The recent case of Padden v Bevan Ashford  EWCA 1616 is a telling example of the onerous duty on any solicitor who certifies a mortgage.
The Claimant ('C') and her husband ('H'), a financial consultant, were married in 1977 and co-owned a substantial house. In 2003 H, accompanied by his solicitor, told C that he had taken for his own purposes about £200,000 of client money but could avoid prosecution if it was repaid. H's solicitor subsequently wrote to C recording that, at the meeting, she had said she was willing to 'assist' H by inter alia giving up her interest in the house. H's solicitor advised her to take independent legal advice.
C visited one of the Defendant's ('D') branches and was advised not to sign a proposed consent to forego her beneficial interest in the house. 2 weeks later C and H visited another branch of D with 4 documents, including a second mortgage over the house and a deed that recorded H's indebtedness at over £860,000. A solicitor ('M') witnessed the signatures of C and H on each document including the certificate in the mortgage as to C's understanding of its obligations. C received no advice from M.
H was subsequently prosecuted and sentenced to 6 years' imprisonment. C divorced H and the house was sold. C's subsequent claim against D for M's failure to advise her properly in connection with the transaction was dismissed at trial.
Allowing C's appeal and ordering a retrial, the Court of Appeal held that the consequence of the certificate signed by M was that he had advised C about the mortgage and, to the best of his knowledge, she had understood its effect and was not acting under any undue influence or misrepresentation. That certificate was also intended to protect the other party to the transaction from any subsequent claim to set it aside. D's initial bald advice not to sign was not sufficient to discharge that duty. A solicitor ought to explore why C was prepared to put her home and assets at severe risk to protect H who turned out to be a fraudster. She needed to be advised to discover the extent of H's criminality and the likelihood of prosecution.
Derek Kerr / 1st Feb 2012
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