Kandola v Mirza Solicitors LLP

The claimant seeks damages against the defendant solicitors, who acted for him in the proposed purchase of a property in 2010. On exchange of contracts a deposit of £96,000 was paid on terms, unusually, that it be held by the vendor's solicitor as agents for the vendor. The vendor did not complete and the deposit has been lost. Since then the vendor has been made bankrupt and the solicitors who acted for him have disappeared. The SRA has intervened in their practice and the two principals of the firm have been struck off, the Law Society having found allegations of fraudulent misuse of client money (not in relation to this transaction) proved in their absence. Mr Kandola's central complaint is that he should have received better advice about the risks involved which would inter alia have revealed that a bankruptcy petition was outstanding against the vendor, in which case he would not have proceeded with the transaction on those terms. The defendant's case is that Mr Kandola was fully and properly advised throughout, including specific advice which he acknowledged in writing not to exchange contracts on that basis, but he elected not to follow that advice.

Behind that bare outline of the facts is a history that the claimant's counsel described as 'murky'. That is largely because the claimant himself has not chosen to dispel the murk. There is a reasonable amount of contemporary documentary evidence, particularly from the defendant's file in relation to the matters it dealt with, but it is apparent that the defendant was not aware of all aspects of the transaction and much was going on directly between Mr Kandola and the vendor or a middleman, and even between Mr Kandola and the vendor's solicitor, in respect of which there is very little if any by way of documents and an explanation emerged only by dint of Mr. Wood's very able cross examination.

I heard only from two witnesses, Mr Kandola and Mr Elahi, who is head of the defendant's conveyancing department and was responsible for the purchase file, initially supervising an assistant Mr. Husain but dealing directly with Mr Kandola and the vendor's solicitor at the time of exchange. Mr. Husain provided a short witness statement, which was agreed. Mr Elahi is accepted to be an experienced conveyancing solicitor, and is clearly knowledgeable and well familiar with the conveyancing process, The Law Society's Conveyancing Handbook and the standard conditions of sale, with a good understanding of the reasons for the various provisions of those documents. He accepted that he was not always the most conscientious at making file notes, and that some documents he would have expected to be on his file (such as copies of the draft contract as amended and returned by him) were not there, for reasons he could not explain. He said that Mr Kandola was a client for whom he dealt on many transactions; he very rarely gave instructions in writing but had Mr Elahi's mobile number and was in the habit of ringing many times a day to give him instructions or make enquiries as to progress. Mr Elahi could be anywhere when these calls came through and may not have the opportunity to make a written note. In some cases he would simply do what had been asked, eg to write a letter the content of which reflected the instructions given. He would make a note if the matter was of importance, however. He was adamant that the notes he had made were accurate reflections of his instructions and advice. Mr Elahi came across as an experienced solicitor dealing pragmatically but carefully with a somewhat cavalier and entrepreneurial client. He was anxious and perhaps for that reason somewhat prone to lengthy theoretical explanations of the reasons for various steps in the conveyancing process, but those explanations did show a good understanding on his part. In my judgment he was an honest and credible witness.

Mr Kandola is a successful businessman who owns a number of care homes through a limited company and owns or controls several buy to let residential properties, either in his own name or in the names of various members of his family. By his own account something over 20 such properties have passed through his hands over the years. He was introduced to Mr. Elahi in the 1990s and has since then been on friendly terms with him and instructed him in a considerable number (though not all) of his property transactions. Mr. Elahi in his witness statement said he had acted in about 23 such transactions for Mr Kandola or his family or friends on Mr Kandola's introduction. Mr Kandola was thus both a long established client and one who was commercially sophisticated.

Mr. Hamilton said that despite his commercial experience Mr Kandola was not sophisticated with documents. He accepted that Mr Kandola's evidence was confusing and at times inconsistent, but nevertheless submitted that in relation to the crucial parts of his evidence, he could be accepted as a witness of truth. There are however many reasons why in my view Mr Kandola's evidence should be treated with great caution. In many respects his oral evidence was substantially inconsistent with his pleaded case. It was also apparent that he had been prepared to tailor his evidence and production of documents for the purposes of making a claim. Both these aspects are illustrated by the events surrounding undertakings at one point offered by Aston Solicitors ("Astons"), the solicitors acting for the vendor, which I refer to in more detail below. Two letters were sent to Mr Elahi offering undertakings that if Mr Kandola advanced funds to their client Astons would repay stated amounts on receipt of funds on completion of a transaction they said they were instructed in. Mr Kandola's pleaded case was that these were connected with the Dymoke Rd purchase and intended to provide security for his deposit, and that Mr Elahi should have accepted them, or taken proper instructions before refusing to do so. Mr Elahi's evidence was that the proposal to lend on the security of undertakings was separate from the Dymoke Rd purchase, that he had advised Mr Kandola not to proceed on any such transaction as the undertakings were not good security and another client had lost money in a similar transaction and Mr Kandola had accepted that advice. Mr Kandola's first witness statement said he was not aware that the undertakings had been rejected until after contracts were exchanged. However he accepted in cross examination that Mr Elahi had, before exchange, spoken to him about the first letter offering an undertaking and made it clear that he was not prepared to act on the basis of accepting such undertakings. He knew therefore at the date of exchange that, whether or not he considered them connected with the purchase, Mr Elahi had refused to accept the undertakings, but Mr Kandola proceeded nonetheless. Mr. Hamilton abandoned in closing any claim based on failure to accept or advise about these undertakings.

Further, and more seriously for Mr Kandola's credibility, after the purchase fell through he made a claim on the SRA Compensation Fund alleging failure by Astons to comply with the undertakings they had offered. For that purpose he provided his new solicitors with copies of the letters offering the undertakings. He did not however show his solicitors a letter of 2 July 2010 from Astons in which Astons said they had been contacted direct by Mr. Kandola who asked them to comply with the undertakings, but that the undertakings offered had been refused and so were of no effect. Nor apparently had he told his solicitors, as he has now accepted, that he was aware that the undertakings had been refused before exchange of contracts.

In other respects Mr Kandola's pleaded case denied advice in respects in which there are file notes to the effect that he was advised. He amended his evidence to say that he had no recollection, or that matters were not explained to him clearly enough. In particular in relation to a key meeting on the day before exchange, his witness statement said he had only a limited recollection of what was discussed at that meeting. When questioned about specific matters recorded in the file note however he claimed that he did recall such discussion, but it was not as recorded. I concluded that, at the least, his later recollection was less reliable than the contemporary notes and Mr Elahi's recollection which corresponded with those notes.

The property in question in this case was at 40-42 Dymoke Rd Hornchurch in Essex. It consisted of 3 adjacent plots and was owned by (or at least registered in the name of) Mr. Shahid Qamar Siddiqui. Mr Kandola negotiated to buy the property at about the beginning of May 2010. He produced a series of emails dated on or about 5 May 2010 in which he offered first £460,000 and then £425,000 to a firm of agents acting on the sale. His witness statement said he had offered £415,000 but eventually negotiated £425,000, but the emails do not support that. His evidence is that at some point he became aware of the seller's name and that Mr Siddiqui was the business partner of his nephew Sukhvir, and he then cut out the agent and began to deal with Sukhvir as middleman between himself and Mr Siddiqui. His witness statement said this was after Astons first contacted Mr Elahi on 18 May, but in cross examination he accepted the agents must have been out of the picture before then and that was the reason why they had sent no memorandum of agreed sale and had not chased for any commission. Mr. Elahi also said that he had been aware at the time of his first instruction that Mr. Kandola was dealing with his nephew.

Astons sent a draft contract to the defendant on 18 May followed shortly thereafter by office copy entries of the titles. There were three titles making up the site, but only two were sent initially. These however showed a charges against both titles in favour of Bank of Scotland, Take a Look Ltd and Tiuta Funding Ltd, a previous sale contract made in 2008 with a Mr. Dubb and an interim charging order made in 2009 to secure a county court judgment in favour of Tiuta plc. It was also apparent (by the time all three titles had been seen) that Mr Siddiqui had originally bought the property for £605,000, so he was selling at a loss.

Mr Elahi said that he was initially instructed by telephone on 19 May, at which point Mr Kandola told him the purchase was to be in the name of his wife. His witness statement said that he was told the price was £425,000, though that is not recorded on the file and he was not sure in oral evidence when exactly he was given that figure.

The normal deposit provided for by the standard conditions of sale would be 10%, or £42,500 assuming Mr Elahi was aware of the price. There is a note of 28 May recording Mr Kandola's instructions that he wished to propose a 5% deposit instead. This is not uncommon and Mr Elahi's evidence was that Mr Kandola always tried to minimise the deposit he paid. No figure is mentioned in that note or when a letter was sent to Astons on 4 June making the 5% proposal, so it may be that Mr Elahi had not by then been told the price.

It appears from Mr Kandola's evidence that he was given to understand the property was jointly owned by Mr Siddiqui and Sukhvir, though registered in Mr Siddiqui's name only. Mr Kandola's evidence is that his nephew told him that "they" (meaning Mr Siddiqui and Sukhvir) had the opportunity to make a profit buying and reselling a property at 6 Mornington Rd in London E11, but they needed money to finance the purchase price, which he agreed to provide on the basis repayment would be secured by a solicitor's undertaking. It is not clear when Mr Kandola agreed this, but whenever it was it does not appear he told Mr Elahi about the arrangement, at least initially.

According to Mr Elahi, he was called on 7 June by Mr. Malik of Astons who asked "when are you sending the money?" He had no idea what this was about. Mr. Malik said that Mr Kandola had agreed to make a loan to a client of his (not named). Mr Elahi did not know about any such proposal and asked Mr. Malik to put it in writing. That led to the first "undertaking" letter, dated 7 June, as follows:

“OUR CLIENT: Aiysha Aurangzaib Khan

PROPERTY: 6 Mornington Rd London E11

We are instructed by the above named client in relation to the sale of her property known as 6 Mornington Rd, London.

Our client has instructed us to transfer the sum of £109,000 to your client Mr. Kondola (sic) on completion of the sale of her property. Accordingly we hereby undertake to transfer the said amount upon completion once the funds have been received and cleared in our account from Alfa solicitors.

We confirm that completion is expected to take place either today or tomorrow at the very latest…”

Mr Elahi said Mr Kandola called to ask if he had received a letter from Astons. Mr Kandola must therefore have known that the letter was to be sent, having been told either by Sukhvir or Astons. Mr Elahi said Mr Kandola told him he had agreed to lend £90,000 odd to a client of Astons, but did not say who it was, or that it had anything to do with Dymoke Rd. The letter referred to a different client and property and Mr Elahi took it to be entirely separate. He advised Mr Kandola not to proceed on any such transaction and said he would not be prepared to act on it. His file note (undated but clearly relating to that conversation) says "advised we wouldn't act in this matter-no way enforcing payment –u/t from sol. not sufficient – we already rep[resent] a client where lost money this way". According to Mr Elahi, Mr Kandola appeared to accept this; he said "ok" and Mr Elahi regarded that as the end of the matter. Mr Elahi replied by fax to Astons to say "we are not instructed in this matter". Mr Kandola now accepts that Mr Elahi made clear he would not act on the basis of accepting any undertaking.

A second letter was received from Astons dated 8 June this time saying:

“Re: Mr. K Kandola

Irrevocable undertaking

We understand your client has agreed to advance our client a bridging facility of £96,800 for a period of 24 hours. We hereby undertake to return that sum together with the agreed interest payment which amount[s] to £112,000 within the agreed 24 hour period upon receipt of the monies in our account.

The payment should be made to our following client account…

Ref: 6 Mornington Rd.”

Mr Elahi took this to be another reference to the same transaction, and replied that Astons had been told his firm was not acting and should cease writing to him about it. He did not apparently mention this letter to Mr Kandola. It was put to him that he should have realised it related to Dymoke Rd because it referred to "our client" and had a client reference number 40/AM which had appeared on previous letters relating to Dymoke Rd, whereas the letter of 7 June had reference 43/AM. Mr Elahi said he would not have noticed the change on one digit in the other solicitor's reference and took "our client" to be the same Ms Khan previously mentioned, particularly because of the reference to 6 Mornington Rd.

Having heard Mr Kandola's evidence, it is apparent that he was discussing this matter at least with Sukhvir. He denied speaking direct to Mr Siddiqui, and also initially denied speaking to Astons, although he later appeared to admit that he had done so, and indeed Astons themselves said that he had on at least one other occasion. He had agreed with Sukhvir that he would lend money on security of an undertaking on the basis that it would be repaid within 24 hours when Mr Siddiqui and Sukhvir made a back-to-back sale of 6 Mornington Rd, with a substantial uplift to give him a share of the profit they would make. He therefore knew that Astons would make that proposal. I find that he did not however tell Mr Elahi that Sukhvir or Mr Siddiqui were involved, or that it had any connection with Dymoke Rd. Indeed it appears likely that at that stage it did not, because the letters from Astons envisaged that money would be paid to them without reference to exchange on Dymoke Rd and that the repayment would be made to Mr Kandolawithin 24 hours rather than being held and applied to the Dymoke Rd price.

When Mr Elahi said he would not act in such a transaction, Mr Kandola and Sukhvir between them came up with the idea of making the payment by way of increased deposit on exchange for Dymoke Rd and having it released to Mr Siddiqui instead of being held by the solicitor. Mr Kandola said repeatedly in his evidence that his understanding was that the deposit would be held by the solicitor and not be in Mr Siddiqui's hands. When it was pointed out to him that this would not allow it to be used to buy 6 Mornington Rd he agreed that it would have to be used for that, but he expected it to be paid back to Astons and then kept by them. He no doubt expected that Astons would be handling both transactions and the money would effectively never leave their hands. He said that he had been assured by Sukhvir that that was what had happened, and it was Astons, not Mr Siddiqui, who had kept the money.

That plan, I find, is what was in Mr Kandola's mind when he met Mr Elahi on the morning of 9 June 2010. In relation to that meeting there is a file note which, on Mr Elahi's unchallenged evidence, was prepared a few days afterwards. Mr Kandola told Mr Elahi that the transaction would now proceed in his name rather than his wife's, that he wished to pay a deposit of £96,000 (approximately 22% and so much more than he was previously considering), that he wanted this to be released to Mr Siddiqui on exchange rather than being held by the solicitor as stakeholder and that he was doing this to help his nephew Sukhvir and Sukhvir's business partner. The file note says:

“Cl[ient] attended- proceeding in his name

Considered [Office Copy Entries]-plans- plot missing- exp[lained] various charges on register, charges +2+ contract req[uired]. Need to deal with prior to completion and need replies to [Pre Contract enquiries].

Queried why 96k dep[osit] + to be released- exp[lained] previously offering 5%. Seller is Sukh's business partner agreed this level of dep. To be released, normal practice dep. held by buyer's sol. Advised cl[ient] too risky if seller goes bankrupt or unable to complete. Esp[ecially as] we don’t have total level of o/s charges.

Cl[ient] satisfied he is taking risk. Says should be ok, will pay more than 10% dep.

Getting good price and to help out Sukh's business partner. Not doing anything illegal- exp[lained] will need to sign auth[ority] to proceed…”

Mr Elahi expanded on this in oral evidence. The reference to "plot missing" was because the contract and plans sent referred to only two of the three titles. Astons supplied the missing details and the contract was amended before exchange. This was the first he had been told of a plan to pay £96,000 deposit and to release it to the seller. He had advised against it and explained the risk that it would not be recoverable if the seller did not complete. He had advised of the risk that the seller might not be able to complete if he could not get releases of all the charges, and that since they did not know how much was secured by those charges they could not know if they could be paid off from the purchase money. Mr Kandola was determined to proceed however and regarded the deposit as a loan to his own nephew. Mr Kandola had asked whether the arrangement involved anything illegal and was assured it did not. Mr Elahi was not in a position to refuse to accept his client's instructions and so prepared by hand a form for Mr Kandola to acknowledge he was proceeding against advice, which he explained as he wrote it. Mr Kandola read it and signed. That form (later referred to as "the waiver") read:

“I confirm that I have been advised by Mirza Solicitors not to exchange contracts in this matter without having sight of the replies to pre-contract enquiries. I have also been advised not to exchange contracts without having evidence of the total outstanding charges over the properties. I have also been advised against releasing the deposit of £96,000 to the seller. I am also aware that I risk losing my £96,000 deposit if the seller is unable to complete the sale… ”

Mr Kandola's initial pleaded case made no mention of the waiver he had signed. His written evidence was that he had no recollection of what had been said at the meeting and could not be confident that it included all the matters mentioned in the waiver. In any event, he said, whatever had been said to him could not have been clear enough as he did not understand it, or what he had signed, fully. However when pressed about particular points in the waiver he said he now did recall discussion about them, though not in the terms of the note. He said he had not understood the waiver, though when pressed as to what words in it he did not understand he could point only to the reference to "total outstanding charges" and then accepted that he knew what the words meant and that the important thing was not how many charges there were against the property but how much debt was secured by them. He also accepted that he had not said to Mr Elahi that there was anything that he did not understand, and even that he would have given the impression to Mr Elahi that he did understand what he was being told.

It was not suggested that Mr Elahi had not written his note when he said he did, ie a few days after the meeting, or that he had embellished it to refer to matters that had not in fact been discussed. Mr. Hamilton in closing accepted that Mr Elahi had given the advice recorded in his note. I am satisfied that it is an accurate summary of the matters discussed, and in particular that the risk arising from the possibility of bankruptcy was mentioned. Further, I do not believe that Mr Kandola in fact failed to understand the substance of what was said to him or the meaning of the waiver that he signed. Not only did he, as he accepts, give the impression to Mr Elahi that he had understood, he actually did understand. The matters discussed would be ones he was familiar with as an experienced businessman and property investor, Mr Elahi was sufficiently concerned to require him to acknowledge the advice he had been given and was well familiar with his client and communication with him. Mr Kandola's recollection of what was said is vague and no part of it suggested that he had been misled in any way. It is not therefore realistic to think that Mr Elahi did not convey his message in a form that Mr Kandola understood.

It follows that Mr Kandola was aware that the deposit would be released to Mr Siddiqui, that if the transaction did not complete he would be at risk if Mr Siddiqui failed to repay it, particularly if he was insolvent, and that there was a risk that Mr Siddiqui would not be able to discharge the various charges against the property. He was further aware that his solicitor considered it inadvisable to take these risks. He took his own decision to do so.

In taking that decision Mr Kandola accepted he was motivated by, among other things, the fact that the purchase was potentially very profitable for him, that he was helping his nephew and his business partner and that he stood to benefit from a share of the profit they would make from the Mornington Rd property.

Mr Kandola also accepted that he had been assured by Sukhvir that after he and Mr Siddiqui had sold Mornington Rd they would pay the deposit and agreed return back to Astons who would hold it until completion of the Dymoke Rd sale, and further that after the deposit had been paid he had been told by Sukhvir that this had happened. It was for this reason, he accepted, that he thought that the money was in Astons' hands and they were responsible for its loss. There was no evidence presented to me however to support that belief. Astons subsequently said they had paid the deposit out to their client. If they did, it is accepted they were entitled to do so. I should say that although Mr. Kandola expressed his belief as above, his case was pleaded on the basis that the money had been released to Mr. Siddiqui (Particulars of Claim para 20) and that was admitted in the Defence (para 34).

Restructuring his loan as a deposit clearly required a new mechanism for Mr Kandola to recover the return he had agreed with Sukhvir. When the payment was envisaged as a loan the idea was that it would be paid back with "interest"; hence the proposed undertaking by Aston to return £112,000 the day after payment. That would not work with a deposit, since that would not normally be repaid unless the transaction fell through. It was Mr Kandola's evidence that he had agreed with Sukhvir that if he agreed to pay an enhanced deposit the purchase price or effective purchase price of the property would be reduced. In oral evidence he said the reduced price would be £415,000, though elsewhere in his written evidence he had given figures of £410,000, £409,000 or £400,000. Mr Kandola said he had told Mr Elahi this before exchange, but he had not said this previously in his pleadings or written evidence. I have no hesitation in finding that he did not. Mr Kandola seemed to envisage that this was an adjustment that would be made after exchange, but if it only depended on his putting up the £96,000 he was doing that at exchange so it would make sense to reduce the price at that point and show the amended price in the contract. Even if the reduction was to take effect later in some way, if agreed at the beginning it should have been reflected in the contract. I have no doubt Mr Elahi would have done so if he had been told about this further unusual aspect of the deal.

After the meeting on the morning of 9 June, Mr Elahi returned the draft contract to Astons and made arrangements for exchange. He obtained undertakings from Astons to discharge all the charges shown on the Office Copy Entries previously provided, and Astons' confirmation that they had written to the holders of all those charges and the proceeds of sale would be sufficient to pay them off. Astons also stated that the previous sale contract with Mr. Dubb had been rescinded in accordance with its terms, and the entry in respect of it would be removed before completion. There is no evidence to show whether Astons in fact did what they said they had done; it is now clear that the charges secured business debts which in total greatly exceeded the sale price, but it is not unusual for that to be the case and for chargeholders nevertheless to agree to release their charges so that a sale can proceed. Contracts were exchanged by telephone on 10 June, but not before Mr Elahi had obtained confirmation by phone from Mr Kandola that he should do so. The contract was amended to provide, as Mr Kandola had instructed, for a deposit of £96,000, for that to be held as agent for the vendor, and for completion on 10 August (an unusually long period) or earlier on 5 days notice at Mr. Kandola's option.

On 22 June Mr Elahi sent a letter to Astons chasing their client's part of the signed contract. The letter also said that Mr Kandola's instructions were that "the parties have agreed to vary the existing contracts on the basis that the price is to be changed to £410,000 and the deposit payable will be 10% being £41,000 and the deposit paid of £96,000 is to be returned. Please confirm". Astons replied the next day sending the signed contract and denying their client had agreed any variation. Mr Elahi raised the matter again in an email sent at 11.49 on 24 June saying "My client has spoken with your client again who we understand has agreed to change the price and terms of the contract as per our letter of 22 June. Please speak to your client to confirm instructions." That too was rejected. Mr Elahi said that he had written these having been instructed by Mr Kandola by telephone that these variations had been agreed.

When asked why Mr Siddiqui should agree to make changes to the contract that were unfavourable to him, Mr Kandola said that it was because it what he had agreed with Sukhvir before exchange. This is consistent with his having made some side deal with Sukhvir intended to get back the financing element of the increased deposit once Mr Siddiqui and Sukhvir had made their expected profit. The fact the matter was raised after exchange supports the conclusion above that Mr Elahi had not been told of any such arrangement at the time of exchange. The fact the proposals were rejected seems to indicate that Sukhvir and Mr Siddiqui were preparing to renege on their side deal with Mr Kandola.

Later on 24 June Mr Elahi received updated documents from the Land Registry, having made a Priority Search with the intention of registering the contract. He had advised Mr Kandola this should be done in view of the extended period provided for completion. Those documents revealed, for the first time, that a bankruptcy petition had been presented against Mr Siddiqui on 1 June, resulting in a bankruptcy notice being registered against each title on 2 June. This had not shown up on the Office Copy Entries previously sent by Aston because they had been obtained before 1 June.

Mr Elahi and Mr Kandola spoke about this on 25 June (it is not clear whether they had done so the day before as well). Mr Elahi had prepared a letter dated 25 June to Astons notifying them of the bankruptcy entry and asking for urgent information as to what they intended to do about it. An attendance note records however that Mr Kandola did not want this to be sent "until £96k returned", so instead Mr Elahi sent an email making no reference to the bankruptcy notice but saying "We are instructed to cancel the Land Registry priority search upon receipt of the deposit monies in this matter from you in the sum of £96,000…". It is not immediately obvious why this would be attractive to Mr Siddiqui if the sale had been truly at arm's length, but I think the likeliest explanation is that Mr Kandola intended to make some arrangement with or through Sukhvir for the cancellation of the sale and return of his deposit and wanted to be able to offer the reassurance that if that was agreed the title would be cleared of the entry in his favour.

Whatever the explanation, the proposal to repay the deposit was not taken up. Mr Elahi's letter of 25 June was eventually sent by fax on 29 June. It led in due course to an email of 20 July from Astons stating "I can confirm that the bankruptcy charges would be taken off on completion. If you require an undertaking to that effect we are happy to provide that."

On 2 July Astons wrote saying:

“We have been contacted by your client Mr. Kandola in relation to deposit monies which he is claiming were to be returned to him as per our undertaking… our undertaking…was…rejected by you therefore making the undertaking null and void…

…it was agreed between us we will be holding the deposit monies as agent. Upon our client's instructions, these monies were transferred to him. We are therefore not holding any monies at present…

Following your letter and your client's email… ”

Mr Kandola said he had not contacted Astons direct but through Sukhvir. In view of the direct references to contact from him and an email from him, I think that is unlikely to be true. He accepted though that he knew the undertaking had not been accepted, so he cannot have been surprised that his 'try on' was rejected. He said that Sukhvir had told him the money had been paid back to Astons, contrary to what they said.

It was still Mr Kandola's intention to complete the purchase if possible. To that end he paid £140,000 to the defendant's account on 14 July and arranged a remortgage of a property owned by his son, producing approximately £170,000 that was held by the defendant to be part of the completion money. However it seems Mr Kandola and Mr Elahi became more and more doubtful about the vendor's willingness to complete. Responses from Astons became sparse. Eventually a notice to complete was sent on 20 July, under the provision in the contract for Mr. Kandola to call for early completion on 5 days notice. It produced no response and the due date expired on 27 July. The following day (coincidentally) the SRA visited Astons' offices and found them locked. Mr Elahi complained to the SRA on 4 August (having first obtained Mr Kandola's instructions to do so) that Astons' phone line was dead, and about their cavalier attitude to giving undertakings. A decision to intervene in Astons was taken by the SRA on 19 August.

Various steps were taken thereafter in an attempt to recover the deposit. A notice to complete was sent direct to Mr Siddiqui. The intervention agents advised they had no instructions to complete the contract for Mr Siddiqui, and suggested a claim on the SRA Compensation Fund. Subsequently they confirmed that Astons had no money in client account at the date of intervention.

Later notice was served rescinding the contract and repayment was demanded from Mr Siddiqui. All was to no avail. Mr Kandola made a claim on the compensation fund in September 2010, using his present solicitors because Mr Elahi said he had no experience of making any such claim. It was eventually rejected. In January 2011 correspondence was received from a firm called Faith & Co stating they were acting for Mr Siddiqui on a sale of the property and seeking an undertaking to release the registration of the contract on payment of £95,000, but nothing came of it. In March 2011 Bank of Scotland appointed LPA receivers. Mr Kandola made an offer to buy the property for £350,000, but sought credit for his deposit already paid so his net offer was only £254,000. It was rejected.

The file contains notes of many conversations between Mr Elahi and Mr Kandola during this period, including the following:

“10/8/10 t/c client as completion delayed

to send money [this refers to the £140,000 he paid and the proceeds of remortgage of the son's property] back

knows I warned him not to release deposit.

31/8/10… long T/c- discussed options

…wants his deposit back- says still with Astons- ? if he is sure- says yes- Sukh told him- wants to make comp fund claims can only do that if entitled to dep back…

6/9/10 …put matter on hold- will pursue comp claim + take up matter with nephew.”

Mr Kandola also said that Sukhvir had told him that he should not be concerned about the bankruptcy notice as it related only to a debt of £10,000 for business rates which Mr Siddiqui could easily satisfy. It is clear he believed that he was being told the truth by Sukhvir at the time, though he now has doubts about Sukhvir's veracity. All of this shows, as Mr Kandola accepted, that throughout he was in regular communication with his nephew, thought he had made arrangements through him with Mr Siddiqui to resolve the matter and get his money back (even though such arrangements were denied when put to Astons) and believed the reassurances that he was being given by Sukhvir.

Finally in relation to the evidence Mr. Wood put a series of propositions to Mr Kandola about what he had known about the charges on the property and the risks involved in the transaction. This culminated with Mr Kandola clearly accepting that if he had been told that a bankruptcy petition had been presented against Mr Siddiqui, and also told that it related only to a debt of £10,000, it would not have affected his willingness to proceed to exchange contracts.

In closing, Mr. Hamilton recognised that his client's evidence had made certain parts of his claim untenable. He abandoned any claim that Mr Elahi ought to have accepted the undertakings offered on 7 and 8 June, or had failed to take full instructions before rejecting them. He accepted that Mr Elahi had given the advice on 9 June recorded in his note but, he submitted, that advice was not sufficient. It was not clear enough, and in the circumstances a solicitor should have taken additional steps to evaluate the extent of the risk the client was running by agreeing to release the deposit to the seller. He pointed to the number of charges on the property, the fact they were not ordinary mortgages but secured business debt and included notice of a county court judgment debt. He submitted that Mr Elahi should have made a bankruptcy search or a Land Registry priority search prior to exchange, either of which would have disclosed the bankruptcy petition which by that time had been filed.

Mr. Hamilton accepted that it would not be normal for either such search to be done by a buyer's solicitor before exchange. There is no recommendation to do so in the Law Society's Conveyancing Handbook, either generally or if the deposit is to be released. In such a case, the Handbook explains what the risks are and says that a client should be advised of these risks before he proceeds. In that respect, Mr Elahi went further by positively advising his client against proceeding.

The circumstances however required, Mr. Hamilton submitted, that the solicitor should go "beyond the Handbook" and take steps that could assist in gauging the extent of the credit risk being run. There was no expert evidence (no permission had been sought for such evidence) to support the contention that any reasonable solicitor would take such steps, but he pointed to the well known rule that the court does not normally permit expert evidence in solicitors negligence cases, holding itself able to assess the extent of the solicitor's duty.

As to the standard of the solicitor's duty, Mr. Wood submits it is not that of "a particularly meticulous and conscientious practitioner… The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession", see Midland Bank v Hett Stubbs & Kemp [1979] Ch 384 at 402. In Brown v Gold & Swayne [1996] PNLR 130 at 137, he said, Millett LJ had commented that if the court required evidence as to matters of conveyancing practice the proper way of providing it would be by reference to textbooks. The Law Society's Conveyancing Handbook was plainly a good guide to accepted practice, and its recommendation was only that in a case where a deposit was to be released the client should be advised of the risks. No other work had been cited to suggest the solicitor should go further without instructions and investigate the extent of those risks.

In my view a note of caution needs to be sounded about that observation from Millett LJ. It is plain he was speaking of matters of practice only, to be distinguished from questions of law such as whether a solicitor was obliged to inspect a property on behalf of his client. It may be a nuanced question in any instance whether a particular step should be taken as a matter of a duty to comply with accepted practice or by virtue of a legal duty to take that step specifically.

Mr. Wood also referred me to Yager v Fishman & Co [1944] 1 All ER 552 and Carradine Properties v DJ Freeman & Co [1999] Lloyd's Rep PN 48 in support of the proposition that the solicitor's duty to explain matters to his client takes account of the client's own experience; the solicitor is not required to explain matters that should be obvious to a person with the client's experience or background.

This is particularly relevant in considering the extent to which a solicitor should explain matters such as the risks involved in taking a particular step. An inexperienced client, or one dealing in matters he is not familiar with, may require more explanation before he can sufficiently understand the risk he is about to take. An experienced client may need less explanation, or even none at all. When an explanation is given, the solicitor may appropriately tailor it to fit his knowledge of the client's understanding. Of course if the client asks for more explanation or appears not to understand, the solicitor may have to go into more detail. But the solicitor is not a guarantor of his client's subjective understanding, and will have fulfilled his duty if he gives an explanation in terms the client reasonably appears to him to be able to understand, and to have understood, even if the client later alleges that he did not in fact understand what was said.

In the present case, in my judgment the risks were adequately explained to a person of Mr Kandola's experience. Mr Elahi referred to risk of loss of the deposit, to the number of charges on the property, the fact that the amount outstanding under them was not known, and the risk that Mr Siddiqui might not be able to complete the contract and might become bankrupt. Mr Kandola said in evidence, rather incoherently, that he had assumed he would be protected if the contracts were exchanged because they would be completed, but in my view that was attempted rationalisation and Mr Elahi had clearly explained to him at the time that there was a risk that the contract would not be completed. If that happened, Mr Kandola would have to look to Mr Siddiqui to repay the deposit, which he might be unable to do, particularly if bankrupt.

I have found above that Mr Kandola did in fact understand the advice he was given. Even if I had found he did not subjectively understand that advice, it would have been fatal to his claim that the advice was given in terms suitable for a person of his experience and that he gave Mr Elahi the impression at the time that he had understood it.

It is then said that having advised of the risk of insolvency it was the solicitor's duty to take steps to explore the extent of that risk, by making searches that would have revealed the existence of the bankruptcy petition. It is accepted that if he had made either a bankruptcy search or a Land Registry Priority Search prior to exchange the petition would have been revealed. Mr Kandola also accepted that if he had wanted to check on Mr Siddiqui's credit status he could have taken other steps himself, such as making an enquiry with a credit reference agency.

It is not, in general, a solicitor's duty to check on the credit status of his client's counterparty in a transaction unless instructed to do so. There may be circumstances in which a solicitor should check specifically for the commencement of bankruptcy proceedings, since that may affect a party's ability to complete a transaction or give a good title. But that is not the same as a general duty to make checks about risk of future insolvency. Nor can such a duty arise merely because the client is incurring a risk of loss if the counterparty becomes insolvent, for that will be true in most if not all transactions. Nor in my view does such a duty arise merely because the transaction takes an unusual form which does involve a solvency risk (eg on release of a deposit) where the more normal form would not (deposit held as stakeholder). In such cases the duty of the solicitor is to advise of the unusual risk, but not to seek to evaluate it unless specifically instructed to do so.

In part that is because the decision whom to trust in business is a commercial decision for the client to take and not the solicitor. In part it reflects the submission that Mr. Wood made, with which I agree, that just because a solicitor (or other professional) could take a particular step does not mean that it is his duty to do so. His duty is always defined by his retainer. If he advises his client of a risk, it is a matter for the client to decide whether he wishes to take that risk, or to obtain further information or security before doing so. The solicitor is not, in general, obliged to seek out such further information unless instructed to do so.

The position would be different if there was an established practice of obtaining particular types of information in the course of a particular type of transaction. Conveyancing is a process extensively set about with established procedure of this sort, for instance as to the making of searches and enquiries of local authorities and environmental registers which go well beyond the establishment of title to land and bear on its value and the costs and risks of ownership. But it is accepted that there is no established procedure to make either of the suggested searches at the time of exchange of contracts.

There is in my view a large element of hindsight in this submission. As it happens, the petition in this case was filed before exchange. But Mr Kandola would have been equally at risk if Mr Siddiqui's bankruptcy had commenced at any time after exchange and before successful recovery of the deposit, and no search could have revealed that or prevented that risk from eventuating. That does not mean there would be no advantage in doing such a search if the client had instructed it, but its limited value is an additional factor against finding the solicitor under a duty to perform such a search.

Mr Elahi said in evidence that although he had advised Mr Kandola to register the sale contract, it would not have been possible to make a priority search before exchange and potentially disadvantageous to make his priority search too early thereafter as priority would have expired by the time of anticipated completion. Accordingly, even if asked to explore the credit risk, he would have advised the client to do so by other means. That evidence, which was not contradicted, makes it impossible to hold that he was under any duty to perform a priority search before exchange.

For those reasons, I hold that Mr Elahi was not under any duty to make either of the suggested searches prior to exchange.

Even if I had been of a different view on that point however, Mr Kandola's answer in evidence on the issue of reliance would have been fatal to his case. He accepted that if told of the petition, but that it related only to a debt of £10,000 and would be cleared by completion, it would not have affected his willingness to proceed. That is exactly the explanation he was given by Sukhvir after exchange, when Astons also readily offered an undertaking to discharge the bankruptcy entry on completion. There can be no reasonable doubt given the eagerness of Mr Siddiqui and Sukhvir to secure Mr Kandola's money that if the matter of the petition had been raised prior to exchange they would have provided the same, or some similar, explanation to persuade Mr Kandola to proceed, and that Mr Kandola would have accepted it. This is not surprising, the extent of his direct dealings with Sukhvir shows that he was making his own decisions on the form and substance of the transaction, and that he believed trusted and relied on what Sukhvir said to him in doing so.

For these reasons, the claim is dismissed.