Roche v Peilow

• Jurisdiction: Ireland
• Judge: Griffin J.,McCarthy J.
• Judgment Date: 01 January 1986
• Neutral Citation: 1985 WJSC-SC 1513
• Court: Supreme Court
• Docket Number: [1977 No. 1113P]
• Date: 01 January 1986

1985 WJSC-SC 1513

The Supreme Court

Walsh J.

Henchy J.

Griffin J.

Hederman J.

McCarthy J.M

121/1980

ROCHE J & ROCHE M v. PEILOW N A & PEILOW R A

Between

Joseph Roche and Majorie Roche

Plaintiffs/Appellants

and

Morman A. Peilow and Robin A. Peilow (Trading as William J.Shannon & Co.)

Defendants/Respondents

Citations:

COMPANIES ACT 1963

COMPANIES ACT 1963 S104

COMPANIES ACT 1963 S99

COOK V FAULKNERS" REPRESENTATIVES

DANIELS V HESKIN 1954 IR 73

FINLAY V MURTAGH 1979 IR 249

KELLY & ANOR V CROWLEY 1985 IR 212

LAND ACT 1965 S12

LAND ACT 1965 S45

O'DONOVAN V CORK CO COUNCIL 1967 IR 373, 102 ILTR 169

SIMMONS V PENNINGTON 1955 1 WLR 183, 1955 1 AER 240

TAYLOR V RYAN UNREP FINLAY 10.03.83 1983/12/3596

Synopsis:

NEGLIGENCE

Solicitor

Sale of land - Registered land - Plaintiff wishing to purchase house to be built - Sale to be effected by building contract and lease to plaintiff by building company - Plaintiff consulting defendant solicitor - Plaintiff's instalment payments completed before title of building company investigated by defendant - Discovery of pre-existing equitable mortgage by deposit of land certificate - Insolvency of building company - Refusal of mortgagee to release house unless paid proportion of mortgage debt - Defendant negligent - Decision of High Court (21/12/79) reversed - (121/80 - Supreme Court - 17/5/85).

Roche v. Peilow

1 Judgment delivered on the 17th day of May, 1985by Walsh J. [Hederman Agreed with the Judgments Delivered]

2 The appellants, who are husband and wife, engaged the respondents in 1973 to act as solicitors for them in the purchase of a house in Cork. They have alleged that the respondents were negligent and in breach of contract in the carrying out of their work as such solicitors for the appellants. In the result they instituted proceedings against them in the High Court for damages. The action was heard by the then President of the High Court, Mr. Justice Finlay, who in a reserved judgement delivered on 21 December 1979 dismissed their action. This appeal is brought against that judgment. The facts are fully dealt with in the judgment of the learned President. For the purpose of this judgment it is sufficient to set them out briefly.

3 The house purchase was to be effected by means of a building contracts with the developer of building sites, a company named J.B. Construction Company Limited. The building contract, which was dated 19 February 1973, was coupled with an agreement for a lease dated 19 February 1973 between the construction company and the first-named appellant. The lease was to be for a term of 999 years from 25 March 1972 and was to be granted in consideration of the expense incurred by the said Joseph William Roche in the erection of the house in question and in consideration of the rents and covenants to be reserved in the lease. The lease referred to the site of the house which was part of the lands comprised in Folio 58474 of the Register of Freeholders of the Country of Cork of which the construction company was the registered owner and was known as Site No. 19, Muskerry Drive, Woodlands, Blarney, Co,Cork.

4 The arrangement for the building of the house and the grant of the lease was part of a building development of a much larger area which was owned by the said J.B. Construction Company Limited. The contract provided that the landlord would on or before the execution of the lease furnish the appellants with a certified copy of the said Folio. The lands on which this development was taking place was subject to the provisions prohibiting letting, sub-letting or sub-division specified in section 12 of the Land Act 1965 and to the provisions restricting the vestingof interests specified in section 45 of that Act but nothing in this case arises on that matter. Many other house purchasers had entered into similar agreements and when their respective leases were executed they were entered as burdens on the Folio. The Land Commission had already consented to the sub-division and letting of the property for the building purposes in question. By a letter dated 6 April 1973 the solicitors for the construction company had informed the respondents that none of the burdens affecting the property comprising Folio 57474 of the Register of Country Cork affected the property being demised to the appellants. They further certified that there were no dealings pending which would adversely affect the appellants" title. In fact on 12 July 1972 a charge by deposit of title deeds had been created by the construction company in favour of Lombard and Ulster Banking (Ireland) Limited and a certificate of registration of such charge pursuant to section 104 of the Companies Act 1963 was issued on 21 July 1972. The mortgage by way of deposit was for the purpose of securing all monies which were due or would thereafter become due or from time to time accruing from the construction company to Lombard and Ulster Banking (Ireland) Limited.

5 The method of carrying out the building development in question was, on the evidence, one of acquisition of the land to be developed by the construction company and themortgaging of the land by deposit of title deeds to raise the money necessary to carry out the development. The development would also be financed by each prospective house purchaser who would enter into a building contract and pay for the building periodically in accordance with the building contract. The completion of house would be the time to execute the lease to the purchaser. Lombard and Ulster Banking Limited would in the ordinary course of events release from their charge the site of the house in question so that the lease could be executed free from any such encumbrance. In return the finance company would be paid by the constrction company out of the proceeds of the building contract the appropriate sum for the release of that particular site. This apparently was a common method of financing building developments and was well known to members of the solicitors" profession, including the respondents.

6 An obvious danger in this system of financing building development was that if the builder were to be become insolvent be would be deprived of the mortgaged property by the finance institution which has acquired the charge over the property. Furthermore, if for any reason the builder was unable to complete the building the purchaser could also be at risk in that the ultimate cost to him would be much greater if he had to employ another builder to complete the building and pay off the finance company himself oralternatively to suffer the loss of the partly built house and of the site. In such a case a purchaser would obviously be in a very much more vulnerable position than one who already had a lease of a site before he entered into the building contract.

7 In the present case £1,000 deposit was paid as a booking fee on 10 April 1973 to the builders. Later the builders demanded the stage payments appropriate to first floor joist level of £2,500. The sum eventually paid on 22 April 1974. In the interval there had been a very considerable dispute arising out of the appellants" complaint that they were not satisfied with the manner in which the building was being executed and refused to pay until their wishes were accommodated. The matter went so far that on 13 April 1973 the builders were willing to refund the deposit to the plaintiffs and call off the whole arrangement. The appellants had also experienced difficulties in obtaining bridging finance which was part of the reason that they found some difficulty in paying the £2,500 which had been demanded. During the disputes between the appellants and the builders the respondents, as theappellants" solicitors, gave them full and ample warning of the danger of losing their prospects of a loan from the Royal Liver Society. The respondents made strenuous effects to get the Royal Liver Society to extend the period during which the loan could be taken up. EventuallytheSociety withdraw altogher.

8 On 22 February 1973 the respondents had sent to the building company a set of requisitions on the title. In reply they were told, among other things, that the land certificate would be furnished before registration of the lease as a burden on the folio on the closing of the sale. A certified copy of the folio was sent to the respondents in reply to another requisition. Nothing on the folio and nothing in the answers furnished to the various requisitions disclosed that the property was the subject of a mortgage by way of deposit of the land certificate. As this was registered land such a deposit would not appear in the folio. No search was made in the Companies" Office. As the building company was a limited company under the Companies Acts there should be a record in the Companies" Office of any deposit of title deeds of the company's property. In fact there was such a record.

9 The respondents had not made any search in the Companies" Office and thus they did not make themselves aware of the fact that the site in question was subject to the mortgage. They were therefore not in a position to, and did not, inform their clients of the existence of that mortgage. They had explained to the appellants that under the contract they would be obliged to make payments at various stages in the amounts provided and did point out therisk of losing this money should the builders go into liquidation during the course of construction. The appellants understood this risk and elected to take it. However, none of these warnings turned upon the possibility of the site not being available.

10 The appellants have alleged that the respondents were negligent and in breach of their contract with the appellants for not discovering the mortgage by making the appropriate searches in the Companies"Office and of warning them of this additional risk. The appellants had already paid the builders...