BRISTOL AND WEST BUILDING SOCIETY v MOTHEW

A potential breach of fiduciary duty proves central to a solicitor’s misgivings, when for atypical reasons a lender sought recovery of their loss through equitable principles after other options failed.

In the late 1980s, the respondents entered into a mortgage arrangement with a couple looking to secure a second property for £73,000; however, due to market instability, the respondents expressed that the £59,000 loaned was subject to the mortgagors paying the balance of the property purchase from existing capital to reduce the risk of default; after which, the acting appellant solicitor knowingly agreed to undertake the conveyance and provide a full report as contained in their contract. 

Prior to completion of the purchase, the mortgagors took out a small charge against their existing property for £3,350 in order to raise the funds needed to secure the mortgage and aware that the debt would be secured against the new house; and yet, the appellant continued with the purchase without reporting the change in financial circumstances.

Following a successful transaction, the mortgagors honoured only a handful of repayments before lapsing into default; whereupon, the new house was sold as part of the repossession process; however, the property crash had diminished the property’s value short of satisfying the debt by £6,000, therefore the respondents sought equitable damages from the solicitor on grounds of breach of fiduciary duty through non-disclosure of the loan terms.

In this instance, the court ruled in favour of the respondents and awarded damages to the effect of £59,000, less the funds raised from the sale; whereupon, the appellant challenged the judgment in the Court of Appeal.

Here, the court upheld the appeal on grounds that appellant’s oversight did not constitute a breach of fiduciary duty to either party as they had been consciously acting in good faith toward both throughout the disposition.

This translated that any lapse of skill or appreciation was accidental and not premeditated, as required under the rules of equity, while the Court also reminded the parties that:

“[I]f a fiduciary is properly acting for two principals with potentially conflicting interests he must act in good faith in the interests of each and must not act with the intention of furthering the interests of one principal to the prejudice of those of the other…”