Law Report: 3 June 1998 - Meaning of 'good marketable title' in underta king

Barclays Bank plc v Weeks Legg & Dean (a firm); Barclays Bank plc v Layton Lougher & Co (a firm); Barclays Bank plc v N E Hopkin John & Co (a firm); Court of Appeal (Lord Justice Millett, Lord Justice Pill and Lord Justice May) 21 May 1998

IN A STANDARD form undertaking given to a bank by a purchaser's solicitor to facilitate the completion of a contract for the sale of land, whereby the solicitor undertook to apply any sums received solely for acquiring "good marketable title", the expression "good marketable title" did not mean "a freehold title free from encumbrances".

The Court of Appeal so held on the hearing of three appeals concerning the proper construction of a standard form of undertaking given by solicitors to Barclays Bank plc.

The undertaking was in a form agreed between the Law Society and the banks, and contained the following undertakings:

(a) that any sums received from you or your customer for the purpose of this transaction will be applied solely for acquiring a good marketable title to such property and in paying any necessary deposit legal costs and disbursements in connection with such purpose. The purchase price contemplated is pounds . . . gross and with apportionments and any necessary disbursements is not expected to exceed pounds . . . ;

(b) after the property has been acquired by . . . and all necessary stamping and registration completed to send the title deeds and/or land certificates and documents to you and in the meantime to hold them to your order.

In each of the three cases the bank had brought an action for damages against the solicitor who had given the undertaking, claiming that the solicitor had parted with the money on completion of the purchase of the relevant property but had failed to obtain a title to the property which provided satisfactory security for the bank.

Simon Berry QC, Jonathan Nash, Nigel Jones and Michael Sullivan (Eversheds) for the bank; Mark Hapgood QC and Richard McManus (Blake Lapthorn), Peter Cranfield (Wansbroughs Willey Hargrave) and David Halpern (Morgan Bruce) for the solicitors.

Lord Justice Millett said that the following issues arose on the appeals: the meaning to be attributed to the expression in the undertaking "for acquiring a good marketable title to the property"; and whether the obligation which the solicitors assumed by giving the undertaking was an absolute or a qualified obligation.

The subject-matter of a sale of land and the vendor's duty to prove his title to the subject-matter of the sale were two quite separate questions. The obligation of a vendor was to deduce sufficient title to the property which he had contracted to sell. The expression "good marketable title" described the quality of the evidence which the purchaser was bound to accept as sufficient to discharge that obligation. It said nothing about the nature or extent of the property contracted to be sold to which title had to be deduced.

The expression was a compendious one which described the title and not the property, and where it was contained in a contract for the sale of land, it meant "to the property contracted to be sold". In the present cases it was not contained in a contract for sale or in a communication between vendor and purchaser, but in a separate document provided by the purchaser's solicitor to a third party. The property was described in the undertaking in order to enable the parties to identify the transaction to which the undertaking related, not the property which the purchaser was acquiring. It was not necessary for the full particulars of the property together with the rights with and subject to which it was being sold to be set out in the undertaking, but was sufficient for the property to be described in terms sufficient to enable the relevant transaction to be identified.

The undertaking was, therefore, to be construed as an undertaking not to part with the money except for a good marketable title to the property which was the subject of the transaction briefly described in the document.

Further, the undertaking ought to be construed as subjecting the solicitor to qualified a obligation only, i.e. to obtain in exchange for the money what a reasonably competent solicitor acting with proper skill and care would accept as a good marketable title. That would bring his obligations under the undertaking into conformity with his obligations to his own client as well as with his trust obligations to the bank, and would not involve exposing him to a liability which no solicitor could properly be advised to accept.

Kate O'Hanlon, Barrister