Conveyancing Fraud – Further Advice from the Court

Lawyer CheckerConveyancers have seen a number of cases go through the courts involving identity fraud, resulting in the loss of client money; each causing them to carefully consider their practices to avoid liability.

At the heart of the case law is the relief of the Trustee Act 1925, section 61, which states:

“If it appears to the court that a trustee, … 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 trust …, then the court may relieve him either wholly or partly from personal liability for the same.”

Whilst cases such as Davidsons Solicitors v Nationwide Building Society [2012] reflect the benefit of s.61 relief for conveyancers, the case of Santander UK PLC v RA Legal Solicitors [2014] marked liability getting stricter, and the s.61 defense less valuable in practice for solicitors.

It would be fair to say that, whilst in the case of Dreamvar v Mishcon de Reya [2016] many conveyancers may have been shocked by the decision, it was in keeping with previous decisions. It was held in this case that the buyer’s solicitors were in breach of trust for paying the purchase price over to the ‘seller’s’ solicitor who was actually an identity thief.

The recent case of Patel v Freddy’s LTD & Others [2017] however held that it is the seller solicitor’s duty to check his client’s identity. It is not for the buyer’s solicitor to duplicate the actual checking of the buyer’s identity, nor to check that the buyer’s solicitor has done so.

This decision may have reduced the risk of liability to a buyer’s solicitors, but has put the onus on seller’s solicitors to ensure they are checking the identity of their clients. Whilst s.61 can still provide relief where the solicitor “has acted honestly and reasonably, and ought fairly to be excused for the breach of trust” it is still of increasing importance for conveyancers to ensure they are taking steps to prevent fraudsters from being able to commit identity fraud in the first place.

Lawyer Checker’s Consumer Bank Account Checker enables seller’s solicitors to verify their client’s bank account before remitting funds, therefore giving conveyancers an extra shield of protection and mitigating the risk of this type of crime occurring.

Whilst this is a useful tool for conveyancers, it does not hide the fact that there is still, like in previous cases, the opportunity for fraudsters to imitate a ‘seller’s’ solicitor, or create an entirely bogus firm who are pretending to act for a seller of a property they do not own. Lawyer Checker’s Account and Entity Screen allows a buyer’s solicitor to undertake quick but detailed checks on a firm before remitting funds during every transaction.

By incorporating these services into their daily practices, conveyancers are able to reduce the risk of situations like those discussed from occurring, therefore mitigating the risk of liability. 

Whilst criminals are becoming more savvy in the ways they can commit fraud, conveyancers can at least ensure that they have verified their client’s or the other side’s identity before moving monies.

Associate News is provided by Legal Futures Associates.
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