Civil procedure – Breach of undertaking – Conveyancing – Land charges

(1) Adrian Paul Clark (2) Heather Jane Clark v Lucas Solicitors LLP: Ch D (Sarah Asplin QC): 31 July 2009

The applicants (C) applied for summary judgment in respect of their claim for specific performance of an undertaking given to them by the respondent firm of solicitors (L) in the course of a conveyancing transaction.

C had purchased a property from a third-party property developer (G) that formed part of a housing development site. Two charges were secured on the entirety of the site: one in favour of a bank and the other in favour of an individual (K) who had loaned G money for the development of the site. The bank’s charge had priority over K’s. It was an express term of the bank’s charge that it could set off the whole or any part of G’s indebtness to it against any credit balance that G might have with the bank. L acted as solicitors for G in the sale of the property and, in reply to requisitions on title inquiries, gave undertakings to C prior to their purchase of the property to discharge the charges on it. It did not appear that L communicated in any way with K prior to giving the undertaking to discharge his charge. L paid the purchase sum of the property to the bank, which used the sum to partially discharge G’s liability to it and it discharged its charge on the site. K received nothing and refused to discharge his charge on the site, which was for a sum approximately twice that which C had paid for the property. L admitted that it was in breach of its undertaking. L contended that it was inappropriate to order it to perform its undertaking as: (1) performance of the undertaking was an impossibility and an inquiry as to damages was the appropriate course; (2) there was insufficient evidence as to the precise sum due to K; (3) ordering performance of the undertaking would be disproportionate to C’s true loss; (4) C might be entitled to be subrogated to the rights of the bank under their prior charge.

Held: (1) Performance of L’s undertaking was not impossible. The undertaking given by L was in a standard form and was to pay off charges on completion. Such a step was within L’s control, Udall (t/a Udall Sheet Metal & Co) v Capri Lighting Ltd [1988] QB 907 CA (Civ Div) applied. The situation could have been avoided if a redemption figure had been obtained and an agreement reached before L gave the undertaking. Further, the undertaking could be performed by the payment of a cheque, albeit a larger one than might have been payable had enquiries been made and agreement reached at the appropriate time, L Morgan & Co v Jenkins O’Dowd & Barth [2008] EWHC 3411 (Ch) applied. Moreover, it could not be said that performance of the undertaking was either otiose, John Fox (a firm) v Bannister King & Rigbeys [1988] QB 925 CA (Civ Div) applied, or that K’s rights could be equated with those of a person entitled to an easement who would need to be persuaded to relinquish his right and could legitimately choose not to do so, Wroth v Tyler [1974] Ch 30 Ch D considered.

(2) There was no evidence of a real dispute as to the sum that was owed to K.

(3) Despite the fact that the sum demanded by K was approximately double the value of C’s property, K was entitled to demand the full sum due and L was to be taken as having contemplated that that might well be the case, especially in light of the fact that G was developing the site as a whole. Accordingly, K’s demand was not something which could be categorised as wholly unreasonable or outside L’s contemplation, Morgan and Angel Solicitors v Jenkins O’Dowd & Barth [2009] EWHC 46 (Ch), [2009] 1 WLR 1220 considered.

(4) The effect of L’s argument as to subrogation was to seek to require C to commence difficult litigation, and even sell their property in order to mitigate their loss if K could not be persuaded to accept less than the sum due to him, instead of being able to enforce the undertaking. Such a course could not be correct and would place L in a position as if it had not given the undertaking at all. Accordingly, it was appropriate to grant C’s application.

Application granted.

Adrian Pay (instructed by Eversheds) for the applicants; Charles Phipps (instructed by Williams Holden Cooklin Gibbons) for the respondent.