“It appears to me that the judgment of the Court of Queen's Bench ought in all respects to be affirmed. I am of opinion that a person, who induces another to contract with him as the agent of a third party by an unqualified assertion of his being authorized to act as such agent, is answerable to the person who so contracts for any damages which he may sustain by reason of the assertion of authority being untrue. This is not the case of a bare misstatement by a person not bound by any duty to give information. The fact that the professed agent honestly thinks that he has authority affects the moral character of his act; but his moral innocence, so far as the person whom he has induced to contract is concerned, in no way aids such person or alleviates the inconvenience and damage which he sustains. The obligation arising in such a case is well expressed by saying that a person, professing to contract as agent for another, impliedly, if not expressly, undertakes to or promises the person who enters into such contract, upon the faith of the professed agent being duly authorized, that the authority which he professes to have does in point of fact exist. The fact of entering into the transaction with the professed agent, as such, is good consideration for the promise.”
“This implied contract may, of course, be excluded by the facts of the particular case. If, for instance, the agent proved that at the relevant time he told the party with whom he was contracting that he did not know whether the warrant of attorney under which he was acting was genuine or not, and would not warrant its validity, or that his principal was abroad and he did not know whether he was still living, there will have been no representation upon which the implied contract will arise.”
“For my part, I have considerable doubt whether the mere fact of a solicitor's client becoming bankrupt automatically operates to discharge the solicitor's retainer. Of the three reasons given in Halsbury, the first raises the question of what authority a solicitor does have when he accepts a retainer to bring proceedings for a client and what warranty he gives by bringing the proceedings in the client's name. Prima facie his authority is to bring the proceedings in the name of the client and I do not see that he warrants more than that he has a retainer from the client who exists and has authorised the proceedings and against whom a costs order can be made. He does not warrant that the client has a good cause of action or that the client is solvent. Whether the client has made representations to the solicitor as to his ability to pay for future services and disbursements depends on the facts of the particular case. It is of course true that the relationship of solicitor and client is confidential and fiduciary and that the solicitor is hardly likely to have agreed to act for the trustee in bankruptcy, but that does not in itself entail the automatic discharge by the bankruptcy of the retainer. Accordingly I am not persuaded by the reasoning in Halsbury . In any event the present case is not one relating to the termination of an existing retainer but one which raises the question whether a retainer ever came into being. For the reasons given, in my judgment the retainer did come into being. The bankrupt had the legal capacity to retain a solicitor and he gave authority to the solicitors by instructing them to bring the proceedings in his name.”
“I see nothing in these authorities to contradict the contention of [counsel] for the solicitors, that a solicitor who lends his name to the commencement of proceedings is saying (1) that he has a client, (2) that the client bears the name of the party to the proceedings and (3) that the client has authorised the proceedings. He does not represent that the client has a good cause of action. What the plaintiff in the present case was lacking was a good cause of action since any action in respect of [the] claim … was vested in his trustee in bankruptcy. In my judgment in commencing these proceedings the solicitors had authority from the plaintiff to do so and warranted no more than that. In particular they are not to be taken to be warranting that the plaintiff had a good cause of action vested in him.”
“64. Nevertheless, Nelson v Nelson is helpful as to what a solicitor conducting proceedings does not warrant, even though we do not think it deals directly with the question we have to decide. As a matter of principle, therefore, is a warranty as to name justified? 65. Mr Matthews for SEB says it is. Such a warranty, he submits, should be considered as part of the warranty of authority or something akin to it. The opposing party is entitled to be told the correct name of the client from whom the solicitor has authority and entitled to rely on the name put forward in the proceedings. This is the basis on which litigation or arbitration is conducted. It should not be difficult for a solicitor to ascertain the correct name of his client. The opposing party on the other hand has no right or obligation to do so. 66. In considering these submissions it is important to bear in mind that generally a solicitor conducting proceedings does not warrant what he says or does on behalf of his client. Thus he does not warrant that his client, the named party to the proceedings, has title to sue, is solvent, has a good cause of action or defence or has any other attribute asserted on his behalf. The solicitor relies upon his client's instructions for all these things, as he will normally do for naming his client correctly. As he gives no warranty as to the accuracy of his instructions generally, it is difficult to see why the naming of his client should be treated as an exception. Why should this be any different, for example, from the naming of a client who has no title to sue? There is an obvious distinction between such matters and the solicitor's own authority to act because the solicitor will usually know whether he has such authority or not. The imposition of strict liability on a solicitor for breach of warranty of authority is justified because otherwise the opposing party will be left without remedy against his supposed client. 67. The warranty which a solicitor gives is that he has a client who has instructed him to assert or deny the claims made in the proceedings against the opposing party. We do not think he warrants that the client has the name by which he appears in the proceedings. As a matter of principle it would not be right to impose strict liability upon a solicitor for incorrectly naming his client. Otherwise solicitors could be made liable for any case of misnomer including, for example, typographical errors or change of corporate name without a change of rights.”
“If there were nothing irregular on the face of the document the lender's solicitor would be entitled to accept it without question. He would not be required to inquire into the circumstances in which it was executed. But—and this is, of course, an important safeguard—the lender would have the benefit of the implied warranty of authority given by the borrowers' solicitor that he has the authority of the borrowers to complete the mortgage by delivering the mortgage deed—see the judgments in the Court of Appeal in Penn v Bristol and West Building Society[1997] 3 All ER 470 ,[1997] 1 WLR 1356 . I can see no reason why the position should be different in the circumstances that the same solicitor acts for both lender and borrowers. I do not hold that the duty of the solicitor, as solicitor for the lender, is increased by the fact that he acts also for the borrowers; but, equally, I can see no reason why, as solicitor for the borrowers, he should not be taken to warrant to the lender that he is acting for them in the transaction with their authority. That does not, necessarily, mean that he is warranting that the signature on the mortgage deed is authentic; but it has much the same effect. Mr Borsay must be taken to have warranted to the society that the mortgage deed which he delivered on completion as solicitor for the borrowers was delivered with the authority of both Mr and Mrs Barton.”
“96. For my part, I do not think that questions of this kind can be answered in the abstract or at a high level of generality. A warranty of authority is an implied obligation arising as a matter of contract in appropriate circumstances. Whilst the core nature of the warranty is well established, its precise limits in any particular case must, in my judgment, be determined by reference to the specific circumstances which have given rise to the warranty. That is an objective question to be determined by reference to the circumstances prevailing and known to the parties at the time when the warranty is deemed to have arisen and not in the light of subsequent developments. It is in this context that considerations similar to those expressed by the Court of Appeal in Midland Bank plc v Cox McQueen [1999] PNLR 593 are likely to be of considerable relevance, particularly since the Court is dealing with the extent of an implied obligation rather than with the construction of a written document.”
“We accept that a warranty may be given by a solicitor, or other agent, expressly to a third party as to a particular attribute or attributes of the solicitor's or agent's client. We consider it more appropriate in such discussions to talk of attributes of clients rather than the identity of a client. The identity of a person is made up from a bundle of qualities or attributes. In particular there is nothing in principle in the law of contract to prevent an agent from guaranteeing to a third party that he has a principal who is the same person as appears on property registers, for example, as the owner of a specific property. As Judge Hegarty observes in his judgment (p 103) however: 'It is … almost inconceivable that an agent would agree to this'. But, in any event, where, as here, no such express warranty was asked for, or given, matters must rest on the implied warranty of authority to be implied as a matter of law, the extent and nature of which was defined correctly in the Excel case.”
“In my view the dispute can in fact be resolved without reference to the further findings made by the judge as to the state of mind of Mr Mackay and the Respondent. The Respondent made it very clear that he was acting as agent only. The Respondent did not contract as a principal in his own right. The Respondent warranted that he was acting on behalf of the entity that was negotiating to purchase the site. As appears hereafter he was, or at any rate there is no reason to believe that he was not. It has not therefore been demonstrated that the Respondent was in breach of his warranty of authority. That is the end of the case. It is true that the Respondent represented that the name of his principal was, firstly, Morecambe Investment Ltd and, secondly, Morecombe Investments Ltd but he did not on either occasion warrant the accuracy of the name given in the sense that he effectively guaranteed that it was correct. For the avoidance of doubt the same would be true if his only representation on this topic had been that made by virtue of his countersigning and returning the letter “For and on behalf of Morecombe Investments Ltd”
“153. The difficulty in applying a test of intention to the identification of the parties to a contract arises, so it seems to me, only where the parties conduct their dealings in some form of inter-personal contact, and where one purports to have the identity of a third party. There the innocent party will have in mind, when considering with whom he is contracting, both the person with whom he is in contact and the third party whom he imagines that person to be. 154. The same problem will not normally arise where the dealings are carried out exclusively in writing. The process of construction of the written instruments, making appropriate use of extrinsic evidence, will normally enable the court to reach a firm conclusion as to the person with whom a party intends to contract. This was the position in Boulton v Jones 27 LJ Ex 117, Cundy v Lindsay 3 App Cas 459 and King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd 14 TLR 98. There is a substantial body of authority that demonstrates that the identity of a party to a contract in writing falls to be determined by a process of construction of the putative contract itself.”
“132. I do not accept that, assuming such representations to have been made, P&P Property relied on them. Mr Robinson does not appear to have thought such a representation was being made by Owen White. His evidence was to the effect that he relied not on such a representation, but on Owen White having "done all of the correct due diligence required by them to establish the identity of their client as being the true owner of the Property", and Mr Polycarpou's evidence in relation to Winkworth was to similar effect.”
“That was in the context of agents generally. In the particular context of inquiries before contract in a normal conveyancing transaction, Morritt J. expressed a different view in Cemp Properties (UK) Ltd. v. Dentsply Research & Development Corporation [1989] 2 E.G.L.R. 205, 207. He observed that it would be absurd if the solicitor for one party to the transaction owed a duty of care to another party as well as to his own client. In my view, in normal conveyancing transactions solicitors who are acting for a seller do not in general owe to the would-be buyer a duty of care when answering inquiries before contract or the like. In reaching the conclusion that the law should not generally import a duty of care in such circumstances, three factors have weighed with me. The first lies in the context in which such representations are made. The context is a contract for sale of an interest in land. The buyer is formally seeking information from the seller about the land and his title to it. The answers given by the solicitor are given on behalf of the seller. The buyer relies upon those answers as answers given on behalf of the seller, although the confidence of the buyer and his solicitors in the reliability of the answers may be increased when they see the answers have been given by a solicitor in the ordinary way. They will expect the seller's solicitor, as a professional acting on behalf of his client, to have got the answers right. I venture to think that in these circumstances one would expect to find that the law provides the buyer with a remedy against the seller if the answers were given without due care. I am far from persuaded that the fair and reasonable reaction to these facts is that there ought also to be a remedy against the other party's solicitor personally. Secondly, what one finds is that the law does indeed provide the buyer with a remedy against the seller in respect of any misrepresentation in the answers given on his behalf. As already noted, the seller himself owes a duty of care to the buyer. When, as is usual, the answers are given by the seller's solicitor, the seller will be as much liable for any carelessness of his solicitor as he would be for his own personal carelessness. He will be so liable, because in the ordinary way the solicitor has implied authority from the seller to answer on his behalf the traditional inquiries before contract made on behalf of the buyer. In providing the answers the solicitor is acting within the scope of his authority. Some of the inquiries will raise questions of fact. Others will raise legal, conveyancing points which the client cannot answer himself. The client leaves all these matters to the solicitor to handle for him, after seeking instructions where appropriate from the client on any particular points on which the client may be expected to have relevant information. Thus, the purchaser to whom incorrect answers are given is not without a remedy even if the fault was that of the seller's solicitor and not the seller himself. Whoever was at fault, the buyer has a remedy for damages at common law against the seller. (This, I interpose, is to be contrasted with a case such as Smith v. Eric S. Bush [1990] 1 A.C. 831. There the mortgagor would have been without remedy if he did not have one against the valuer personally or his employer.) Thirdly, at the forefront of his submissions, Mr. Jackson presented an argument that to impose a duty of care on solicitors would be to expose them to conflicting duties, with one duty owed to their clients, and another different duty owed to the buyer. I am not persuaded that this would be so. The duty to the buyer would be to take reasonable care to see that the answers provided were accurate. That duty would march hand in hand with a duty to the same effect owed by the solicitor to his own client. There would be no conflict. Nevertheless, and although I am not impressed by this argument based on conflict, it does seem to me that in the field of negligent misrepresentation caution should be exercised before the law takes the step of concluding, in any particular context, that an agent acting within the scope of his authority on behalf of a known principal, himself owes to third parties a duty of care independent of the duty of care he owes to his principal. There will be cases where it is fair, just and reasonable that there should be such a duty. But, in general, in a case where the principal himself owes a duty of care to the third party, the existence of a further duty of care, owed by the agent to the third party, is not necessary for the reasonable protection of the latter. Good reason, therefore, should exist before the law imposes a duty when the agent already owes to his principal a duty which covers the same ground and the principal is responsible to the third party for his agent's shortcomings. I do not think there is good reason for such a duty in normal conveyancing transactions.”
“The reasoning of the Vice-Chancellor, unless it is confined to stating a special rule applicable to solicitors in conveyancing transactions, is, in my judgment, inconsistent with the ratio decidendi of Punjab National Bank and with the general principle of tortious liability where the person doing the relevant act is the agent of another, which the Vice-Chancellor himself recognised in his citation of Smith v Bush and Resolute Maritime.”
“The threefold test and the assumption of responsibility test indicate the criteria which have to be satisfied if liability is to attach. But the authorities also provide some guidance as to the factors which are to be taken into account in deciding whether these criteria are met. These factors will include: (a) the precise relationship between (to use convenient terms) the adviser and the advisee. This may be a general relationship or a special relationship which has come into existence for the purpose of a particular transaction. But in my opinion counsel for Overseas was correct when he submitted that there may be an important difference between the cases where the adviser and the advisee are dealing at arm's length and cases where they are acting "on the same side of the fence." (b) the precise circumstances in which the advice or information or other material came into existence. Any contract or other relationship with a third party will be relevant. (c) the precise circumstances in which the advice or information or other material was communicated to the advisee, and for what purpose or purposes, and whether the communication was made by the adviser or by a third party. It will be necessary to consider the purpose or purposes of the communication both as seen by the adviser and as seen by the advisee, and the degree of reliance which the adviser intended or should reasonably have anticipated would be placed on its accuracy by the advisee, and the reliance in fact placed on it. (d) the presence or absence of other advisers on whom the advisee would or could rely. This factor is analogous to the likelihood of intermediate examination in product liability cases. (e) the opportunity, if any, given to the adviser to issue a disclaimer.”
“3. In complying with the terms of the code, the seller’s solicitor acts on completion as the buyer’s solicitor’s agent without fee or disbursement but this obligation does not require the seller’s solicitor to investigate or take responsibility for any breach of the seller’s contractual obligations and is expressly limited to completion pursuant to paragraphs 10 to 12. Before completion … 7. The seller’s solicitor undertakes: (i) to have the seller’s authority to receive the purchase money on completion; and (ii) on completion, to have the authority of the proprietor of each mortgage, charge or other financial incumbrance which was specified under paragraph 6 but has not then been redeemed or discharged, to receive the sum intended to repay it; BUT if the seller’s solicitor does not have all the necessary authorities then: (iii) to advise the buyer’s solicitor no later than 4pm on the working day before the completion date of the absence of those authorities or immediately if any is withdrawn later; and (iv) not to complete without the buyer’s solicitor’s instructions. 8. The buyer’s solicitor may send the seller’s solicitor instructions as to any other matters required by the buyer’s solicitor which may include: (i) documents to be examined and marked; (ii) memoranda to be endorsed; (iii) undertakings to be given; (iv) deeds or other documents including transfers and any relevant undertakings and authorities relating to rents, deposits, keys, to be sent to the buyer’s solicitor following completion; (v) consents, certificates or other authorities that may be required to deal with any restrictions on any Land Registry title to the property; (vi) executed Stock Transfer Forms relating to shares in any companies directly related to the conveyancing transaction. 9. The buyer’s solicitor will remit to the seller’s solicitor the sum required to complete, as notified in writing on the seller’s solicitor’s completion statement or otherwise in accordance with the contract, including any compensation payable for late completion by reference to the ‘contract rate’ if the Standard Conditions of Sale are utilised, or in default of notification as shown by the contract. If the funds are remitted by transfer between banks, immediately upon becoming aware of their receipt, the seller’s solicitor will report to the buyer’s solicitor that the funds have been received. Completion 10. The seller’s solicitor will complete upon becoming aware of the receipt of the sum specified in paragraph 9, or a lesser sum should the buyer’s and seller’s solicitors so agree, unless – (i) the buyer’s solicitor has notified the seller’s solicitor that the funds are to be held to the buyer’s solicitor’s order; or (ii) it has previously been agreed that completion takes place at a later time. Any agreement or notification under this paragraph should if possible be made or confirmed in writing. 11. When completing, the seller’s solicitor undertakes: (i) to comply with any agreed completion arrangements and any reasonable instructions given under paragraph 8; (ii) to redeem or obtain discharges for every mortgage, charge or other financial incumbrance specified under paragraph 6 so far as it relates to the property which has not already been redeemed or discharged; that the proprietor of each mortgage, charge or other financial incumbrance specified under paragraph 6 has been identified by the seller’s solicitor to the extent necessary for the purpose of the buyer’s solicitor’s application to HM Land Registry. After completion 12. The seller’s solicitor undertakes: (i) immediately completion has taken place to hold to the buyer’s solicitor’s order every document specified under paragraph 8 and not to exercise a lien over any of them; (ii) as soon as possible after completion, and in any event on the same day: (a) to confirm to the buyer’s solicitor by telephone, fax or email that completion has taken place; (b) to notify the seller’s estate agent or other keyholder that completion has taken place and authorise them to make keys available to the buyer immediately; (iii) as soon as possible after completion and in any event by the end of the working day following completion to send written confirmation and, at the risk of the buyer’s solicitor, the items specified under paragraph 8 to the buyer’s solicitor by first class post or document exchange; (iv) if the discharge of any mortgage, charge or other financial incumbrance specified under paragraph 6 takes place by electronic means, to notify the buyer’s solicitor as soon as confirmation is received from the proprietor of the mortgage, charge or other financial encumbrance that the discharge has taken or is taking place.”
“In my judgment, whatever the right interpretation of the judge's point (i), he was correct to hold that, on the facts of this case, there had been no completion. It is, I consider, unnecessary in relation to the breach of trust issue to consider what the position would have been if, following the remitting of the loan money, M&U had received in return documents that purported to be what they expected to receive but which were forgeries. Since, however, the answer to that question may be material to M&U's alternative ground of appeal in relation to causation, I shall express my view on it. The purported contract was a nullity, since the Greens had not agreed to sell their property to Mr Davies, nor had they authorised anyone to sell it to him in their name; and the purported completion of that nullity by way of the exchange of purchase money for forged documents could not in my view have amounted to completion. Nothing, said Lear, will come of nothing, and so it was here. Completion in the present context must mean the completion of a genuine contract by way of an exchange of real money in payment of the balance of the purchase price for real documents that will give the purchaser the means of registering the transfer of title to the property that he has agreed to buy and to charge. An exchange of real money for worthless forgeries in purported performance of a purported contract that was a nullity is not completion at all. Had that happened in this case, the parting with the loan money would have been a breach of trust.”
“[12] Mr Thomas Grant QC for Abbey (who, like Mr Pooles, did not appear below) advanced one short and one longer argument in support of a conclusion that the transfer on 28 July was a breach of trust. The short one was that RA Legal had no authority under the terms of the trust upon which they held Abbey's money to release it to Sovereign, even on terms that Sovereign was to hold it to RA Legal's order, because Sovereign was not acting for the owner and supposed vendor of the Property, and was neither able nor intending to complete the transaction. Sovereign was, of course, a firm of solicitors, and the money was transferred into Sovereign's client account. But, said Mr Grant, Abbey appointed RA Legal, and no-one else nor any other solicitor, as its trustee for the custody of the money pending completion. It had no authority to transfer custody to another person, even another solicitor, any more than a trustee of another's money or property can simply delegate custody to anyone of its choosing. ….. [15] In my judgment Mr Grant's short submission is correct. Where an intending lender transfers the loan money to an intending purchaser's solicitors on terms that they hold the money on trust until completion, I accept of course that the purchaser's solicitors have authority to deposit it in a bank of their choosing, in client account, and if necessary to move it to a client account of theirs in some other respectable bank than the bank to which the lender originally transferred the money. I also accept that the purchaser's solicitors have the lender's implied authority to transfer the money to the client account of solicitors acting for the vendor prior to completion, to hold to the purchaser's solicitors' order pending completion. That is an ordinary incident of residential conveyancing in the modern world with which institutional lenders may be taken to be familiar. [16] But it by no means follows that the purchaser's solicitors have the lender's implied authority to transfer the trust money pending completion to the client account of any other solicitor than the firm which is in fact acting for the owner and intending vendor of the Property upon which the lender is to obtain a charge on completion. In the present case, Sovereign did not fit that description. It was not acting for the owner of the Property, had no instructions either to contract for or complete its sale to Mr Vadika, and had not the slightest intention of using any part of the money transferred to its client account for the purpose of discharging the existing first mortgage on the Property. For that simple reason I consider that the transfer of the money to Sovereign's client account on 28 July was a breach of trust.”
“221. I agree with Mr Patten QC that the fact that paragraph 3 provides that the seller's solicitor is not required "to investigate or take responsibility for any breach of the seller's contractual obligations" is, in substance, inconsistent with the vendor's solicitor being liable, as the purchaser's agent, for breach of trust in releasing the money in the event that completion does not occur because the seller does not have title. One of the seller's obligations is to provide a genuine transfer of title. If the vendor's solicitor is liable for breach of trust merely because no genuine transfer is provided it would effectively be taking responsibility for what paragraph 3 says it is not. The extent of the vendor's solicitor's obligations on completion are governed by the express undertakings that it provides in accordance with the Code. In my view, in the light of the guidance in cases such as Mothew, in these circumstances it would be wrong to construe the Code so as to give rise to a breach of trust or, as a result, as an effective guarantee of title.”
“112. The argument that "completion" in this context is intended to have the same meaning as considered earlier in this judgment (i.e. that of a genuine completion), is in my view formidable. Clearly, that is what the purchaser, and his solicitor, is aiming to achieve in paying the monies to the vendor's solicitor as agent, under the Code. As the Code recites, however, it is "intended to provide a fair balance of obligation between seller's and buyer's solicitors and to facilitate professional co-operation for the benefit of clients". The provisions of paragraph 3 need to be seen in this light. It is expressly provided that the obligation to act as agent for the purchaser's solicitor "does not require the seller's solicitor to investigate or take responsibility for any breach of the seller's contractual obligations and is expressly limited to completion pursuant to paragraphs 10 and 12". 113. I agree with Mr Dicker QC that this provision is inconsistent with the vendor's solicitor being liable, as the purchaser's agent, for breach of trust in releasing the monies in the event that completion does not occur because the vendor is not the registered owner or does not have title. It must follow that the vendor's solicitor is entitled to release the monies (to itself on behalf of its client, or otherwise to its client's order), even if the transfer document received in return is not a genuine one, and there is not, as a result, a genuine completion. I further agree with Mr Dicker QC that such obligations as there may be on the vendor's solicitor in relation to the genuineness or otherwise of the transfer document provided by his client are to be found in the undertakings given by it in accordance with the other provisions of the Code (which I consider later in this judgment).”
“If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve him either wholly or partly from personal liability for the same.”
“[33]The second main stage of the s 61 analysis, usually described as discretionary, consists of deciding whether the trustee ought fairly to be excused for the breach of trust. This requires that regard be had to the effect of the grant of relief not only upon the trustee, but also upon the beneficiaries: see Marsden v Regan[1954] 1 All ER 475 ,[1954] 1 WLR 423 , per Evershed MR at 434; and Bartlett v Barclays Trust Co (No 1)[1980] Ch 515 ,[1980] 1 All ER 139 ,[1980] 2 WLR 430 , per Brightman J at 538A. Furthermore, s 61 makes it clear that even if the trustee ought fairly to be excused, the court still retains the discretionary power to grant relief from liability, in whole or in part, or to refuse it. In the context of relief sought by solicitor trustees from liability for breach of trust in connection with mortgage fraud, much may depend at this discretionary stage upon the consequences for the beneficiary. An institutional lender may well be insured (or effectively self-insured) for the consequences of third party fraud. But an innocent purchaser may have contributed his life's savings to the purchase and have no recourse at all other than against his insured solicitor, where for example the fraudster is a pure interloper, rather than a dishonest solicitor in respect of whose fraud the losers may have recourse against the Solicitors' Compensation Fund. [34]Relief under s 61 is often described as an exercise of mercy by the court. In my judgment the requirement to balance fairness to the trustee with a proper appreciation of the consequences of the exercise of the discretion for the beneficiaries means that this old-fashioned description of the nature of the s 61 jurisdiction should be abandoned. In this context mercy lies not in the free gift of the court. It comes at a price.”
“277. I should add, in this context, that I obtained the impression during her cross-examination that, whilst Ms Lim was undoubtedly aware of her obligations in respect of client due diligence and was careful to ensure that she was provided with the necessary documents, she was less prepared to insist on her client answering any further questions that she had. Although I am conscious that Mr Harper was not Ms Lim's only client and that the demands of a conveyancing solicitor's practice are likely to be such as to make complying with a solicitor's obligations in this respect more difficult, such obligations are important and, in my view, on this occasion Ms Lim would have fallen short of the high standard equity expects of a trustee. 278. It is difficult to know what would have happened had Ms Lim asked Mr Harper for more information about his residence and work in Dubai. The fraud was plainly a sophisticated one which appears to have [been] carried out with some expertise. However, in my view, it is plainly possible that, despite the obvious sophistication of the fraud, further questions would have revealed the true position or discouraged Mr Harper from proceeding further and, even if they did not, they would have increased the prospect of that occurring. 279. So far as the question of discretion is concerned, such factors as exist reinforce the conclusion that, if Owen White had been liable for breach of trust, they should not have been granted relief. P&P Property is not, as I understand it, insured against the fraud, and incurred a liability to City & Western in respect of the loan for the purchase price. It also incurred a potential liability to the true Mr Harper as a result of the work that it carried out on the property. No submissions have been made as to whether P&P Property might have or have had a potential claim against Peter Brown & Co. and nothing in this judgment should be taken as expressing any views on that issue one way or another. In any event, I do not consider that, even if such a claim were to exist, it would provide a reason for exercising the court's discretion to grant relief to Owen White.”
“187. As for MdR's position, it is common ground that it is insured for events such as this, and that its insurance cover is sufficient to cover in full the loss suffered, should it not be excused from liability. In terms of balancing the relative effects or consequences of the breach of trust, it is apparent that MdR (with or without insurance) is far better able to meet or absorb it than Dreamvar. While, as I have held, it was not unreasonable for MdR not to have advised Dreamvar about the risk of fraud, or to have sought greater protection for Dreamvar against that risk (such as further undertakings), it is also not irrelevant that MdR was necessarily far better placed to consider, and as far as possible achieve (a matter not in the event tested), greater protection for Dreamvar against the risk which in fact occurred. As I have already found, Dreamvar has no recourse against MMS, and (it appears) no practical likelihood of either tracing or making any recovery from the fraudster. As a result, the only practical remedy it has is against MdR. 188. For these reasons, I conclude that MdR ought not fairly to be excused for the breach of trust, and that I should in any event, in my discretion, decline the relief sought. I would however add that if, contrary to my conclusions above, MMS were liable to Dreamvar, I would have exercised my discretion to relieve MdR of its liability for breach of trust to the extent of the liability found against MMS.”
“The seller’s solicitor undertakes: (i) to have the seller’s authority to receive the purchase money on completion; and (ii) on completion, to have the authority of the proprietor of each mortgage, charge or other financial incumbrance which was specified under paragraph 6 but has not then been redeemed or discharged, to receive the sum intended to repay it; BUT if the seller’s solicitor does not have all the necessary authorities then: (iii) to advise the buyer’s solicitor no later than 4pm on the working day before the completion date of the absence of those authorities or immediately if any is withdrawn later; and (iv) not to complete without the buyer’s solicitor’s instructions.”
“243. Mr Patten QC submitted that there was no breach of undertaking. So far as paragraph 7(i) is concerned, he submitted the reference to the "seller" is to the person agreeing to sell the property, not to the true owner. He submitted that the provision was introduced to address the risk that if monies were forwarded to the seller's solicitor that person might run off with them leaving the buyer with no remedy against the seller. He referred to Edward Wong Finance Company v Johnson Stokes & Master[1984] AC 296 where the vendor's solicitor absconded with the completion monies and in which the Privy Council commented at p.307H that to address this risk "all that is needed in such a case is that the purchaser's or lender's solicitor should take reasonable steps to satisfy himself that the vendor's or borrower's solicitor has authority from his client to receive the purchase money". I accept Mr Patten QC's submissions in this respect. In my view, the reference to "seller" in the Code is to the person agreeing to sell the property, not a reference to the registered title holder if different. The passage cited from the Edward Wong case is consistent with his submission as to the purpose of the provision.”
“133. It was common ground before me that the undertaking in paragraph 7(ii) was an absolute undertaking to have the authority of the (genuine) proprietor of each relevant mortgage, charge or other financial encumbrance. Indeed, such an undertaking would be necessary to mitigate the mischief in Edward Wong. Further, as Patel v. Daybells shows (at [60]-[63], per Robert Walker LJ), even in cases where the Code does not apply, unconditional and unqualified undertakings by the vendor's solicitor whereby responsibility is accepted for the discharge of mortgages over the property being sold, are commonplace. While the Notes to the Code do not say that a similar rationale to that described in relation to the undertaking in paragraph 7(ii) applies to the undertaking in paragraph 7(i), it can be questioned why it does not. The authority of the vendor's solicitor to receive the purchase monies on behalf of the true owner or registered proprietor could equally be regarded as an indispensable requirement of residential conveyancing, the purpose of which is intended to be a genuine completion. ….. 151. As set out above, I have concerns as to the views expressed in some of the cases which indicate that the general understanding within the profession is that solicitors acting for vendors in transactions for the sale of residential property would not give, and would not be expected to give, an undertaking to the effect that their client is the registered owner of the property being sold. I also have concerns as to whether construing paragraph 7(i) as applying only to the vendor's solicitor's client (and not the registered owner, if different) meets the mischief to which the paragraph was directed, and whether the proposed distinction between the nature of the obligation accepted to be assumed by paragraph 7(ii) is consistent with the suggested (more limited) construction of paragraph 7(i). 152. It is however the position that the views expressed in cases such as Excel, Grandison and Stevenson were effectively repeated in the factual evidence I heard from Ms Curtis- Goulding, and in the evidence before Mr Dicker QC in P&P (at [123]). It is also noteworthy that I was not referred to any guidance or commentary which expressed a view that the effect of paragraph 7(i) was (or was intended) to transfer the risk of identity fraud by the supposed vendor to the vendor's solicitor. These factors point to the objective expectations of the parties not being to the effect that MMS was assuming such a responsibility.”