Frauds after Mishcon

Several months after the Mishcon decision, practitioners are still trying to come to terms with its conclusions that a buyer’s solicitor is liable to his own client for any fraud perpetrated by the seller on his own lawyers in a conveyancing transaction.

This seems to place the burdens on the wrong parties and reflects the fact that trust law, and its arcane niceties (section 61 of the Trustee Act 1925 not being the least of them), has failed to keep pace with electronic communications and the rise of the cunning fraudster.

Whilst most lawyers now have incorporated much of the up-to-date thinking on cybercrime prevention, many still have not, and clients need to be made aware of the dangers of relying on email too.

Even then, if a buyer’s solicitor is faced with a seller whose credentials he feels uncomfortable about, what can he do? He can ask the sellers representative for an undertaking (good luck with that) or can advise his client to withdraw from the transaction. But what if the client insists on proceeding with the transaction in the face of, and against, the lawyer’s advice? Whose fault should that be, if the clients’ money ends up in a fraudster’s account in Dubai?

Until the Court of Appeal pronounces on the issue it appears that the burden is fairly and squarely on the buyer’s solicitor, as trustee of his clients’ money, to decide ultimately whether or not to proceed. I doubt the lenders will be any help, either.

I wonder whether this is (partly) what is contributing to a slight hesitation in the conveyancing market at the moment – though there are many other contributing factors – and what the result of the Appeal courts deliberations might be.

It seems equally well-established that a lawyer – on whichever side of the transaction – need only act reasonably, not perfectly. Thus, we are not at fault if the client has managed to dupe us through a range of sophisticated methods. There, but for the grace of God, go all of us.

However, in a battle to determine who should foot the bill for the lost money, it appears that insurance is still the last recourse of the courts. Our PII should cover us for any such losses, but how long will that carry on? What effect would a massive claim have on our renewal terms?

We can speculate on the ultimate outcome, but in the meantime, we have houses to convey and the fraud problem to overcome as best we can.

The Mishcon decision contains no new law, after all.

You can hear more about this case by attending this year’s LFS Conference where Trevor Hellawell will be talking about Cybercrime and Property Fraud.

 

Trevor Hellawell

ExL Practice Development

07850 56 26 99

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