Legal Executives get a shot in the arm

Executives' status has been given extra weight but the concept of manifest disadvantage is questioned, says Roger Pearson.

Legal executives have had their status strengthened by an Appeal Court ruling.

The ruling in Barclays Bank v Coleman, leaves no doubt that if a legal executive has been given the backing of his principals his advice should be regarded as given on behalf of his firm.

And Lords Justices Nourse, Pill and Mummery gave guidance on what is necessary to show that the principals have given such backing.

The question of the status of such advice was raised in a case in which a wife sought to ward off a claim by Barclays Bank, which wanted to take possession of her home in Clapham, south London.

In appealing against a decision made at Central London County Court by Judge Wakefield, who granted possession to the bank, she argued that independent advice she had received before entering into the mortgage deal was flawed.

She claimed that a certificate of independent legal advice signed by a legal executive from the firm she had consulted was inadequate. It did not entitle the bank to assume that the advice in question had been given with the authority of the firm's principal.

In the county court her arguments were accepted. But the judge granted possession to the bank because – despite his view of the effectiveness of the certificate – the deal was not "manifestly disadvantageous" to the wife.

In the Appeal Court the wife failed in her challenge to that decision. But, in a cross appeal, the bank successfully challenged the view the judge had taken in respect of the advice of the legal executive.

Lord Justice Nourse said: "Advice given by a legal executive is legal advice and, provided that it is independent and given with the authority of his principal, there is no reason for holding it to be inadequate."

He added: "A solicitor who allows his legal executive to give advice from the address at which he practices necessarily holds him out as having the authority to do so."

In this case the legal executive's certificate gave the address of his firm and the judge said that entitled the bank to assume the advice had been given with the authority of the firm's principal, as it had been.

Anne McCarthy, a partner in the banking litigation team at Nicholson Graham & Jones, acted for Barclays Bank and views the decision as a victory for common sense.

"This was a policy decision by the court to reflect the realities of a solicitor's practice," she says.

For legal executives the case has also put into question another important aspect: whether there is a need for the concept of manifest disadvantage to be re-examined.

Lord Justice Nourse said there was binding authority that courts had to be satisfied that a claimant had been put at manifest disadvantage.

But he added: "The authorities have got into a very unsatisfactory state… A re-examination of what [manifest disadvantage] really means is necessary."

McCarthy says: "Although this judgment does not change the law, Lord Justice Nourse has questioned the future of the requirement to prove manifest disadvantage in cases of presumed undue influence and in his comments has signalled the need for a review."