The fraud was only discovered when the true owner turned up at the property and found builders instructed by the “new owner” undertaking works at the property.
The Judge held that whilst the solicitors’ checks were designed to reduce fraud, they could not eliminate the risk and that in acting in the transaction the solicitors had not warranted their client was the true owner of the property. There were also no special circumstances to indicate that the solicitors had assumed a duty of care to ensure their client was the true owner. Furthermore, upon a construction of the undertakings given in connection with the sale, the solicitors were not in breach of trust in paying the purchase monies away to the fraudster.
Plainly such a finding leaves purchasers in a vulnerable position. Solicitors acting for purchasers could seek express warranties from a solicitor acting for the seller that their client was the true owner but is it likely these would ever be forthcoming?
So far as the estate agents are concerned, the Court found that they were not liable for negligent misrepresentation in failing to establish the fraudster was the true owner of the property nor were they liable for breach of warranty or duty to the innocent purchaser.
However there was discussion and criticism of the manner in which the agents had dealt with their money laundering checks and other identity checks. In particular, the Judge found that the agents “approach to its client due diligence and anti money laundering obligations was wholly inadequate”.
Aside from the limited scope for redress to innocent purchasers who find themselves in similar situations, the case should also serve as a warning to agents of the importance of undertaking money laundering and due diligence checks in a proper manner and ensuring they can evidence such compliance.
In particular, it should be borne in mind that in this case if there had been any evidence that the agent had assumed responsibility for confirming the identity of the seller, the outcome might have been different.
P&P Property Limited –v- Owen White and Catlin LLP and Another  EWHC 2276(Ch)
For further information relating to this article, please contact Simon Lockley, Director in Dispute Management and Civil Fraud Asset Recovery Unit.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.