P&P Property Ltd v Owen White & Catlin LLP & Anor

An agent’s warranty of authority ordinarily concerns authority to act for the identified principal. It does not ordinarily extend to guaranteeing the principal’s identity, title, solvency or other attributes. A wider warranty requires clear words or circumstances supporting that implication.

Conveyancing solicitors acting for a vendor generally owe no duty of care to the purchaser in relation to verifying the vendor’s identity, absent special circumstances showing an assumption of direct responsibility. An estate agent may owe a duty based on assumption of responsibility, but reliance alone is insufficient.

The 2011 Law Society Code for Completion by Post did not make the vendor’s solicitor a guarantor of genuine title or impose liability in trust merely because the vendor was fraudulent.

The claimant agreed to buy a residential property from a person impersonating the registered owner. The purchase completed and the completion monies were paid through the defendants, the vendor’s solicitors and estate agents. The fraud was then discovered.

The claimant brought claims against the solicitors and estate agents for breach of warranty of authority and negligence. It also claimed against the solicitors for breach of trust and breach of undertakings under the 2011 Law Society Code for Completion by Post. The court also considered, contingently, relief under section 61 of the Trustee Act 1925.

1. Warranty of authority. The claims against both defendants failed. The ordinary warranty is that the agent has authority to act for the client. It does not, without more, warrant that the client is the true person of that name, owns the property or possesses another relevant attribute. The distinction between authority to act and attributes of the principal was material. The authorities concerning forged signatures did not establish that a solicitor acting for an impersonator necessarily gives a wider warranty.
2. Negligence. The claim against the solicitors failed. Following Gran Gelato Ltd v Richcliff [1992] Ch 560, solicitors acting for a vendor in an ordinary conveyancing transaction do not generally owe the purchaser a duty of care in answering or making transaction representations, absent special circumstances. No direct responsibility had been assumed here.
3. The estate agent’s position was governed by assumption of responsibility principles and, alternatively, the Caparo Industries v Dickman [1990] 2 AC 605 threefold test. Reliance and foreseeability were insufficient. There was no communication crossing the line into an objective assumption of responsibility, and it was not fair, just and reasonable to impose a general duty to verify the vendor’s identity or title.
4. Trust and undertaking. The 2011 Code did not require the vendor’s solicitor to investigate or take responsibility for breach of the vendor’s contractual obligation to provide genuine title. Paragraph 7(i) referred to the person agreeing to sell, not necessarily the registered owner. Paragraph 10 was not expressed as an undertaking. The Code therefore did not make the solicitors guarantors of title or liable in trust merely because no genuine completion occurred.
5. The £430,000 was held as deposit money as agent for the vendor after the purchaser’s solicitor agreed to that arrangement, so its payment to the vendor was not a breach of trust. The remaining £600,000 was not held on trust pending completion under the 2011 Code on the facts. The claims therefore failed.
6. Although the court did not need to decide section 61 of the Trustee Act 1925, it stated that the solicitors would not have shown that they acted reasonably for the statutory purpose. Their conduct would not, however, have amounted to negligence.