Liability of seller's solicitors for their client's fraud

It has long been established that solicitors owe their clients a duty of care, especially when it comes to protecting their clients’ money.   For most individuals and many companies the single biggest financial transaction they will ever be involved in is the sale or purchase of the family home or company premises.   It is therefore critical that solicitors ensure their clients’ money is not paid to the wrong party. 

However, in a recent Court of Appeal decision it has been held that solicitors can also be responsible for the loss of money belonging to another firm’s client.    In Dreamvar v Mishcon de Reya the purchasers transferred thousands of pounds to fraudsters posing as the owners of property they wished to buy.   The Court ordered not only the purchaser’s solicitors, but also the seller’s solicitors to make a financial contribution to the losses the purchasers had suffered.   

In a related case the Court of Appeal held that the solicitors acting for the fraudulent “sellers” in that transaction could be held liable for the fraud committed by their client and were ordered to repay the money the buyers had lost.  

This seems to create an important precedent for people who lose out to fraudsters “selling” properties they don’t own.   It means that solicitors acting for sellers must carry out thorough checks to establish the identities of those sellers, and whether or not they actually own the properties they are seeking to ‘sell’. 

The Court of Appeal made it clear that it is the seller’s solicitors who are best placed to clarify and confirm whether the seller is the true owner of the property.  This ruling should come as welcome news for all of us who are at risk of being the victims of fraudulent property transactions.