The Facts – Mr Dawson engaged the services of a solicitor, to sell his property at 35 Merton Hall for £440,000. It transpired that the client was not the real Mr Dawson, but a fraudster. His solicitor carried out client due diligence and inspected a passport which identified the fraudster as Mr Dawson. There was no suggestion that the solicitor ought to have known that the passport was in fact a forgery. The solicitor also obtained copies of two utility bills and a bank statement addressed to Mr Dawson at an address in Maidenhead. However, the address for service given by the Land Registry on the Office Copy Entries for the property was an address in Cambridge. The solicitor did not act on this discrepancy.
The Seller’s Solicitor – The judgment confirms that it is well established that (in general) a seller’s solicitor does not owe a duty of care to a purchaser, but says it is an “absolute obligation not to release the purchase money before completion”. The vendor’s solicitor is a trustee of the purchase money and parting with it before completion is a breach of trust. In the event of a fraudulent transaction, where there is no completion (i.e. no registration of the new owner) then the vendor’s solicitor is liable to the purchaser for the money paid away. There will be very few situations where the seller’s solicitor will be excused this liability.
The Buyer’s solicitor – The buyer’s solicitor on the other hand is in a much more unfortunate position. He had made a number of enquiries of the vendor’s solicitor over the course of the transaction including checking whether the vendor’s solicitors were familiar with the seller. As can happen on many transactions the vendor’s solicitor confirmed he had no personal knowledge of the vendor prior to the transaction but they had met him in person, seen his passport and utility bills showing his UK address.
The judgment held that these responses were not good enough for the buyer’s solicitor to have relied upon them. The buyer’s solicitor said that he had trusted the vendor’s solicitor to have carried out due diligence and ID checks but the athe buyer’s solicitor ought to have queried the circumstances of the seller’s solicitor’s involvement and the nature of the transaction in greater detail.
The Decision – The buyer’s solicitor was held to have acted honestly but not reasonably and was held jointly liable with the vendor’s solicitor.