P&P Property Ltd v Owen White & Catlin LLP & Anor 
In P&P Property Ltd v Owen White & Catlin LLP & Anor  EWHC 2276 (Ch) (30 September 2016) the Claimant exchanged contracts and completed on a property in London between November and December 2013, completion taking place on 12th December 2013. Following completion the Claimant discovered that the seller had committed a fraud as he was not the true owner of the property, he had impersonated the owner. The Claimant, a Property Investment company, claimed that the Defendant Solicitors were
- In breach of warranty of authority,
- In negligence,
- In breach of trust and
- In breach of undertaking and
The Defendant Agents were liable for breach of authority and negligence.
The Court heard oral evidence from eight witnesses including the Claimant, their Solicitors, the rightful legal owner of the property, the Solicitor acting on the sale transaction from the Defendant Solicitors and a witness for the Second Defendant Agents. The other three witnesses on behalf of each party were not cross-examined. Mr Robin Dicker QC, sitting as a Deputy High Court Judge, considered Breach of Warranty and Authority claimed against both Defendants by the Claimant:
“that, through words and conduct, they represented that they had authority to act for the owner of the Property and in particular that they were properly instructed by the true Clifford Harper, when they were not. It claims that, in reliance on such warranties of authority, it agreed to purchase the Property and arranged funding from City & Western”.
He referred to the claim against the First Defendant Solicitors where the Solicitor had signed the Contract on behalf of the Seller. He observed that, if this had been construed as referring to the true registered owner then the situation would be like that in Penn & Bristol & West where the Solicitors in that matter warranted that they had authority to act on behalf of the wife.
He considered the Solicitor from the First Defendant Solicitors had not given a guarantee that the Seller was the true registered proprietor
“any more than the solicitors in Bristol & West Building Society v Fancy & Jackson were warranting that the signature on the mortgage deed was authentic or that they had authority to deliver it, although, as Chadwick J said, “it has much the same effect”. It would be the consequence of warranting that she had authority to act for someone who was, in fact, the owner of the property”.
Mr Robin Dicker QC considered that the matters were concerned with, not whether the Solicitor had the authority to act for the client
“but with the attributes or characteristics of that client. I can see no basis on which a warranty of authority can be implied in the present case which would extend to such matters”.
In dealing with the claim against the Second Defendant he concluded that, given such anti-money laundering checks can never be wholly perfect and relying upon the fact that they have been undertaken rather than on a warranty, he said suggests that no such undertaking was given.
He concluded that the breach of warranty of authority claims failed against both Defendants.
He examined Negligence:
The Claimant claimed that the First Defendant Solicitors and Second Defendant Agents acted negligently and owed them a duty of care in tort.
With regard to the First Defendant Solicitors he would look at this when examining the effect of section 61 of the Trustee Act 1925.
With regard to the Second Defendant he concluded that it would not be fair and reasonable that the Agents owed a duty of care to the Claimant buyers in that they were acting for the Seller and not the Claimant. It was usual for a buyer to instruct their own Solicitor who would act for them in acquiring a good title to the property. He was satisfied that the Agents were not negligent in respect of any of the other particulars which had been alleged by the Claimant and for being unsuspecting of the Seller, that he was an imposter.
He concluded that the claims against both Defendants failed for breach of a duty of care.
In respect of the claim for breach of trust and breach of undertaking this was against the First Defendant Solicitors only. The Claimant alleged that the First Defendant held the completion monies from the buyer on trust and as a valid completion did not take place the monies were paid to the fake Seller in breach of trust.
They also claimed that the First Defendant had undertaken, in accordance with the Law Society’s Code for Completion by Post, to receive the purchase monies with the sellers authority and complete the transaction upon receipt, which they had breached.
The First Defendant Solicitors argued that the monies it received from the buyer were not held upon trust for the buyer and, even if they were, those terms had not been breached and alternatively claimed relief under s.61 of the Trustee Act 1925. They denied it was in breach of undertaking.
Mr Robin Dicker QC considered whether the First Defendants was in part liable for breach of trust, which is dependent upon what terms the monies were received and, in what circumstances they were allowed to release them to the fake Seller, which, he observed, required looking at the Law Society’s Code for Completion by Post.
He noted that the completion monies were paid to the First Defendant Solicitors in three portions. The first two portions were received on 11th and 12th December totalling £430,000 and a letter sent from the Claimant property Solicitor to the First Defendant Solicitor confirming agreement to that sum being treated as part of the deposit, to be held as agent for the seller, with confirmation that the contract was now varied.
Mr Robin Dicker QC considered that this put the Claimant’s claim for breach of trust in difficulty in respect of the £430,000. One of the co-owners of the Claimant Company said in evidence that he was unaware that the money would be transferred and then be released before completion as he would have recalled discussing any risk elements. Whereas, his property Solicitor in his evidence was sure he would have discussed it with him.
The Judge said that by agreeing to the £430,000 being treated as part deposit and, being held by the First Defendant Solicitors as Agents for the Seller, was inconsistent with the First Defendant holding it on trust for the buyers Solicitor, pending completion. He said the First Defendant Solicitors were entitled to pay the monies over to the Seller which would not be a breach of trust.
He said in relation to that sum of money the claim against the First Defendant Solicitors for breach of trust failed.
With regard to the balance of £600,000 this was received by the First Defendant Solicitors on the afternoon of 12th December 2013. In a phone call between the First Defendant Solicitors and the Buyers Solicitors the matter was completed and the completion monies transferred to the imposter’s account in Dubai.
The Judge considered
“By agreeing that completion was to be treated as having occurred, it seems to me that Mr Robinson may have released Owen White from any obligation to continue to hold the balance of the completion monies to the order of his firm and lost the ability to contend that, in paying the balance of the £600,000 to Mr Harper that afternoon, Owen White were acting in breach of trust, unless that release was for some reason ineffective”.
He concluded that the claim for breach of trust in respect of that amount of money failed.
Regarding the claim by the Claimant that the First Defendant was in breach of undertaking in respect of paragraphs 7 (i) and 10 in the Code of Conduct he said this fails.
With regard to S.61 of the Trustee Act 1925 he referred to his conclusions in respect of the Claimant’s claim for breach of trust and considered that, the question of whether the First Defendant would be entitled to relief under that Act would not emerge.
He considered that whilst the First Defendant had failed to show that it was entitled to relief under s.61 of the Act, he concluded the Solicitor of the First Defendant would not be negligent in respect of a breach of duty of care.
He commented that a trustee is not entitled to relief under that Act just by showing that they did not act as no reasonable trustee would have acted. The burden of demonstrating that he has acted reasonably falls on the trustee. He said in this matter, the Solicitor might have fallen short of that but she also was not negligent.
He said he sympathised with the Claimant but he concluded that its claims against the First and Second Defendant for breach of warranty of authority and negligence failed together with its claims against the First Defendant Solicitors for breach of trust and breach of undertaking.