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Can solicitors and estate agents who acted for a fradulent seller be liable to the buyer?
The High Court has recently considered the liability of solicitors and estate agents who acted for a fradulent seller.
The buyer brought various claims against the estate agents and solicitors under the equitable doctrine of warranty of authority, in negligence, for breach of trust and; for breach of undertakings given under the Law Society’s Code for Completion by Post (2011 edition) in the recently decided case of:
P & P Property Ltd v Owen White and Catlin LLP and others  EWHC 2276 (Ch).
Lady Justice smiles on the two professions and we all breathe a long sigh of relief as the court held that:
• Neither the solicitors nor estate agents were in breach of warranty of authority based on the facts of this case as neither had represented to the buyer that it had authority to act for the true owner of the property.
• Neither the solicitors nor estate agents owed the buyer a duty of care to ascertain the seller’s identity or that they were the true owner of the property.
• The solicitor’s obligations on completion were governed by the express undertakings in the 2011 Code. It was wrong to construe the 2011 Code as giving rise to a breach of undertaking which would in effect amount to a title guarantee.
• The effect of paragraph 10 of the 2011 Code was that on becoming aware of the receipt of the completion monies the solicitors were permitted to use the money for the purpose of completion and were not required to hold the money on trust to the order of the buyer’s solicitor.
• The effect of paragraph 3 of the 2011 Code was that the solicitors were not to be regarded as permitted to use the completion monies only for the purpose of a genuine completion and therefore were not liable for breach of trust.