The Court of Appeal has overturned controversial fraud decisions which have a bearing on agents’ and conveyancers’ responsibilities for checking buyers’ credentials.
The decisions concern two cases.
In one, a client of conveyancing law firm Mishcon De Reya had bought a house in London; after handing over payment it transpired a fraudulent seller had been renting the house and had illegally pretended to be its owner.
Originally a judge decided Mishcon De Reya was liable for a £1.1m loss allegedly suffered by the buyer; this was despite the fact that the fraudulent seller’s conveyancers were also sued by the buyer, but were deemed not at fault.
That decision has now been overturned.
A similar case - also involving a purchase of a circa £1m London home - has also had an earlier ruling overturned by the Court of Appeal.
In the second case a supposed-seller contacted estate agency Winkworth and conveyancers Owen White & Caitlin and instructed them to sell his property.
Only after the sale for £1.04m was the buyer discovered to be a fraud. The buyer, P&P Property, then sued Winkworth and the conveyancing firm; Winkworth was not found liable the first time and this decision was upheld yesterday.
But the decision in this case that the conveyancing firm had been liable has now been overturned.
The estate agency has now been awarded full costs so has been completely cleared, but in both cases the Court of Appeal expects the vendors’ legal firms to make contributions to recompense the duped buyers.
The two cases had similar characteristics - both sellers and purchasers instructed solicitors and the transactions were conducted relatively rapidly, and only after the payment was apparently handed over to the sellers by their solicitors did the fraud come to light.
In reaction to the Court of Appeal decision Catherine Penny, a litigation expert at law firm Stevens and Bolton, says: “We can almost hear the collective sigh of relief of those involved in acting for purchasers in conveyancing transactions. Those acting for sellers though, not unreasonably, need to make sure they carry out the proper identity checks.
“The purchasers pursued claims against both sets of solicitors involved and, in one case, the estate agents too. At first instance, Mishcon de Reya, who acted for the purchaser on the transaction, even though it had not been negligent, was found to have acted in breach of trust and was liable for the full purchase price, to its client.
“That was the case even though the fraud had been perpetrated by someone who was not their client. Apparently the judge was persuaded by the fact that Mishcons had insurance which would cover the loss. The judge had not been convinced that even though the solicitors acting for the fraudulent seller had, admittedly, not carried out the correct identity checks, they should be liable.
“In the other case, none of the solicitors were found to be liable. All parties appealed the decisions for differing reasons” she concludes.