Property Fraud Revisited

This article was first published in Estates Gazette on 30-02-2016

In "Frustrating property fraud" (EG 25 October 2014, p109), we considered property frauds involving a "rogue" conveyancer or a "bogus" law firm. This was followed up by a look at the more common identity fraud cases, where fraudsters impersonate the registered proprietor of a property, purport to sell the property and then march away with the proceeds of sale ("Property fraud: how to right a wrong", EG 17 January 2016, p59). In the same article, we reviewed some of the remedies available to victims of such frauds, including breach of trust claims. Such claims will arise where conveyancers, holding completion monies on trust for the buyer, pay away the monies otherwise than for purposes for which they were intended - ie by paying away the monies without completion taking place. We also covered section 61 of the Trustee Act 1925 (the "1925 Act"), which gives the court a discretionary power to grant relief in respect of a conveyancer's breach of trust. This is available to a conveyancer who acted honestly and reasonably.

Conveyancers beware

Lately, the court has provided further guidance in respect of these types of breach of trust claims, and the circumstances where section 61 relief will be granted. Of course, in fraudulent property transactions, both the buyer's and the seller's conveyancers will pay away the completion monies otherwise than for the intended purposes to which those monies should be put. Accordingly both conveyancers may, as a consequence, be in breach of trust. It is therefore possible for both the buyer's and the seller's conveyancers, innocent of involvement in the fraud, to be held liable to the victim of the fraud.

This is exactly what occurred in the recent case of Purrunsing v A'Court & Co (a firm) and another [2016] EWHC 789 (Ch); [2016] PLSCS 111, and in finding both conveyancers liable for breach of trust, the court gave a clear indication as to the reasonable standards to which conveyancers must adhere in order to qualify for relief under section 61 of the 1925 Act. It is worth noting that in Purrunsing (and customarily in all other property fraud cases), the fraud invariably occurs to those categories of property identified as vulnerable - namely, properties which are: (i) vacant; (ii) tenanted; (iii) not charged; (iv) registered to a sole proprietor; and/or (v) of high value - each being a red flag.

Practitioners must be particularly vigilant when...