Midland Bank Plc v Cox McQueen (A Firm): CA 26 Jan 1999

Solicitors were instructed by the bank to obtain the signature of a client and of his wife to a motgage. The deed was signed by the husband and a woman pretending to be the wife.
Held: The court said that it was asked whether the bank intended to ask for, and whether the solicitors intended to give, a promise to answer for the fraud of the customer even if that fraud could not be detected by exercising all proper care The solicitors who had been asked to obtain the signature to a mortgage on behalf of a bank, but who were misled as to the identity of the signor were not liable in negligence. The nature of the transaction was that the bank charged to carry risk, not the solicitors.
Lord Woolf MR said: ‘In my judgment the decision in Zwebner should not be given a wide application. To do so would ignore the wider consequences of our decision. If commercial institutions such as banks wish to impose an absolute liability on members of a profession they should do so in clear terms so that the solicitors can appreciate the extent of their obligation which they are accepting. Frequently this sort of task is undertaken by small firms of solicitors who are already finding it difficult to remain viable. This is partly because they are heavily burdened by the costs of insurance. If they are to be liable for very substantial sums of damages as a result of the fraud of the customers of the bank which they cannot prevent, then either they will have to withdraw from providing those services or they will have to charge for their services at a rate which is very different from that which was charged here. Neither result is in the interests of the banks or their customers or the public. The result is not in the interests of the banks’ customers as they will not benefit from the explanation of the transaction from a member of the legal profession who is qualified to give that explanation. It is not in the interests of banks as they will have to pay higher fees which they may or may not seek to recover from their customers. It is not in the interest of the public because it is important that legal services are readily available and this will not be the case if small firms are unable to survive. Unless the language used in a retainer clearly has this consequence, the courts should not be ready to impose obligations on solicitors which even the most careful solicitor may not be able to meet.’
Mummery LJ said: ‘The letter was a retainer by the bank of a firm of solicitors to perform professional services of an advisory and ministerial kind for the bank. Professional services provided by the solicitors would not normally involve the guaranteeing of a result by them, such as verifying the identity of Mrs. Dukes, let alone providing the bank with what would amount to an insurance policy against the risk of fraud occurring in a transaction entered into by the bank with its customer, Mr. Dukes; a transaction about which the solicitors were told little by the bank and in which they had no input or influence.
The bank agreed to lend a substantial sum to their customer. That customer was Mr. Dukes. Mrs. Dukes was not a customer of the bank. She was not a client of the solicitors retained by the bank to obtain her signature. It is improbable that the solicitors would agree to provide to the bank more than the exercise of the reasonable care and skill of a competent solicitor in relation to the task to be undertaken. It was part of the bank’s case against the solicitors that the retainer was subject to the usual implied duty of care. That implied term also governed the obligation to obtain the signature of Mrs. Dukes. The judge rejected the case of negligence against the solicitors. There is no appeal against that. The bank’s case on the appeal rests on the contention that the wording of the retainer was apt to create an absolute obligation which would be breached by the solicitors, no matter what precautions they might have taken and what lengths they might have gone to ensure that the woman who signed the mortgage was Mrs. Dukes. For the reasons stated above and for the reasons stated by the Master of the Rolls, I am unable to accept the contention that this retainer, when construed in the context in which it was given and accepted, was intended to have that far-reaching effect.’
Lord Woolf MR, Mummery LJ, Mantell LJ
Times 02-Feb-1999, Gazette 10-Feb-1999, Gazette 17-Feb-1999, [1999] EWCA Civ 656, [1999] Lloyds Rep PN 223, [1999] PNLR 593, [1999] EG 12, [1999] Fam Law 310, [1999] 1 FLR 1002
England and Wales
CitedZwebner v Mortgage Corporation Plc; Trustee of Property of Zwebner and Brooks and Co CA 18-Jun-1998
The claimant applied for a loan secured against a property owned with his wife. The defendant instructed solicitors who reported on title with an undertaking that documents would be executed before completion. They sent the mortgage to Mr. and Mrs. . .

Cited by:
CitedPlatform Funding Ltd v Bank of Scotland Plc (Formerly Halifax Plc) CA 31-Jul-2008
The parties disputed the extent of duty owed by a surveyor to a lender relying on his valuation of a property to be loaned.
Held: The valuer’s appeal failed. The valuer had valued the wrong property, after being misled by the borrower. The . .
CitedCornelius, Regina v CACD 14-Mar-2012
The defendant appealed against his conviction for fraud under the 2006 Act, saying that the judge had wrongly failed to give a Ghosh direction. As a solicitor he had organised a scheme for buying properties, obtaining finance by the nomination of . .

These lists may be incomplete.
Updated: 14 May 2021; Ref: scu.83707