On the hook for another’s fraud

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In Santander (UK) plc v R.A. Legal Solicitors [2014] EWCA Civ 183, a firm of solicitors found themselves on the hook for a fraud in which they were not involved, but in which their substandard conduct had played a part. The law has always imposed a high standard on trustees but s61 of the Trustee Act 1925 has provided for breaches to be excused where the trustee acted honestly and ought fairly and reasonably to be excused. In this recent mortgage fraud case the Court of Appeal decided that the “shoddy performance” by the firm meant that they could not claim the benefit of the section.

BACKGROUND -

In May 2009 R.A. Legal were instructed by the purchaser and Santander in connection with the purchase of a residential property. The purchase price was £200,000 for which Santander were lending £150,000. Sovereign Chambers were apparently instructed by the vendor. Although a firm of solicitors in apparently good standing with the Law Society, Sovereign were in fact fraudsters. The funds disappeared from Sovereign’s client account and were not used to purchase the property. The funds were never recovered...

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