Solicitors Can Make Conveyancing Mistakes

[Author – Tim ODwyer]

An Appeal Court has ruled that a father and his daughter validly escaped a developer’s option to buy their property because of a solicitor’s slackness over the Christmas-New Year holiday period.

When Maitland Murray and daughter Jacqueline bought a bungalow in Birmingham, England, from pension fund trustees one of the sale terms gave the trustees, who owned adjoining playing fields, an option to re-purchase from Murrays.  This option was exercisable within 15 years from 9th December 1985, the date of the conveyance to Murrays.  Despite being in a green belt, the playing fields would increase in value if development permission was granted in the future. Murrays’ property was critical for access to any development.

In 1997 Darkstar Land Limited acquired the playing fields and the benefit of the option.  On 4th December 2000, with a new town plan in the wind, Darkstar gave notice of exercise of the option.  The purchase price, determined after an independent valuation, was less than Murrays expected.

Nevertheless, Darkstar generously offered them “enhanced terms”.  Murrays’ property would be put on the market and Darkstar would pay Murrays one third of the difference between the option price and the best offer received.

By July 2003 planning permission had been obtained for the construction of five dwellings on the playing fields, but Murrays and Darkstar were still negotiating some details of the “enhanced terms”.  A month later Darkstar announced it would enforce the original option terms.  On 16th December 2003 Murrays were served a “10 working days” notice to complete.  This warned that, should they not settle, Darkstar would issue court proceedings for specific performance and/or damages.

Because the notice included an un-veiled threat, it had been prepared by Miss Haylock, a solicitor in Darkstar’s London solicitors’ litigation department, rather than by Mrs Roots, the conveyancing department’s solicitor.  At the same time Darkstar offered, without prejudice, to proceed on the enhanced terms provided Murrays accepted without further amendment an enclosed draft contract.

The Murrays were reluctant to settle on terms they considered unfavourable, and mistakenly thought the time limit expired on Boxing Day.  So in dismay they contacted the Birmingham Post.

On Monday 22nd December 2003 Miss Haylock informed Mrs Roots about the newspaper’s inquiries, but added brightly:  “We are agreeing a revised date of 9th January with the owners’ solicitors.”  The same day Miss Haylock faxed Murrays’ Coventry solicitors that Darkstar was prepared to extend settlement from the due date of 2nd January until 9th January 2004 “to take account of the Christmas and New Year period”.  Both Miss Haylock and Mrs Roots then took leave until Monday, 5th January 2004.

On Christmas Eve, the Post ran Murrays’ story under the headline “Family Faces Boxing Day Eviction”.

Meanwhile, Miss Haylock’s extension request, although received by Murrays’ solicitors, was not drawn to conveyancing partner Paul Drew’s attention before they closed for the holidays on 23rd December.  Although his firm would not open again until Monday, 5th January 2004, Mr Drew remained aware of the Friday 2nd January deadline.  At 12.13 pm that day he emailed both Miss Haylock and Mrs Roots from his office that Murrays were ready to settle.

At 3 pm Mr Drew telephoned Darkstar’s solicitors, leaving a message that the matter was urgent and concerned settlement of their client’s option purchase.  A return call 15 minutes later advised that both Miss Haylock and Mrs Roots were unavailable until the following Monday.  Mr Drew emphasised that the matter could not wait until then.

By 3.40 pm, when Miss Haylock telephoned him from her home, Mr Drew suspected that Darkstar would not be able to settle that day.  Without asking this begging question, he explained that he had been unaware of the extension request and confirmed again his clients’ readiness.  Without intending to mislead the other solicitor, he cautiously and non-committedly said he would obtain Murrays’ instructions about extending and “revert back” to Miss Haylock. However, being anxious not to compromise his clients’ good fortune in light of the other side’s apparent disarray, he did not call back.

Because Miss Haylock took this “non-reply” to be an acceptance, Darkstar did not tender.  On the next working day Mr Drew terminated the contract.

An angry exchange of correspondence followed before Darkstar sued for specific performance on the basis of “estoppel arising by conduct”, and lost.  Then it lost again on appeal.

After considering the Australian High Court case of Legione v Hatley, the Appeal Court ruled in a judgement (given only last year) that Mr Drew’s failure to get back to Miss Haylock could not amount to a promise or assurance not to require settlement that day.  Nothing he said could be construed as agreeing to an extension, nor did he act unconscionably or improperly.  His overriding duty was to his clients.

Alarm bells should have been ringing but, the Appeal Court remarked, Miss Haylock appeared deaf to them. No reasonably competent solicitor acting for a buyer in such circumstances should have understood from Mr Drew’s silence that Murrays were agreeing to extend.

Miss Haylock had already convinced (and deluded) herself that Murrays would extend.  Consequently she had not prepared for settlement on the due date. This litigation lawyer was focusing on the later date and was, in the words of the judgement, “contemplating the issue of proceedings in anticipation of default.”

(Real names are not used in this article which appeared in the December 2007 edition of Australian Property Investor magazine.)

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