Rosbeg Partners v LK Shields (A Firm)

• Jurisdiction: Ireland
• Judge: Mr Justice Michael Peart
• Judgment Date: 08 November 2013
• Neutral Citation: [2013] IEHC 494
• Court: High Court
• Date: 08 November 2013

[2013] IEHC 494

THE HIGH COURT

Record Number: No. 3135P/2010

Rosbeg Partners v LK Shields (a firm)

[2013] IEHC 494

Between:

Rosbeg Partners

Plaintiff

And

LK Shields (A Firm)

Defendant

KELLEHER v O'CONNOR (T/A DON O'CONNOR & CO) 2010 4 IR 380

Contract law - Duty of care - Breach - Loss - Marketable title - Mitigate loss - Contributory negligence - Mitigation of loss

Facts: The plaintiff claimed that its title to the property the subject of the proceedings was not properly registered by the defendant firm after it lost out on a sale because it was unable to satisfy the purchaser that he had good marketable title. It was alleged that the plaintiff had failed to mitigate his loss as he had turned down various offers and had been holding out for some time for a better price.

Held by Peart J. that the duty of care owed to the plaintiff had been breached and that it was the failure to have registered the plaintiff”s title to the property that directly led to the failure to reach a point of exchanging contracts and completing the sale. The loss incurred was the difference between the lost offer and the present value of the property. The plaintiff could not have been guilty of contributory negligence or of failing to mitigate his loss.

1 When you engage a solicitor to act in the purchase of property, you are entitled to expect that after the purchase monies are paid to the vendor your solicitor will ensure not only that you own what you paid for, but also that your ownership will be properly registered in the Registry of Deeds or Land Registry, or indeed both, as the case may be. That is what the solicitor undertakes to do on foot of the retainer.

2 If your solicitor fails, in breach of the duty of care owed to you, and/or in breach of his contract with you, to properly register your title after the purchase monies have been paid over, there can be consequences for you, which may not become apparent for many years.

3 While the solicitor will, or at least should, be aware that he has not registered your title following the completion of the transaction with the vendor, you will not become aware of it until you are so informed, perhaps by your solicitor. Alternatively, you may hear of the problem through a third party, such as your Bank which will have been expecting to receive your title deeds as part of its security for any loan advanced, and may ask you to get onto your solicitor to find out why the deeds have not arrived. This may reveal the fact that the title has not yet been registered.

4 It must be a very rare case where you discover from a party who has offered to buy the property from you some 13 years later that the records in the Land Registry show that you do not appear to own all of what he thought you had bought. That is what has happened in the present case.

5 The plaintiff claims that because its title to Unit 520 Western Industrial Estate, Naas Road, Dublin 12 ("the property") was not properly registered by the defendant firm after it bought it in 1994 it lost out on a sale of that property to Mr Pino Harris for €10 million in 2007 at the height of a property bubble, because it was unable to satisfy the purchaser at a critical point of time that he had a good marketable title to all the property in sale, and therefore the precise acreage of the property in sale. The present value of the property is in the order of €1 million.

6 After an offer was made in writing, but before any contract for sale was prepared (and I leave aside for the moment the question as to whether or not the offer had been accepted by the plaintiff), the purchaser, who had indicated in writing a willingness to purchase the property for €10 million, told the plaintiff via its estate agent that it did not appear to own a portion of the property in question, and that when it had sorted the matter out it should revert if it so wished.

7 By the time the title was fully and properly registered, the property market had weakened significantly, and in addition that purchaser was no longer interested at that price, and eventually not interested at all. The property has not been sold since.

8 The plaintiff claims that the loss of that sale, less the current value of the property, is the measure of his loss, in addition to a sum for interest to date on bank borrowings which it would not have had to pay if the sale had completed, since it would have paid off a substantial portion of those borrowings from the proceeds of sale in compliance with a commitment given to its bank.

9 The defendant firm accepts that the title had not been properly registered by this time, but says that there is no evidence that the plaintiff ever accepted the offer of €10 million which was made, and therefore that the reason this sale did not proceed was not because the title to the property was not properly registered.

10 In addition, or alternatively perhaps, the defendant claims that the fact that a portion of the property had not been registered as it should have been, ought not to have prevented a contract for sale being prepared and executed, if indeed the plaintiff had accepted the offer, since there was never any doubt that the plaintiff owned the entire property in sale, and the difficulty which came to light could easily have been dealt with by the inclusion of appropriate Special Conditions in the Contract for Sale.

11 They also plead that the plaintiff has failed to mitigate its losses because, at a time when the property market had already begun its sharp decline by early 2008, it turned down a verbal offer of €8 million made by the same Mr Harris in mid-February 2008, and a later verbal offer by him of €6 million in August 2008 because it was holding out for more. In such circumstances the defendants say that the plaintiff ought not to be found liable for €9 million, being the difference between that offer and its present value of about €1 million, even if the Court is satisfied that this offer had been accepted.

The title problem in more detail:

12 In February 1994 the plaintiff company agreed to purchase Unit 520 Western Industrial Estate, Naas Road, Dublin 12 for a sum of IR£765,000 from Packaging Resource Limited. The defendant firm was retained for the transaction. The purchase was completed on the 6th May 1994 when the balance of the purchase monies was paid over to the vendor.

13 The property comprised 5 Lots made up of 5 separate titles. Lot 1 was a registered title (Folio 90991F, Co. Dublin). Lots 2 and 4 were unregistered title (i.e. Registry of Deeds), Lot 3 comprised both registered title (i.e. part of Folio 23011F, Co. Dublin) as well as unregistered title. Lot 5 was a possessory title. It is the title to Lot 3 which has caused the problem in this case.

14 Lot 3 comprised, inter alia, part of Folio 23011F, Co. Dublin. If the defendant firm had attended to matters correctly upon completion, the transfer and conveyance in respect of the entire of Lot 3 would have been part of the documents being lodged in the Land Registry to record the change of ownership, and would have led to a new folio being opened in respect of the part of Folio 23011F being acquired by the plaintiff, leaving the balance of Folio 23011F in the ownership of the vendor. Each folio would show by reference to a marked map what was comprised in the folio, and what remained in Folio 23011F. This is a perfectly normal situation, and happens all the time. There is nothing complicated about it provided that suitable maps are lodged showing, clearly marked, the respective lands.

15 What appears to have happened is that a single composite Deed of Transfer was executed by the vendor in respect of the five Lots in sale. This deed was handed over to the defendant firm on closing on the 6th May 1994 when the purchase monies were paid over. The deed was duly stamped with the appropriate stamp duty on the 8th June 1994. Sometime between that date and 7th February 1995 the deed was lodged in the Registry of Deeds in order to effect registration in respect of the unregistered lands. That registration was completed on the 7th February 1995 according to the face of the deed itself.

16 There is a memo dated 24th October 1996 on the defendant's conveyancing file which indicates that a member of staff was requested to lodge the deed and other necessary documents in the Land Registry in order to effect the registration of the change of ownership in respect of Folio 90991F, and part of Folio 23011F. The documents were lodged in the Land Registry, presumably shortly after the date of that memo. All would have been well thereafter were it not for the fact that, as often happens, queries were raised by the Land Registry on the 6th November 1996 in relation to boundaries and the maps which accompanied the deed to the Land Registry. An additional feature is that a 1992 Deed of Transfer and Conveyance (which included part of Folio 23011F Co. Dublin) from Pension Nominees Limited to Packaging Resources Limited (which was the vendor to the plaintiff company) had not been registered by the time this purchase was completed, and the defendant firm undertook the task of registering that transaction too in the Land Registry, as part of the registration process in respect of the plaintiff's purchase.

17 Following the queries raised by the Land Registry on the 7th November 2006 the defendant firm immediately wrote to the vendor's solicitors telling them that the Land Registry had rejected the map attached to the deed, and requested them to furnish another map. It should be said that on closing the vendor's solicitor had provided the defendant firm with an undertaking to deal with any Land Registry queries. For the remainder of 1996, all of 1997, 1998, and 1999 the defendant firm endeavoured to get the vendor's solicitor to sort out the...