Purrunsing v A'Court & Co (a firm) & Anor

A conveyancer who holds purchase money on trust must not release it before genuine completion. The standard under section 61 of the Trustee Act 1925 is the same for a vendor’s solicitor as for a purchaser’s solicitor. The court applies a high, though not perfect, standard of professional reasonableness.

In assessing reasonableness, the trustee’s conduct is considered in the round. A failure to follow reasonable, risk-based client due diligence which increases the risk of fraud defeats relief, even if the relevant regulations were directed principally at money laundering. A conveyancer who obtains material information must tell the client and advise against proceeding until satisfactory answers are obtained.

The claimant paid the purchase price for a residential property to his conveyancer, House Owners Conveyancers Ltd, which paid it to the vendor’s solicitors, A’Court & Co. The purported vendor was a fraudster impersonating the registered proprietor, and completion never occurred. Both defendants admitted breach of trust and sought relief under section 61 of the Trustee Act 1925. The claimant also claimed damages from House Owners Conveyancers for breach of contract and duty.

The issues were whether either defendant acted honestly and reasonably, whether relief should be granted, whether House Owners Conveyancers was liable in contract or duty, and how responsibility should be apportioned between the defendants.

1. Section 61. Relief requires the trustee to establish both that he acted honestly and reasonably and that he ought fairly to be relieved. The burden lies on the trustee. The reasonableness standard is high, requiring exemplary professional care, efficiency, conscientiousness and thoroughness, though not perfection. Conduct must be considered in the round. An unreasonable departure from reasonable practice which increased the risk of fraud is material even if the fraudster might have succeeded in any event.
2. A vendor’s solicitor holding purchase money pending completion is a trustee in the same way as a purchaser’s solicitor. The absence of a tortious duty of care to the purchaser does not affect the trust. There is no principled basis for applying a more lenient section 61 standard to the vendor’s solicitor. AIB Group (UK) plc v Mark Redler & Co Solicitors was confined to the measure of equitable compensation where the trust formed part of the machinery for performance of a contract.
3. House Owners Conveyancers. It knew, or ought to have known, that the response to its additional enquiry was unsatisfactory. It should have told the claimant that the enquiry sought to establish a link between the property and the apparent vendor, disclosed the deficiencies in the response, and advised him not to proceed until satisfactory answers were obtained. Its failure was a breach of contract and/or duty. The claimant would probably have withdrawn or required further information. Relief under section 61 therefore failed.
4. A’Court & Co. The Money Laundering Regulations 2007 required a risk-based assessment of the information available. In the circumstances, reasonable due diligence required consideration of whether the apparent vendor owned the property and whether the transaction was lawful. The relevant risk indicators included the property’s being unoccupied, unencumbered and high value, the mismatch between the supplied address and the register, the absence of documents linking the vendor to the property, the vendor’s unexplained conduct and his overseas location. A’Court & Co failed to discharge the section 61 burden.
5. The alternative allegation that A’Court & Co failed to investigate registered title was rejected. The register was ordinarily conclusive, and the seller’s obligation would usually be met by supplying official copies absent further relevant enquiries. The admitted confidentiality breaches by House Owners Conveyancers were unreasonable but played no material part in causing the loss.
6. Both defendants were liable for the same damage. Applying section 2(1) of the Civil Liability (Contribution) Act 1978, and considering relative causal potency and blameworthiness, each defendant was ordered to bear an equal part of the loss. The claimant succeeded against both defendants.