Solicitors’ Duty of Care to Third Parties

All solicitors owe a duty of care to their clients, and breaching this duty can lead to accountability. However, a critical question arises: Do solicitors also owe a duty of care to non-clients? This article aims to clarify this issue, drawing insights from the Court of Appeal‘s decision in Ashraf v Lester Dominic Solicitors & Ors [2023] EWCA Civ 4. This landmark ruling sheds light on the scope of solicitors’ responsibilities to third parties.

In most cases, solicitors are obligated to fulfil their duties to their clients exclusively. However, there are rare situations where solicitors have been found to have a duty of care towards individuals who are not their clients.

In Ashraf v Lester Dominic Solicitors & Ors [2023] EWCA Civ 4, the Court of Appeal hinted at the possibility that a solicitor, when handling paperwork to alter a property’s title register for a bank with a registered charge, may bear a duty of care to all parties involved. This showcases the court’s inclination to expand solicitors’ obligations beyond their clients, particularly when they undertake roles that benefit third parties, whether intended or incidental.

If you have a third party claim our dual-qualified Solicitor & Barrister team assess your case at the outset. We will quickly determine the merits and prospects of the claim and then also advise you on how to obtain an optimal settlement (often on a no win no fee basis).

Ashraf v Lester Dominic Solicitors & Others

The case centred on a property transaction wherein Syed ul Haq (the “Seller”) aimed to sell a property in Ealing to Bijan Attarian (the “Buyer”) for £1,250,000. The Bank of Scotland served as both the lender for the Seller’s existing mortgage and the proposed new mortgage for the Buyer. Interestingly, FLP Solicitors represented all three parties involved in the transaction. However, complications arose when the office manager at FLP Solicitors misappropriated the sale proceeds provided by the Bank of Scotland. Subsequently, this manager was convicted, leading to the takeover of FLP Solicitors.

Despite FLP Solicitors undergoing intervention, the transaction proceeded forward. The Buyer sought new legal representation, and likewise, the Bank of Scotland engaged Rees Page Solicitors in lieu of FLP Solicitors. However, the Seller remained without legal representation. Subsequently, during the process of updating the property register, Rees Page Solicitors, representing the Bank of Scotland, inaccurately completed the HM Land Registry’s Form AP1 (the “Form AP1”). Notably, Panel 13 of the Form AP1 required details of each party’s conveyancers. Despite FLP Solicitors no longer operating and the Seller being unrepresented, Rees Page Solicitors erroneously listed FLP Solicitors as the Seller’s representatives. Additionally, Rees Page Solicitors failed to fulfil the requirement of verifying the identity of the unrepresented party, despite it being a requisite for HM Land Registry. This verification is crucial as it allows HM Land Registry to rely on the conveyancer’s confirmation regarding their client’s identity. However, despite this oversight, the application was approved by HM Land Registry.

Enforcement of Third-party Duty of Care

The Seller commenced legal proceedings against several parties implicated in the transaction, including Rees Page Solicitors. Following his demise, the Seller’s estate pursued the claim, alleging a breach of the duty of care owed by Rees Page Solicitors to the Seller, despite the absence of a direct client-solicitor relationship. As per the Seller’s estate, Rees Page Solicitors were obliged to exercise reasonable care to ensure the accurate execution of the transfer by the Seller, who held the status of the registered proprietor during document submission.

Summary Judgment

Drawing on the precedent set by the Court of Appeal in Dreamvar (UK) Ltd v Mishcon de Reya [2016] EWHC 3316 (Ch), Rees Page Solicitors effectively secured summary judgment, contending that they bore no duty of care to the Seller. This assertion was grounded on the fact that the Seller neither engaged them as his solicitors nor sought advice from them. Subsequently, representatives of the Seller’s estate lodged an appeal against this judgment.

First Appeal

The appeal, heard in March 2022, resulted in dismissal. It was concluded that there was insufficient evidence to indicate that this case warranted an exception to the standard principle that solicitors typically do not owe a duty of care to third parties.

Second Appeal

The focal point of this article is the recent 2023 appeal, which provided Lord Justice Nugee with the opportunity to deliver a significant ruling concerning the duty of care owed to third parties.

The pivotal question before the Court was whether Rees Page Solicitors owed a duty of care to the Seller, a non-client, given that he had not received substantive advice from them. While traditionally, solicitors are not considered to owe duties to non-clients, the Court found that Rees Page Solicitors’ completion of the Form AP1, indicating the Seller’s representation by FLP Solicitors in the transaction, implied an assumption of responsibility towards the Seller. This underscores the acknowledgment that there are “exceptional cases where solicitors have been held to owe a duty of care to someone who is not their client.”

Crucially, the completion of the Form AP1, affirming the Seller’s representation, had the consequence that the HM Land Registry refrained from further verifying the Seller’s identity, potentially exposing him to fraud.

Third-party Duty of Care

Rees Page Solicitors’ legal representatives argued before the Court that verifying a party’s identity, as required in this case, parallels the obligatory anti-money laundering checks conducted by firms. They maintained that such verification serves the broader interests of society, going beyond the immediate concerns of individual transactions.

In contrast, legal representatives for the Seller’s estate emphasised the explicit purpose of identity checks outlined in the Form AP1 as: to mitigate the risk of property fraud. They contended that this objective primarily benefits the parties involved in a transaction rather than society at large.

Download the Judgment Here

Court’s decision regarding Duty owed to third parties

The Court sided with the latter perspective. The Court affirmed that it was accurate that Rees Page Solicitors did not owe any duty of care to the Seller until the date they finalised and lodged the application with HM Land Registry. Nonetheless, Lord Justice Nugee suggested that they might have had a duty of care towards the Seller at the point when completing HM Land Registry documents for register alteration.

Lord Justice Nugee referred to the case of Al-Kandari v JR Brown & Co | [1988] QB 665, stressing that while every case is different, he believed that:

“giving such confirmations the solicitor for the applicant is not acting for the applicant alone but stepping outside that role and acting for all parties… and hence owes a duty to all such parties to act with reasonable care in filling in the form accurately.”

Lord Justice Nugee elaborated on Panel 13 of the Form AP1, emphasising that when Rees Page filled it out, they were providing assurances to the HM Land Registry not only on behalf of the Bank of Scotland but also concerning the other parties involved.

The Court refrained from making a definitive decision on whether a duty was owed, but it did grant the appeal, to the extent of setting aside the summary judgment and allowing the claim against Rees Page Solicitors to proceed to trial.

Potential Implications on Third-party Duty of Care

The case of Ashraf v Lester Dominic Solicitors & Ors [2023] EWCA Civ 4 marks a potentially significant development in the realm of solicitors’ duties. While the outcome remains uncertain, the case underscores the importance of diligence and care in legal transactions, particularly concerning third-party interests. As legal practitioners navigate evolving responsibilities, the implications of this case will undoubtedly shape future legal practice.

Book an Initial Consultation with our Professional Negligence Lawyers

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