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Exploring the boundaries of rectification

Land Registry early completion

Exploring the boundaries of rectification

Ten tips on reducing the bill in claims by lenders

How to prevent, resolve and deal with complaints before the Legal Complaints Service

switched on Issue31•Autumn2009•aquarterlynewsletterproducedbyAonClaimsSolutions

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02 Exploring the boundaries of rectification

05 Ten tips on reducing the bill in claims by lenders

07 How to prevent, resolve and deal with complaints before the Legal Complaints Service

09 Land Registry early completion

Welcome to Switched Onandthestartofthenewpolicyyear.WhetheryouarenewtoAon,oranexistingclient,ItakethisopportunitytomentionthatAonClaimsSolutions(ACS)operatesaclaimshelpline(seebackpage)todealwithanyqueriesthatyoumayhaveconcerningwhat,whenandhowtonotifycomplaints,circumstances or claims relating to your firm.

Inmanycases,ourin-housesolicitorsandclaimshandlersatACSareabletorectifyproblemsthatoccasionallyhappenonfiles.Thekeyistonotifyusasquicklyaspossiblesothatwecanassistoradviseonthe best course of action. On that note, our lead article by Neil Hext, barrister, Exploring the boundaries of rectification focuses on the specific issue of sorting out mistakes following the drafting of a contract. Neil examines the basic principles and recent current authorities, which provide guidance on how the courts approach the rules of rectification.

Isyourfirmaconveyancingpractice?Ifso,youmayhavearequestforafilefromalenderclient.Lendershavebeencarryingoutauditsoftheiradvisers’filesinthehopeofrecoveringpastlossesandsucharequestcould be a reason to notify us of a possible circumstance likely to give rise to a claim. Craig Loweth, from Barlow Lyde & Gilbert LLP, helpfully summarises arguments and steps that we take to defend such claims in his article 10 tips on reducing the bill in claims by lenders.

Inpreparationforthe2010implementationoftheLegal Services Act 2007,ACShassetupaspecialistunitto provide guidance to our insureds on the handling of complaints. Reena Shah, in her article How to prevent, resolve and deal with complaints before the Legal Complaints Service focuses on complaints, from prevention to resolution.Thisprovidesyouwithaquickreferenceguidetocomplementthein-depthproceduresdetailedinthe Solicitors’ Code of Conduct, the Practice Notes issued by the Law Society and the procedures detailed by the Legal Complaints Service.

Lastly,RoySlocombeaconsultantwithinqualifyinginsurerQBE’squalityassuranceteam,addresseschanges recently introduced by the Land Registry for conveyancing practitioners in his article Land Registry early completion.

Stewart Muirhead, solicitorEditor, Switched On

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Rectification is all about sorting out mistakes in the drafting of a contract. It deals with the situation where the parties have agreed ‘apples’ but have written ‘pears.’ But it is not the only way in which the court can reach the result that it finds the parties intended. Where it is obvious that a mistake has been made, the court may conclude, as a matter of construction of the document itself, that the parties intended something different. It is common to find these arguments of construction being run in parallel to a rectification claim. Because of the technical rules surrounding the doctrine of rectification, they can have better prospects too. With the liberalisation of the rules of construction, culminating in the well known case of ICS v West Bromwich[1998]1WLR896,itis tempting to think that contractual construction represents a complete replacement for the long-established rules of rectification. But is that really the case?

Rectification – basic principles

In order to establish rectification, the claimant must show that:

a The parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified.

b There was an outward expression of accord.

c The intention continued at the time of execution of the instrument sought to be rectified.

d By mistake the instrument did not reflect that common intention(Swainland Builders Ltd v Freehold Properties Ltd [2002]2EGLR71,para33).

The “common continuing intention” must be something that is mutually held. It is not enough that there was simply a unilateral intention. It must be possible to show what the parties actually intended. So it is not good enough to show that what is in the agreement is a mistake. One must go on to prove what the parties meant to say in its stead. This is notsomuchaquestionofexactwords.Itissufficientthatthe substance and detail of the intention can be ascertained. Swainland Builders is a good example of this. The parties had failed to provide in a written agreement that the seller of a freehold was itself to retain a leasehold interest in two of the

flats contained in the development. The claimant proved that

that was the common intention, albeit the precise mechanics

of how that was to be achieved had not been agreed. In those

circumstances the court was prepared to give effect to that

intention by ordering the grant of leases by the defendant

back to the claimant.

Therequirementfor“outwardexpressionofaccord”has

been the subject of recent debate. Historically, it was always a

requirementofrectificationthatitbepossibletoidentifysome

objective expression of the parties’ common intention. So you

would get into difficulties if you had a case where, although

each party could retrospectively be shown to have shared a

common intention incorrectly recorded in the agreement, it

was at all times kept hidden from the other. In practice, such

cases would be rare because, once a dispute has arisen, the

other side are unlikely to confess that their true intention was

anything other than that which appears in the contract they

are trying to uphold. But in Munt v Beasley[2006]EWCA

Civ370,preciselythissituationdidoccur:duringthecourse

of correspondence after dispute had arisen, the defendant’s

solicitors made it clear that the defendant agreed with the

claimantastowhatthecontract(alease)hadbeenintended

to achieve. In those circumstances Mummery LJ suggested,

obiter,thattherequirementforoutwardexpressionofaccord

wasnotnecessarilyastrictlegalrequirement.

The difficulty with this proposition, however, is that it

might be taken to suggest that what is important is the

subjectiveintentionsoftheparties.Asamatterofprinciple

that is incorrect: rectification simply allows the court to adjust

the written agreement so that it reflects the true agreement.

It does not change the well-established rules that insist that

thetrueagreementbedeterminedobjectively.Subsequent

authorities, albeit first instance, have made it clear that this

is so. PT Berlian Laju Tanker TBK v Nuse Shipping Ltd[2008]

2Lloyd’sRep246,atparas38-48;Investec Bank (Channel

Islands) Ltd v The Retail Group plc[2009]EWHC476(Ch),

para116.

Exploring the boundaries of rectification

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The third ingredient for a successful rectification claim is that the common intention can be shown to have continued down to the time of execution of the instrument sought to be rectified. The reason for this is obvious: it is one thing for the parties at one point during the course of negotiation to have agreedX;butiftheysubsequentlyenterintoacontractthatsays Y, that could just as easily be because they have changed their minds about X as it is that they made a mistake. Unless it can be shown that they continued to think that the bargain they had was X, and that therefore where the agreement says Y it is a mistake, rectification will not be allowed.

Allofthesethingsmustbeprovedbyreferencetocogentevidence.Backin1784theycalledthistherequirementfor

“strongirrefragableevidence”(Shelburne v Inchiquin(1784)1BroCC338)thesedaysitissimplyreferredtoas“convincingproof.” (Thomas Bates and Sons v Wyndham’s (Lingerie) Ltd [1981]1WLR505,521).Strictlythisdoesnotintroduceadifferent standard of proof. It simply recognises that mistakes in written agreements are not everyday occurrences. The court’s starting point is that the parties meant what they said, until the contrary is shown.

Correction by constructionIt will by now be clear that the task of establishing

rectification is not a straightforward one. How much easier it would be if one could argue that the true intention of the parties could be gleaned as a matter of construction from the defective agreement. This is the process of correction by construction. The court will depart from the literal meaning of a defective contract if two conditions are satisfied: first, there mustbeaclearmistakeonthefaceoftheinstrument;second,it must be clear what correction ought to be made in order to cure the mistake. See East v Pantiles (Plant Hire) Ltd[1982]2EGLR 111.

This principle has gained force as a result of the “fundamentalchange”(ICS v West Bromwich[1998]1WLR896)thathasovertakenthelawrelatingtoconstructionof

contractsinthe1970sand80s.Thecourtcanhaveregardtothe background, or matrix of fact, in order to determine the true meaning of the contract. If one would conclude from the background that something must have gone wrong with the language that the parties have used, the court can construe thecontractsothatitmakessense:“thelawdoesnotrequirejudges to attribute to the parties an intention which they plainlycouldnothavehad.”(ibid,p.913perLordHoffmann.)Thustherequirementthatthemistakebeobvious“onthefaceof the instrument” has in some cases been relaxed. In Holding & Barnes v Hill House Hammond[2002]L&TR1334,thecourtwas prepared to look at six other leases contemporaneously as part of the same overall transaction to conclude that an error had been made in the lease that was the subject of the dispute.

Rectification usurped?Butonceoneletsgoofthisrequirement,itcanbecome

difficult to see where correction by construction ends and rectification begins. Plainly, the wider one is entitled to cast the net in order to establish that there has been a mistake in the contract, the closer the process of construction comes to usurping the position of the doctrine of rectification. This blurringoftheboundariesleadspotentiallytoproblems.Afundamental difference between the process of construction and rectification relates to the position of third parties. Obviously, where the court construes a document, that construction applies whoever is arguing about it. So if, for example, an assignment to a third party of the contractual rights has taken place, that third party stands in the shoes of the original contracting party, for better or worse. In contrast, it is not possible to obtain rectification where doing so would prejudice a bona fide purchaser of rights under the agreement who takes his interest without notice of the problem, ref: Snell’s Equity,31sted.,para14-19.

To some commentators, this epitomises a more general problem inherent in the modern liberal approach to construction.Athirdpartywhopurchasesrightsundera

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pre-existing agreement could be seriously prejudiced if he is not able to rely upon the plain meaning of the words in the document. He will not necessarily know that the parties were negotiating against a specific background that compels the court towards a particular construction, rather than the one that one might ordinarily have reached on the wording of the document. That can create unfairness and uncertainty.

The current positionThese fears may be exaggerated. The current position

can be illustrated by reference to two recent cases. In KPMG v Network Rail [2008]1P&CR11,thebreakclauseinaleasehadbecomegarbledbetweenitsoriginaldraft(attachedtotheagreementforlease)andtheexecutedversion.Ononeview, the clause as ultimately agreed gave to the tenant two more opportunities to break the lease than had originally been provided. It was easy to see that something had gone wrong withthedrafting;indeed,comparisonwiththeoriginalversionshowed that what had happened was that part, but not all, of a clause had been removed, leaving a vestige giving rise arguably to the “two extra” meaning. The problem was how to correct it.

The case was argued both as a matter of rectification and asamatterofconstruction.TheCourtofAppealheldthatrectification was not possible, primarily because there was evidence that one party had subjectively understood the new draft to mean something different from the old one. There was no compelling evidence, therefore, that the intentions that thepartieshadoriginallyhad(asrepresentedbythefirstdraft)continued through to the date of the execution of the lease. But as a matter of construction, the court held that the clause retained its original meaning, notwithstanding that it had become garbled. That there was a mistake in the wording was obvious. Other clauses in the lease undermined the proposition that the parties had intended there to be two extra breaks in the lease. There remained uncertainty as to whether the true intention was to retain the clause in its full form, or to remove the garbled section in its entirety. This the court resolved in favour of the former.

The second case is Chartbrook Ltd v Persimmon Homes Ltd [2008]EWCACiv183.Therethedisputeconcernedaclauseproviding for additional payment to a landowner in the event that a development being carried out by the defendant yielded profit above a certain level. The clause was reasonably clear in its wording. But its effect was difficult to understand commercially. The defendant argued that there had been a mistake and that the clause should be construed so as to provide for additional payment calculated in a different way that made more business sense. Like KPMG, the case was argued in rectification and as a matter of construction. On the former,theCourtofAppealthoughtthatthedefendanthadhad a strong case, given the way in which the negotiations had proceeded. The problem was, however, that the court below had made certain findings on the oral evidence that made continuing mistake unlikely. For that reason, the decision to reject rectification could not be overturned. On the construction point, one might have thought that the court would hold, as they had in KPMG, that because the clause on

its face was difficult to understand as a commercial proposition, a mistake had been made. But the majority held to the contrary. The clause made grammatical sense and there was nothing unclear, uncertain or ambiguous about it. The court was not prepared to re-write it, notwithstanding the apparent commercial absurdity that it created. Lord Justice Rimer said:

“Perhaps the most that can be said on the issue of construction is that, looking at land values as at 2001, the contractual terms seem improbable ones for Persimmon to have signed up to. If so, the explanation is either (i) that it made a bad bargain, or (ii) that it may have made a sensible one but the written agreement recorded it wrongly. If the former, Persimmon is stuck with its bargain, and it is not the court’s function to reform it. If the latter, Persimmon may have a claim to have the agreement rectified.”

Both KPMG and Chartbrook illustrate how hard it remains to establish rectification. Neither of the cases was easy from thispointofview.Althoughtherewasevidenceinboththatthe original understanding had been one thing, it is always difficult in the context of ongoing and detailed negotiations to establish that the ultimate draft was a mistake, as opposed to a decision to move away from what had gone before.

But Chartbrook is confirmation that, though it might have shifted, the boundary between rectification and construction still remains. Where the wording shows a clear mistake, the process of correction by construction is a legitimate tool that the court can use to make commercial sense of the contract. AsKPMG suggests, this will sometimes be an easier route to a result(althoughtheresultwillnotalwaysbethesameoneasmight have been achieved through rectification: it is striking that, by adopting a process of construction, the court was prepared to reach the conclusion that the clause was to remain the same, notwithstanding the evidence that one party’s subjectiveunderstandingwasthatitwastobedifferent).

Where, however, the wording of the agreement is clear and unambiguous, Chartbrook illustrates the limits of construction: it will be difficult to say that there is a clear mistake, even where the result is thoroughly uncommercial. In a case like that, rectification may be the only answer. Reports of its demise are perhaps exaggerated.

Neil Hext, Barrister4NewSquare,London

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Over a similar period, lenders have also been trawling their advisers’ files, in the hope of recouping some losses. Claims are now following, predominantly against solicitors and surveyors.

The liability of those professionals may well be less of an issue in these claims, given the law derived from the previous propertycrashofthe90s,andthecodificationproducedbyregulatorybodiesinresponsetoit(forexampletheCouncil of Mortgage Lenders Handbook, Rule 3 of the Solicitors’ CodeofConduct,andtheLawSociety’sPracticeNote(s)onMortgageFraud).

There is, however, likely to be significant scope for argumentastothecostofanysuchliability.Afewinquiriesmight knock thousands of pounds off the bill. I set out below those areas where I think that the attention will fall as we enter this era.

Lenders were keen to obtain their share of the mortgage market in the recent boom, often resorting to the money markets to finance loans rather than their own deposits. Thatwillhaveitsconsequencesinthebust.

We enter this new round of lender litigation with the experienceofthe1990sbehindus.Inpassingthough,itmay be worth noting a recent case that dealt with a stricter interpretationofaprofessional’scontractualliability(Platform Funding Ltd v Bank Of Scotland plc[2008]EWCACiv.930).Inthatcase a valuer was held liable in respect of his certificate that he had inspected the subject property, when in fact he had not because he had been deceived by the borrower. The significance for professionals is the departure from the normal standard of skill and care, and possible imposition of a strict liability where the professional gives an incautious description of his advice.

Securitisation One key development since the last round of lenders’ litigation

is that some institutions have sold on their loans. If so they may not have either the right to bring an action, or have suffered any loss. This is the first point to be checked on any claim.

Claims in contract/tort Theprofessionalwillbeliablefortheconsequenceofhis

actions.Accordingly,itisimportanttoconsiderboththenatureof his error and the basis of his instructions. There may be a limit on his liability. If a professional provides information about onlypartofthetransactionwhichisincorrect(eginrespectofthepurchasepriceorvalueoftheproperty),heshouldonlyberesponsiblefortheconsequencesoftheinformationbeingwrong,notforalllosses(whichthelenderwillinvariablyclaim)arising out of the loan. No lender’s case should be taken at face value.

Broadly, the key considerations are whether the omissions relate to the value of the security or the integrity of the borrower. In principle, it is the lender’s role to investigate the creditworthiness of the borrower, and that of the solicitor to advise on title.

However, if the solicitor fails to report information which casts doubt on the integrity of the borrower and which would have deterred the lender from the transaction altogether, then the solicitor may still be held responsible for the whole loss.

Ten tips on reducing the bill in claims by lenders

As a client succinctly put it, “when the tide goes out you can see who’s been swimmingwithouttheirtrunkson”.Andsotheexposureoffinancialinstitutionshasbeensplashedaroundthepressoverthelast18monthsinrespectoftheirdebt practices, particularly in light of sub-prime, securitisation and the downturn in the property market.

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ClaimsinequityLenders often try to argue an entitlement to claim for

alleged breaches of fiduciary duty or trust. That is because, if successful, the lender will recover any losses that it can show it has suffered. However, in respect of fiduciary duty, a lender will have to prove a deliberate intention on the part oftheprofessionaltoprefertheinterestsoftheborrower(orasubstantialfailuretoproperlyinvestigatethetitleatall).For breach of trust, they will also have to establish the direct consequencesofanybreachoftrust.Despitethefrequencywith which such claims are made they often do not stand up to scrutiny.

Contributory negligence The lender’s lending practices will come under close

inspection and whether it has learnt any lessons from the 1990segthepursuitofvolumelending,overandaboveproperevaluation of each application. Furthermore, given the current scrutiny of banks, the judiciary this time around may be less sympathetic to lenders and alert to imprudent lending practices.

In the Nationwide Managed Litigation (see Nationwide Building Society v Balmer Radmore (a firm) and Other Actions [1999]PNRL606)reductionsofbetween50%and90%were obtained in a number of cases. Cases are fact sensitive but those defending lender claims should, in the light of Nationwide, now be astute to review.

aCredit(andother)checksagainstborrower–salarydetails,pay slips, accounts, employers’ and bank references, electoral roll, credit history and the like.

b Excessive loan to salary ratio, and relying on a borrower’s self-certification of income.

cDisregardforalender’sowninternalprocedures,lendingcriteria and staff training.

d Inappropriate reliance on valuation, or in-house over-valuation.

e Excessive LTV, if coupled with other factors.

Recovery/mitigation The lender’s first recourse should be to seek any loss from

the borrower and repossession and sale of the security. If a lender fails to pursue either timeously then it may be found to have failed in its duty to mitigate its loss.

Last time round the lenders obtained windfalls by claiming losses from professionals, and then seeking recovery from the borrowers after the recession was over by reliance on the repayment covenant. There was nothing to stop them from doing so, sometimes leaving the professional’s insurer out of pocket. In the light of that experience insurers will often make it a settlement condition that the lender assigns any rights against the borrower.

(Thirdparty)contributionThe court will assess any contribution on the basis of each

party’sresponsibilityforthedamageinquestion.Forexampleif the property was overvalued by an external valuer then, depending on the facts, one might anticipate the prospects of acontributionclaimintheregionof50%,althoughin the case of Cheshire Building Society v Cobbetts[2009]EWHC254(Comm)thecourtorderedan80%contributionfrom the valuer.

I anticipate that in the current round, greater scrutiny is likely to be placed on brokers, financial intermediaries, guarantors and even the Land Registry to share claims.

InterestLenders often include a claim for compound interest for their

costs of funding an advance. Recent court decisions have made it more likely that such claims will succeed. However, it is my expectation that this is an area that insurers may wish to revisit.

Early evaluation There is a different costs landscape now, particularly with

referencetoCFAs.Accordingly,anearlyevaluationandanoffermay prove vital to reducing the overall bill. Furthermore there may be scope for challenging costs claimed, eg the amount of the success fee.

Limitation

Lenders may only now be discovering the problems in their transactions in the earlier part of the decade and it may be arguable that their loss was sustained, and time started to run, from when they entered into a potentially disadvantageous transaction. In the case of Watkins v Jones Maidment Wilson [2008]EWCACiv.134thecourtfoundthattheclaimantsuffered a measurable loss when they acted on the allegedly negligent advice to enter into the transaction.

Aco-ordinatedapproachInthe1990stheSolicitorsIndemnityFundwasableto

co-ordinate its approach to claims, whereas there are now a number of interested insurers. Much might be gained now by co-operation in dealing with claims, for example exchanging information about lending practices and the selection of appropriatetestcases(particularlyinrespectofsecuritisationandimprudentlendingpractices).

Craig Loweth,AssociateSolicitorBarlow Lyde & Gilbert LLP

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Our experience in dealing with complaints shows that there are three areas that generate the most complaints – communication, costs and delay.

How to prevent complaintsPreventing complaints is as important as dealing with them.

The reasons for the complaints will vary from firm to firm. It is however worth keeping a log of complaints. You will be able to use this information to identify trends about individuals in yourdepartment,specificthemesandareasoflaw.Asalreadystated, there are three common causes of complaint, regardless of area of law or size of firm:

Communication

Keep your client up-to-date and let your client know what •progress has or has not been made on the case

Replytoyourclient’stelephonecallsinareasonabletimeframe;•your client care letter/terms of your retainer should detail the level of service and timeframes in which you will respond

Costs

Ensure costs information is set out in a clear way for •your client

Provide an update of costs and estimates throughout •the retainer

Make sure the value of the retainer is always compared to •the likely costs and that it is discussed at the outset. The matter should be discussed again if the costs or the value of the retainer change

Delay

Keep matters moving•

If you are waiting for information from a third party, •let your client know and ensure it is followed up in a reasonable timeframe

Ensureadequatecoverisinplacewhenyourfeeearneris •on leave

What to do if you receive a complaintAgoodcomplaintsprocedurewillsaveyoutimeandmoney

in the long run because it increases the chances of resolving the complaint in-house. It is therefore worth focusing on how the complaint is first dealt with, how the investigation is conducted and how the outcome is communicated to the client.

Notification of a complaint

Timeliness is key in dealing with the complaint and you shouldensurethatyouhaveadequateresourcesetasidetoconsiderandrespondtocomplaintsquickly.

Take a common-sense approach in dealing with •the complaint

Give consideration to a face to face meeting, verbal or •written response depending on the circumstances

If in doubt on how to respond to the complaint, contact •ourdedicatedhelpline(seebackpagefordetails).Youmayneed to notify the complaint as a circumstance under your professional indemnity policy

Practical steps

Ensuring your staff are aware of the procedure to be used in the event a complaint is received is vital.

Acknowledgethecomplaintwithin2days•

Send your client a copy of the internal complaints procedure •– including the LCS contact details

Inform your client who will be reviewing the complaint•

Stipulate the timeframe in which you intend to reply to •the complaint

How to prevent, resolve and deal with complaints before the Legal Complaints Service

How to prevent complaints, how to resolve complaints in-house and what happens if the complaint is referred to the Legal Complaints Service (LCS)

This article focuses on complaints from prevention to resolution and is intended tobeaquickreferenceguidetocomplementthein-depthproceduresdetailedinthe Solicitors’ Code of Conduct, the Practice Notes issued by the Law Society and proceduresdetailedbythe(LCS).

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Considering a complaint

Itisworthbearinginmindthataqualityresponseatthe outset can reduce the time you spend on corresponding with the LCS later.

Consider each issue the client has complained about in turn•

Take a balanced approach when endorsing actions of •your firm

Consider your client’s circumstances. Some clients are more •vulnerable and sensitive so tailor your response accordingly

Adviseyourfeeearneroftheoutcomeofthecomplaint•

Responding to a complaint

The method of response is important when dealing with a complaint. Serious consideration should be given to the method of communication to respond to the complaint. In the event a face-to-face meeting is held you should keep an accurate record of it. You might also want to follow it up in writing detailing what was agreed or why an agreement could not be reached. In the event you decide to choose to respond to the complaint in writing the letter should detail the following:

What the complaint is about•

Abriefsynopsis/chronologyofevents•

The terms of the retainer and instructions your client •gave you

Anoutlineoftheinvestigationsyouhaveundertakento•consider the complaint

The findings resulting from the investigation•

Anyoffersofremedyandanexplanationtotheclienthow•they can be accepted

Anyimprovementsthepracticehasmadeasaresult•

Anyavenuesofappealinternally•

Inform your client the matter can be referred to the LCS •within six months – you should provide your client with the LCS’s contact details

What happens if the matter is referred to the LCS?

The LCS is an independent complaints handling body. Whilst it is part of the Law Society, it operates independently. It was previously known at the Consumer Complaints Service (CCS),andbeforethatastheOfficefortheSupervisionofSolicitors(OSS).Itsaimistoresolvecomplaintsthatconsumershave with solicitors on a free impartial basis that is acceptable to all the parties concerned.

The complaint will initially be dealt with by a caseworker on an informal basis. The caseworker will obtain each party’s view and will assist in trying to conciliate matters if at all possible. Here you can make an offer on a commercial basis to resolve the complaint. You will of course need to keep your insurer informed throughout the process.

If the complaint cannot be resolved informally by the caseworker, the matter is referred to an adjudicator. The adjudicator will investigate the complaint and, if necessary, requestfurtherdocumentsfromyouortheclient.

The adjudicator will review all the allegations and your responses, including the representations made by the caseworker and will then issue his final response to you and the client.

The adjudicator can make a finding of “No poor service” in which case he will inform both parties and close the file.

The adjudicator also has the power to issue a decision which neither party can appeal, although the client would have the right to reject the decision made by the adjudicator and would still be in a position to refer the matter through the courts should he or she wish to do so.

If the adjudicator decides the service falls short of what the client should reasonably expect, a finding of one or more of the following can be made:

Reduce or limit your bills•

Awardcompensationfordistressandinconvenience•

Awardcompensationforfinancialeffects•

Tell you to take specific action at your cost •

AnyawardstheLCSmakesfordistressandinconveniencewill usually be met by your professional indemnity policy.

Going forward it is anticipated there will be much media and consumer interest generated following the creation of the OfficeofLegalComplaints(OLC)inlate2010,whichwilltakeover from the LCS. This will raise public awareness and will no doubt increase the level of complaints about legal services.

It is hoped that this article has served as a useful reminder for anyone who has to deal with complaints. We would in fact recommend that you monitor and review complaints on an ongoing basis.

In the unfortunate event you receive a complaint and you are not sure how to deal with it, or just want to discuss ways forward,youcancontactourhelpline(seedetailsonbackpage)andwewillbehappytoguideyouthroughtheprocessstep by step.

Reena Shah, Claims HandlerAonClaimsSolutions

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This confusingly named process does not mean legal or physicalcompletionofatransaction;itsimplymeansacceleration when the Land Registry will make the first changes to the Register in connection with the applications received.

The revised process took effect from applications to register in respect of sale, remortgage or lease etc received by the Land Registryafter3August2009.

The Land Registry will process any complete applications thatarereceived(theseareapplicationswithnodocumentsmissingortofollow)and,unlikethepreviousarrangements,these will be processed in any order.

The main impact of this is that it may mean that the transfer of title to the new owner and the charge in favour of the new lender may be registered by the Land Registry prior to the existing charge(s) being removed.

Restrictions and the new policyWhen acting for a buyer you should establish from

the Proprietorship Register whether there are any relevant restrictions in relation to charges registered against the seller. The contents of any restriction on the Register will determine how the Land Registry will apply the new policy.

Restrictions in favour of a proprietor’s charge may prevent

the registration of a further charge or, in most cases, any disposition without the chargee’s written consent. In such cases theLandRegistrywillrequesteither:

Proof of satisfaction of the charge.1.

Evidence of compliance with this restriction.2.

If the lender does not provide to you evidence of the dischargewithin20businessdaysyouwillnotbeabletoaddresstherequisitionwithinthattime.TheLandRegistrywillallowafurther20businessdaysextensionifyoudoallofthefollowing:

Makeawrittenrequestfortheextension.1.

Demonstratethatyouareactivelypursuingthematter.2.

Show that the existing lender is causing the delay.3.

Ifyoucannotresolvematterswithin40businessdays,theLand Registry will cancel both the application for discharge and the applications to register the transfer and the new charge.

If your application is cancelled, the risk is that you might lose priority if there is a competing application and/or search made before you have made a further application to register the disposition.

Land Registry early completionOn9July2009theLawSocietypublishedaPracticeNotetoaddressthe Land Registry’s intention to introduce a system of “early completion” from3August2009.

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Comment on the new policyThere are also extensive sections regarding the various

means by which charges may currently be notified to the Land Registryasdischarged,iesectionsDS1,END,EDorE-DS1.

Once any transaction is registered, a new Title Information DocumentwillbeissuedinthenormalmannerandtheLandRegistry will also issue a document known as a Registration CompletionSheet(RCS)andthesewillneedtobecloselymonitored and kept to ensure that arrangements are made to discharge any earlier charges that are shown to still be in existence.

There is no indication that the Council of Mortgage Lenders(CML)isgoingtomakeanychangetoitsHandbook,as their view is that the Land Registry early completion process is not an issue that substantially affects the current process.

The CML view is that “lenders regard completion as having taken place once the retainer has been complied with. It is not relevant that the Land Registry has imposed an intervening stage in the transaction as this does not change the overall position.” By “completion” the CML means completion of the instructions from a lender, not legal or physical completion.

14.1.1.1oftheCMLLendersHandbookrequirestheconveyancer to register the mortgage as a first legal charge at the Land Registry and lenders do not regard the retainer as being complied with until this is achieved.

There is a suggestion that firms may, when acting for a buyer, want to seek additional assurance from the seller’s solicitors to ensure that they facilitate the necessary discharge of all existing charges.

This is a change that would appear to have significant potential to increase the workload of conveyancers and for there to be a significant risk that solicitors acting for a buyer may not be able to properly discharge their duty to the lender by registering the lender’s charge as a first charge with the Land Registry.

Firms will need to have effective and comprehensive procedures in place to manage the chasing process that will probably be needed and that undoubtedly will cause increased work.

Since the change was announced as a proposal by the Land Registry earlier this year the Law Society has made extensive representations and expressed significant concern, both at the move of work from the Land Registry to conveyancers, who are unlikely to be able to charge properly for it, and also the loss of opportunity to bring into line those lenders who currently are somewhat dilatory in confirming repayment of their outstanding borrowings and providing the necessary discharge documentation.

This is only a brief high-level summary of the key features of what are detailed and technical changes and is no substitute for a close reading of both the Law Society Practice Note (www.lawsociety.org.uk/productsandservices/practicenotes/earlycompletions/3153.article)andtherelevantLandRegistryregulations(PracticeBulletin16–EarlyCompletion).

RecommendationIt is imperative that firms update their processes and

operate efficient and detailed diary systems to ensure that allthenewlyintroduceddeadlinesandrequirementscanbecomplied with.

Firms need to remember that they have a duty, both to their lay client and also to the lending organisation, to ensure that at the end of the process purchasers have a clean title to the property with all prior charges properly discharged and the new lender’s charge, where relevant, registered as a first charge to comply with your duties under the CML Handbook.

Roy Slocombe,QAConsultantQBEInsurance(Europe)Ltd

s w i t c h e d o n11

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