Bristol and West Building Society versus Mothew, (1998) Ch. 1

This case gave a rather more concrete and segregated definition as to what all duties formed the body of fiduciary duty for a professional, and in what circumstances do these fiduciary duties arise and when are they are supposed to be followed by the professional in question. Although the solicitor as a professional had a fiduciary duty to uphold, but not every breach of care done by the solicitor as a professional can be counted as a breach of fiduciary duty. In the case of Mr. Mothew, the building society was made aware of all the risks involved, after which they had consented to the acts of Mothew. This, in turn, removed the causal link for the breach so alleged against Mr. Mothew.
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Introduction

Bristol and West Building Society versus Mothew is a leading case in the history of jurisprudence related to fiduciary duties in England. The case is also concerned with the issue of professional negligence. It is a fact that a professional solicitor is tasked with work that requires a significantly high level of skill and care while doing his/her work. The nature of the fiduciary duty which the professionals are expected of maintaining was also established as a long-standing principle in the law of England. This case gave a rather more concrete and segregated definition as to what all duties formed the body of fiduciary duty for a professional, and in what circumstances do these fiduciary duties arise and when are they are supposed to be followed by the professional in question.

Facts of the Case

Mr. Mothew was a solicitor. In a contract of mortgage, he had acted on behalf of both the mortgager and the lender in the transaction. The transaction was for the purchase of a residential property. It was alleged that he negligently told the building society that there was no second charge on the house when the mortgage agreement was signed. At the time of reporting to the building society and requesting its funding, without the knowledge of Mr. Mothew, the borrower had a relatively small bank overdraft facility limited to £2,000. After completion of the purchase and mortgage (at which time the lender’s funds were applied to the transaction) but before the transactions were registered at Land Registry Mr. Mothew was approached by the borrower’s bankers i.e. the Barclays, stating that they were granting a second mortgage facility to the borrower and seeking that their second charge be registered at Land Registry. The documents for the second charge were prepared and executed by the borrower at the premises of the Bank. Mr. Mothew then asked the Building society to give their consent so that the second charge may be registered, and when they received the notice of the second charge having been registered, they acknowledged the same as well. However, later the building society was forced to let off the property which they had purchased. This caused them to suffer a loss. They sued Mr. Mothew for the damages which they incurred since Mr. Mothew had withheld the information about the overdraft facility of the borrower.

Mr. Mothew, on the other hand argued that Bristol and West had been aware of the second charge and even if it had not known, it would still have proceeded with the transaction and suffered the same loss, because in 1988 when the transaction was going through, the market was buoyant and the extent of the borrower’s overdraft facility was common place. This would mean no damages would be recoverable at common law, for there would be no causal connection with Mothew’s (alleged) negligence and the building society’s loss.

Issues

The case was brought before the Court of Appeals and the Court pondered over the following question –

  1. Whether Mr. Mothew was liable for the damage suffered by the respondents in this appeal?
  2. Was Mr. Mothew negligent in the professional conduct as a solicitor?
Also Read  M.S.MEWAR v. LAKE PALACE HOTELS MOTELS (P.) LTD. [1997] 4 CLJ 440 (Delhi)

Held

The initial attempt of Mr. Mothew to defend his actions was unsuccessful. However, the case was later taken to the professional indemnity insurers of Mr. Mothew to the Court of Appeals, and in the judgement of the Court of Appeals, the appeal presented by Mr. Mothew was allowed. In the end, the situation was resolved by the parties arriving at negotiation, a settlement where Mr. Mothew and his insurers were not required to pay any penalty, but on the other hand, Bristol and West had to pay as many as 80,000 Pounds to the costs of the indemnity insurers of Mr. Mothew.

Analysis

The judgment delivered by the Court of appeals in Bristol and West Building Society versus Mothew allowed the appeal presented by Mr. Mothew. In the judgment, the Court of Appeals stated that although the solicitor as a professional had a fiduciary duty to uphold, but not every breach of care done by the solicitor as a professional can be counted as a breach of fiduciary duty. The breach of fiduciary duty does not need to have a causal link to be demonstrated. In the eyes of the Court, this is because such breaches are a breach of trust or loyalty. However, in the case of Mr. Mothew, the building society was made aware of all the risks involved, after which they had consented to the acts of Mothew. This, in turn, removed the causal link for the breach so alleged against Mr. Mothew.

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