21 Sep 2011

Professional Negligence: The Basics

Professional Negligence: The Basics

Paul McIntosh, Senior Solicitor, provides a basic guide to dealing with professional negligence claims.

Paul McIntosh, Senior Solicitor, provides a basic guide to dealing with professional negligence claims.

In the current economic climate, lenders repossessing property often find themselves facing a significant shortfall following sale. Although this may simply be down to falling property prices, it is worthwhile in many cases to investigate the background to the original transaction and the conduct of the professionals who acted in the original purchase and mortgage.

Investigating the Transaction

A lender will want to obtain the original conveyancing file from the completing solicitor for the purpose of these investigations; this is the only way to fully investigate the conduct of that solicitor.

The Law Society of Scotland has made it clear to solicitors that two separate files should be kept for a purchase and security transaction: one for the purchase, which belongs to the borrower; and one for the security, which belongs to the lender. Due to legal professional privilege, the lender is only entitled to require delivery of the lending file.

This can often cause difficulty in investigating the background to the transaction, as the lending file will not generally contain the documentation and information required for such an investigation. Further, completing solicitors will often be unwilling to release the entire file in any case due to the prospect of facing a possible negligence claim.

Waiver of Privilege

There is a clear need to be able to fully investigate the background to these transactions. As such, many lenders include a clause in their mortgage agreement requiring the completing solicitor to deliver their complete original conveyancing file upon receiving a request from the lender. This clause acts as a waiver of legal professional privilege with the borrower authorising his solicitor to release the entire transaction file to the lender.

This was confirmed recently in the decision of the High Court of England & Wales in the case of Mortgage Express v Sawali. The Judge, in delivering his judgment in favour of mortgage express, stated that it was a matter of ‘commercial common sense’ that the clause would function as a waiver of legal professional privilege. The clause was clearly expressed, and could not have functioned as anything else but such a waiver.

A Useful Tool

This decision does not necessarily state the law in Scotland, however it is anticipated that the same reasoning would be followed in a Scottish court, and so it provides a useful tool in investigating possible professional negligence claims in Scotland. The commercial realities of lending are the same across the whole of the UK.

The existence of such a waiver can spell the difference between an investigation stonewalled by an obstructive completing solicitor, and a successful professional negligence claim.

Paul McIntosh, Senior Solicitor

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