The decision to find both conveyancers liable for the buyer's loss in the case of Purrunsing v A'Court & Co & Anor was unpopular, but it provided some guidance as to where the blame would fall for losses arising from property fraud.
But, just a few months later, the case of P&P Property Ltd v (1) Owen White & Catlin (2) Crownvent Ltd t/a Winkworth appears to contradict this decision, and has created uncertainty as to who will be found liable if a buyer falls victim to fraud.
A tale of two frauds
In the case of Purrunsing, the court determined that the seller's conveyancer made "no serious attempt" to verify their client's identity. In addition, the buyer's conveyancer should not have been convinced by answers to its questions about the seller.
But in the latest case of P&P Property, despite failings on the part of the seller's conveyancer, the court stated that they owed the buyer no duty of care. Nor were they required to investigate, or take responsibility for, any breach of their client's contractual obligations.
So although the conveyancers accepted the fraudster as a client even after warnings were flagged in relation to their identity during anti-money laundering checks, they were not held responsible for making good the buyer's loss. This is because the judge ruled that a seller's conveyancer cannot expressly warrant that the seller is who he says he is. On that basis, had they been held liable, they too would have been innocent victims.
Enough is not enough
Mills and Reeve, who represented one of the defendants in P&P Property, has suggested this case could leave buyers exposed to the risk of losses arising from property fraud due to the issue of the seller's identity. Although their conveyancer can try to dot every ‘i' and cross every ‘t', they are unable to completely guarantee the identity of the seller, and are unlikely to be able to obtain a warranty from the seller's conveyancer. Simply put, the extensive checks solicitors make are designed to reduce the risk of fraud, but it's not possible to eliminate it entirely.
Guarding against surprises
In the face of such concerns, Mills & Reeve suggested that "some form of insurance product might be devised to help". They could have been talking about Countrywide's Secure Conveyancing Insurance Policy (SCIP), a ‘no-fault' insurance policy that removes the uncertainty inherent in cases of property fraud by settling claims without a need to establish who, if anyone, is liable for the loss.
SCIP offers peace of mind to everyone involved in the conveyancing process by covering any losses suffered from unforeseen or unknown risks. These risks include not only fraud, but forgery, misrepresentation by the seller (whether deliberate or not), missing title information, and boundary disputes.