Duties and Execution
Wood v Commercial First Business Ltd (in liquidation)  raised two interesting but distinct issues which could change how mortgages are obtained and the execution of deeds in property transactions.
The dispute revolved around the lender, Commercial First Business Ltd (CF) providing both a fee and commission to a mortgage broker, UK Mortgages and Financial Services Limited (UKMFS), who had arranged for Wood to enter into three mortgages with CF. Wood challenged the validity of the mortgages which had been assigned prior to CF entering into a CVL.
Question of Fiduciary Duties
The Court examined what and when brokers must disclose to their clients in respect of commission. UKMFS had told Wood that commission may be paid but also promised to tell her the exact amount once it became apparent; however this was never fulfilled. Consequently, the commission received was deemed as 'fully-secret' and the remedies available were that of fraud. The Court further examined where a broker may owe a fiduciary duty to a borrower. Hurstanger v Wilson  states that a duty shall be owed even where a broker gives no advice but instead simply arranges a contract as there is an implied representation that the arranged contract is competitive and thus confidence in the broker shall follow. The judge in Wood considered this point and went even further to state that there was a fiduciary relationship where a borrower knows that their broker is receiving a fee and, to not breach that duty, the broker must obtain informed consent from the Borrower.
Last year, the Law Commission's recognition of the validity of electronic signatures when executing documents led to issues being raised about whether the formalities governed by section 1(3) of the LP(MP)A 1989 were satisfied. The longstanding position is that for a deed is to be validly executed, it must be signed 'in the presence of a witness who attests the signature'; a requirement which, at its surface, seems to conflict with the idea of electronic signatures. However, the Court's approach in Wood seems to indicate that this may not be the case.
Wood did not dispute the validity of her execution of the mortgage deeds but raised the notion that the LPA requirement that a deed be signed in the presence of a witness should be extended to the witness’ signature, and that this should also be in the presence of the executor. The Court held that the wording of the statute was not to be broadened to encompass a necessary presence of the executor, nor anybody else.
Wood highlights the need for full disclosure of commission terms, including the sum of commission payable, to avoid any possible challenges over fiduciary duties owed to a Borrower. It is particularly important where one party becomes insolvent and the right to contribution is devalued.
The case further highlights the growing demand for a more facilitated of dealing with executing documents to allow for documents to be signed and circulated at a faster rate. Recommendations such as video witnessing to overcome potential obstacles that can arise from e-signatures is one way which the adaptation of law to the development of technology can be observed.
- Written by Fernanda de Faria (a Brunel Law School student and Debating Officer) and Rishin (a trainee solicitor at Blake Morgan).