Law report: Duty of solicitor instructed by third party

WHERE A solicitor received instructions from a third party claiming to act for a client, it was the duty of the solicitor to satisfy himself that the client did indeed wish to instruct him.

Sheikh Ahmed Jaber Al-Sabah succeeded in his claims against Fehmi Mohamed Ali, Brain & Brain, a firm of solicitors, and the Land Registry that he had, by means of forged transfers, been deprived of the ownership of two residential properties in London.

Ali had benefited under the allegedly forged transfers; Brain & Brain, through a solicitor then employed by them, had acted or purported to act as solicitors for the plaintiff and Ali in the transactions of which the forged transfers were part; and the Land Registry had made entries in the register of the title to the properties in question on the basis that the allegedly forged transfers were genuine.

On the judge's finding of fact that Ali had forged the signatures of the plaintiff on the transfers and thereby defrauded him of ownership of the properties, the following issues, inter alia, arose: whether Brain & Brain could properly have acted on the basis that Ali had ostensible authority to act for the plaintiff; and the extent to which the Land Registry was liable to indemnify the plaintiff under section 83(2) of the Land Registration Act 1925.

Section 83(2) provided: "Where an error or omission has occurred on the register, but the register is not rectified any person suffering loss by reason of the error or omission shall, subject to the provisions of this Act, be entitled to be indemnified."

Mark Warwick (Howard Kennedy) for the plaintiff; Timothy Evans (Treasury Solicitor) for the Land Registry; Michael Pooles (Wansboroughs Willey Hargrave) for B.

Mr Justice Ferris said that it was clear that a solicitor could not properly act for a client unless he had instructions from the client to do so. It was the solicitor's duty to satisfy himself that he had been so instructed.

If instructions came to a solicitor not from the client himself but from a third party claiming to represent the client, the solicitor should take special care to satisfy himself that the client wished him to act, by seeing the client personally or obtaining written confirmation from the client, or by taking some other step which was sufficient in the circumstances to show that the client wanted the solicitor to act for him in the matter in question.

A solicitor who failed to act in accordance with that principle would not only fall foul of the rules of professional misconduct but, if he caused prejudice to the interests of the person he supposed to be his client, even in doing something which it would be perfectly proper for him to do if he were duly retained, he would be liable in negligence. In the present case, Brain & Brain had been in clear breach of its duty to the plaintiff.

Furthermore, when a solicitor acted for the vendor of property, it was part of his duty to satisfy himself that the price was paid at or before the time of completion. Where the usual practice for the solicitor to receive and account for the price of property on the vendor's behalf was not followed, a special burden lay on him to satisfy himself that the vendor did not part with his property before the price had been paid.

The scheme of the Land Registration Act 1925 was to make the Land Registry in substance an insurer of last resort in respect of registered titles. The indemnity was to be in respect of the loss suffered by reason of the error or omission in the register. In the present case, to the extent that the plaintiff recovered damages from Ali or Brain & Brain, he would not have suffered such loss.

Accordingly, the loss against which the Land Registry had to indemnify the plaintiff should be ascertained after taking into account amounts actually recovered by the plaintiff from those, including Brain & Brain, who were responsible for the error in the register having been made.

Kate O'Hanlon

Barrister