The ruling in the Mishcon case seems a classic example of the law being applied to reach the ‘right’ outcome for policy reasons. If the judgment is upheld and enforced, Dreamvar is no longer suffering the financial loss of the fraud but instead the ultimate victim becomes the entirely innocent law firm and its insurers. Clearly the section 61 defence could have applied but the court used its wider discretion to ensure that Dreamvar was adequately compensated.
This is in itself inequitable when Mishcon has done nothing wrong, but firms all pay for insurance so that is somehow deemed acceptable.
So how to resolve this growing problem? Perhaps it is time for a second tier to be added to the Land Registry electronic database accessible only by registered business users. When applying for registration, perhaps a copy of the passport or driving licence of the applicant should also be provided which can then be viewed on request.
Conveyancers could then check the name, date of birth, gender and signature of their seller clients against this record of the registered proprietor. This can be combined with some recognition that, in performing customer due diligence, sellers’ solicitors owe a duty to purchasers, lenders and their solicitors and will be found liable in the event of a preventable fraud. This will inevitably lead to better practice all round, make it much easier to root out the fraud at an earlier point and hopefully prevent transactions reaching the stage where completion monies change hands.
Martin McCabe, Kidd Rapinet LLP, Maidenhead