Mortgage

Loan to purchase property - incorrect documentation - date mortgage made - date funds transferred to borrower's solicitors by mortgage companySecured Residential Funding Plc v Douglas Goldberg Hendeles & Co: CA (Swinton Thomas, Brooke and Laws LJJ): 19 April 2000

The borrower applied to a mortgage company, HMC, for a loan to purchase a house.

HMC sent a mortgage pack to the defendants, the borrower's solicitors, but mistakenly sent documents relating to an associated company, the claimants SRF.

HMC agreed to make the advance and the sale proceeded.HMC paid the mortgage advance into the defendants' client account two days before completion.

HMC noticed the mistake just before completion, but the defendants received the correct blank documents after completion.The borrower executed the mortgage deed and assigned her life policy in favour of the claimants, who were registered as proprietor of the charge over the property at the Land Registry.

After the borrower fell into arrears the claimants obtained an order for possession of the property.

A loss was made on its sale.The claimants brought a claim against the defendants for damages for negligence.

At the trial of two preliminary issues the judge held that the defendants owed the claimants a duty of care, but that HMC made the mortgage advance as principal and therefore dismissed the action as the claimants had established no loss.

The claimants appealed.Thomas Putnam (instructed by Davis & Co, High Wycombe) for the claimants.

Daniel Gerrans (instructed by Ince & Co) for the defendants.Held, dismissing the appeal, that the contract for an advance was wholly distinct from the mortgage which followed; that the mortgage advance was made on the day the mortgage company transferred the funds to the client account of the borrower's solicitors rather than on the date of completion of the purchase; that no agency arose because HMC never purported to act on behalf of the claimants, and, since HMC made the mortgage advance as principal before the date of completion, the action was properly dismissed.