## Facts

- A building society agreed to advance a residential mortgage on the express condition that the borrowers fund the balance of the purchase price from their own resources “without resort to further borrowing,” and instructed the acting solicitor to report any additional financing.
- The solicitor acted for both lender and borrowers in the conveyancing transaction.
- The solicitor knew the borrowers intended to secure an existing bank overdraft by a second charge over the property.
- The solicitor nevertheless reported to the lender that the balance of the purchase price was being provided without further borrowing; the lender advanced the mortgage funds and completion occurred.
- The borrowers later defaulted; the lender enforced its security and suffered a shortfall on the advance after sale.
- The lender sued the solicitor for breach of contract, negligence, and breach of trust/fiduciary duty, seeking to recover the full transactional loss.
- The solicitor conceded breach of contract and negligence (inaccurate reporting) but denied that the conduct was a breach of trust or fiduciary duty attracting strict restitutionary liability.

## Issues

1. Whether the solicitor’s negligent misstatement to the lender amounted to a breach of fiduciary duty or breach of trust, rather than only a breach of the duty of care and skill.
2. In a solicitor-negligence case involving incorrect information, whether the claimant must prove it would not have entered the transaction “but for” the error, or whether reliance on the incorrect information suffices.
3. Whether compensation for the solicitor’s breach is governed by strict equitable “reconstitution” principles or by common-law rules of causation, remoteness, and quantification of loss.

## Decision

- The Court of Appeal held the solicitor committed negligence (and breach of contract) but did not commit a breach of fiduciary duty or breach of trust of the type that triggers strict liability to restore the full amount advanced.
- The lender established that it relied on the solicitor’s incorrect report in proceeding with the loan.
- However, the lender still had to prove what loss was caused by the negligence; common-law principles of causation and remoteness governed the measure of compensation.
- The appeal was allowed to the extent prior orders treated the negligence as a breach of trust/fiduciary duty warranting automatic recovery of the entire shortfall; damages were to be assessed on ordinary compensatory principles.

## Legal Principles

- A fiduciary relationship is characterized by an obligation of loyalty; not every duty owed by a fiduciary is itself fiduciary in nature.
- Negligent performance of a duty of care and skill, even by a fiduciary, is not without more a “breach of fiduciary duty” in the strict sense; fiduciary breaches typically involve disloyalty (e.g., conflicts, unauthorized profits, or preference of one interest over another without informed consent).
- Where the wrong is negligent misinformation (not misapplication of property), the remedy is compensatory damages for loss caused by the negligence, not strict “trust fund” reconstitution.
- In professional negligence based on incorrect advice or information, the claimant need not prove it would certainly have acted differently; it is sufficient to prove reliance on the incorrect information in acting.
- Because the duty breached was a duty of care (not a loyalty duty), common-law rules of causation and remoteness govern quantification of damages, even if the claim is framed in equity.

## Conclusion

The Court of Appeal limited the solicitor’s liability to compensatory damages for loss caused by negligent misreporting, rejecting attempts to recast ordinary professional negligence as breach of trust or fiduciary duty to obtain strict restitutionary recovery of the entire transaction loss.


Bristol & W. Bldg. Soc’y v. Mothew (t/a Stapley & Co.), [1998] Ch. 1 (Eng. C.A. 1996)