A recent Court of Appeal case has raised further concerns surrounding who holds the liability for conveyancing fraud – the buyer’s or the vendor’s solicitor.
The story starts with Mishcon de Reya, in which the High Court ruled that it should pay compensation as the buyer’s solicitors – although no demonstrable negligence was observed.
The court heard how a fraudster posed as a homeowner, found a buyer, engaged solicitors and disappeared with the proceeds of the house sale.
The court was forced to rule who was liable in this situation – a particularly hard task as both parties, the buyer’s solicitors and the seller’s solicitors, had done little wrong.
However, it was ultimately Mishcon de Reya who was found liable, as it was “best insured” to handle the £1 million deficit.
But a recent case indicates that solicitors working on behalf of a fraudulent client could also be liable.
The buyer of the property in this instance, P&P, sued the fraudster’s solicitors Owen White & Carlin LLP, as well as the estate agents.
The Court ruled in favour of P&P, meaning the solicitors working on behalf of the fraudulent client were ordered to repay some £1 million in compensation. Again, claims of negligence and breach of warranty of authority were dismissed.
This judgment led to significant confusion, and Mishcon de Reya appealed the court’s decision.
Announcing the ruling this week, Lord Justice Patten said firms on both sides, in fact, should share responsibility and ordered both firms of solicitors, Mishcon and the vendor’s solicitors Mary Monson, to make undisclosed financial contributions in compensation for the buyer.
Commenting on the case, Simon Blandy, Director Of Regulatory Standards, Council For Licensed Conveyancers Said: “This is an extremely important ruling that raises a lot of questions without answering them all. As a regulator we will have to scrutinise it closely before deciding what action, if any, we need to take. But the case emphasises the importance of taking a risk-based approach when accepting instructions and managing transactions.”
Beth Rudolf, Director Of Delivery At The Conveyancing Association, added that the ruling may make way for more intensive identification processes.
“Essentially we hope now that the Government will look more closely at a centralised identification process with biometrics built in to ensure that the instances of seller ID fraud are eradicated,” he said.
“By linking an official photograph of the registered proprietor to the title, as you would with your passport or driver’s licence, these frauds would be virtually impossible.”
Experts have suggested that the Supreme Court is the only next feasible step. Until then, conveyancing firms have been advised to be due diligent in assessing the clients and law firms they work with.