Conveyancing Fraud – who Ought to Pay?
February 15, 2018
I propose to consider three recent authorities dealing with attempts by the victim of conveyancing fraud to recover their loss not only from their own Solicitors, or conveyancers, but also from those of the other party to the transaction. The cases in question are Purrunsing v. A’Court & Co (a Firm) and Another  EWHC 789; P&P Property Limited v. Owen White & Catlin LLP  EWHC 2276; and Dreamvar (UK) Limited v. Mishcon de Reya (a Firm)  EWHC 3316. These are all first instance decisions. The first is by Judge Pelling QC sitting as a High Court Judge; the second a decision of Mr Robin Dicker QC sitting as a Deputy High Court Judge, and the third a decision by Mr David Railton QC also sitting as a Deputy High Court Judge. The P&P Property Limited case is subject to appeal. The Mishcon case has attracted some media attention and I assume will appeal too.
Obviously, client monies are held by Solicitors on trust. There has been an increasing consideration by the Courts of the question what breaches of an instruction amount to a breach of trust. In Target Holding Limited v. Redferns  1 AC 421 it was held that a Solicitor trustee, lacking authority to part with mortgage money before completion, is in breach of retainer and breach of trust if he negligently completes before obtaining good title. But it turns on the facts. In Lloyds TSB Bank PLC v. Markandan & Uddin  EWCA Civ 65 the Solicitors paid out completion monies without getting the documents needed to register title, but they did have an undertaking from the vendors’ purported Solicitor to provide those documents. The purported Solicitor was a fraudster and the money could not be recovered. The transaction took place on Council of Mortgage Lenders terms which required that the loan should be held on trust until completion. Completion obviously did not mean registration of title, but it was held that it did mean that the firm of Solicitors should have received the completed transfer and other title documents required to register title, or a Solicitors’ undertaking to provide them. Since there were not any documents or (genuine) solicitor’s undertaking, the Solicitors were in breach of trust.
Purrunsing v. A’Court & Co
Mr Purrunsing bought some property in Wimbledon for £470,000 from a Mr Dawson. Mr Purrunsing used a registered conveyancer, House Owners Conveyancers Limited (HOC). Mr Dawson used Solicitors, A’Court & Co (ACC). However, when Mr Purrunsing paid the purchase price to his conveyancer, who passed it on to Mr Dawson’s Solicitors, who passed it on to Mr Dawson in Dubai, it turned out he was not Mr Dawson at all, did not own the property which is never registered in Mr Purrunsing’s name, and disappeared with the cash. Mr Purrunsing sued Mr Dawson’s Solicitors, ACC, and got judgment against them on the basis that the purchase money had been paid away by them in breach of trust, because there had never been a genuine completion of the transaction. But ACC applied for relief under s.61 Trustee Act 1925, on the basis that they acted honestly and reasonably and ought fairly to be excused from liability. Mr Purrunsing joined his own conveyancer, HOC, as a defendant. HOC admitted being in breach of trust, but also applied for relief; and denied liability for breach of contract and/or duty.
The Judge did not feel that Mr Dawson’s Solicitor had distinguished himself. Both HOC and ACC were relevant persons within the Money Laundering Regulations 2007 and so they had an obligation to apply customer due diligence, which obviously involves identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source, and obtaining information on the purpose and intended nature of the business relationship. All of this is much discussed in the Law Society’s Conveyancing Handbook and its Property and Registration Fraud Practice Note. Practitioners are required to take a risk-based approach that is, an appropriate one depending on circumstances. The Note particularly warns that certain properties are vulnerable to registration frauds, including unoccupied properties, and high value properties without a legal charge (both of which applied in that case).
The address given by Mr Dawson was not either of the addresses for service that appeared on the proprietorship register of the property. Moreover Mr A’Court knew that Mr Dawson was pressing for an expedited sale, that he had not asked Mr Dawson for permission to write to him at the address given on the register, and did not know why the address he had been given was not the address given on the register. In fact Mr Dawson had not supplied any documentation connecting him with the property (and had not been asked for any). There were various other worrying features, including the fact that on the initial aborted sale, Mr Dawson had pulled out only when asked to provide information about where he worked which could be checked. Also, he lived overseas and would not be returning to the UK before completion.
Section 61 Trustee Act 1925 provides:
“If it appears to the Court that a trustee, whether appointed by the Court or otherwise, is or may be personally liable for any breach of trust… but has acted honestly and reasonably, and ought fairly to be excused for the breach of the trust… then the Court may relieve him either wholly or partly from personal liability for the same”
The Judge identified three authorities which contained all the relevant principles: Lloyds TSB Bank Plc v. Markandan & Uddin  EWCA Civ 65; Davisons Solicitors v. Nationwide Building Society  EWCA Civ 1626; and Santander UK Plc v. RA Legal Solicitors  EWCA Civ 183. Each of those cases was to do with relief claimed by Solicitors acting for purchasers, and lenders to purchasers.
Statute provides a two stage test: whether the trustee acted honestly and reasonably; and whether he ought fairly to be relieved. Counsel for ACC therefore submitted that it should be easier for vendor’s Solicitors to get relief than for purchasers’. The Judge identified the principles.
- The reasonableness test applied to a Solicitor who parts with completion monies without getting completion has to be a high one because s.61 has to be understood consistently with equity’s high expectation of a trustee. He needs to have acted “with exemplary professional care and efficiency” and to be “careful, contentious and thorough”; although the test remains on a reasonableness and not perfection;
- The burden lies on the trustees;
- Conduct that is irrelevant or immaterial to the loss, is to be disregarded; but a departure from best practice that increased the risk of fraud is relevant, even if the fraudster would have achieved his goal anyway;
- The Court will usually look at the complaints in the round and as a whole, rather than taking each separately;
- The Court has to have regard to the effect of the grant of relief not just on the trustee but on the beneficiary, and so questions such as the financial strength of the loser, and the availability of insurance, are relevant.
He dismissed the idea that vendors’ Solicitors should have an easier time on the question of reasonableness. It was entirely irrelevant that they did not owe a duty of care to the purchaser. The point was that they were just as much a trustee of the purchase monies as the purchaser’s Solicitor or conveyancer. The obligation was the same: not to release money before completion. So s.61 applies equally to vendor’s and purchaser’s Solicitors.
The point about HOC was that it had failed to advise Mr Purrunsing of an unsatisfactory response to Additional Inquiries. What had been asked for was confirmation that HOC was familiar with the sellers, and that they would verify that they were the sellers and check their ID to support that. (HOC said that asking such questions was not standard conveyancing practice, and that they no longer did it.) The response was that they had no personal knowledge of Mr Dawson, but had met him in person and seen his passport, together with utility bills etc showing his UK address as notified to them. The Judge held that the question had been concerned with ensuring that the vendor was entitled to sell the property; and on that basis, HOC could not reasonably have been satisfied with the answer, because it did not tell them that ACC had any information linking Mr Dawson with the property. The Judge held that the fact that he had no such information was something that he ought to have told Mr Purrunsing. On this basis, HOC was in breach of contract and/or duty in failing to pass that information on. He held, further, that it followed that HOC had failed to discharge the burden of proving that it acted reasonably for the purposes of s.61 Trustee Act 1925. That must be right.
He also held that ACC had failed to discharge the same burden. The MLR required them to obtain information on the purpose and intended nature of the business relationship. It was not just a matter of establishing that Mr Dawson wanted to sell a house. What ACC had to do was look at all the information available and assess whether it was consistent with the lawfulness of the proposed transaction. So ACC should have considered whether Mr Dawson was the owner of the property in view of all the warning signs mentioned already. Of course, ACC’s duties under the MLR were not owed to Mr Purrunsing: but the fact that they had not been satisfied and should have been, and that in consequence the likelihood of loss by fraud was increased, meant that ACC did not meet the reasonableness threshold for s.61 Trustee Act 1925 either.
The Judge required HOC and ACC to contribute equally to the loss, having regard to the relative causal potency of their contribution to the disaster, as well as their comparative blameworthiness.
P&P Property Limited v. Owen White & Catlin LLP
P&P Property (PPP) was owned by Messrs Polycarpou, father and son. It bought a property near Goldhawk Road in London from a Mr Harper, for about £1m. Mr Harper had said he wanted to sell the property to obtain funds to complete on a foreign property. After completion, PPP started work, and the true owner turned up. PPP sued the supposed Mr Harper’s Solicitors, Owen White and Catlin LLP, and the estate agents who marketed the property, Winkworth. It sued them for negligence and breach of warranty of authority. (Interestingly, it had originally been alleged that ACC in the Purrunsing case was in breach of warranty of authority, but the allegation was abandoned a week before trial). It also claimed the Solicitors had held the completion monies on trust and that since no valid completion had taken place, the payment to the fraudster had been in breach of trust.
The breach of warranty of authority argument failed. The Solicitors were not warranting that they acted on behalf of the person who actually owned the property, or that their client was the registered title holder. Neither the Solicitors nor the estate agents should be regarded as having implicitly represented that their client was who he said he was, or that he owned the property. The negligence claims failed too. To the extent that they made representations, they were making them on behalf of their client. And the breach of trust claim failed as well, on the basis that the Solicitors had not received the completion monies on trust, but only as agent for the fraudster.
The Judge rejected the idea that the cases cited to him established that any Solicitor who acted for someone impersonating the true owner was necessarily liable for breach of warranty of authority (Penn v. Bristol & West Building Society  1 WLR 1356; Bristol & West Building Society v. Fancy Jackson  4 All ER 582; and Zwebner v. The Mortgage Corporation Limited  PNLR 769). On the other hand he also rejected the idea that because a professional man is not readily to be supposed to undertake to achieve a guaranteed result, (Platform Funding v. Bank of Scotland  EWCA Civ 1016), it followed that a warranty of authority to act on behalf of the true owner would not be implied: the Platform Funding case was about breaches of duty, not warranties of authority; and it was about the extent of the duty, not whether there had been a warranty of authority. He also rejected the idea that because a Solicitor instructed in litigation only warrants that he has a retainer from the client who exists (Nelson v. Nelson  1 WLR 233; and SEB Trygg Liv Holding AB v. Manches  EWCA Civ 1237), the same applied outside the special case of litigation. He held however that the Court would not construe an implied warranty of authority as operating more broadly than as representing that the agent had authority to act on behalf of his client, unless it is clear that such a warranty is properly to be implied.
The question is, therefore, highly fact-dependent. As a matter of policy, the starting point was that the main justification for the doctrine was that if the agent does not have the authority which he claims, the third party may have no claim against this supposed principal. Treating the agent as having warranted his authority is justified because it gives the third party a claim. But this was not a case where the purchaser would have no claim against anyone: PPP had a claim against the fraudster (although not a very useful one, because he could not be traced). The Judged identified 2 possible approaches: the first involved identifying who the agent represented that they had authority to act for; and the second concerning what attributes they represented that the person had. So the first approach begs the question whether the Solicitors and estate agents warranted that they were acting for the person who was their client, or for the person who actually bore the name. The second asked whether they represented that their client (whoever he was) actually owned the property. The Judge rejected the idea that a Solicitor’s warranty of authority would ordinarily be anything more than a warranty that they had authority on behalf of their client. No doubt the counterparty’s Solicitors would assume that the Solicitor had carried out appropriate identity checks and the correct client due diligence to establish the identity of their client as being the true owner of the property; but no Solicitor would expressly warrant that they had authority from the true owner, because if they did, they would effectively be guaranteeing that their client was the registered title holder and would be strictly liable if he was not. If no Solicitor would do that expressly, there was no basis for implying a warranty of that breath.
(I suppose an intermediate position is possible. A Solicitor might be understood as warranting, not only that they were acting for their client, but they had carried out client due diligence which, on a risk-based assessment, had satisfied them that their client was the true owner of the property. If so, then the Solicitors in the PPP case would probably still not have been liable for breach of that warranty, on the facts of that case. And in fact, the Judge observed that, given that such checks can never be infallible, reliance on the fact that they have been carried out, rather than on any warranty that the client owned the property rather indicates that no broad warranty is given).
So the same fate befell the claim against the estate agents on the basis of breach of warranty of authority. As already noted, the negligence claim failed as well, for reasons which are fairly obvious.
The Purrunsing case was distinguished on the basis that it concerned the 1998 Edition of the Law Society’s Code for Completion by Post. In the PPP case the relevant Code Edition was 2011. The earlier code had said that pending completion the seller’s Solicitor would hold the funds to the buyer’s Solicitor’s order. The newer Code provided that the Seller’s Solicitor would complete upon becoming aware of the receipt of the sum unless notified that the funds are to be held to the buyer’s Solicitor’s order or it had been previously agreed that completion should take place at a later time. The submission was that where completion would occur simultaneously with receipt of the money, there is no period during which a trust could exist (absent some such notification or agreement). The Judge accepted this submission. But it did not automatically follow that the vendor’s Solicitor, acting as the purchaser’s Solicitor’s agent, could use the monies otherwise than for the purposes of a genuine completion, and avoid being in breach of trust on that ground. The judge accepted that the Code’s providing that the seller’s Solicitor is not required to investigate or take responsibility for any breach of the seller’s contractual obligations was in substance inconsistent with the vendor’s Solicitor being liable as agent for breach of trust in releasing the money for a non-genuine completion. The newer Code therefore excluded the possibility of a breach of trust on simultaneous completions.
In any case, a large part of the purchase money had been, by agreement, treated as part of the deposit, to be held by the Solicitors as agents for the seller. There could be no trust of that in any event.
It was also suggested that the seller’s Solicitor’s undertaking to have the seller’s authority to receive the purchase money on completion had been broken because the Solicitors did not have the true vendor’s authority. It was held that the relevant provisions of the Code did not amount to an undertaking at all. And the Court accepted the submission that one would have expected some warning if adoption of the Code had meant that the seller’s Solicitors thereby automatically became responsible for their client’s fraud.
The Judge went on to consider s.61 Trustee Act 1961, although his remarks were strictly obiter. The Solicitor gave evidence that she started from the proposition that her client was genuine, but that she needed to look out for circumstances that suggested otherwise. The Judge said that he did not consider that her starting point was inappropriate, but that much depended on its application in practice, and emphasised the importance of professionals’ trying to reduce the risk of being used to facilitate criminal activities. The property was of relatively high value, unencumbered, and unoccupied, and being sold by someone overseas. It was treated as an urgent transaction. She had evidence of the fraudster’s identity, and of a link to the property, but she did not have any evidence of where he was actually living or could be contacted, although she knew he was not living at the property. The anti-money laundering search had turned up some warnings, and suggested that further checks might be required. She did not undertake them. When she got some bank statements for a client who was supposedly living in Dubai, even a cursory glance would have indicated that most of the payments were for everyday purchases in and around London. She said she had only looked at them for the purpose of the address. For this and other reasons she should have made further enquiries and if her firm had been liable for breach of trust, relief would not have been granted under the 1925 Act. But he accepted that she was not negligent.
Dreamvar (UK) Limited v. Mishcon de Reya
The facts were very similar in the Dreamvar case. Dreamvar bought a property in Earls Court from Mr Haeems for £1.1m. He turned out not to be the real Haeems or the owner of the property, and the money was lost. Dreamvar had instructed Mishcon de Reya (MDR). The fraudster had instructed Mary Momson Solicitors Limited.
Dreamvar sued MDR for breach of contract and tort and breach of trust. The negligence claim was on the basis that they had failed to notice or advice or certain risks (MDR said that there were no features giving rise to the risks, they were not in breach of duty, and any advice which they could reasonably have given would not have led to the discovery of the fraud). The negligence claim was also put on the basis that they should have sought an undertaking from MMS that they had taken reasonable steps to identify their own client. The breach of trust claim was on the basis that the money had been paid to MDR on trust, and they were only authorised to release it on a genuine completion (MDR said they were authorised to release the monies on the basis of what looked like a completion even if it was not, and alternatively sought relief under s.61 Trustee Act 1925).
Dreamvar also sued MMS for breach of warranty of authority, breach of trust, and breach of undertaking. The breach of warranty of authority claim was on the basis that they had warranted that they had the authority of the true owner (MMS said they had not, and only warranted that they were acting on behalf of a client); or that they had warranted that they had taken reasonable care and skill in identifying their client as the owner, because the purchasers, Solicitors relies on the vendor Solicitors to carry out client due diligence, including money laundering checks as a matter of fact (if they had given such a warranty they had certainly broken it, but they denied that had given one, and in any case reasonable care would not have led to the discovery of the fraud). The breach of trust claim was that MMS had received the completion monies on trust and were only authorised to pay them onwards if there were a genuine completion (MMS said there was no trust at all and if there had been, they were authorised to pay on a non-genuine completion under the Law Society Code; but they accepted – without explaining in what way – that they had not carried out their client due diligence competently, and accordingly did not seek relief under the 1925 Act). Finally, the Claimant alleged that paragraph 7 of the Code amounted to an undertaking to have received vendor authority, that is, the authority of the real vendor (MMR said that the Code did not say that at all).
The Claimants identified the principle about warnings over identity fraud as there had been “some unusual feature of the case which would ring alarm bells in the mind of a reasonably prudent conveyancer”. The parties accepted this, as a matter of principle. The Claimant relied on a number of features which, they said, ought to have rung alarm bells.
- The property was relatively high value;
- The address given by the fraudster did not correspond to the title register;
- The vendor was not registered as having any interest in the address which he actually said he occupied;
- The address which he said he occupied was a poor quality, whereas the property which he was selling was of high value (though he had said he was going through a divorce);
- He had instructed Manchester solicitors who might not have acted for him beforehand (nothing wrong with that?);
- The sale was being rushed through (something to do with his supposed divorce; on the purchasers’ side, his urgency was rational and commercial in a competitive market);
- When asked about management charges he had failed to identify the amount or the name of the management company (but on the other hand, the management company did very little and it could all be sorted out after completion);
- The TR1 was to be received and returned via post alone (but that could hardly mean that MDR ought to have known that MMS had not met the vendor).
On the other hand, MMS was reputable, was patently aware of its due diligence obligations, there was nothing about the way the transaction was conducted to suggest they were not competent, and a reputable firm of estate agents which was also subject to money laundering regulation had been involved. The judge held that there was no negligence on the part of MDR.
He also held that if the Claimant had been given the proper advice, it would only ever mounted to the fact that there was a risk of identity fraud but it was remote. On that basis, it was held it was unlikely to have pulled out.
The Claimant said that if identity fraud had looked like a real risk, MDR should have sought an undertaking from MMS that it would take reasonable steps to establish its client’s identity, and to investigate further was MMS had done to satisfy itself about that. However the judge accepted that it was not unreasonable for MDR to consider that there were no circumstances in which a vendor’s Solicitor would have been willing to give such an undertaking. Nor that it would have been unreasonable to refuse to put her firm in the position of having to review isolation identity provided in respect to the vendor who was not her client. So even if MDR should have advised the Claimant of the risk of fraud, it was unlikely that it would advise to take either of the further steps alleged, and it would have been reasonable not to do so.
The second way in which the claim in negligence was put was the alleged failure by MDR to seek an undertaking that MMS had taken reasonable steps to establish its client’s identity. This was a free-standing complaint, applicable even if there were no enhanced risk of fraud. This seemed to involve the idea that in every residential conveyancing transaction the purchaser’s Solicitor should seek a directly enforceable right against the Vendor’s Solicitor, reflecting the reality of its reliance on his doing due diligence. It was freely accepted that this was hardly conventional conveyancing practice, but supported on the footing that if there is no other protection for a purchaser, the profession as a whole has adopted an unreasonable approach, which should be departed from: Edward Wong Finance Co Limited v. Johnson Stokes and Master  AC 296; and Bolitho v. City & Hackney Health Authority  AC 232 (in personal injury). However in view of the existence of the Code and the Handbook on Conveyancing, it could not be said that the leading elements of the profession had not directed their minds to what a Solicitor needs to do to provide a proper level of protection, so it was not one of those exceptional cases where professional practice was unreasonable or illogical. That claim failed, therefore.
So then there was the claim for breach of trust against MDR. Everyone accepted that the monies should only be paid away on completion. The question was whether it had to be a genuine completion, or a purported completion. The Judge held that it had to be a genuine completion, on the basis of Lloyds TSB Bank Plc v. Markandan & Uddin  EWCA Civ 65 followed in Nationwide Building Society v. Davisons  EWCA Civ 1626 and Santander v. RA Legal Solicitors  EWCA Civ 183. In the present case is was a matter of implication, because MDR’s client care letter did not make it clear; but against the background of those cases, a term requiring genuine completion was implicitly required. So MDR was in breach of trust.
Dealing with the claims against MMS, it was accepted that the PPP case was directly on point, and there were no material factual differences; and also, of course, while the High Court was not technically bound by it, it should follow it unless there were powerful reasons not to do so. You may recall that in PPP the effect of paragraph 10 of the Code was said to be that because completion would occur simultaneously with receipt of the money, there was no period during which a trust could exist in the hands of the vendor’s Solicitors. The Judge in Dreamvar accepted that there might be time for a trust, between receipt of the monies and the Solicitor’s awareness of the receipt, and that this conclusion was supported by the RA Legal case and the Purrunsing case. He felt that the Code did not alter the position. But the point was what the trust allowed the Solicitor to do with the money which it held. Was it to be released on a genuine completion or on a pretended completion? In the PPP case it was held, on the basis of paragraph 3 of the Code that the money could be released even on a pretended completion. This was because the Code provided that although the seller’s Solicitor acted on completion as the buyer’s Solicitor’s agent, he did not have to investigate or take responsibility for any breach of the seller’s contractual obligations. It was submitted that, consistently with the previous reasoning about genuineness of completion being required, the Code should be regarded as requiring a genuine completion too. After all, that is the whole point of a conveyancing transaction, and the Code is designed to support that. So it was said that the PPP case was wrong on this point. However, the Judge held that since the Code recited that:
“It is intended to provide a fair balance of obligation between seller’s and buyer’s Solicitors and to facilitate professional co-operation for the benefit of clients”,
against which paragraph 3 is to be read, that the Code was inconsistent with there being a breach of trust for releasing monies for a pretended completion.
However, there was also a claim that MMS was in breach of undertaking. The undertaking in question was said to be in paragraph 7 of the Code: “the seller’s Solicitor undertakes to have the seller’s authority to receive the purchase money on completion”. The allegation was that this was an undertaking that MMS had the authority for registered proprietor of the property. A number of cases suggested that the Courts regarded it as inconceivable that any such express undertaking would ever be offered: Excel Securities v. Masood  Ll.R.P.N.165 and Stevenson v. Singh  EWHC 2880; although voices are not unanimous: Zwebner v. Mortgage Corporation  PNLR 769, 777D; LSC Finance Limited v. Abensons Law Limited  EWHC 1163; and of course the PPP case. The undertaking in question is at paragraph 7(i) of the Code. Everybody understands the undertaking in paragraph 7(ii) of the Code as an absolute undertaking to have the authority of the genuine proprietor of every relevant mortgage or charge. Why should there be a difference? It cannot be because mortgage corporations are less likely to be fraudsters, because even if they were, the paragraph does not just apply to mortgage corporations. Maybe it was just intended to prevent Solicitors running off with the money, as they did Wong. But on the basis that the views in Excel and Stevenson were repeated in the factual evidence heard in this case and in the PPP case, and that there was no guidance or comment suggesting otherwise, the Judge concluded that the object of expectations of the parties were not that MMS should be assuming liability to ensure that the completion was genuine on the footing that their client was who he said he was. Clearer words would be required to impose such an obligation. Accordingly, the breach of undertaking claim failed.
But Dreamvar had also made a claim of breach of warranty of authority against MMS. The PPP case had not considered an argument that there was a warranty that the vendor’s Solicitor had exercised reasonable care and skill in establishing its client’s identity as the registered owner. To get over the line of authority ending in PPP that there was no warranty that the Solicitors had the authority of the registered owner of the property, it had to be argued that those cases were wrong. The Judge agreed with PPP, and held that the point had not been fully argued in Penn. More to the point, he had already decided that references to the seller in the relevant paragraph of the Code referred to the person purporting to sell, not to the actual owner. More importantly yet, it was essential to such a claim that the recipient of the warranty should understand it, and rely on it as, warranting the warranty alleged. It is reliance upon the promise which provides the consideration for it. MDP had not understood that they had received a warranty of that kind, and so could hardly have relied on it.
As to the second warranty alleged the Judge held it was inappropriate to consider an implied assumption of contractual responsibility to exercise reasonable care separately from the assumption of such a responsibility in tort. There was no suggestion that any such tortious duty arose, and quite right too: no such duty of care is owed. If there is no duty of care, it is hard to see why there should be an implied collateral warranty to the same effect.
So then there is the claim for relief under s.61 Trustee Act 1925 by MDR. MDR needed to have acted reasonably. It had already been found not to have been in breach of duty. Although the burden of proof in relation to s.61 is reversed, the finding that they were not in breach of duty did not depend on where the burden of proof fell. It had been a finding on the reasonableness of MDR’s conduct, and that it was reasonable. So it was a question of whether MDR ought fairly to be excused, and whether the discretion ought to be exercised in its favour. As already noted, the effect on Dreamvar and on MDR was relevant to consider. The transaction had been a disaster for Dreamvar, but MDR had insurance. Dreamvar’s only practical remedy was against MDR. So MDR was not excused.
I do not know whether this decision is going to be appealed, but it seems likely that it may be affected by the appeal being pursued in PPP.
Frauds of this kind are, regrettably, an increasing feature of conveyancing practice. On the whole, people are doing the best they can. As things stand, when the professions do the best they can but the fraud still succeeds, the purchaser is left out in the cold. Maybe there could be an insurance solution, but the question is what it would it cost, and who would be persuaded to pay for it.
This is the text of a series of talks given earlier this year.