A decision in the high court last week in the matter of Mortgage Express vs Sawali means that anyone signing a mortgage form or offer may have signed away their rights to legal professional privilege - the privilege whereby a solicitor is able to withhold disclosure of certain documents relevant to a dispute - with regards to their mortgage transaction even if the mortgage offer was signed before the solicitor was instructed.
"It would be the case that if the lender wanted to see the 'entire file' where a solicitor was instructed by both the lender and the borrower, permission from the borrower would be required to release that part of the file relating to the conveyancing part of the transaction" explains Elaine Dobson, Real Estate Partner, Bircham Dyson Bell LLP.
"However, in this case the court ruled that the solicitors, who were a successor practice to the original solicitor, must hand over the entire file to the lender even though they were unable to contact the borrower, because the borrower had signed a declaration in his mortgage offer authorising it, which amounted to a waiver of legal professional privilege."
"The decision makes it much easier for lenders to obtain copies of entire files where such a declaration has been signed by the borrower, usually before a solicitor has been instructed, and further such a declaration enables the lender to see whether solicitors are in breach of the Council of Mortgage Lenders Conditions. This is a stark reminder to both borrowers and their solicitors to be mindful of such clauses and in particular for solicitors to ensure that their clients are aware of the potential consequences that may arise from documents signed before they were instructed."
The transaction was one of a number of files where a purchase was funded by a different lender and on the same day re-mortgaged to the lender in question who was now demanding the file. The High Court ruled that the waiver was unambiguous, irrevocable and binding on both the lender and the borrower and that the original solicitor owed a duty to report any matters that might otherwise be subject to legal professional privilege to the mortgagee on the basis of the terms of the Council of Mortgage Lender's Conveyancing Handbook.
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