Agency – Equity – Professional negligence – Estoppel by representation

Jean Sarah English v (1) Colin English & Yvonne English (2) Hodge Jones & Allen (a firm) (3) Swift Advances plc: Ch D (Judge David Cooke): 3 August 2010

The claimant (E) issued proceedings for fraud against her son (C), the first defendant, in relation to a legal charge secured against her house. She also sought damages for professional negligence against the second defendant solicitors (H) and the return of monies paid to redeem the legal charge from the third defendant finance company (S).

E’s case was that in 2002, without her knowledge, C had forged her signature on a loan and legal charge secured against her house and taken the loan proceeds. E accepted that she had signed a ‘solicitors verification certificate’ at H’s offices, which had been provided by S and which confirmed that she had been advised, alone, about the consequences of entering into the loan, but she alleged that she had never actually received such advice and had believed that a completely different financial transaction was under consideration. She maintained that she only learnt of the loan upon seeking advice following service of possession proceedings, when she was told that the charge to S would have to be met from the sale proceeds of her house. S was paid and C then disappeared with the remaining net proceeds. C was not prosecuted because forensic evidence was not conclusive of forgery, but in the instant proceedings, E had entered a default judgment against him, which remained unsatisfied. Her case against H was that they should not have certified to S that they had advised her in relation to the loan agreement and the legal charge, and her case against S was that it was liable to repay her the money used to satisfy the charge on the basis of constructive trust or payment by mistake.

Held: (1) The first issue to be established was the authenticity of E’s signature on the relevant documents. The joint expert evidence supported a finding that none of the signatures were hers.

(2) Second, it was necessary to establish what had taken place at H’s offices. If E’s account of the meeting was correct, the events must have been markedly different to what was recorded on H’s verification certificate. E bore the burden of showing by evidence that on a balance of probabilities, that contemporaneous document was not a true reflection of events, and her evidence had to be all the more convincing given that she accepted that she signed the document herself at the time confirming its accuracy. There were a number of indications within the solicitors verification certificate that it had been completed with some care, which suggested that the solicitor concerned had been paying more than lip service to it. On the facts and evidence, E had been aware of the loan earlier than she claimed, and parts of her recollection had been shown to be inaccurate, confused or difficult to believe. Her testimony was not therefore a reliable basis on which to ignore the written and signed record of the advice given at the meeting. E’s contention that H should have refused to sign the verification certificate if he was unable to provide all the advice that it anticipated was not acceptable: H had no prior retainer with S and the certificate did not define the scope of H’s duties to S or establish duties that were owed to E. As the relevant solicitor had returned the certificate with deletions of the matters that he was not prepared to certify, he was not in breach of any obligation to S and could not incur any liability to S in respect of the subject matter of the deleted clauses. It had been for S to decide whether it was prepared to proceed with the transaction notwithstanding the deletions. H was not in breach of any duty to E and the case against it had to be dismissed.

(3) Notwithstanding that E’s situation invited sympathy, given that she had been motivated by a desire to help C and to conceal his forgeries from her other children, E’s conduct was, on the facts and evidence, sufficient to amount to ratification of C’s acts, to the extent that she was estopped from denying that she was bound by the documents that C had signed, Greenwood v Martins Bank Ltd [1933] AC 51 HL applied. The effect of the ratification was to constitute C retrospectively as E’s agent to enter into transactions on her behalf and to put forward documents as being authorised by her. Alternatively, the elements necessary to establish an estoppel based on representation were also made out.

Judgment for second and third defendants.

Nigel Clayton (instructed by Armstrong Luty) for the claimant; no appearance or representation for the first and second defendants; Graham Chapman (instructed by Mills & Reeves) for the third defendant; Damian Falkowski (instructed by in-house solicitor) for the fourth defendant.