Property Fraud and Breach of Trust: Buyer’s and seller’s solicitors both liable for loss

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The High Court has found that solicitors on both sides of a conveyancing transaction were equally liable to the purchaser-victim of a property fraud, as each were in breach of trust. Banking Litigation specialist reviews the recent case of Purrunsing v A’Court & Co and Anor [1] and explains its importance and implications for buyers, sellers, lenders and conveyancers alike.

The Property Fraud

In what is unfortunately an increasingly common scenario, this case arose from the fact that a fraudster purported to be (but was not) the registered proprietor and seller of a property.

The buyer (and claimant), Mr Purrunsing, transferred the purchase monies for the property to his solicitors (the second defendant, House Owners Conveyancers Ltd, HOC), who held those monies on trust until they were transferred to the seller’s solicitors (the first defendant, A’Court & Co, ACC). ACC, in turn, held the monies on trust until they were transferred to the fraudster’s overseas account, and lost.

The Legal Case

Neither defendant disputed that they were trustees in respect of the purchase monies while they held those funds; nor that, by virtue of the fact that genuine completion of a lawful transaction never occurred, both the buyer’s and the seller’s solicitors acted in breach of trust when they transferred those funds. What was in issue before the High Court, however, was:

  • whether either or both HOC and ACC were entitled to relief under section 61 of the Trustee Act 1925 (TA). The court has discretion to grant relief where a trustee has acted honestly and reasonably and ought fairly to be excused for breach;
  • whether HOC was also liable to its client, Mr Purrunsing, for breach of contract and/or negligence; and
  • whether and to what extent either or both HOC and ACC were liable for, and should contribute to compensating, Mr Purrunsing’s loss.

High Court Decision

Whilst there was no suggestion that either ACC or HOC had acted dishonestly or fraudulently themselves at any time throughout the conveyancing transaction, the court found that, bearing in mind HM Land Registry and Law Society joint guidance on property and registration fraud, which identifies various indicators of properties and transactions that are vulnerable to fraud; and bearing in mind solicitors’ obligations pursuant to the Money Laundering Regulations 2007 to undertake client identity checks and to monitor client activities according to a risk-based approach, there were various aspects to the transaction which should have alerted the solicitors to the possibility of fraud. Namely:

  • the property was vacant;
  • the property was not charged;
  • the property was of a reasonably high value;
  • the purported seller was based abroad;
  • the purported seller was pressing for an unusually quick completion;
  • there was an inconsistency between the correspondence address provided by the purported seller and the address for service shown on the office copy entries;
  • the purported seller failed to provide any documentation actually linking him to the property;
  • the purported seller denied that any building work had been carried out at the property during his period of ownership, and this was inconsistent with the Local Search result; and
  • the purported seller had aborted an earlier potential sale when he had been pressed for information about his employer.

The fact that ACC failed to carry out money laundering/identity checks in accordance with reasonable practice; and the fact that HOC failed to report gaps and discrepancies in the information provided by and about the purported seller and about the property meant that neither ACC nor HOC had acted reasonably. As such, the court held that neither was entitled to be excused for their breach of trust under section 61 TA.

The court also held that HOC was additionally in breach of contract and/or negligence in failing to advise Mr Purrunsing that the responses to their enquiries failed to establish any personal knowledge of the purported seller or any link between him and the property. However, ACC’s attempt to argue that the seller’s solicitors should not be held liable to the same extent as they buyer’s solicitors (due to the former’s lack of contractual duty or professional duty of care to the purchaser-victim) was rejected [2].

In considering the respective liability contribution of each defendant, the court acknowledged that, due to their breach of trust, both defendants were liable for the same damage. The court had regard to the fact that each were trustees equally and to the causative potency of each of the defendants’ actions and their respective blameworthiness. The court concluded that the defendants should bear equal liability.

WM Comment – Importance and Implications of Purrunsing

This case will be of interest to all those involved in the conveyancing process. It is clear confirmation that solicitors’ duties extend beyond any contractual relationship or professional duty of care – in addition, both the buyer’s and the seller’s solicitors act as trustees of purchase monies during the course of the transaction and both therefore have trustees’ duties with which to comply. This case is of particular significance to lenders in cases where a claim against one of the solicitors is not possible, for instance because professional indemnity insurance is not available.

The case also provides a practical (albeit non-exhaustive) resumé of the types of indicators of property fraud for which conveyancers should watch out at all times.

Finally, the Purrunsing case is a helpful example of the manner in which the court will assess the reasonableness, or otherwise, of a solicitor’s actions when deciding whether or not to grant section 61 TA relief from the consequences of a breach of trust.


[1] [2016] EWHC 789 (Ch)
[2] Ibid. Para 39 – 45. There is no lesser standard of reasonableness for a seller’s solicitor than a buyer’s solicitor. Each is a trustee who, in the instance of breach, has fallen below equity’s expectations. However the court did acknowledge that, by virtue of a seller’s and buyer’s differing respective roles in a conveyancing transaction, what each has to do, practically, in order to fulfil that standard of reasonableness might differ.

To view videos of our recent seminar on Mortgage Fraud & Injunctive Relief with guest speaker Thomas Grant QC please click here.