Retention by Appointment?
The Court of Appeal in Aroca Seiquer & Asociados, Miguel Angel Aroca Seiquer v Roger Adams & Ors  EWCA Civ 1589 held that a Spanish Law firm had negligently failed to warn UK purchasers of Spanish holiday homes not to pay the full purchase price without proof that the vendor was able to pass unencumbered title to them.
A key aspect in the court's decision was determining at which point the purchasers retained the Spanish law firm and consequently when the firm's duties to advise of the risk came into play.
The appellants in this matter were a Spanish law firm ('Aroca'), who sought to appeal an order awarding the respondents (holiday home purchasers) damages for professional negligence.
16 purchasers had bought holiday homes in Spain from a Spanish vendor. Two UK-incorporated agents marketed the properties in the United Kingdom, on behalf of the vendor. The agents offered a "one-stop" service to the purchasers, which included recommending they retain Aroca to act as their Spanish lawyers in the conveyancing transactions. The purchasers were not commercial buyers and required professional guidance to acquire the properties.
After contacting the agents, the purchasers visited Spain to inspect the properties. On this trip or shortly afterwards the purchasers signed a reservation form and purchase contract and paid the relevant agent a deposit of 10% of the purchase price. The remainder of the purchase price was paid in instalments. The purchase contracts did not accord with Spanish law, in particular they were not accompanied by documentary proof of a bank guarantee or insurance contract.
Aroca, despite being aware of the defects in the purchase contracts, sent each of the purchasers a letter shortly after the purchase contracts were signed. The letters were entitled 'Dear Client' ("the Dear Client letters") and set out a number of duties Aroca would be responsible for, if they were instructed in respect of the purchases.
Once the properties were built, the relevant agent notified the purchasers and arranged for them to visit Spain to complete the purchase. As part of those arrangements, the agents made appointments for the purchasers to attend Aroca's offices. Thereafter, the purchasers made the final instalment of the purchase price and took possession of the properties. However, the purchasers did not receive good title. Unbeknownst to them, the vendors had mortgaged the properties and failed to discharge the mortgages.
The judge at first instance found that Aroca had been retained by the purchasers prior to the final instalments being paid and had acted negligently in failing to advise the purchasers of the risks of paying the final instalment without securing good title.
When did Aroca agree to act on behalf of the Purchasers?
The critical factor in determining whether Aroca was liable to the Claimants turned on when they agreed to act on behalf of the purchasers.
The Court of Appeal held that the 'Dear Client' letters sent by Aroca constituted a contractual offer to act for each of the purchasers. The purchasers then accepted these offers, when their agents arranged an appointment for the purchasers to attend Aroca's offices during their 'completion' trip to Spain.
The Court of Appeal rejected Aroca's submission that the making of an appointment was equivocal conduct and consequently not capable of constituting acceptance. Instead, the court found the conduct to be unequivocal, with the appointments clearly made in order for Aroca to act for the purchasers. During the trip to Spain, the purchasers visited their property, went to a bank to collect a banker's draft for the final instalment of the purchase price and cash to pay to Aroca for taxes and fees, and attended Aroca's offices. They also met with the vendor to pay the final instalment and receive the keys. There was no suggestion of any other Spanish lawyer acting for the purchasers and the idea that the appointments were made so that the purchasers could decide whether to instruct Aroca was fanciful.
It consequently followed that the arranging of the appointments for the purchaser to attend Aroca's offices was the point at which the contract was formed following a valid offer and valid acceptance. The purchasers had retained Aroca at this point and Aroca owed a duty of care to the purchasers.
Were Aroca Negligent?
The scope of Aroca's retainer to each purchaser was to provide a conveyancing service and it was held that Aroca was obliged to exercise the degree of skill and care ordinarily exercised by reasonably competent Spanish property lawyers providing their services to English-speaking clients who were not resident in Spain. The Court at first instance had rejected an argument that Aroca owed the duties of a reasonably competent English solicitor. It also rejected the argument that Aroca's duties were lower because property agents had had conduct of initial meetings and negotiations. It was found that the purchasers had retained Aroca before paying the final instalments to the vendor. Aroca had therefore been negligent in failing to advise the purchasers that there was no bank guarantee as required by Spanish law, there was no proof that the vendor was able to pass an unencumbered title and Aroca had failed to advise the purchasers of the risks of paying the final instalment without securing good title. It was further found that had each purchaser withheld the final instalment, the vendor would have discharged the mortgages and the purchasers would have consequently acquired good title.
As a result, the purchasers were awarded damages based on the unencumbered value of the properties, with the exception of two purchasers who had discharged the mortgages and who were instead awarded damages for the cost of doing so.
Aroca submitted to the Court of Appeal that there was a procedural unfairness in the trial. They submitted that the purchasers had never pleaded that they had retained Aroca when they made the appointments to attend their offices, nor had they developed this argument in their opening or closing submissions. The judge's decision was therefore made on a basis that neither party had addressed. Aroca subsequently argued that they were deprived of the opportunity to call relevant evidence about the systems in place between agents and Aroca for making appointments for purchasers.
The Court of Appeal dismissed this argument on the basis that Aroca must be able to point to a real possibility of relevant evidence that could realistically have made a difference to the trial Judge's decision. The court was not convinced that such evidence existed, as there was doubt over whether the staff employed during the relevant period would be able to give specific evidence relating to each particular purchaser. The transactions had occurred 11 to 12 years prior to the trial and Aroca handled about 3,000 purchases a year. Any evidence would therefore be generic evidence relating to the system in place and such evidence would not assist Aroca's case.
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