In P&P Property Ltd v Owen White & Caplin LLP [2016] EWHC 2276 (Ch); [2016] PLSCS 261 the court considered a range of remedies that might be available to a defrauded buyer, before absolving the professionals who acted for, and had been deceived by, a fraudster. Selling agents and solicitors acting for sellers will welcome the decision. Solicitors acting for buyers will take a rather different view.
Sadly, the tale is all too familiar. The fraudster targeted a high-value property, which was neither mortgaged nor occupied, and pushed a sale through, claiming that it was urgent. He was very plausible and no one suspected that he was an imposter. Indeed, the fraud was not discovered until after the “sale”, when the registered proprietor walked past the property and discovered builders working there.
The solicitors instructed by the fraudster had taken steps to identify their client, but the judge described the actions of the selling agents in relation to client due diligence and anti-money laundering as “wholly inadequate”. Even so, the judge dismissed the buyer’s claim for breach of warranty of authority against both firms on the grounds that, absent special facts or clear words to the contrary, such a warranty operates only to confirm that an agent has authority to act on behalf of his client. An agent does not, simply by acting as such, represent that his principal will perform the contract, or is solvent, or make any other representation as to his principal’s attributes or characteristics.
The judge did not consider that, merely by informing the buyer of the name of the person selling the property, the selling agents were thereby warranting that they were acting for the true owner. Questions of title were primarily a matter for solicitors instructed on sales and purchases. And, if the fraudster’s solicitors were held to have warranted that they had identified their client as the registered proprietor, or that he was the true owner, they would, in effect, have been guaranteeing the title, which would be difficult to reconcile the legal position as it is generally understood.
The judge also dismissed negligence claims against both professionals on the ground that it was the buyer’s – and not the seller’s – solicitors who owed a duty of care to the buyer. The seller’s selling agents and solicitors had acted for the seller and had not assumed responsibility to the buyer: Gran Gelato v Richcliff [1992] Ch 560.
The buyer turned, finally, to Purrunsing v A’Court & Co [2016] EWHC 789 (Ch); [2016] PLSCS 111, arguing that the fraudster’s solicitors were liable to the buyer for breach of trust. The judge disagreed. The Law Society Code for Completion by Post (2011 edition) had superseded an earlier version of the Code that was in force when the fraud was perpetrated in Purrunsing. The 2011 Code envisages that completion will take place as soon as the purchase money arrives, (unless the buyer’s solicitors notify the seller’s solicitors that the funds are to be held to their order, or it has been agreed that completion will take place at a later time). The buyer’s solicitors had paid the purchase money to enable completion to take place immediately. So the seller’s solicitors never held the money on trust for the buyer, and the buyer’s solicitors had not made any special arrangements with the seller’s solicitors or issued any completion instructions that would have protected the buyer against the possibility that the seller was a fraudster.
Allyson Colby is a property law consultant
