Fraud - Again! By Paul Butt
Consultant Solicitor, Rowlinsons Solicitors
Introduction Once again Conveyancing fraud is in the headlines – and in particular the vexed question as to whom should bear the loss. Regrettably, it increasingly seems that the answer will be – the Conveyancers! Recently we have had more cases in effect holding conveyancers liable for the fraud of others. It is now well established – and hopefully well known - that if a conveyancer receives client’s money – whether for a lender or a buyer – that money is held on trust pending completion. So if completion does not take place – or it turns out that what was thought to be completion is fraudulent, the conveyancer will be liable for breach of trust. This is an absolute liability irrespective of fault. So we start with the position that the conveyancer is liable. However, the court has the power to waive liability under s.61 Trustee Act 1925 if the trustee/conveyancer has acted ‘honestly and reasonably and ought
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fairly to be excused for the breach of the trust’. However, remember that a high duty is placed on trustees, particularly professional trustees. So, in deciding whether the conveyancer should be excused from liability, the Court of Appeal has held that the conduct of the entire transaction must be taken into account, not just matters which might have facilitated the fraud: see Santander v RA Legal [2014] EWCA Civ 183. This was a case involving a fraudster in the seller’s solicitor’s offices, but the buyer’s lender’s solicitors could not ‘fairly be excused for the breach’ where they had handled the transaction in a ‘slipshod’ way – for example by failing to get the usual undertaking to discharge the outstanding mortgage and also failing to get agreement to use the Law Society Code on completion – neither of which would have prevented the fraud. However, the existence of the s.61 power does mean that if we have carried out the transaction in a ‘reasonable’ manner – as most conveyancers do – then we will be relieved of the liability.