Professional negligence lawyers Irwin Mitchell have just won justice for a couple after failings by conveyancing solicitors saw their house sale fall through – and the couple left nearly £170,000 out of pocket. Daniel Brumpton, a partner at Irwin Mitchell and the professional negligence specialist who led the case, tells Today’s Conveyancer why all solicitors should learn a lesson from it – and keep the Conveyancing Handbook on their desks.
How many claims do you deal with against conveyancers Daniel?
“We do all sorts of professional negligence so that’s clients suing solicitors, surveyors, accountants, architects, financial advisers – the full range of professionals. The majority of our claims at the moment are split between solicitors and surveyors – I’d say that in excess of 50% of the claims I see are against conveyancing solicitors. The housing market is on the up so we’re there are some new instructions coming through but we’re also getting old claims from the end of 2008 and beginning of 2009 at the height of the crash– there’s a six year window in which to bring a claim.
“I think mistakes are made in conveyancing because it’s a volume business. I know, of course, that lawyers don’t make mistakes on purpose but if a firm can cut out the number of mistakes they make all the better for their business, reputation and, most importantly, clients.”
What happened in this case?
“Our clients, Mr and Mrs Beer, from Surrey – who, thankfully, had a legal expense insurance policy through their home insurance – decided to sell their house in mid-2007 to a property developer. They owned a big five-bedroom detached house and wanted to downsize – they were in their 60s and their children had all moved out. So they instructed McMillan Williams – the defendants in the matter – and explained that they had a deal with the developer and wanted to exchange but agree a long completion date because they hadn’t found a place to buy yet. They told McMillan Williams to get a 10% deposit from the developer.
“But McMillan Williams didn’t get a 10% deposit – instead, unbeknownst to our clients, they took a 4.3% deposit. This only came to light when our clients found a property to buy and the time came to exchange contracts on that property. They were asked for a 10% deposit by the sellers so they instructed McMillan Williams to use the 10% deposit from the sale of their property – and discovered they hadn’t received a 10% deposit but less than half of that.
“Still, the people our clients were buying from agreed that they’d take a 4.3% deposit. The problem was, though, the solicitors also failed to give any warning about the risks of accepting a reduced deposit to Mr and Mrs Beer. In particular, no warning was given that the Beers’ potential liability to their vendor might exceed the amount of the deposit from their purchaser whether in cash or the deemed 10% deposit. That’s just wrong – and so it played out.
“Sure enough, the developer pulled out of the purchase of our clients’ property meaning they couldn’t complete on the purchase of their property. Then their sellers decided to sue our clients for the shortfall in the deposit because by that time the crash had kicked in and they couldn’t sell their property for as much as they’d agreed with our client and had lost money on the deal.
“So when they sold it nine months later at a lower sum they pursued our clients for the difference, which equated to £117,821.45. Our clients had to re-mortgage their own property to pay that off and that’s when they approached us for help.
“Straight away, I could see there were two aspects to this: firstly, a claim against their original purchaser for the remainder of the deposit and secondly, a claim against McMillan Williams for taking a lower deposit than instructed and for advising there was no risk in exchanging contracts.
“We investigated the claim against the developer first and found out he had a number of CCJs against him – he wasn’t good for the money and there was no point in pursuing him. So we looked at the solicitors – well of course they had insurance and there was a better prospect of bringing a successful case against them. So, in 2009, we started down that avenue and it was a battle all the way to trial, in the last week of October 2013.
“Even then that wasn’t an end to it – we had the judgement in our favour in January 2014 but McMillan Williams applied for permission to appeal on paper. That was knocked back by the Court of Appeal in June 2014 but they then made an application for oral permission to appeal. That was rejected in November so, at last, there’s no further course of action they can take and our clients have been vindicated in bringing their claim.”
What effect did all this have on your clients?
“Moving house isn’t easy at the best of times but this was just a nightmare for the Beers. Clients place their trust in conveyancing solicitors and to be let down like this and then have a five year battle to bring the case to court – well, it was just so stressful. My clients are lay-people so giving evidence in court and being cross-examined on that evidence wasn’t pleasant for them. The worst of it is that they still haven’t been able to sell their house and move on. But now, hopefully, with the reparations the court awarded them, they can.”
What was the court’s final decision?
“The Judge found that the solicitors had breached their duty of care by not informing our clients they’d accepted a lesser deposit – at the very least our clients should have been asked whether they were happy to take a 4.3% deposit instead of a 10% deposit.
“The Judge also found that McMillan Williams should have advised our clients more fully about the risks involved in exchanging on the new property – the solicitors’ advice on that was either inadequate or wrong.
“In total our clients recovered in the region of £167,000 which is the full amount they had to pay the sellers of the property they wished to buy plus interest. The solicitors have been ordered to pay our clients’ legal costs as well, which are in the region of £200,000.”
What makes this case so interesting?
“Usually claims of this nature aren’t heard – normally they are either settled out of court or, if the case isn’t very strong, dropped. But here the solicitors thought they’d done everything right and were extremely bullish in defending themselves the whole way through the process. And, quite clearly, they hadn’t done everything right as the judgement was pretty scathing of them.
“Hopefully this case will encourage others who’ve been mistreated similarly to seek legal recourse. There’s still a belief that when a solicitor makes a mistake there’s nothing the client can do but that’s nonsense. There are firms out there, like us, who can help.”
What can conveyancing solicitors learn from this?
“First of all, they need to accept they aren’t right all the time. As I said, McMillan Williams adopted a very bullish attitude in defending this, which they are entitled to do – they have a reputation to protect – but I would have expected them to be more reciprocal in terms of settlement discussions.
“One criticism levelled at them by the Judge, for example, was that there were no file notes made of conversations with their clients at the time the purchase was going ahead. That’s appalling. Paperwork is so important – in any discussions with a client, a file note should be taken.
“The Judge also set a great store on the Conveyancing Handbook – it’s not the law but it’s a guide to good practice in conveyancing. And McMillan Williams hadn’t followed it. I think there’s a lesson for all solicitors there.”