This was confirmed in a claim brought by solicitors, not the lenders involved, to recover moneys advanced to a borrower.
In Jacob Forbes Solicitors Ltd v Akita & Anor, the defendant obtained two loans from separate lenders which were to be secured by remortgage of the defendant's residential property. The claimant acted as the defendant's solicitors and the money was transferred to them. No remortgage took place, though the monies were transferred to the defendant. The claimant brought a claim against the defendant for recovery of the monies as agent/trustee for the lenders. The claim was said to be for the lenders' benefit. The lenders were not parties to the proceedings and the claimant had no express authority to act on behalf of the lenders although the lenders were aware of the proceedings.
The defendant applied to strike out the claim on the basis that the claimant was not instructed by the lenders and had no authority to act. The claim should have been brought by the lenders.
The court agreed. The claim was hopelessly misconceived. There was no evidence the solicitors had authority to act on behalf of the lenders, although the lenders were aware of the proceedings. If there was an agency situation, the usual position would be for the principal to bring the claim.
Things to consider
The usual course would be for the lender to give its name to the proceedings in such a case, being the contracting party, with the solicitor undertaking all the work and indemnifying the lender against all costs incurred. The fact that the defendant could have obtained a third party costs order against the lender (as the real party to the proceedings) did not find favour with the court as such orders are meant to be exceptional.