Scope of duty and factual causation: Andrew O’Neill and Elizabeth O’Neill v Bull & Bull (A Firm) (2018)
The judgment in the recent case of (1) Andrew O’Neill (2) Elizabeth O’Neill v Bull & Bull (A Firm) (2018) provides helpful guidance on the scope of a solicitor’s duty of care when advising on a property purchase with unusual mortgage conditions. Tim Barr and Chris Lewis, at DWF LLP, acted for the defendant firm of solicitors.
The claimants, Mr and Mrs O’Neill, wished to purchase a new house and retained the defendant to act for them. On the face of it this was a straightforward conveyancing transaction. However, somewhat unusually, the mortgage conditions required the claimants to obtain a report from a structural engineer or chartered surveyor about subsidence/movement referred to in the mortgage valuation report (MVR) before the loan monies could be advanced. No report was obtained. Exchange of contracts took place but the mortgage lender refused to advance the funds prior to completion because no survey report had been received.
The claimants subsequently obtained a report from a consulting engineer who advised that there was no evidence of progressive movement. When this report was sent to the lender it dropped the “bombshell” that it had made a previous mortgage offer to another prospective purchaser of the same property, who had withdrawn following an adverse report on the condition of the property. There then followed discussions between the lender’s surveyor and claimants’ structural engineer, which resulted in the lender’s surveyor agreeing with the structural engineer’s findings. Content to proceed, the lender advanced the loan monies and completion eventually took place.
Unfortunately, that was not the end of the story as the claimants later complained of ongoing movement/subsidence to the property. They alleged that the defendant was negligent in failing to draw the mortgage condition and the MVR reference to movement to their attention. They admitted that they had not read either the mortgage offer or the MVR other than the headlines and considered that the condition to obtain the report was part of the “small print”. The claimants argued that had they been properly advised they would have withdrawn from the purchase. Their claim was for diminution in value between the price paid for the property and its actual value at the date of purchase.
The defendant argued that it had not breached its duty of care: it had explained the terms of the mortgage to the claimants and the claimants had said they would arrange a survey and obtain the necessary report. Unfortunately, there was no file note available which recorded such conversations. On causation, the defendant argued that the claimants would have gone ahead with the transaction in any event as the structural engineer’s report concluded there was no progressive movement in the property at the material time. The defendant also argued that the Claimants had failed to provide the requisite expert evidence to prove that the property was moving at the material time.
The Court's Decision
HHJ Simpkiss ordered a split trial on liability and quantum. Following the trial on liability, he found the defendant in breach of duty for failing to adequately draw the terms of the mortgage offer, the importance of obtaining a structural engineer’s report, and the consequences of not doing so, to the claimants’ attention.
He then went on to consider what the claimants would have done had they been properly advised. Following cross-examination, the Judge was satisfied that the claimants had read enough of the MVR to see that it was reporting evidence of movement and the need for a survey report. He then went on to consider the chronology of events after exchange of contracts and receipt of the structural engineer’s report. He concluded that, if properly advised, the claimants would not have withdrawn from the transaction and that it was “overwhelmingly probable that the Claimants would have satisfied [the lender] that a satisfactory structural survey had been produced to enable them to proceed with the purchase.” Consequently, the defendant was not liable for any alleged diminution in value of the property.
Considerations for lawyers and insurers
The case highlights important issues regarding the scope of a solicitor’s duty of care. The first being the need to ‘know your client’. Although the claimants had purchased a property previously and Mr O’Neill worked in the construction trade as an electrician, the Judge did not consider them to be sophisticated or even experienced clients in property transactions. They were regarded as ordinary consumer clients in a routine conveyancing transaction. In such cases, he held, a solicitor “ought to explain to them, in general terms, the nature of the transaction, the contractual terms and the mortgage”.
There is a more specific duty to bring to the client’s attention any unusual terms. In this case it was not enough for the solicitor to write to the claimants asking them to confirm that the mortgage offer was satisfactory and that they had fully understood its terms. There was a duty to explain to the claimants that if they exchanged contracts without the lender being satisfied by a structural engineer’s report on the condition of the property, they risked not being able to proceed with the transaction, forfeiting the deposit and being liable for damages for breach of contract. From a risk management perspective, when such advice is therefore given to a client it is essential to make a written record for the file, either by a letter to the client or an attendance note, to avoid any dispute later on.
Furthermore, the Judge held that where a MVR discloses movement which is “significant and likely to be progressive” a competent solicitor should draw to the client’s attention the importance of obtaining a structural engineer’s report and the consequences of not doing so. However, and this will be a welcome point for lawyers and their insurers, the Judge also held that once a structural survey was available, it was not any part of the defendant’s duty as solicitors acting on the purchase to advise about structural matters.
The decision serves as a useful reminder to professional indemnity claims handlers that, even when a solicitor is in breach of duty, a careful analysis and application of the facts to the ‘but for’ test should be carried out before taking a view on liability.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.