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Just received this about a bogus law firm.
SOLICITOR LIABLE FOR PAYING MONEY TO SHAM FIRM
A solicitor was acting in a purchase and mortgage. Unfortunately the people who purported to be the seller's solicitors were crooks who had set up a sham firm. The buyer, one Mr Davies, was a party to the fraud.
The solicitor nearly spotted the sham. He checked the register of solicitors which showed that although the relevant law firm existed, it did not have a branch at the address given. However the crooks then showed him a letter from the Solicitors Regulation Authority acknowledging receipt of an application to register a new branch at that address.
Reassured, he paid the mortgage advance of £700,000 over to the crooks.
The High Court ordered the solicitor to reimburse the lender. The lenders had given the usual instructions that the mortgage money was not to be paid out unless various conditions were satisfied, including obtaining a solicitor's undertaking to provide the transfer documents. Clearly he had not complied with those conditions. The lenders did not have to prove negligence, because the solicitor was holding the advance on trust, and so was strictly liable for breach of trust.
The court declined to show mercy under s61 of the Trustee Act 1925. That says that if a trustee "has acted honestly and reasonably, and ought fairly to be excused for the breach of trust... then the court may relieve him either wholly or partly" from liability. The burden of proof here is on the trustee to show he acted reasonably. There were sufficient unusual features of the case that he was unable to do that.
The moral is simple. Never assume another law firm is genuine unless it is well known to you, or you have checked it out with evidence from a reliable third party. Evidence supplied by the firm itself is not enough.
Lloyds TSB v Markandan & Uddin [2010] EWHC 2517 (Ch)
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SOLICITOR LIABLE FOR PAYING MONEY TO SHAM FIRM
A solicitor was acting in a purchase and mortgage. Unfortunately the people who purported to be the seller's solicitors were crooks who had set up a sham firm. The buyer, one Mr Davies, was a party to the fraud.
The solicitor nearly spotted the sham. He checked the register of solicitors which showed that although the relevant law firm existed, it did not have a branch at the address given. However the crooks then showed him a letter from the Solicitors Regulation Authority acknowledging receipt of an application to register a new branch at that address.
Reassured, he paid the mortgage advance of £700,000 over to the crooks.
The High Court ordered the solicitor to reimburse the lender. The lenders had given the usual instructions that the mortgage money was not to be paid out unless various conditions were satisfied, including obtaining a solicitor's undertaking to provide the transfer documents. Clearly he had not complied with those conditions. The lenders did not have to prove negligence, because the solicitor was holding the advance on trust, and so was strictly liable for breach of trust.
The court declined to show mercy under s61 of the Trustee Act 1925. That says that if a trustee "has acted honestly and reasonably, and ought fairly to be excused for the breach of trust... then the court may relieve him either wholly or partly" from liability. The burden of proof here is on the trustee to show he acted reasonably. There were sufficient unusual features of the case that he was unable to do that.
The moral is simple. Never assume another law firm is genuine unless it is well known to you, or you have checked it out with evidence from a reliable third party. Evidence supplied by the firm itself is not enough.
Lloyds TSB v Markandan & Uddin [2010] EWHC 2517 (Ch)
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