Case Notes:  Are Conveyancers at threat from Mishcon decision?
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Case Notes: Are Conveyancers at threat from Mishcon decision?

Jan 31 2017

English firm, Mishcon de Reya, have been held strictly liable for breach of trust in a property sale fraud case last week.  Pending an appeal, we consider what Scottish conveyancers should be alert to?

 

The case in brief

Mishcon de Reya ('Mishcon') acted for the purchaser in a London conveyancing transaction.  After the transaction completed, it transpired that the seller was in fact a tenant masquerading as the property owner.

While a claim for negligence against the firm was unsuccessful (the claimant had argued that the firm had failed to obtain an undertaking from the seller's solicitors regarding their checks to establish the client's identity) the High Court nonetheless found Mishcon to be in breach of trust.

Deputy High Court judge, David Railton QC, acknowledged that there had been no dishonesty on the part of either firm, but considered that the 'only practical remedy' was for the purchaser to claim against Mishcon - given that they had substantial Professional Indemnity insurance in place which would cover the loss.

While the decision is stayed pending the result of an appeal, the strict liability finding of the court will be of concern to conveyancers, North & South of the border.

 

Conveyancing Risk Mitigations

  • Check the identity of parties to a transaction carefully.  This should include electronic identity checks.  It should also include checks to verify the seller's ownership of the property.  This could include asking for details of the solicitors they used for the purchase of the property, and the date of purchase - as these facts can be verified, and may trip up a fraudster.    As the purchaser's solicitor, you may wish to ask for documentary evidence that assist's confirm the seller's rights in the property (such as a Stamp Duty return which only the real owner could produce).

 

  • Use a robust client and transaction vetting process, and keep a record on file.  Any high risk transactions should be flagged to a Senior Partner Risk and Compliance Partner.  This would include any resale within 6 months of a purchase, or where the correspondence address of the seller is not the same as that shown on the property title.

 

  • Advise your purchaser client of the potential risks, and of any requests for information that you have not received a (satisfactory) response to.

 

For more information on Conveyancing Risks, and advice on how to mitigate the risks, contact us.  We will also be adding further guidance and training resources on risk issues impacting conveyancers during the course of a year.  These will all be available on our website Resource Centre.

 

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