Commercial property update - April 2011

Briefcase News

Access to client files

In the case of Mortgage Express –v- Sawali (2011) Mortgage Express applied to the Court for an order requiring Mehrban Sawali to deliver up his files on which he had acted as solicitor for both the borrower and the lender, and in respect of which Sawali kept a joint file.  It is established law that in a situation like this the solicitor has in effect two clients and each client is entitled to have his affairs treated confidentially and the advice given to each is covered by legal professional privilege.

The Solicitors’ Code of Conduct makes it clear that where a joint file is kept, the whole of the file must not be disclosed to the lender without the consent of the borrower and, unless the borrower specifically consents to it, the solicitor would not have been permitted to release the entire files to Mortgage Express.

Mortgage Express on the other hand was concerned to investigate the files in their entirety.  They were particularly concerned because one of the transactions had initially been funded by a different lender and then the subsequent re-mortgage of the same property to Mortgage Express took place on the same date the mortgage was completed.  This is the kind of information that the Council of Mortgage Lenders Handbook would expect a lender’s solicitor to reveal as part of its duty to prevent fraud.  This could only be ascertained by examination of the complete file.

In its application to the Court, Mortgage Express contended that the borrower had expressly waived its right to confidentiality and legal professional privilege because its standard application form for the loan signed by the borrower, contained the following declaration:

“I irrevocably authorise my conveyance to send its entire file relating to the entire transaction (not just the loan) to you at your request”.

Mr Sawali claimed that this authority did not extend to privileged material relating to the borrower’s purchase of the property and furthermore, that there had been no communication from the borrower to him providing or confirming this authority.

The Court was unimpressed by this argument claiming that the declaration was unambiguous, irrevocable and binding on both borrower and lender and should be read in the context of a mortgage transaction in which the solicitor was acting for both parties and there was need for full disclosure.

The Court’s view was that such declaration had to be construed as authorising the solicitor to provide documents within the file that would be covered by the borrower’s legal professional privilege, as otherwise, it would be impossible for lenders to monitor transactions and obtain documents that they needed in order to consider whether the solicitor was in breach of his duty.  The declaration was consequently objectively construed as meaning exactly what it said.  The borrower had expressly authorised Mr Sawali to provide the entire file to Mortgage Express for the purpose of entering into the transaction and Mr Sawali was ordered to deliver up the entire file to Mortgage Express.

Preventing Use of a Right of Way

The second case considered this month relates to an illegal caravan site and the use of a right of way to gain access to it.

In the case of Ashdale Land & Property Co Limited –v- Mairoello (2011) the freeholder of the land subject to the right of way applied for an injunction against 12 defendants in an effort to prevent them from infringing the terms of a right of way which ran along a dirt track on his land.

It is an established principle that when an easement is granted for a specific purpose it cannot be used for other purposes and that a right of way is not a right to park.  Where rights are exercised unlawfully, the court can make an order preventing that unlawful use.  In 1995 the claimant in this case had sold a field at the end of the lane together with the agricultural right of way. 

That field was subsequently sold off in parts, some of which were divided into plots that were then sold on to travellers.  Travellers began to move on to the site in 2008 and during 2009 serious works began to develop part of it with hard core being brought on to provide hardstanding for caravans.  This activity breached the terms of the right of way across the lane and also planning control.  An enforcement notice was issued against some of the travellers on the field who then applied for retrospective planning permission.  In November 2009, one of the defendants brought in more quantities of concrete material to provide hardstanding for another eight caravans.  This activity continued even though a stop notice had been issued by the local planning authority and injunctions were obtained by both the claimant and the local planning authority. 

The claimant then placed large concrete blocks towards the end of the lane to prevent vehicular access to the caravan site and the travellers began to use the lane for the parking of cars which was also in breach of the terms of the right of way.  The claimant then sought to prevent all the defendants from using the right of way.  This was resisted by one of the defendants who said that he had a genuine intention to use his land for agricultural purposes, something that the Court  did not believe.  In this case, the Judge was satisfied that the exceptional circumstances of this case (where an injunction prohibiting the unlawful use of the right of way had been ineffective), it was “proportionate, just and appropriate” to prevent any use of the right of way.  He said that the occupiers should be given the opportunity to remove the caravans before all access was obstructed and the defendants would be at liberty to apply for a modification of the order if this were justified by subsequent events – ie evidence that they were not going to continue the unlawful use and revert to agricultural use only.