Conveyancing firm to pay £1m fraud bill

In a recent judgement, a firm which was the victim of identity fraud has been ordered to pay over £1 million, putting conveyancers on high alert.

Mishcon de Reya was found to be liable for breach of trust when its client was tricked into purchasing a London property from a tenant masquerading as the owner.

The claim was based on the firm’s supposed failure to seek an undertaking from the alleged seller’s solicitors that when it had been confirming the identity of the client, it had taken the relevant reasonable steps. As well as all claims against the buyer’s solicitors, a claim for negligence against Mishcon also failed.

The permission to appeal has since been sought, but due to the increased frequency of this kind of scam, the ruling is likely to be a concern for firms.

Where a buyer has fallen victim to ID fraud, they will be left with a mortgage for a property they have no right to and may in turn try to recover any losses from the relevant professionals involved in the transaction.

Deputy High Court judge David Railton had accepted that in the case of City firm Mishcon de Reya, the involved firms had acted honestly and innocently in regards to carrying out their roles.

He went on to say that Mishcon de Reya was in a better position than the client to face the consequences as it had the necessary insurance to cover the suffered loss in full. The ‘only practical remedy’ open to the client, according to Railton, was to target the City firm.

The High Court ruled last year that conveyancers on both sides of a transaction were liable for a rogue seller who committed a fraud worth £470,000. A’Court & Co had made no serious attempt to comply with anti-money laundering regulations to prevent the fraud according to his Honour, Judge Pelling. The firms had also, critically, not obtained any documentation which linked the seller to the property.

Pelling also ruled that House Owners Conveyancers Limited, the buyer’s conveyancer, was responsible for not bringing attention to suspicions following queries over whether the alleged owner was entitled to sell the property.

The Court of Appeal will now be observed closely by lawyers as the similar case of P&P Property Ltd v Owen White & Caitlin LLP & Anor is heard later in 2017.

In order for homeowners to be alerted to activity which occurs in relation to a registered property, Land Registry advises that its Property Alert Service is signed up to.

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