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February 2018

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Heaney v McEvoy [2018] NICA 4 Tomlin Order for possession – grounds to set aside O’Neill v Bull & Bull (A Firm) (Unrep) Canterbury County Court 5 February 2018 Solicitors – professional negligence – mortgage conditions – duty to advise Sinha v Saluja (Unrep) Chancery Division (Barling J) 21 February 2018 Receivers – injunction to restrain sale HM Land Registry Practice Guide 29: Registration of legal charges and deeds of variation of charge HM Land Registry Practice Guide 29: Registration of legal charges and deeds of variation of charge
Case name Neutral citation Legal points Case summary Facts Held Comment Heaney v McEvoy [2018] NICA 4 Tomlin Order for possession – grounds to set aside The court considered the effect of a Tomlin Order for possession and the basis on which it could be set aside for fraud. The deceased died leaving a property which was occupied by some of her children, the defendants. Her executor claimed possession for the purposes of winding up the estate. Ds made a claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Order 1979. Ds attended court and were legally represented by solicitors and counsel, but agreed to compromise the proceedings by entering into a Tomlin Order in which they withdrew the Inheritance claim and agreed to judgment in the possession claim. They subsequently had second thoughts and acting as litigants in person applied to set aside the Tomlin Order on the ground of fraud, alleging that their legal team had been bribed and had conspired with the other side, and that they had been forced to enter into the Tomlin Order by counsel. At the hearing [2017] NICh 24 the judge held that Ds came nowhere near to adducing reasonably credible evidence of fraud and there was no evidence that they had been pressurised or tricked by their legal team into signing the Order. The court had no doubt that the Ds knew exactly what they were agreeing to when they signed the Tomlin Order. The court also had no doubt that they simply had second thoughts, but the reason for this was immaterial. There were no grounds to allege mistake. Ds were legally represented and signed the terms with their eyes open. Although they complained about the quality of the advice they received from the solicitors and counsel, and their conduct, the court did not know enough about their circumstances to reach any view on these issues. It was open to them to sue their legal team if they had failed to exercise the requisite degree of skill and care. Finally, Ds proved to be unreliable historians, eager to mould the facts to their objective as opposed to telling the unvarnished truth. The application was therefore dismissed. Ds appealed on much the same grounds and were given time to put their cases at an oral hearing, although they afterwards complained that they had found the process confusing and should have been allowed to cross-examine the respondent. The court reminded itself that generally an appeal is by way of rehearing, conducted by way of review of the trial, but without re-hearing trial testimony. The trial judge had the advantage of hearing oral evidence on the Tomlin Order issues. In the absence of any indication that the judge had misdirected himself, there was no basis upon which an appeal court would interfere with his findings. There was also no basis upon which Ds could resist an order for possession. Appeal dismissed. Although this is not a mortgage case, it raises issues which occasionally arise in mortgage cases, namely the enforceability of a Tomlin Order (a type of consent order) for possession. Having second thoughts or blaming your legal team is not enough. In order to set aside a Tomlin Order, you need to establish some vitiating circumstances ie. grounds which are sufficient in law to set aside a [mortgage] contract. Special care needs to be taken in alleging and proving fraud. Here, the evidence was nowhere near sufficient. Most litigants can expect to be condemned in costs for running these sorts of allegations without any evidence! Although this is a decision of the Court of Appeal in Northern Ireland, the same principles apply in England and Wales.
Case name Neutral citation Legal points Case summary Facts Held Comment O’Neill v Bull & Bull (A Firm) (Unrep) Canterbury County Court 5 February 2018 Solicitors – professional negligence – mortgage conditions – duty to advise Although a solicitor acted in breach of duty in failing to draw unusual terms of a mortgage offer to the client’s attention, it was not causative of any loss. Cs retained solicitors to act for them on the purchase of residential property, subject to mortgage. The mortgage valuation report identified subsidence, and the mortgage offer was subject to a condition which required a structural engineer’s report to address the issue before releasing the advance. The solicitor asked Cs to confirm that the mortgage offer was satisfactory and that they understood its terms, which they did. Contracts were exchanged but completion was delayed after it came to light Cs had not read the mortgage offer and were unaware of the requirement for a structural engineer’s report, which they said the solicitors had not specifically told them about. Completion eventually took place, but Cs subsequently complained about subsidence, which they claimed had caused a diminution in value of their home. There had been a breach of duty. Although the solicitor claimed he had been told the clients would obtain a report, there was no file note to this effect. The terms of the mortgage offer requiring an engineer’s report was sufficiently unusual and should have been addressed. The mortgage valuation report had also flagged up issues about the structural integrity of the house which should have been followed up. However, it was overwhelmingly probable that had Cs been properly advised, they would have proceeded with the purchase in any event, and on this basis the question of damages did not arise because the breach of duty was not causative of any loss as a result of any diminution in value. Gabriel v Little (BPE v Hughes-Holland) [2017] UKSC 21 considered. Conveyancing transactions are a major source of professional negligence claims. Much client dissatisfaction stems from a lack of communication. Here, the solicitor owed a duty to advise on unusual terms (and as is so often the case, should record the advice given in file/attendance notes), but was not liable for any losses resulting from the client’s own decision to go ahead regardless.
Case name Neutral citation Legal points Case summary Facts Held Comment Sinha v Saluja (Unrep) Chancery Division (Barling J) 21 February 2018 Receivers – injunction to restrain sale A borrower’s application for an interim injunction to restrain a sale of property by receivers on the ground that he had repaid his indebtedness was dismissed. Borrower B borrowed monies from lender L secured by a second charge over business premises. Following default in repayment L appointed receivers who proposed to sell the property at auction. B applied for an interim injunction to restrain the sale on the basis that he had repaid the indebtedness. B’s evidence from bank statements and spreadsheets presented a confused picture, with inconsistencies when compared to contemporaneous evidence. He had failed to show a good arguable case that his indebtedness had been paid off, as required by American Cyanamid, and there was no serous issue to be tried. In addition, B failed to show that the property was likely to be sold at an undervalue, or that he would have been able to give a cross-undertaking in damages. Application dismissed. An application for an interim injunction to restrain receivers from doing something, in this case selling a property, is usually quite a tricky thing to do. Ordinarily a claimant will need to show a good arguable case that the appointment is invalid, or that the receivers are acting outside their contractual and/or statutory powers (s 109 Law of Property Act 1925) and be able to offer a reliable cross-undertaking in damages. Here, the borrower also sought to restrain a sale at an undervalue, something which usually requires clear and reliable valuation evidence of a sale outside the ‘bracket’ and/or some other breach of duty. Although the claimant could, alternatively, have sought an account (given that the dispute was about whether he had paid the loan off) on the evidence, he probably still wouldn’t have secured an interim injunction.
Publication HM Land Registry Practice Guide 29: Registration of legal charges and deeds of variation of charge On 19th February 2018 HM Land Registry updated Practice Guide 29, adding a new section (14) about digital mortgages, and the use of the digital mortgage service.