Carruthers Law

Solicitors Negligence: Conveyancing Negligence.

February 19, 2012

In Lloyds TSB Bank PLC V Markandan & Uddin (a firm) [2012] EWCA Civ 65 was an appeal by the Defendant firm of solicitors of a decision of the Chancery division. The solicitors had acted for the purchaser of a residential property in London. They also acted for the lender and paid over the advance to the sellers solicitors having signed an unqualified certificate of title.

It turned out that the whole transaction was a sham. The purchaser was a fraudster and the firm of solicitors acting for the sellers didn’t exist, and the true owners of the property had no knowledge of the transaction.

It was accepted by the court that the solicitors acted honestly however they had acted in breach of trust when they paid the advance without receiving the documents necessary to register the title, or a solicitors undertaking to provide those documents

• They were not entitled to relief under the Trustee Act 1925 .
• They had not acted reasonably when they released the advance without receiving the necessary documents and also failed to establish the credential of the sellers solicitors.
• The lender was entitled to recover the whole of the advance plus interest.
• The matter came before the court of appeal.
• The court found there was no dispute that the solicitors held the payment from the lender on trust.

The money was held on trust until completion. If completion had  taken place on the 4th September then there would have been no claim for breach of trust because the trust would have come to an end. The court considered what was completion in this case and decided completion didn’t take place.

Normally completion would be an exchange of moneys and documents. This was not a completion. The owners hadn’t agree to sell the property nor had they authorised any one to sell it in their name. The exchange of the purchase monies for the forged documents  did not amount to completion .

In this case there was an exchange of money for what purported to be documents but which in fact weren’t.

They had received an undertaking from the purported firm of solicitors. Whilst unfortunate that the solicitors had been victims of fraud the completion on the the September was a nullity

The solicitors were in breach of trust and as a consequence accountable to the lender.

The court were not prepared to entertain relief under section 61 which states.

• “If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve him either wholly or partly from personal liability for the same.”

Lord Justice Rimer

• “Whilst it is impossible not to have sympathy for M&U in becoming enmeshed in the fraud, the judge’s conclusion was that, by these two shortcomings, they brought their misfortune upon themselves. If they had instead performed their role as solicitors with exemplary professional care and efficiency, but had still parted with the loan money in circumstances that were objectively reasonable, the decision on the section 61 application might have been different“