High Court rules that innocent vendor whose signature was forged on conveyancing documents suffered damage on exchange, not completion.
Mr and Mrs Edehomo purchased an investment property in London in 1989 as joint tenants. In November 2002, Mr Edehomo instructed Bowlings to act on their behalf in relation to the sale of the property. By this time, however, they were estranged. Contracts were exchanged on 21 November 2002 and completion followed on 2 December 2002. It later transpired that Mr Edehomo had forged his wife’s signature (and may have used a confederate to impersonate her in meetings with Bowlings) and she received no proceeds from the sale.
Mrs Edehomo issued a claim against Bowlings for breach of duty on 1 December 2008, over six years after the exchange of contracts but under six years from the date of completion. Bowlings applied (initially unsuccessfully) to have the claim struck-out on the grounds that it was statute-barred.
On appeal to the High Court, Bowlings argued successfully that Mrs Edehomo’s cause of action accrued on the exchange of contracts as, at that point, the value of her interest in the property was significantly diminished. This was found to be the case even though her loss would only be realised on an attempt by her to sell the property, as no potential purchaser would choose to enter into a contract to buy an interest in the property at open market value when told it had been sold to someone else.
The court found that Mrs Edehomo would have been able to commence proceedings against Bowlings on exchange, having suffered loss at that point, based on a claim in tort. Accordingly, as the cause of action had accrued more than six years before the commencement of proceedings, the claim was time-barred.
This case neatly addresses the timing of the accrual of a cause of action against a solicitor in tort of an innocent vendor in circumstances where he or she has been impersonated in order to effect a sale of property in which they have an interest, there being no retainer between the two. In instances where exchange and completion take place on the same day, often a hallmark of property fraud, little will turn on the issue. However, where the two are separated, as here, appreciating when the cause of action accrued can be of crucial importance to defendant solicitors and their insurers and can enable the early disposal of the claim. It is also a salutary lesson for claimants – Mrs Edehomo was cheated of a significant financial interest and now has no recourse to recover her loss, except possibly against her own solicitors, to the extent that they were instrumental in her failing to issue her proceedings within time.