The Bristol & West Building Society (the society) has been prominent in its pursuit of negligence claims against solicitors through the Chancery Division and Mercantile Court of the Bristol District Registry.

The sheer volume of these actions, based upon the society's lending conditions, has given rise to recurring issues -- the approach to which the district judges in Bristol have needed guidance in order to ensure consistency in their decision-making.

The guidance was issued in the form of a 155-page judgment handed down by Mr Justice Chadwick on 16 April 1996 and covered 13 separate RSC ord 14 applications, or appeals against earlier decisions, generically known as Bristol & West Building Society v May, May & Merrimans [1996] The Times, 26 April.

This article examines that judgment.In his judgment, Chadwick J focuses on issues of liability and causation arising from solicitors giving a substantially unqualified certificate in the report on title in the following terms:'I/we confirm that the details of the transaction accord exactly with the particulars in the offer of advance and the requirements of the solicitors instructions...'I/we have investigated title to this property and report that I/we consider the title to be good and marketable and that it may be safely accepted by the [society].'The report on title has assumed particular significance in the Society's actions because:-- it is the primary means by which solicitors convey facts (a) which the society's standard form solicitors instructions oblige them to report, ie a contractual duty), and (b) which a reasonably competent solicitor would realise might cause the society to question the valuation on which the society was ostensibly relying, ie the tortious duty; and-- it contains a representation on which the society relies and which triggers the release of the advance cheque and the society's authority to solicitors to complete the mortgage transaction.The essential point is that the judgment creates three categories of case.Category oneThis is where a solicitor omits to draw to the society's attention at any time prior to receiving the advance cheque a fact which the solicitor knows, or ought to know, would make the representation given in the report on title misleading.

We will call these cases 'Mothew cases', following Chadwick J's decision in Bristol & West Building Society v Anthony Paul Mothew [1995] 27 July, (unreported).

In Mothew cases, Chadwick J held that a solicitor's actual or presumed knowledge that the representation given in the report on title was misleading justified the imposition of a constructive trust on the advance monies received by the solicitor.Category twoThis is where, as a result of a failure to exercise reasonable skill and care, a solicitor is ignorant -- at any time prior to receiving the advance cheque -- of a fact which should have been drawn to the Society's attention, and which made the representation given in the report on title misleading.

We will call these 'Target cases', following the decision of the House of Lords in Target Holdings v Redferns [1995] 3 All ER 785.In Target cases, Chadwick J held that the absence of any actual or presumed knowledge that the representation given in the report on title was misleading meant that it was not necessary to impose a constructive trust on the advance monies r eceived by the solicitor.

The monies would still be held on trust, but the trust would be a bare trust.Category threeThis is where a solicitor is under no duty (either contractual or tortious) to draw a fact to the Society's attention.

Again, Chadwick J held that a bare trust existed in these cases.It is important to remember that Chadwick J was dealing with RSC ord 14 applications, or appeals against earlier RSC ord 14 decisions.

The relief he gave to the parties was, therefore, limited to giving summary judgment, or leave to defend as the case may be.

In the Mothew cases, he refused the solicitors leave to defend and directed that judgment be entered with damages to be assessed.

In the Target cases he granted the solicitors unconditional leave to defend on the issue of causation.

In the remaining cases he granted the solicitors unconditional leave to defend on issues of liability and causation.Implications of the judgmentThe judgment is significant because Chadwick J has confirmed that in his view there should be a category of breach of trust, ie the Mothew category, which should be treated differently from other breach of trust cases, such as the Target category.

The judge says that in Target cases there should be an investigation into what would have happened if the solicitor had done all that he was required to do, but in Mothew cases there should be no such investigation.

In short, in Mothew cases, causation is irrelevant.Whilst a distinction does need to be made between cases in which a solicitor misleads with actual or presumed knowledge and cases where a solicitor innocently misleads, the use of causation as the means of giving effect to that distinction produces rather crude and arbitrary results.

An example of this would be as follows.A lender offers to make an advance of £70,000 to a borrower.

The offer of advance requires life cover of £70,000 to be in place because the mortgage is of the endowment variety.

According to the lender's standard form instructions issued to the solicitor, it is the solicitor's responsibility to ensure that the required life cover is arranged.Subsequently, the solicitor gives a clear and unqualified representation in the report on title and yet knows that, for one reason or another, life cover of only £50,000 is on risk at the date of completion.

The borrower later falls into arrears and, as a result, the lender automatically converts the mortgage to a repayment basis.

The lender subsequently repossesses and sustains a shortfall when the property is sold.This example would fall into the Mothew category because the solicitor failed to comply with the instructions issued to him and, by omitting to draw attention to the absence of the required life cover, the lender was misled by the report on title.

But in this example, the true cause of the loss was, in our view, the borrower's default.

The lender could not have had recourse to the security of the life cover because it had converted the borrower's mortgage account to a repayment basis.

Even if the borrower's account had not been converted, the borrower had not died and, therefore, the eventuality against which the life cover was intended to protect the lender's interest never occurred.

However, on Chadwick J's analysis, these facts would be irrelevant.

The lender would be entitled to summary judgment for the full amount of its loss, despite the fact that the solicitor's 'intentional' omission was not the true cause of the loss.Chadwick J seemed to recognise the arbitrary nature of his Mothew/Target distinction when he came to consider the facts of the 13 cases before him.

One case, involving Bower Cotton & Bower, is of particular interest in that the solicitor who had conduct of the transaction in question clearly knew that the purchase price would be £122,750 before he had received a copy of the society offer of advance, which stated that the purchase price was to be £122,000.

Despite this, the solicitor did not draw the discrepancy to the society's attention and instead gave a clear and unqualified report on title.

The following excerpt illustrates the practical difficulty the judge experienced in applying the Mothew/Target distinction:'...

[Bower Cotton & Bower's] report on title is strictly misleading; in that it contains an unqualified confirmation, contrary to fact, that the details of the transaction accorded exactly with the particulars in the offer of advance.

That unqualified confirmation could not properly be given in the circumstances that the contractual price (£122,750) differed from the purchase price (£122,000) stated in the offer of advance.

But, in the circumstances of this case -- and, in particular, in the absence of any reason to withhold that information from the society I do not think it right to hold that whoever signed the report on behalf of [Bower Cotton & Bower] must have known that the failure to draw attention to the increase in the purchase price was the result of an oversight.

It should not, without direct evidence, be attributed to any intention to mislead.

I do not think this case should be treated as a Mothew case.'It is unclear why Chadwick J considered the report on title to be misleading.

Had the discrepancy between the actual purchase price and the price specified in the offer of advance been disclosed by Bower Cotton & Bower, the society might have increased its offer of advance.

At worst, the solicitor seems to have saved the society from a greater loss by not reporting the increase in the purchase price.

The suggestion that the society was misled as a result seems unrealistic.

The result of the case does not sit happily with what could have been the outcome had the Mothew/Target distinction been applied with its full rigour.Chadwick J is correct to say that a solicitor who knowingly misleads should be treated differently from a solicitor who innocently misleads, but runs into difficulty when he uses causation to give effect to that distinction.Experience of claims against solicitors brought by the Society and certain other lenders shows that many claims involve 'technical' breaches of the small print of standard form instructions which, almost without exception, have occurred many years previously.

If causation is disregarded in such cases, the technical nature of the breach will be overlooked when the question of compensation comes to be assessed.Breach of trust cases should have, as their cornerstone, principles of equity and fairness.

In the words of the House of Lords in Target Holdings v Redferns:'Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach.'This statement remains true, irrespective of the type of trust involved.

If causation ceases to be a relevant issue in breach of trust cases, the law of equity could give rise to the unattractive spectacle of certain lenders making windfall recoveries from professionals who performed an unpaid service, and yet whose indemnity insurance is systematically targeted as a means of recovering bad debts, largely sustained for reasons unconnected with any fault on the part of the professional concerned.We are not suggesting that professionals who are found to be negligent should not be liable to compensate; simply that the law should, in all cases, take heed of the relatively uncontroversial principle that a fair payment should be made for a fair claim.

We are not convinced that the decision in Bristol & West Building Society v May, May & Merrimans reflects that principle.

This article was written by Erik Salomonsenand Steven Dewhurst, partner and solicitor in the insurance litigation department at Bond Pearce Solicitors, Exeter.