A conveyancer’s failure to follow best practice contributed to a mortgage fraud, the Court of Appeal has ruled in a case described by lawyers as a ‘clarion call’ to ensure work is done professionally.
The High Court ruled last year that the now closed RA Legal, which had released £150,000 in purchase monies to a firm purporting to act for vendors without obtaining a legal charge, had acted in breach of trust.
But the judge relieved RA Legal of liability, applying Section 61 of the Trustee Act 1925. He held that the firm had acted ‘reasonably’ and its departure from best practice had not directly caused the loss.
In Santander v RA Legal the Court of Appeal overturned the ruling, stating that for the purposes of Section 61, a trustee’s departure from best practice may be sufficiently connected with a beneficiary’s loss if there is ‘some element of causative connection’.
Lord Justice Briggs said that connection falls short of ‘but for’ causation; instead there simply needs to be something about the trustee’s behaviour that materially contributes to the beneficiary’s loss in a wider sense.
He said: ‘It would not be appropriate to exclude as irrelevant conduct which consisted of a departure from best or reasonable practice which increased the risk of loss caused by fraud, even if the court concludes that the fraudster would nonetheless have achieved his goal if the solicitor had acted reasonably.’
Steven Baker, solicitor in the litigation and dispute resolution team at Matthew Arnold & Baldwin, said the judgment is ‘crucial’ for lenders and purchasers in the fight against mortgage fraud.
Eddie Goldsmith, chairman of the Conveyancing Association, said the judgment confirms that a conveyancer’s conduct will be taken into account and that shoddy practice could have a bearing on a court’s decision to apply Section 61, relieving a firm from liability.
‘It is a clarion call for conveyancers to be professional and deal with transactions with great care, but there is an ambiguity about what is good practice,’ he said.