SOLICITOR'S FRAUD

Evening Post, Volume LXXXVII, Issue 79, 3 April 1914, Page 8

SOLICITOR'S FRAUD

TWO PARTIES SUFFERING NEGLECT TO FAY MORTGAGE. DECISION RESERVED. Legal argument in the case Scarborough Wiight v. John London was heard by his Honour Mr. Justice Edwards to-day. Mr. C. P. Skerrett, K.C., with him Mr. U. Samuel, appeared tor the plaintiff, and the Hon. i<'. H. D. Bell, K.C., with him Mr. M. Myers and Mr. H. M'lntyre, for the defendant. The plaintitt is a settler of Kimbolton, Wellington, and the defendant a. settler at Tauranga, The case was heard at Palmerston North, and adjourned to Wellington for aigument. The claim was for a sum of £51375, the plaintiil alleging that the amount was paid for the release of a mortgage which was not paid. The plaintiff took 102 acres of land on lease from the defendant, with a purchasing clause, the price being £20 IDs and the rental £1 per acre. Ulivur 2voel Gillespie acted as solicitor for the plaintiff, and M'lntyre and Murphy lor the defendant. Gillespie boriowed £18110 to pay off the mortgage, and a transfer was duly executed. But Gillespie tailed to pay £L575^ due on the mortgage, misappropriating' it to his own use ; and as he was bankrupt it couJd not tie recovered. THe plaintiff was held liable for the amount by the mortgagees, and claimed that defendant should recompense him, on the ground that Giilespie, by the acts ot defendants solicitors, had been enabled to commit the fraud. In the course of the statement of defence the defendant stated that at the desire of the solicitor Gillespie as agent for the plaintiff, the defendant's solicitors gave the transfer to Gillespie subject to the mortgage, and that neither he nor his solicitors warranted to the plaintiff that at the time he was the owner of the land in fee simple, or, alternatively, that such a transfer was tieffvered to Gillespie on the express understanding that it be not used except subject to memorandum of mortgage, and the due payment of moneys. The defendant filed a counter-claim for £lotfs, as the unpaid balance of the purchase money, or the return of the transfer of the land on repayment of the amount paid by the plaintiff. ME. SKERRETT'S OPENING. Mr. Skevrett, in opening, said the case was one of considerable difficulty. The outstanding feature was that but for the default of the solicitors for the vendor in completing a purchase in the ordinary and regular course of business, Gillespie would not have been able to inflict loss on one or two innocent parties. Wright had no possible claim against M'lntyre itnd Murphy, the solicitors for the vendor, even although they might be the immediate cause of his loss. On the other hand it was clear that London had business relations with M'lntyre and Murphy, and if they had caused, him loss by neglect of duty his remedy was against them. Dealing with facts, Mr. Skerrett stated that the plaintiff held a short lease with a compulsory purchasing clause which had been exercised before the expiry of the lease on Ist September, 1912. The lessee, London' 6, title was subject to a registered mortgage under which he secured the sum of £1500 and interest, the interest being payable on, 30th September, 1912; In anticipation of the, completion of the purchase, M'lntyre and Murphy consulted the vendor for London to execute the conditions of release by command of the Bank of Australasia at Feilding, to be delivered up to them upon payment of the principal and some of the interest. The deeds were forwarded by the secretary"©!' the Truet and Agency Co., Ltd., on 28th September, 1912. The plaintiff Wright was unable to pay the whole of the purchase money himself, but paid into Gillespie's hands the sum of £311, and iastrucied him as- his eolicitcr to procure as great an advance- as he could upon the first mortgage. Accordingly Gilles- ■ pie procured from Gunn's trustees the sum of £1500 as first mortgage on the land, and J,h© 6um was paid into Gillespie's banking account on Hth or ]Bth September. Gillespie raised the sum of £300 on second mortgage, and this was paid into his banking account on sth November, 1912. During this period the vendor's solicitor was pressing Gillespie to complete, and on Ist October, 1912, obtained an advance of £200 on account of the purchase money of £2091. There was an extraordinary delay between Ist September and,* sth November in the completion of tne purchase, notice to complete having been given as early as May, 1912. • The transaction was completed by Gillespie, as solicitor for Wright, paying the sum of either £495 17s 6d or £408 6s Bd, being the balance of the purchase money over and above the principal and interest owing to the Trust and Agency Company. M'lntyre and Murphy accepted a personal undertaking of Gillespie to discharge the memorandum of mortgage to the Trust and Agency Co., Ltd. On 6th November M'lntyre and Murphy handed over to Gillespie an executed transfer, whioh declared that the vendor was possessed of a piece of land free from incumbrances, and consequently acknowledging receipt of the whole of the purchase money. Op 18th November M'lntyre and Murphy were informed by the Trust and Agency Co., Ltd., that Gillespie had not carried out his undertaking to pay off the mortgage. Meanwhile, For a year Wright felt secure. He was not asked for rent by London, or for interest as owner in fee of the land by the Trust and Agency Co., Ltd. He paid for a year the interest^ to Gillespie for loans from Gunn s trustees and Mrs. Prior ; and remained confident that the whole transaction had been completed in the usual way. He was infoimed for the first time in September, 1913, that the mortgage had not been paid off ; and it was then too late to protect himself. The position was that Wright and London were both innocent parties suffering from the fraud of a third person,- and the question was which of the two should suffer. There was no question of one solicitor acting for the two parties to the action. The Joss to Wright was, in fact, caused by the acceptance by M'lntyre and Murphy of Gillespie's undertaking, and their neglect to see that the mortgage was paid off. The purchase could have been completed by the vendor paying off the Trust and Agency mortgage and receiving the whole of the purchase money. That was what he contracted to do, but there was no intention to adopt that course. The other and most convenient way was that the purchaseis, by the vendor's direction, should pay oft' the mortgage to tho Trust and Agency Co. out of the purchase money, and that the vendor should see that this was done. This course was intended to be followed. But for this coiuse, Gillespie could not have committed the fraud. London had handed over the transfer without seeing that ho had performed liis duty, and the whole conduct of the vendor was a representation to Wright that the transaction had been safely completed, and that he possessed tho land free from any encumbrances created by the vendor, and as Gillespie had the transfer in his possesesion he was able to represent that the transaction had been completed The vendors, through , their solicitors, knew, and Wright did not know, that the mortgage bad not been paid off ; and they remained for over a year without any proper enquiry into the matter. The

rights of all parties lay in a Court of Equity and not in a Court of Law. The contention of the plaintiff was that the fraudulent solicitor, Gillespie. was enabled, by the action of the defendant, to represent that the transaction was com pleted. If he had not been so enabled, the plaintiff would have 1 ad to take the consequences of the act of his agent, Gillespie. Mr. Skerrett proceeded to quote anumber of decisions bearing upon the present case. Referring to the disposal of the moneys by Gillespie, Mr. Skerrett said that if Wright had known, during the time Gillespie was solvent, that the mortgage had not been paid, he could have brought pressure to bear upon Gillespie to find the money. He would have found the money by some means. He would, it was true, have robbed somebody else to get it, but in law, as in every-day life, a man was entitled to the benefit of his urgency or his activity. IN REPLZ.* The Hon. F. H. D. Bell, in his reply, said that he did not see any great difficulty in the cases, and contended that there was no foundation for the claim either in equity or in law. He contended also that the fact that different solicitors were employed by the parties made an, entirely different position to that which would have arisen had there been a common solicitor. Mr. Myeis also addressed the Court. His Honour reserved his decision.