A lender has lost its appeal against a High Court ruling that said a solicitor was not liable for its loss in a £2.5m mortgage fraud perpetrated by her former partner because she was not aware of the misrepresentations he made.
In UCB Home Loans Corporation Ltd v Soni & Another  EWCA Civ 62, the Court of Appeal dismissed the appeal by UCB which claimed Nasreen Kherdin, who was in partnership with Pritesh Vallabhdas Soni, was also liable for his fraud.
Mr Soni defrauded UCB after falsely claiming five mortgages of properties in his name were security. He handled the conveyancing on each transaction himself, through a London-based practice of which he was sole proprietor, but claimed that the work was being done by Ms Kherdin. She was his partner in another practice, also called Soni & Co but at a different office and address, in Essex.
In order to obtain the funds, Mr Soni told UCB that Ms Kherdin would do the conveyancing and forged her signature on the title documents. Giving judgment, Lord Justice Lloyd, sitting with Ward LJ and Toulson LJ, dismissed the appeal on the basis that Ms Kherdin did not know of, or allow the making of, the representations that Mr Soni made to UCB and on which it relied when supplying credit.
UCB’s claim was based on section 14(1) of the Partnership Act 1890, which says: “Everyone who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.”
The High Court held that UCB had formed a contract with Mr Soni in the five cases in question as a sole practitioner, although the lender believed it had contracted with the partnership, and that Ms Kherdin knew nothing of Mr Soni’s representations.
UCB appealed on the basis that the judge was wrong in fact that Ms Kherdin did not know and presented evidence it said supported this view. Lloyd LJ described it as “an elaborate construct on a flimsy and insecure base”.
He added: “Nothing in this gives me any reason to suppose that the judge’s conclusion was not fully justified as to what happened. Moreover it seems to me clear that this sequence of events did not give Ms Kherdin any reason to suppose that Mr Soni had made any false representations… or as to her responsibility for the conduct of the conveyancing.”
He ended: “In my judgment the judge’s conclusion on this aspect of the case is unimpeachable.” His fellow judges agreed.