Summary: A firm of solicitors was held to have made negligent misrepresentations to the Land Registry when applying for the discharge of a mortgage on the basis of documents which – unknown to them – were forged.
Chief Land Registrar v Caffrey & Co  EWHC 161 (Ch) (03 February 2016)
In 2007, Mr and Mrs Turner (the ‘Turners’) mortgaged Walnut Hill Farm (the ‘Property’), to DB UK Bank Ltd (‘DB’) as security for a loan. In October 2009, the Turners supplied their solicitors, Caffrey & Co, (‘Caffrey’) with a forged DS1 purportedly signed on behalf of DB to discharge the mortgage. Caffrey submitted the DS1 to the Land Registry together with a Form AP1 to apply to alter the register and delete the mortgage. The Land Registry requested evidence that the person signing the DS1 had authority to do so on behalf of DB. Resourcefully, the Turners supplied Caffrey with a (once again) forged power of attorney. Caffrey sent a certified copy of this to the Land Registry, who then removed the mortgage from the title of the Property. Mr Turner subsequently purchased Mrs Turner's share of the Property, raising finance from Santander UK plc (‘Santander’), on the security of a mortgage of the Property.
Subsequently, DB discovered that their mortgage had been removed, and applied to reinstate it. In 2012 an adjudicator decided that the mortgage should be reinstated, but ranking after that of Santander. DB then sought and obtained an indemnity from the Land Registry under the Land Registration Act 2002 (‘LRA 2002’). The Land Registry consequently brought two claims against Caffrey. The first was a negligence claim arising from Caffrey’s failure to verify the documents. This was on the basis of an alleged duty of care owed to DB whose rights had been subrogated to the Land Registry by virtue of the LRA 2002. The second was a direct negligent misrepresentation claim which arose from either an express or implied representation made by Caffrey ‘that they had taken sufficient steps or measures and/or knew sufficient facts to satisfy itself that’ the documents had been properly executed and would be effective.
Master Matthews, sitting in the High Court, dismissed the simple negligence claim on the basis that Caffrey did not owe a duty of care to DB.
In order to succeed on the negligent misrepresentation claim, the Land Registry needed to demonstrate that Caffrey owed them a duty of care either (a) through a fiduciary relationship, or (b) by Caffrey voluntarily answering questions or by tendering skilled advice or services upon which they knew or ought to have known that the Land Registry would rely. Master Matthews found, reluctantly, that Caffrey had assumed a duty of care by tendering skilled services, despite having ‘no particular qualifications for making the statements that are to be attributed to them.’ Accordingly, since the Land Registry’s allegation of representations had not been rebutted, the court found in favour of the Land Registry.
Daniyal Ansari says:
A genuinely puzzling case that may be best explained by the fact that Caffrey failed to put in an appearance and Master Matthews felt obliged to accept the Land Registry’s pleadings of fact which included the allegation of representations being made by Caffrey. Solicitors should however be wary of submitting documents in circumstances where their provenance may be uncertain. Although Master Matthews described the 2009 registration system as 'inherently risky', it is the system which is, in all material respects, still in use at the present day.