With the lockdown in full force, the transfer of money electronically has never been so prevalent and, indeed, so necessary. However, that means that there is more opportunity than ever for the unscrupulous fraudster to intercept this money and prevent it from ever reaching its intended recipient!

In this post, we discuss where the buck stops when a fraudster intercepts a transaction where professionals are involved and who should pick up the bill when it all goes wrong.

The Set-Up

One of the most common situations in which a fraudster tries to insert themselves into a transaction is in a house purchase. House purchases involve large sums of money being transferred, are high in volume and usually require a solicitor to facilitate it to whom the transaction is quite routine.

Due to the nature of these transactions, we have come across a number of instances in which a fraudster has managed to insert themselves into the purchase. The most common being a fraudster sending dummy emails to each party resulting in the purchaser being instructed to pay the deposit into the fraudsters bank account with the purchaser and the solicitor being none the wiser until it’s too late and the fraudster having disappeared with the money.

The Law

Obviously, first and foremost, it is the fraudster who is at fault, and neither party is to blame for the criminal activity of these reprobates. However, do the solicitors have a separate professional duty to safeguard their client’s money?

One such case which considered this proposition was the case of Purrunsing v A’Court (a firm) and another [2016] EWHC 789 (Ch). In this case, the High Court held that a house purchaser’s solicitor was equally liable with the seller’s solicitor for loss caused to the purchaser when the funds were released before completion of the property transaction, and it was discovered that the seller was a fraudster.

The court found that there had been a lack of due diligence carried out by the purchaser’s solicitor as required in terms of the money laundering regulations; the purchaser’s solicitor had failed to provide the purchaser with all of the information they had been furnished with by the seller’s solicitor which would have indicated the risks of the transaction.

Essentially, the court held that both sets of solicitors had failed in their professional duties and that the purchaser’s solicitor had failed to look after their client’s money appropriately.

The Scottish Angle

While this is an English case and there have been no similar reported decisions in Scotland. It is our view that in similar circumstances, a Scottish solicitor would also likely be found negligently liable to their client for not protecting their money. In fact, at MBM, we have helped a number of Scottish clients to achieve a successful outcome by way of favourable out of court settlements against professionals who have failed to protect their clients’ money adequately.

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