In the current spate of lender litigation, solicitors are facing numerous file requests from lenders. Where a solicitor had two clients (the borrower and the lender) he owes a duty of confidentiality to each. Consequently many solicitors only provide the lender with a copy of the documents relating to the lender’s retainer.
To counter this, many lenders provide copies of declarations signed by the borrower as part of the mortgage application. It was common practice for mortgage applications to include a borrower’s declaration purportedly waiving any right of confidentiality or privilege over their solicitor’s file. Until recently the status of these declarations was uncertain, particularly whether they remained effective after the transaction.
This question has been considered in three recent decisions. In short, depending on the terms of the declaration, the lender is frequently entitled to see the solicitor’s entire file.
The three claims are Mortgage Express v Sawali and two unreported decisions involving Oakwood Home Loans and Platform Home Loans (this firm acted for the defendant solicitors in both unreported cases). Proceedings alleging negligence/breach of contract had been issued in only one of the three claims.
The declarations read as follows:
- “I/We irrevocably authorise my/our conveyancer to send their entire file relating to the whole transaction (not just the loan) to you at your request.” (Sawali)
- “Any solicitor acting for you may disclose to us any information or documentation that we ask for about the transaction or the property which was the subject of this Application and you waive any duty of confidentiality or privilege which may otherwise exist in relation to this mortgage transaction.” (Oakwood)
- “I understand, declare and agree that my Solicitor shall disclose to the Company all information relevant to the Company’s decision to lend and that I waive any right to claim solicitor/client confidentiality or legal privilege in respect of such information.” (Platform)
In each case, the declaration in the mortgage application was found to extend beyond the end of the original purchase transaction. Consequently, the defendant solicitors were ordered to disclose the entire file, although the reasons given differed slightly in each case.
What practically should a solicitor do when confronted with a file request from a lender? A solicitor owes important duties of confidentiality to his/her borrower client, and cannot ride roughshod over those duties. In the light of the three decisions discussed above, the following steps might be considered:
- Insist on a copy of the declaration by which the borrower waived privilege and confidentiality over the solicitor’s file. Without such a waiver, the lender is not entitled to see the borrower’s documents. Where the claimant is a large lender, it is highly likely that such a declaration exists, but it should not be assumed.
- Check the terms of the alleged declaration carefully. Each case involved interpreting the precise terms of the declaration: had they been worded more narrowly, the papers may not have been disclosed. Consider the declaration and decide whether it is sufficiently similar to Sawali, Oakwood and Platform to be effective after the transaction has finished. Again, many will be wide enough to cover this situation, but the wording should still be checked. Where it is unclear, consider writing to the borrower for their permission to disclose the rest of the file.
- Consider who made the request. Check the declaration to confirm who precisely is allowed to view the documents, and compare that with who requested the file. Many lenders are composite entities with various subsidiaries. The file should not be sent to a company not entitled to it, even if it appears to be related to the correct company.
- Furthermore, often the request is not from the original lender. If so, then evidence should be sought confirming that the lender requesting the documents has the same entitlement to see the documents as the original lender. Any documents should be carefully considered and their practical effect assessed.
- Consider disclosing the borrower’s part of the file if the declaration is reasonably similar to those quoted: if the solicitor also acted for the vendor the documents created in that retainer should not be disclosed.
Note that neither Sawali nor Oakwood explicitly dealt with the ledger card: in Platform its disclosure was specifically ordered. There is no obvious reason why the ledger has special status protecting it from disclosure, but consider its contents carefully.
The decisions are limited to files relating to transactions funded by mortgage finance and are not of wider application. Consequently, requests for documents in other situations should be considered on a case-by-case basis and, given the seriousness of client confidentiality, solicitors should think very carefully before acceding to such requests.
Solicitors should, in normal circumstances, assert the rights of (former) clients even if those clients have not asserted them themselves. This includes contending that client confidentiality applies to the solicitor’s file. Before disclosing borrower’s documents to a lender, a solicitor needs the comfort of an effective waiver from the client, or an order of the court.
Sawali, Oakwood and Platform give some comfort to a solicitor where there is a similarly worded declaration. Provided careful checks are made, any subsequent claim by a former client for breach of confidentiality will face considerable obstacles. However, if the wording of a declaration is unclear, solicitors should consider refusing to disclose without a court order to that effect.