Duty to third parties clarified by the High Court
The recent High Court case of Chief Land Registrar v Caffrey & Co deals with the duty of care owed by a firm of solicitors dealing with a property transaction.
Caffrey & Co solicitors acted for a couple in relation to the discharge of their mortgage. The couple provided their solicitors with a copy of the discharge form which the bank had purportedly signed. It later transpired that the signature was a forgery. Caffrey & Co did not make any enquiries with the bank when dealing with the discharge of the mortgage. They sent the discharge form to the Land Registry, who acted upon it and removed the charge from the title of the property.
The bank was indemnified by the Land Registry for their losses as a result of the transaction. The Land Registry relied on two causes of action against Caffrey & Co:
1) That Caffrey & Co owed a duty of care to the bank to take reasonable care and skill in dealing with the discharge form; and
2) In making the application for the couple, Caffrey & Co expressly or impliedly represented that it had taken sufficient steps or knew of sufficient facts to satisfy itself that the discharge form had been properly executed. Further, Caffrey & Co owed a duty of care to take reasonable care and skill that all representations regarding the discharge form were true.
In dealing with the first cause of action, the Court found that Caffrey & Co did not owe a duty of care. They had not been asked to act on behalf of the bank and only acted for the couple. Caffrey & Co were therefore under no duty of care to a third party and no duty to verify whether the discharge form was genuine.
In relation to the second cause of action, the Court found that it was right to treat Caffrey & Co as having assumed a duty to take care in the representations which it made to the Land Registry. Default judgment was therefore given in the Land Registry's favour on the second cause of action.