Acting for an imposter: Solicitors’ accountability

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The climate

As professional and regulatory requirements for ascertaining the identity of clients have become increasingly rigorous (not least within the financial and legal sectors), so ID and property frauds have become increasingly prevalent and sophisticated. With the rise of e-conveyancing and a decline in face-to-face dealings, this trend looks set to continue. A common scenario, of which conveyancers can fall foul, is that of a party to a transaction turning out to be an imposter and mortgage funds being released to the fraudster without security being effected. There is no doubt that, being at the transactional front line, conveyancing solicitors and their professional indemnity insurance policies are highly vulnerable. Walker Morris specialist looks at a recent case which may prove key for victims seeking to recoup fraud losses from their legal advisors.

The case

Historically the leading case in this area has been Penn v Bristol & West [1]. In that case a solicitor mistakenly believed that he was acting on the instructions of a husband and wife in the sale of a property, but in fact the wife’s signature was forged. The purchaser’s lender, the victim of the mortgage fraud, successfully recovered its losses from the solicitor by virtue of its breach of warranty of authority. In subsequent cases the courts have been reluctant to hold solicitors as strictly accountable. For example, in Midland Bank v Cox McQueen [2] the court held that there the duty on the solicitor to obtain the wife’s signature was not absolute – the duty was only to exercise reasonable skill and care; and in Excel Securities v Masood [3] the court determined that the scope of a warranty was fact-specific in every case. LSC Finance v Abensons [4] may represent a return to the more strict approach.

The claimant, LSC, loaned £169,000 to a Mrs B, which was intended to be secured by a legal mortgage over a buy-let-property executed by Mrs B, the sole proprietor. The defendant solicitors, Abensons, who acted on behalf of the purported Mrs B, gave an undertaking confirming the execution of a legal charge by Mrs B in respect of the property and the managing partner attested that he had seen Mrs B and witnessed her signature. In fact the purported Mrs B was an imposter and a mortgage fraud was perpetrated.

On the facts, the signature in question bore no resemblance to a previous signature of the actual Mrs B. The court held that Abensons should have been put on inquiry as to the authenticity of the signature and should have verified the identity of the supposed client. In their undertaking, Abensons had warranted that they were authorised to act, and were acting, for Mrs B and they had assumed the risk of an imposter. They also undertook the execution of the charge by Mrs B. That liability was strict and LSC’s claims for breach of undertaking and breach of warranty of authority succeeded as Abensons warranted that they had the actual documents signed by the actual Mrs B. The court also held that Abensons owed a duty of care to LSC and LSC had relied on Abenson’s undertaking in releasing the mortgage funds. In failing to check the signature and ascertain the identity of the purported Mrs B, Abensons had also failed to take reasonable care and were therefore prima facie liable in negligence [5].

WM comment

Lenders and other claimants may have been reluctant to pursue potential ID fraud breach of warranty of authority claims with any real vigour in all but the most clear-cut and straightforward cases in recent years. As such, it is likely that some mortgage fraud losses will currently remain outstanding in circumstances where the Abensons case may now assist.

Whether you are a claimant looking to recoup fraud losses, or a legal advisor seeking to understand your obligations and any potential liabilities, please contact Walker Morris’ Banking Litigation and Professional Negligence specialists for further information or advice.


[1] [1997] 1 WLR 1356 CA
[2] [1999] PNLR 593
[3] [2010] Lloyds Rep PN 165. The transaction in question in Excel was a remortgage where the lender had already investigated the imposter’s identity and it was considered that the solicitor could have done no more to identify the fraudster. The court therefore held that it would be wrong to hold the solicitor liable for ID fraud.
[4] [2015] EWHC 1163 (Ch)
[5] At the date of writing, no decision has been made on the separate question of causation in negligence.