Property fraud and professional liability

18 May, 2016
by: Cripps Pemberton Greenish

An interesting case has recently been decided in the High Court relating to property fraud.  The claimant lost nearly £500,000 after the fraudster based in Dubai posed as the seller of a property in Wimbledon in a sale to the claimant.  The fraud was only discovered after the sale proceeds had been paid out to the fraudster.  A claim was brought against the claimant’s conveyancing firm for breach of trust and negligence and the seller’s solicitors for breach of trust in relation to the purchase money.

The trial concerned whether the firms acted reasonably and were therefore entitled to relief under s.61 Trustee Act 1925. 

The court found that the seller’s solicitors did not comply with anti-money laundering regulations and did not obtain documentation linking the property to the purported seller.  The claimant’s conveyancers had asked the seller’s solicitors to verify that the seller was the real owner, but did not follow up or warn their client when they did not receive a satisfactory response.

The Court held that both firms were liable to the claimant and ordered an equal contribution in respect of the claimant’s loss.

This is an interesting case as previous breach of trust claims have tended to focus on the buyer’s/lender’s conveyancers rather than the seller’s conveyancers.  Attempts to argue that a lower test should effectively be applied to the seller’s conveyancers did not succeed. 

Unfortunately such fraud is on the increase and many fraudsters are becoming increasingly sophisticated.  Property transactions will always be a target due to the large sums which can be involved.  Firms must be vigilant to the risks and ensure that they comply with anti-money-laundering regulations to ensure that they and their clients do not fall victim to such frauds.

The full judgment in Purrunsing v A’Court & Co (a firm) & Anor [2016] EWHC 789 (Ch) can be found here:

https://www.bailii.org/ew/cases/EWHC/Ch/2016/789.html