The Gazette 1949-1952

In February, 1941, Reece died and by his will ap­ pointed the defendant and three others as executors. In March, 1944, having previously given six months’ notice to pay off the mortgage, the plaintiff instituted redemption proceedings against the executors. These proceedings were adjourned into Court for argument on the defendant’s claim to a lien on the documents of title held by him. Vaisey, J., held (1945) 2 All E. R. 414, that since the defendant had, by tbe operation of law, become joint owner, subject to redemption, o f the mortgaged property and o f the title deeds, these deeds must be regarded as having passed out of his custody as solicitor, and, since redemption involved the return by the mortgagee, not only of the estate, but also of tbe indicia of the title to the estate, he was not entitled to any lien on the documents. The Court of Appeal reversed the order (ibid, 650) on the ground that it was premature. In January, 1946, the defendant took a transfer of the mortgage from the mortgagee’s executors to himself alone and thenceforth held the documents in question as sole mortgagee. The re­ demption proceedings were consequently stayed as against the other three executors. In February, 1948, a redemption order was made. The question of the defendant’s claim to a lien was expressly left open in the order, with liberty to apply. In February, 1949, the defendant applied by Chancery summons, for interalia , a declaration as to his lien on the documents of title. On 21 st March, 1949, Romer, J., following the decision of Vaisey, J., held that the defendant was not entitled to the lien claimed. On the present hearing of the appeal against this decision in October, 1950, it was contended for the defendant that, having received the deeds in his professional capacity, the defendant became entitled to a lien over them so long as they remained in his physical possession, and that a lien so acquired continued to be available against any claim to possession of the documents regardless of any intermediate change in the ownership of the documents or in the identity of the person for whom the defendant held them. The Court o f Appeal (Sir Raymond Evershed, M.R., Asquith and Jenkins, L .J.J.), dismissing the appeal, held (i) The defendant’s possession of the mortgage deed and the right to demand it from him which the plaintiff now had as a redeeming mort­ gagor, were referable solely to the relationship of mortgagee and mortgagor, and not to that of solicitor and client. Therefore, the defendant was not entitled to any lien against the plaintiff, so far as the mort­ gage was concerned ; (ii) When a client for whom a solicitor held title deeds mortgaged the property comprised in them to another client of the same solicitor, then, even though the deeds before and after the mortgage remained continuously in the

bank knew at all material times that the No. 2 account was an account o f clients’ moneys, and that con­ sequently the bank was not entitled to a set-off; (iii) that the bank was in law debarred from taking action by the Solicitors’ Act (Northern Ireland), 1938, Section 37(2). The said Section 37(2) provides that a bank, at which a solicitor keeps an account for clients’ moneys, shall not, in respect o f any liability of the solicitor to the bank (not being a liability in connection with that account) have any right of set-off against moneys standing to the credit of that account. This is however subject to a proviso that nothing contained in the section is to deprive the bank of any right existing at the time when the first optional regulations to be made by the Council of the Northern Ireland Law Society regarding the keeping - clients’ money accounts under Section 33 o f the Act came into operation. No such regulations had, in point of fact, been made. It was held by Black, L. J., dismissing the action, that:—(i) In the absence of any agreement to the contrary, a bank is entitled to combine customers’ accounts and set off the debit balance of those in debit against the amount standing to the credit o f those in credit, unless it has notice that any of these sums are trust funds ; (ii) That though the nature or number or magnitude of transactions passing through a parti­ cular account o f a solicitor to the bank may afford notice to the bank that such account is an account of clients’ moneys, this is a question of fact to be determined in each case; (iii) That Section 37(2) of the Solicitors’ (Northern Ireland) Act, 1938, applies only to accounts which to the knowledge o f the bank are clients’ moneys accounts ; (iv) That when a Bank acquires notice that one of the accounts kept by the customer is a trust account, it may nevertheless exercise any right of set-off to which it may then be entitled, having regard to the state o f the accounts at that time. Per curiam :—“ Accounts are merely entries of transactions in books, and where a customer has several accounts with a banker, the true position at any time between banker and customer will only be found by deducting the aggregate o f the customer’s debit balance from the aggregate ol his credit bal­ ances, or vice versa Barratt v. Gough , Thomas (No. 2) (Court of Appeal) (1950) 2 A ll E . R. 1048. The property in question at Oswestry was purchased by the plaintiff in June, 1919, and the documents of title were left in the custody of the defendant as his solicitor. In Decem­ ber, 1919, the plaintiff mortgaged the property to one Reece to secure a sum of £5,000. The defendant acted for both parties in the matter and the docu­ ments of title were never rempved from his custody.

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