The Mortgage Corporation -v- Roodyn Porter Manski
Bankruptcy Search – Potentially Adverse Entry – Self Certification by a loan applicant insufficient – Lender to be given the opportunity to investigate .

Preface
An interesting issue arose in a professional negligence action which came on for hearing in the Chancery Division before Rattee J on 4th October 1999: TMC -v- Roodyn Porter Manski. The issue was whether, in the event of a potentially adverse entry being shown by a bankruptcy search, the solicitor – who was acting for both borrower and lender in 1991 – could rely on the self certification of the borrower that the entry did not relate or refer to him, and therefore need not refer the potentially adverse entry to the lender.

The lender’s complaint was that self certification, in the circumstances, was not sufficient and that the search ought to have been reported to it. In fact, since 1994 The Law Society’s Conveyancing Handbook & The Council of Mortgage Lender’s Handbook for England and Wales (1999), in terms, indicate that self certification is not sufficient and that the entry ought to be reported to the lender so that instructions can be taken.

The case settled on the third day of trial. RPM agreed to pay a substantial order for damages to TMC and RPM also agreed to pay TMC’s costs.

Facts
During mid 1991 the Claimants, The Mortgage Corporation ("TMC") instructed the Defendant ("RPM") - based in Kilburn - to act on its behalf in connection with a purchase transaction in which TMC proposed to advance the sum of [£ ] to enable its loan applicant Thomas Griffin to purchase a property in Wales. The Purchaser/loan applicant resided in Kilburn, London. There were standard mortgage instructions and a relevant special mortgage offer condition. One of the standard mortgage instructions was that RPM were to ensure that there was a clear Bankruptcy search. The relevant Special Mortgage Offer Condition was that RPM were to certify that Griffin was a first time buyer. A bankruptcy search was carried out.

The resulting search revealed an entry against a Thomas Griffin; RPM correctly requested office copy entries and these revealed a charging order nisi against a property in the name of Thomas Griffin in Kent. RPM obtained a certification from Griffin that the entry did not relate to him. On the basis of this self certification RPM did not report the results of the search to TMC. A post advance request by TMC - to the solicitors that had registered the charging order nisi - established that the loan applicant was the same Thomas Griffin as appeared on the Bankruptcy search.

Conclusion
This is an emphatic warning and reminder to solicitors who obtain a potentially adverse entry when carrying out a bankruptcy search, that the search results must be reported to the lender. By allowing the lender to decide what next steps should be taken concerning the search result, the solicitor is obtaining protection from criticism.

Sprecher Grier Halberstam LLP
6th October 1999
Counsel for TMC: Timothy Harry (9 Old Square)
Counsel for RPM: Matthew Jackson