England and Wales High Court (Technology and Construction Court) Decisions

2. The defendants were instructed to act as solicitors for the claimants in a mortgage transaction in which the defendants acted also for the borrower.

3. The claimants allege breach of fiduciary duty and breach of contract and negligence on the part of the defendants.

4. The defendants admit negligence and breach of contract but deny breach of fiduciary duty.

5. Questions of limitation of actions arise.

6. The defendants allege contributory negligence on the part of the claimants. Contributory negligence is relevant only to the admitted negligence and breach of contract (if not statute barred) and is not relevant to breach of fiduciary duty.

7. The sums claimed by the claimants amounting in total to £101,790 plus interest are admitted as figures subject to liability and subject to issues of causation.

8. In the autumn of 1989, Dr. Ombolaji Rauf Kuti wanted to buy a long leasehold interest (112 years) in a flat known as 37, Beechworth, 179, Willesden Lane, London NW6 (the property).

9. Dr. Kuti was the Medical Director of a hospital in Lagos, the Nimota Hospital. On the letter heading of that hospital, he described himself as having the following qualifications: MB BS (Lond), FRCOG (Eng), FMCOG (Nig). He has written letters from a residential address in Lagos and also from Flat 83, Riverside Court, 20 Nine Elms Lane, London SW8. He has given an address for correspondence as 340, Park West, Edgware Road, London W2. He was born in 1935. He shortens his first name to Bolaji, and is commonly known by that name. The use of that shortened name caused some momentary confusion at one point in the transaction the subject of this action which is of no significance.

10. The current senior partner of the defendant firm is Mr. Roger Newhall. At the relevant time he was a partner in the firm, having qualified as a solicitor in 1972. He is the only solicitor in the firm to have played a part in the transaction the subject of this action. At the relevant time his personal practice was almost wholly concerned with residential conveyancing , though he did some commercial property work but not commercial mortgages. The plaintiffs stress that they do not allege any dishonesty on his part. It is the plaintiffs' case that Mr. Newhall was guilty of professional misconduct in that, they allege, he consciously preferred the interest of one client (Dr. Kuti) over the interest of another client (the claimants). The claimants recognise the seriousness of that allegation. It is the claimants' case that the defendant firm is and was a reputable firm and one on which reliance can properly be placed by a Building Society. In the course of their conveyancing practice, the defendants acted for a number of Building Societies and other lenders.

11. Dr. Kuti's family had been clients of the defendants for a couple of years before the transaction in question. Mr. Newhall had dealt with Dr. Kuti's English wife, and had met Dr. Kuti when he had called with her. Mr. Newhall knew Dr. Kuti as a reputable doctor who lived in Nigeria and whose income, he assumed, came from his work as a doctor in Nigeria. He also knew that Dr. Kuti was sometimes in England and that he could be difficult to get hold of because he travelled the world lecturing as a doctor, and because of communication problems with Nigeria.

12. The claimants' business is centred on the Midlands and they have few branches in London. Their branch dealing with North London is the Amersham branch. The transaction in question was approved by Mr. S.P. Hornsby on behalf of the claimants. Mr. Hornsby did not give evidence, and no explanation was given why he was not called to give evidence. Other witnesses gave evidence of the general practice of the claimants and of the collection of arrears and the amount of the claim. The claimants do give some loans for investment property, but such loans would, of course, be subject to different rules and policies and dealt with by a different department from loans for residential property to be occupied by the borrower. Among other differences, a loan for investment property would be granted only for a lower percentage of the property value.

13. The transaction was introduced to the claimants by Mr. Peter Hagan of Jo Hagan & Co, Estate Agents and Surveyors, of 369, Kilburn High Road, London NW6. I was not told anything about Mr. Hagan except that he was an accredited agent of the claimants and was known to Mr. Newhall. One of the claimants' witnesses said that he "would" have been known to the local branch, but that local branch was, of course, in Amersham, some miles from London, though served by the London Metropolitan Line.

14. On 14 October, 1989, Dr. Kuti applied for a loan for the purchase of the property from the claimants. The application was made on a printed form of the claimants headed "Standard Mortgage Application". The name and date of birth of the applicant and the date appear to be in the same handwriting as the signature of the applicant. The rest of the writing on the form was in another hand. That other handwriting may have been Mr. Hagan's. Not all of the boxes on the form were filled in.

15. Among the boxes filled in was one marked "Present address for correspondence" in which the address in Edgware Road was given. It was stressed before me that what was requested was an address for correspondence, not the address of the borrower's existing permanent home. No doubt some applicants for home loans would have sold an existing home and be in between permanent homes at the date of application for a loan for a new home. Another box asked, "Is your present property mortgaged?" to which the answer was given, "Bought with cash". I do not read that as referring necessarily to the Edgware Road property. The address of the property to be purchased was given and the price was stated as £130,000. The purpose of the loan was given as "Home purchase". To the question, "Will you or your dependant use the property offered as security WHOLLY for residential purposes?" the answer was given, "Yes". In the box headed "Please state full names of all persons other than the applicants, aged 17 years or over who will reside in the property on a permanent or semi-permanent basis, together with details of their relationship to you" the answer was "N/A". The borrower's solicitor was named as Mr. Newhall and the defendant firm's name and address was given. The borrower's Bank was named as Barclay's Bank, Brompton Road, Knightsbridge, London. Questions about employers were struck through. Under a section concerning the applicant's business, there were entered the words "Please refer to accountant". The name of an accountant, Mr. Fred Quartey, and his address in Clapham were given. Given a choice of types of survey, a mortgage valuation report was selected. Above the signature a number of declarations were printed including, "I declare that I am of full age and the foregoing particulars are true to the best of my belief and knowledge".

16. With the application were supplied an accountant's report from Mr. F Quartey F.C.C.A. dated 11 October, 1989 enclosing accounts headed, "Chief Dr. R.O. Kuti (Importer and Exporter) - Financial statements for the years ended 30 June 1987, 1988, 1989". Those accounts are simple accounts showing turnover, costs of sales, expenses and profit. The accounts are for the years 1988 and 1989, but the 1988 account shows the figures for the previous year, 1987, in the usual way in the left hand margin. The notes to the accounts state that "Turnover consists of income derived from the import and export of foodstuffs and other consumables between the USA and Africa. All income is net of Value Added Tax." No place of business is stated, though the expenses include rent and rates. The annual net profit varied between 54,637 and 68,175. No currency is specified for the accounts, but the reference to VAT suggests that it was sterling. For the defendants it was suggested that those accounts did not satisfy the claimants' requirement of 3 years accounts, but since the accounts include the figures for 3 years I reject that submission. I accept the evidence of the claimants that there was no requirement for the accounts of a self employed person to be audited, and it would be perfectly normal for a Building Society to rely on unaudited accounts, as these were. It was also suggested that there might have been a partner entitled to share in the profits, but there is no suggestion of that in the accounts which are stated to be the accounts of the borrower.

17. The defendants did not see the application form or the accounts.

18. On 16 October, 1989, Jo Hagan & Co sent details of the property to the defendants and asked them to act on the purchase for Dr. Kuti who had left for Lagos. The defendants opened a file and wrote to the vendors' solicitors on 17 October, 1989. In that letter, the defendants stated their interest, but indicated that they could not act until they had received instructions from Dr. Kuti. The defendants in that letter stated that Dr. Kuti lived in Lagos. They also stated that the purchase price was £130,000 subject to contract "this price to include a number of items of furniture to be included in the draft documentation". Because of the inclusion of furniture, a point has been taken by the claimants about the value of the premises in relation to the purchase price. The defendants did receive a list of items of furniture which included the sort of furniture and electrical goods one would expect to see in a fully furnished flat. The condition and value of the furniture was not ascertained.

19. On 23 October, 1989, Dr. Kuti wrote to the defendants giving them instructions to act, and the defendants received those instructions by 30 October, 1989. The defendants started the sort of correspondence and searches one would expect from a solicitor acting for a prospective purchaser.

20. On 1 November, 1989, the claimants sent to the defendants instructions to act for them on the mortgage of the property. There is no letter from the defendants formally accepting those instructions, but Mr. Newhall in his evidence accepted that the document sent to him on 1 November, 1989 did contain formal instructions to him and he proceeded to act as the claimants' solicitor as well as the solicitor to Dr. Kuti.

21. The instructions sent to the defendants were on a printed form which was one page of a set of carbon impregnated forms. One page of that set was headed "Offer of Advance" and another page was headed "Solicitors Instructions". On the set were typed details of the property, the advance, payments by the borrower, and Special Conditions. The typing was reproduced on all the pages of the set. There was a continuation sheet on which further Special Conditions were typed. The Offer of Advance sheet was required to be signed by the borrower and returned to the claimants.

22. Both the Offer of Advance and the Solicitor's Instructions included printed text as follows:

The General Condition A printed on the back of the form was in the following terms:

At the bottom of the front of the form was printed:

23. By letter of 10 November, 1989, Mr. Newhall sent to Dr. Kuti at his home in Lagos the claimants' Offer of Advance. In that letter, Mr. Newhall wrote:

Mr. Newhall explained various financial details in that letter, but he did not mention the terms of the offer requiring personal residence in the property and forbidding letting. When questioned about the adequacy of his comment, "It speaks for itself", his reply was that the embargo on letting was not absolute and he assumed that the Dr. Kuti had obtained the consent of the claimants. Particularly since Mr. Newhall knew that Dr. Kuti would not be living in the property, he owed a duty to both his clients to draw the restrictions to the attention of Dr. Kuti and to ascertain for himself that consent had been obtained from the claimants (in fact it had not). Mr. Newhall also owed a contractual duty, imposed by condition A of his instructions, to report to the claimants that Dr. Kuti did not intend personally to reside in the property, and he did not perform that duty.

24. In the same letter, Mr. Newhall enclosed a draft form of Power of Attorney authorising him to sign documents on behalf of Dr. Kuti. He explained in the letter and in his evidence that his reason for doing that was to avoid delays in the transaction which might arise from difficulties in communicating with Dr. Kuti. Proposing the use of the Power of Attorney seems an eminently sensible step in the circumstances since there were the usual pressures to avoid conveyancing delays which might prejudice the completion of the purchase. However, counsel for the claimants laid great stress on a later letter from Mr. Newhall indicating that Mr. Newhall thought that the claimants might object after the event to the signature of conveyancing documents under a Power of Attorney.

25. On 7 December, 1989, Mr. Newhall wrote to Dr. Kuti in Lagos. In that letter he recounted recent difficulties arising out of delay in communicating with Dr. Kuti. His letter continued:

It was put to Mr. Newhall that in the matter of the use of a Power of Attorney, he was preferring the interest of his client Dr. Kuti over the interest of the claimants. His answer was that in his experience only one Building Society had raised an objection to the use of a Power of Attorney and he thought that any objection was most unlikely and would in any event have been unnecessary because the charge would have been legally enforceable even though signed by an attorney. He was also sure, on the basis of his experience, that if he had mentioned the matter to the claimants at the time he would have been told, "You are the solicitor, you do what you think is right". Any later objection could have been met by having the charge signed again by Dr. Kuti. In the event, the Power of Attorney, though signed, was not used and the documents were signed by Dr. Kuti on one of his visits to this country.

26. The reference to the furniture in the letter of 7 December, 1989 relates to another concern advanced on behalf of the claimants as to the true value of the property. As the letter indicated, Mr. Newhall had questioned the value of the furniture in one of the enquiries addressed to the vendor's solicitors and he also enquired of the agent, Peter Hagan. On 8 December, 1989, Mr. Hagan wrote to Mr. Newhall on this subject:

The agent's letter not unnaturally related only to the interest of Dr. Kuti in relation to Stamp Duty. I accept the honesty of Mr. Newhall's explanation that in his view, because of the insubstantial value of the furniture, the interest of his client the claimants as to value of the property was adequately protected by the independent valuation which they had obtained. In fact, that valuation is not questioned.

27. Contracts to purchase the property were exchanged and a 10% deposit of £13,000 was paid to the vendor's solicitors.

28. On 20 December, 1989, Mr. Newhall sent to the claimants a Report on Title on the claimants' printed form. No complaint is made about that report with the exception of the subscription to the important printed words:

Allowing that document to be signed (by his secretary under his supervision) with the firm's name was a breach of the contract between the claimants and the defendants. It is a significant feature of his negligent attitude that he allowed his secretary to sign using the firm's name. I accept that Mr. Newhall honestly assumed that Dr. Kuti had obtained the consent of claimants to the renting of the property, but he had not ascertained that that vital consent had been given. That was a serious breach of duty. In his correspondence with Dr. Kuti, the agents, and the solicitors to the vendors and in his evidence, Mr. Newhall made no secret of the fact that he knew that Dr. Kuti intended to let the property but he did not pass that knowledge to the claimants, assuming as he did that they already knew.

29. On 30 December, 1989, Mr. Newhall sent the Charge to the claimants. The charge was executed by Dr. Kuti personally on one of his visits to London.

30. On 5 January, 1990, the defendants received from the claimants the funds to complete the purchase and the purchase of the property was completed.

31. Completion of the purchase thus took place more than 6 years before the issue of the Writ, which was issued on 20 March, 1998.

32. Following completion of the purchase, payment of the sums due to the claimants by way of return of capital and interest, in the words of the claimants' counsel "bumped along the bottom". Over the years, Dr. Kuti paid to the claimants £47,765.32 but he was in arrears from the outset. After attempts by the claimants' Arrears Department to chase up the arrears, the matter was put in the hands of other solicitors, William Sturges & Co. to recover the arrears on behalf of the claimants. William Sturges & Co. corresponded with the defendants and Dr. Kuti and payments were made with proposals to clear the debt, but possession proceedings were commenced in the County Court and a possession order was made suspended on payment of monthly payments of the sums due with sums to clear the arrears. Some payments were made but the condition of the possession order was not met and on the authority of the claimants a writ for possession was issued. The appointment of a Bailiff brought more payments, and the appointment of the Bailiff was cancelled on 14 March, 1992, 6 years and 6 days before the issue of the Writ in this action. More payments followed but Dr. Kuti still did not comply with the terms of possession order. The claimants could have applied for the Bailiff to be appointed again to take possession under the terms of the same possession order, but instead they instructed fresh solicitors, Rees Page, to commence fresh proceedings to collect the arrears which were then £10,384. After further correspondence and more offers, another suspended possession order was made by the County Court and was executed on 10 January, 1995. Possession of the property was thus obtained by the claimants 3 years and 10 weeks before the issue of the writ in this action.

33. On 11 May, 1995, the property was sold by the claimants for £65,000. No complaint is made of the price obtained on the sale by the claimants. The reduced value is explained by the fall in the property market aggravated, no doubt, by the fact that it was a forced sale.

34. In November, 1996, the claimants asked Mr. Newhall for his file and he without delay sent them the whole of his file without claiming any privilege for documents of Dr. Kuti. That was, he told me, and I accept, the first and only time he had been asked for his file in relation to any client.

35. Mr. Newhall admits that he was guilty of negligence in that he knew but did not tell the claimants that Dr. Kuti lived in Nigeria and did not intend to live in the property but intended to let it. He also says that he did not read Condition A of the General Conditions and admits that his failure so to do was a breach of duty. Mr. Newhall said in evidence that he only read the typed Special Conditions on the form of Solicitor's Instructions. However, since he knew that unless arrangements had been made for an investment loan, it was a standard requirement of Building Societies that the borrower should live in the premises and not let them, his failure to read a term which he knew would have been there in some form is of little significance. Moreover, he is bound by the term whether he read it or not. Mr. Newhall now admits that he was in breach of his contract of retainer in failing to comply with Condition A.

36. The defendants strenuously deny breach of fiduciary duty. To prove breach of fiduciary duty, the claimants must prove disloyalty or infidelity on the part of Mr. Newhall. For this purpose, the disloyalty or infidelity need not be dishonest but it must be intentional. The claimants do not allege dishonesty or conspiracy with Dr. Kuti, but they do say that Mr. Newhall deliberately preferred the interest of his client Dr. Kuti to the interest of the claimants. I am bound to say that I find it difficult to understand how, on the facts of this case, a solicitor who is not dishonest could deliberately prefer the interest of his client who was proceeding with a transaction which was dishonestly undertaken. Even if he did not actively conspire with his client, it is difficult to see how he could help him by preferring his interest without himself being dishonest.

37. The nature of the fiduciary duty was discussed by Millett L.J. in Bristol and West Building Society v. Mothew [1998] Ch 1, at 18:

And at page 19 Millett L.J. said:

38. In the case of Nationwide Building Society v. Balmer Radmore and ors. (1 February, 1999), after discussing differing views in academic writings and Commonwealth decisions, Blackburne J. applied the decision of the Court of Appeal in Mothew:

39. In the Statement of Claim in this action the claimants allege that Mr. Newhall misled the claimants with the deliberate intention of preferring the borrower's interests over those of the claimants. The claimants allege that that intention is to be inferred from the following alleged circumstances:

40. It was put to Mr. Newhall that Dr. Kuti was a valued client. He replied that he hoped that all the clients of his firm were valued clients, but he did not do a great deal of work for Dr. Kuti's family, and comparing one client with another, he was far more dependent on the goodwill of the various Building Societies which instructed him from time to time.

41. It was submitted that the documents referred to in the Statement of Claim revealed some matters which were straws in the wind from which I should infer that in failing to report Dr. Kuti's intention not to reside in the property Mr. Newhall was preferring the interest of his client Dr. Kuti to the interest of the claimants. The matter of the Power of Attorney was relied on as the strongest such indication. I do not draw any such inference. I accept Mr. Newhall's explanation of his conduct in the matter of the Power of Attorney and I do not find that conduct on its own any ground for drawing the inference which I am invited to draw. It was his duty to both clients to take reasonable steps to progress the transaction so that their expenditure of money and time on it was not wasted. It was also his duty to take decisions on legal matters as to what was a good title and not raise unnecessary questions which might prompt an ill founded objection from a non-lawyer daunted by the responsibility of answering a conveyancing question.

42. Of course, I should consider this straw in the wind along with the other straws relied on. The matter of the furniture in relation to the value of the property was relied on, but I have already mentioned the explanation given by Mr. Newhall, which I accept.

43. The other documents relied on do little more than show that between Mr. Newhall, the estate agent/broker, the vendors' solicitor, and Dr. Kuti there was a no secret made of the fact that Dr. Kuti intended to continue living in Nigeria and to let the property. Mr. Newhall was negligent (and one could add adverbs for emphasis) to assume that the claimants also knew of the true position. The documents on which the claimants rely must be read as coming from the file of a negligent solicitor and should not be read in a false context of reasonableness and carefulness. Such inferences from the documents as can be drawn adverse to Mr. Newhall are consistent with negligence rather than breach of fiduciary duty. In the light of Mr. Newhall's explanations and his bearing and demeanour in giving his explanations, I find that all the straws relied on by the claimants fall straight to the ground. Mr. Newhall did not question whether Mr. Hagan and his client had acted honestly with the claimants, and he ought to have done so. Mr. Newhall is a good and honest man who when he was younger, about 10 years ago, enjoyed the forbidden pleasure of trusting his fellow man when he was paid not to. Hard experience has taught him to be less trusting. The claimants have not discharged the burden of proof resting on them. I do not find that Mr. Newhall preferred the interest of Dr. Kuti to the interest of the claimants.

44. I therefore find that Mr. Newhall was not guilty of breach of fiduciary duty.

45. The claimants accept that the primary period for each cause of action has expired. The causes of action in both contract and negligence accrued at completion of the conveyance, 5 January, 1990. The limitation period therefore expired on 5 January, 1996. The claimants seek to extend the limitation period by relying on either or both sections 32 and 14A of the Limitation Act, 1988.

46. Section 32 of the Limitation Act is in the following terms:

35. The claimants rely on section 32(1)(b) and section 32(2). The burden of proof rests upon the claimants to show that the section helps them. The nature of that burden was described by Millett L.J. in Paragon Finance v. Thakarar [1999] 1 All ER 400 at 418:

36. By the Reply, paragraph 2(b), the claimants allege that it is to be inferred from the letter of 7 December, 1989 from Mr. Newhall to Dr. Kuti (from which I have quoted) that on the part of Mr. Newhall there was deliberate breach of duty and and deliberate concealment of that breach. For the reasons I have already given when considering the allegation of breach of fiduciary duty, I find that although Mr. Newhall was guilty of serious breach of contract and serious negligence, he assumed that Dr. Kuti and Mr. Hagan had initiated the transaction in a manner which informed the claimants of the true position. Making that assumption, Mr. Newhall did not realise that he was in breach of duty and accordingly there was no deliberate concealment on his part because, in his mind, there was nothing to conceal. It is true that the use of a Power of Attorney might have drawn the attention of the claimants to the fact that Dr. Kuti was difficult to get hold of and that might have led to a question about his residence, but it was Mr. Newhall who suggested the use of a Power of Attorney in the first place, and if he thought he had anything to conceal, he would not have suggested it.

37. Even if there had been deliberate concealment on the part of the defendants, the claimants could with reasonable diligence have discovered the whole of the facts now available to them long before the expiration of the limitation period. I shall set out the facts on which I base that view when considering later in this judgment the facts relevant to the different issue under section 14A of the Limitation Act, 1988.

38. In my judgment, section 32 of the Limitation Act, 1988 does not assist the claimants.

39. The claimants next rely on section 14A of the Limitation Act, in the following terms:

35. The claimants say that they did not obtain actual relevant knowledge until they received the defendants' file and they received that file less than 3 years before the issue of the writ. (The file was received in November, 1996 and the writ was issued on 20 March, 1998). The defendants put the claimants to proof that that was so.

36. The relevant knowledge is knowledge both of the material damage in respect of which damage is claimed and that that damage was attributable in whole or in part to the act or omission alleged to constitute negligence: section 14A(6) and (8).

37. The relevant knowledge includes "knowledge which the [claimants] might reasonably have been expected to acquire from facts observable or ascertainable by him": section 14A(10).

38. From a very early date, the claimants knew that Dr. Kuti was in breach of the terms requiring personal residence and forbidding letting of the property. They also had knowledge from an early date from which they should have inferred that Dr. Kuti always intended to let the premises. They also knew from a very early date that they were suffering damage in terms of arrears of payments due which were almost certainly linked with the fact that the premises were let rather than owner occupied.

39. The issue between the parties is as to when the claimants first actually knew or ought reasonably to have known that the damage was attributable in whole or in part to the negligence of the defendants. (This possible extension of the limitation period can only apply to the cause of action in negligence). The defendants say that the claimants should have called for the claimants' file much earlier, and as soon as they had read it, they would have been aware of the acts of the defendants constituting negligence.

40. As to the standard of reasonableness required in section 14A(10), counsel cited Nash v. Eli Lilley [1993] 1 WLR 782, a case on section 14 involving similar principles. At 799, Purchas L.J. delivering the judgment of the Court said:

41. Counsel also rely on statements of Stuart-Smith L.J. in Forbes v. Wandsworth Health Authority [1997] QB 169 at 412 and 413:

57. By their Rejoinder, the defendants pleaded (and the burden is on them to prove) that if the claimants did not have actual relevant knowledge before 20 March, 1995 (the date three years before the issue of the writ), they ought reasonably to have had that relevant knowledge by reason of various items of knowledge evidenced by various letters and other documents. That relevant knowledge is, of course, knowledge of the damage in respect of which damages are claimed and the other facts relevant to the action as defined in section 14A(8) of the Limitation Act, 1980.

58. The first document on which the defendants rely is a letter dated 6 November, 1990 written by the defendants to William Sturges & Co. On 1 August, 1990, the claimants instructed William Sturges & Co to collect arrears from Dr. Kuti and a letter was written by those solicitors to Dr. Kuti direct at the property. On 30 August, 1990, the claimants told those solicitors that not one single payment had been received by the claimants since the inception of the mortgage and the arrears were then £11,997.63. On the same day, the defendants wrote to William Sturges & Co.:

It is evident from documents on the defendants' file that Dr. Kuti contended that he had instructed Hagan to let the property and pay the rent into his Bank account at the Knightsbridge Branch of Barclays Bank. (That Bank had provided a reference for Dr. Kuti to the claimants). Dr. Kuti said that Hagan had not paid the rents into that Bank account. Whether Dr. Kuti told the whole of that case to Mrs. Dhanda of the claimants on the telephone at that stage is not clear, but it is not contested that he gave some of that information to Mrs. Dhanda. In fairness to Mr. Hagan, I should make it plain that I have heard no evidence either from Mr. Hagan or Dr. Kuti as to the truth of that allegation. Whether it is true or not is not to the point for present purposes. What is relevant is what the allegation shows about the intentions of Dr. Kuti.

59. On 30 October, 1990, in a letter to William Sturges & Co., the defendants wrote:

The defendants' openness about this matter and their lack of any evident sense of guilt about it and about Dr. Kuti's residence in Nigeria is entirely consistent with Mr. Newhall's evidence that he believed that Dr. Kuti had obtained the consent of the claimants to the letting of the property.

60. On 6 November, 1990, the defendants wrote to William Sturges & Co.:

61. Despite the contents of the letter of 6 November, 1990, William Sturges & Co. filed with the Willesden County Court for the purpose of possession proceedings against Dr. Kuti an affidavit sworn by an Arrears Clerk of the claimants containing a paragraph:

62. Both before and after a conditional possession order was obtained on 18 January, 1991, the defendants corresponded with William Sturges & Co. referring to their difficulties in corresponding with Dr. Kuti in Nigeria.

63. On 10 April, 1991, Dr. Kuti wrote to the claimants direct at their head office a letter received by them on 10 May, 1991. Dr. Kuti wrote on paper headed with the address of his home in Lagos:

In the same letter, Dr. Kuti showed willingness to bring his arrears up to date, but the statements that he lived in Nigeria and had let the property from the outset together with the allegation of fraud in relation to the valuation of the property plainly raised questions whether the valuer and the solicitor employed by the claimants had been in breach of their duty. The claimants did not make any enquiry of the valuer or of the defendants with regard to those questions.

64. Correspondence continued and some payments were made by Dr. Kuti, but on 20 June, 1991, the claimants stated that the balance outstanding on the account was £124,681 as against the original loan of £117,800. By then, if not long before, there must have been considerable doubt whether the claimants would ever recover the arrears from this absentee borrower.

65. In January, 1992, the claimants instructed Legal and Trade, an outside company, to make enquiries at the property. They reported that no one at the address knew who was living in the flat.

66. On 13 February, 1992, Dr. Kuti wrote to the claimants on the headed notepaper of the Nimota Hospital, Lagos, which indicated that Dr. Kuti was the medical director of that hospital. With that letter a further payment was enclosed.

67. Further payments were made, and the repossession arranged for 23 March, 1992 was cancelled.

68. By this time, the claimants knew that an address where Dr. Kuti stayed on his visits to London was in 9 Elms Lane, London SW6. By letter written to that address on 24 May, 1993, the claimants confirmed that they had agreed when Dr. Kuti visited their office on that day that they would send all future correspondence to him at the Nimota Hospital, Lagos. The writer of that letter wrote on the claimants' file copy, "A/C not receiving tax relief. Only in England for a few months per year. Doctor in a hospital."

69. By December, 1993, the arrears on the account had been reduced to a little over £8,000. The following month, agents for the freeholder demanded payment by the claimants of service charges for the property unpaid by Dr. Kuti. The claimants instructed solicitors, Rees Page to take fresh possession proceedings. The Court noted that Dr. Kuti was resident in Nigeria, and required the claimants to apply for leave to serve outside the jurisdiction. For that purpose, one of the claimants' arrears clerks swore an affidavit exhibiting a copy of their letter to Dr. Kuti dated 24 May, 1993, stating that Dr. Kuti was believed to be not a national of the United Kingdom, and expressing the belief that service at the Nimota Hospital would come to his attention.

70. After service, the action proceeded and for the purpose of that action another affidavit was sworn by one of the claimants' clerks on 24 June, 1994 stating that to the best of the claimants' knowledge and belief Dr. Kuti and his family did not remain in possession of the property.

71. On 4 October, 1994, Dr. Kuti telephoned the claimants and told them that he was conned into buying the property and a person rented the property for a year and then disappeared. Dr. Kuti asked for more time to pay on revised terms.

72. On 22 November, 1994, Dr. Kuti again telephoned to ask again for revised terms, and said that there was no one in the property. On the basis of a telephone call received by Rees Page from someone who said he was a tenant at the flat, the claimants believed that the property was in fact occupied by a tenant at that time and they expressed that belief to the defendants in a letter dated 25 November, 1994.

73. A possession order was obtained and the property was repossessed on 10 January, 1995. On the previous day, the defendants wrote making a further plea for Dr. Kuti pointing out, not for the first time, that in the current state of the property market, the claimants would make a considerable loss on repossession and sale.

74. It must have been obvious to all concerned that once Dr. Kuti no longer had any interest in the property, the chances of recovering any money from him in Nigeria would be small. No doubt that was one reason for the reluctance of the claimants to repossess over such a long time.

75. The date 3 years before the issue of the writ was on 20 March, 1995.

76. For the claimants it was submitted that the claimants are a reasonable Building Society. Certainly their records show a very small number of repossessions. There were repossessions in 1.35% of their mortgages in 1991, 0.75% in 1992 and less than 0.5% in each year from 1992 to 1996. In the same years their arrears cases varied between 5.55% and 9.28%.

77. It was also said on behalf of the claimants that there was no line of communication between the arrears staff and those who decided to sue. The evidence gave some support to that submission. To the extent that it is correct, it is a matter for criticism of the claimants. There should have been a system to ensure that important information given to the arrears staff was reviewed by those whose task it was to institute legal proceedings. In any event, those latter staff must have reviewed the case on the two occasions when legal proceedings were begun against Dr. Kuti. The claimants had a system whereby the arrears clerks and others noted in some detail on the claimants' computer information received verbally face to face or on the telephone and conversations with Dr. Kuti to which I have referred were so recorded and were available for review by any senior employee who looked at the computer file. Moreover, important information was given direct to individuals with greater responsibility than arrears clerks. The defendants' letters of 30 August, 30 October, and 6 November, 1990 from which I have quoted were sent to the claimants' solicitors and it was accepted in evidence that their contents would have been reported to the claimants. The most important letter dated 10 April, 1991 from Dr. Kuti from which I have quoted was addressed to the claimants' head office in Wolverhampton. If the allegations of fraud made in that letter were not considered by a senior officer of the claimants, there is something badly wrong with the claimants' organisation. On receipt of that letter in May, 1991, if not long before, someone in the claimants' office should have said, "We employ solicitors to protect us against fraud and to prevent our loans being used to buy property for rent, what was this solicitor doing?"

78. At about the time that letter was received by the claimants, Mr. Wilfred Stevens, who gave evidence, was appointed Asset controller in the claimants' Recovery Unit. He told me that at that time it was not widely appreciated that solicitors might have failed in their duties and it was probably not until about mid 1994 to early 1995 that the claimants began to become more aware of the possibility of negligence claims against solicitors. I cannot remember when it was that solicitors began to be added to valuers as defendants in the flood of mortgage cases initiated before the Official Referees, but counsel has suggested that Mortgage Express v. Bowerman [1996] 2 All ER 836 (CA) was the first major case against a solicitor not involving defective title. Judgment was given at first instance in that case by Arden J. on 11 May, 1994 and was reported in the Estates Gazette [1994] 2 EGLR 156: that was nearly a year before the last three year period before the issue of the writ.

79. I find it hard to believe that those responsible for the management of Building Societies in general or this Building Society in particular were ever so naïve as to think that solicitors can do no wrong. If they were so naïve, I do not believe that assists them with regard to section 14A of the Limitation Act. The reasonable man is not naïve.

80. I find that at least as early as May, 1991, the claimants had both the knowledge required for bringing an action in negligence and a right to bring such an action against the defendants. Counsel for the claimants submitted that they only had that knowledge when they obtained the defendants' file, but I do not think that is right. Even when one includes the letters between Mr. Newhall and Dr. Kuti (for which privilege ought to have been claimed on behalf of Dr. Kuti) there was little information on the file giving greater support to a claim for negligence than was already in the possession of the claimants. The correspondence with Mr. Hagan and Dr. Kuti gave clearer evidence that Mr. Newhall knew of the intention to let the property from the outset rather than acquired that knowledge later, but that was a fair inference from the information the claimants already had. The correspondence with Dr. Kuti about the Power of Attorney was a substantial plank in the failed cases on breach of fiduciary duty and concealment of breach of duty but added little to the case in negligence. In any event, the claimants ought reasonably to have asked for the defendants' file in May 1991 at the latest. On receipt of that file they would have had all the information used by them to bring these proceedings.

81. I hold that the claimants are not helped by section 14A of the Limitation Act, 1980.