Professional negligence ruling: conveyancing fraud

18 October, 2016
by: Cripps Pemberton Greenish

Judgment has been handed down in P & P Property Ltd v OWC LLP and Crownvent Ltd t/a Winkworth [2016] EWHC 2276 (Ch), a case regarding property fraud. 

The claimant, a property investment company, exchanged and completed (it thought) on a property purchase in December 2013.  In fact, the seller was a fraudster.  The Mr Harper who represented to the solicitor and estate agent (the two defendants) acting for him that he was the proprietor of the property was not the Mr Harper who actually owned it.

The claimant learned shortly afterwards that the completion funds had been paid to a fraudster impersonating the owner.  As a result, the claimant failed to acquire the title to the property and the fraudster absconded with completion monies of over £1,000,000. 

 

52736328 - fraud red square vintage grunge isolated sign

 

The claimant brought a claim against the seller’s solicitors on the basis of breach of warranty of authority, negligence, breach of trust and breach of undertaking and against the estate agents who marketed the property for breach of warranty of authority and negligence.

Although neither defendant acted for the claimant, it was alleged that they were liable for the claimant’s losses as they had warranted that they acted for the real Mr Harper, and made representations upon which the claimant relied.

All of the claims were dismissed.

The claimant brought the professional negligence claims on the basis that the defendants had fail to act with, respectively, the skill, care and diligence of a reasonably competent solicitor and estate agent.

However, it was held that one party to a conveyancing transaction generally does not owe a duty to the other.  Absent any special circumstances, the only professional which owed the claimant a duty to take reasonable care and skill was the claimant’s own firm of solicitors representing them in the transaction. 

No duty of care was owed by the solicitors or the estate agents to the claimant and so there could be no breach of that duty.

Where there are no special circumstances, a solicitor is to be understood as acting on the instructions of their client when making representations.  To the extent the claim was based on an allegation that the solicitor represented that they had authority to act for the true owner of the property, no express representation was made and none should be implied.

The seller’s solicitors did carry out money laundering checks and met with Mr Harper to verify his identity.

Permission has been granted to appeal.

For more information please contact Pradeep Oliver on pradeep.oliver@crippspg.co.uk or +44(0)1892 765 453.