It is commonplace for a legal professional to request proof of identification from their client at the beginning of any legal transaction. For a conveyancer, verifying their client’s identity is a particularly heavy burden to bear.
Not only does a conveyancer owe a duty of care to their client, but also to their client’s lender who will generally be contributing a vast sum of money to the transaction.
Constant advancements in technology are creating the perfect breeding ground for sophisticated scammers who are successfully forging ID and subsequently carrying out fraudulent purchase transactions.
So what happens when the conveyancer takes all reasonable steps to prove their client’s identity but the fraud is not spotted until it is too late? Who is to blame here?
This question was raised and answered by the controversial decision made in the case of Purrunsing v A’Court (a firm) and another .
Here, the defendant firm of solicitors were instructed by an imposter who wished to sell a high value London property within a short timeframe. London investments are notoriously fast paced and so a desire to complete quickly does not necessarily ring alarm bells. The crux of this case was inconsistencies in the identification provided by the fraudster, whose utility bills did not correspond with the address of the registered proprietor of the property.
The Judge held both the Claimant’s solicitors and the Defendant’s solicitors equally responsible for the Claimant’s loss, stating that had further checks been carried out in respect of this inconsistency, it is likely the fraudsters true identity would have came to light and the transaction terminated before any loss was suffered.
This outcome raised the bar for conveyancing due diligence procedures as the onus was placed on the conveyancer to pick up on and expose any potential property fraud regardless of how unapparent it may be.
That said, it is important to look at the more recent case of P&P Property Ltd v (1) Owen White &Catlin (2) Crown Vent Ltd t/a Winkworth ). Here a claim was brought against both the seller’s solicitors and the estate agents who arranged the sale. The circumstances of this case were similar to those of the aforementioned case. An imposter posing as the legitimate owner of a London property approached both claimants looking for a quick sale. The requisite identification checks were carried out and all appeared in order. Soon after completion, the transaction was found to have been fraudulent when the real owner walked past his property, only to see his kitchen being torn out. Although factually similar to the previous case, here the defendant’s were provided with convincing and consistent identification. They had no reason to doubt the legitimacy of their client, which begs the question, what more could they have done?
Here, the Deputy High Court Judge stated “the checks that are routinely carried out by solicitors on the identity of the client are designed to reduce the risk of fraud – it’s not possible to eliminate it entirely. Those checks should be carried out scrupulously as the consequences can be severe”
The Judge ultimately found in favour of the defendant solicitors and estate agent, stating that should the solicitor be found guilty of negligence in this case then they “are as much a victim as the innocent purchaser in situations such as these”.
This case proved to be a victory for solicitors and estate agents who become unknowingly caught up in a web of sophisticated property fraud by rebalancing the expectations placed on these parties to identify such unscrupulous dealings.
It remains the position that effective anti-fraud measures need to be in place, sufficient ID checks carried out and queries continually raised where inconsistencies are found.
Linder Myers Solicitors aim to make the process of identification checking clear and simple for our clients at the outset of a transaction, and with client cooperation during the risk assessment and due diligence stage, property fraud can be recognised early on and avoided.
Contact us on 0800 042 0700 or firstname.lastname@example.org to discuss your property needs or highlight any concerns you may have on this topic.Find out more about our Residential Conveyancing department