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Solicitor in breach of trust for paying mortgage monies to a fraudster

The issue

Were solicitors in breach of trust in paying over mortgagemonies to a fraudster when they themselves were just as much victims of thefraud as the lender?

The decision

The solicitors were in breach of trust and liable for theentire loss suffered by the lender. They were not entitled to be relieved ofliability under section 61 Trustee Act 1925 as their conduct fell below therequired standard. (Section 61 enables the court to relieve a trustee wholly orpartly from personal liability, if the trustee has acted honestly andreasonably and ought fairly to be excused from the breach.)

Comment

This decision is clearly good news for lenders, bad news forsolicitors. The one crumb of comfort for solicitors is that the court didsuggest that if the firm in this case had acted to a higher professionalstandard in carrying out the transaction, the firm would still have been inbreach of trust in paying away the mortgage monies without authority, but thecourt would have been more likely to exercise its discretion under the TrusteeAct to relieve the firm of liability. Solicitors need to be particularlycareful in checking that the other party’s solicitors do in fact exist.

This article was first written by Bond Pearce and has beenreproduced with their permission. Bond Pearce are a leading UK business lawfirm, to find out more go to bondpearce.com.

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