether Mr Kilvert had owed Mr Ul-Haq a duty of care and whether in fact he had breached that duty.

Comment

Generally, solicitors do not owe a duty of care to anyone other than their client. However, as set out in Court of Appeal’s judgment at paragraph 62, there are three scenarios in which a solicitor’s duty of care extends beyond their client,

“…instructions to solicitors by party A to confer a benefit on party B, when representations or actions by the solicitors are reasonably and foreseeably relied upon by other parties and when solicitors step outside of their role….Beyond these three types of case there is scant authority for solicitors owing duties of care to those that are not their clients.”

It is important to note that the Court of Appeal’s decision simply reversed the High Court’s decision to grant summary judgment and made no finding on the facts as to whether Mr Kilvert did indeed owe a duty or breach that duty if owed. However, it ought to act as a wake-up call to conveyancers who treat the filling in of transactional forms as simply a ‘tick box’ exercise, highlighting how it is arguable that duties can arise inadvertently.

The judgment is also food for thought for PI insurers, who may not be interrogating potential insureds as to their processes for dealing with what, at first glance, appear to be routine forms. It is important to understand the level at which such forms are dealt with by potential insureds and what supervision is in place. 

In our experience, it is not unusual for clerical staff to populate the information in the form for sending out. Firms involved in conveyancing will routinely use the AP1 forms and the Court of Appeal’s judgment makes it clear that inaccuracies and misstatements in that form may give rise to a duty of care that the solicitor may not anticipate or appreciate. Probing questions in proposal forms might well be called for.