Colman Coyle’s Senior Associate, Matt Champ, has successfully resolved a multi-party dispute relating to professional negligence by the client’s former solicitors and a third party’s solicitors acting in breach of trust concerning a property deal.

Matt’s client (“the Client”) wished to make a loan to an individual who wanted to purchase the council flat in which he lived under the Right to Buy Scheme (“the Flat”) (“the Borrower”). The terms of the loan required the Borrower to either repay the sum borrowed, plus interest, or else, at the Client’s election, the Flat would be transferred to the Client when the loan expired.

The sum that was borrowed was to be used to purchase the Flat from the local council with the balance being given to the Borrower to do with as he wished (“the Balance”). The total sum was sent to the Borrower’s solicitors to be held to the Client’s order.

Solicitors advised the Client and solicitors were recommended to act for the Borrower.

The Borrower’s solicitors confirmed that they had the completed paperwork which included an executed transfer, charge and loan agreement (which both sets of solicitors had mutually drafted). The Borrower’s solicitors also stated that they had irrevocable instructions to complete the transaction in due course and, once the Borrower had purchased the property from the local council, they would also register the charge etc in the Client’s favour.

The Borrower wished to leave the country to relocate to Thailand and so the funds were released to him. However, rather than the Borrower’s solicitors retaining the funds needed to purchase the Flat from the local authority, and just providing the Borrower with the Balance, the entire sum was released in error to the Borrower. Accordingly, with no funds to complete the transfer, the property could be purchased and the Client’s charge could not be registered.

The Borrower, who had received the full funds, had disappeared to Thailand with no way of being contacted so as to return the funds. In consequence, the loan had effectively been made to the Borrower but the Client did not have the security that he was supposed to receive as part of the agreed transaction.

Proceedings were issued by Matt which related to the Client’s solicitors’ failure to advise the Client that the suggested action would seemingly contravene the general prohibition contained within the Financial Services and Markets Act 2000 and thus be unenforceable. Had the client of known that, he would never have agreed to provide the Borrower with he funds. It was also alleged that the Borrower’s solicitors had released the entirety of funds to the Borrower in breach of a Quistclose trust (monies provided for a specific purpose i.e. the purchase of the flat).

After the Borrower’s solicitors attempted to strike out the claim against them, which HHJ Monty KC refused to grant but did order that they paid the Client’s legal costs of the application, Matt managed to continue to apply pressure to the Defendants which resulted in both parties agreeing to accept the Part 36 offer that Matt had previously made. The Client will now recover the sum that was borrowed and its legal costs up until the date of acceptance of the notice.

Matt was assisted by Duncan Kynoch of Selborne Chambers.

Colman Coyle have extensive experience in negotiating complicated commercial disputes and also complicated property disputes, even when they overlap. Please get in contact if you require any assistance.