Monday, 17 December 2012

Oh no, it's happened again and this time it's worse!

Some time ago I blogged about a solicitor's identity theft.  To refresh your memories, it's here:

Markandan and Uddin

Well, now it's reported that the same thing has happened again.  What's that?  A successful theft of a six figure mortgage advance used to buy a property.  Now the last time this happened, the buyer's solicitor was held responsible.  At first instance, that's what's happened again.  The Court of Appeal, however, don't agree this time round.  There is at least one worrying new feature of the latest such scam.  The report of the Court of Appeal decision is here:

Davisons v. Nationwide

It seems that a Mr. Gill practised as Rothschilds solicitors in Birmingham.  In January 2009, another firm of solicitors, Davisons, a substantial multi office firm, also in Birmingham, received instructions to act for a buyer of a house and his mortgage lender.  Mr. Wilkes was the solicitor who dealt with the transaction.  Rothschilds Small Heath office wrote to Mr. Wilkes to say that they were instructed by the seller.  As Mr. Wilkes knew nothing of the firm, he checked to find out about them.  Rothschilds were registered with the SRA, as was their Small Heath office.  Therein lay the problem - there was no Small Heath office!  Actually, Mr. Gill, the real Mr. Gill, had found out about the entry on the SRA/Law Society website at least a month earlier and had asked for it to be removed.  It wasn't until April the next year that it was done - some considerable time after Mr. Wilkes did his check.  No explanation for the delay is apparent, but, as is now customary, we are told that changes have been made.  Well, one has to hope so.

There's a lesson for practitioners in this.  Just how often do we check the information which is being published about our firms?  I suspect that the reason Mr. Gill contacted the SRA in December 2008 was because he was dealing with the usual annual return and application for his practising certificate renewal and this led to him looking at the information the SRA was publishing about his firm.  Had this been taking place, let us say, in February, then it might have been months before he found out and did something about it.  It seems that the fraudster registered the branch office in October 2008 from an email address which Rothschild solicitors had never used.

So to cut a long story short, Mr.Wilkes completed the purchase and forwarded nearly £200,000 of the Nationwide's money to the fraudster, who promptly vanished with it. The oddity of this case is that the buyer did indeed occupy the house and the original mortgage for the seller has been paid ever since.  So there's no basis for a possession order by the first mortgage lender and the second mortgage lender does not have a registered charge to enforce!

Then the Nationwide sued Mr.Wilkes firm.  Mr. Wilkes was said to have undertaken in his retainer with the lender to obtain a registered first charge for them and had, in breach of contract, failed to do so.  It was said that his releasing the completion money without obtaining that charge meant that he was in breach of trust. He was trustee of the completion money, holding it for a specific purpose and on specific terms.  His breach of those terms was a breach of trust.  Mr. Wilkes argument was simple - I did due diligence on the "solicitor" I believed I was dealing with.  I followed a perfectly normal conveyancing protocol.  I had an undertaking from the other side to discharge the existing charge.  It wasn't my fault I was dealing with a crook!  The case turned at first instance on whether it was reasonable for Mr. Wilkes to have acted as he did.  The judge at first instance decided that he had not received sufficient to amount to an apparently satisfactory undertaking from the rogue, so he had not acted reasonably.

It probably comes as some sort of relief, therefore, to learn that the Court of Appeal disagreed.  Well a relief to solicitors, anyway.  The fact was that he did have in writing confirmation that the original mortgage would be discharged and that seemed to be from another solicitor.  He was not to know that he was dealing with a rogue.

So why is this case worse than the previous one?  Well, in this instance a competent conveyancer, taking the usual approach to a purchase, was defeated in his precautionary steps because the SRA website, which conveyancers are urged to consult, was simply wrong.  It is deeply troubling that fraudsters are aware of what they need to do to stay ahead of the game and the SRA was so lacking in alertness that he was able to get them to add credibility to his scam.  Let's hope things have really been tightened up and this sort of farce cannot be repeated.

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3 comments:

  1. Jonathan, the fraudsters will always be one step ahead of the authorities and publishing guidance and protocols openly online may be transparent but also is cream for the cat as you say. Anything like this should be on a secure website which only Solicitors can access. However that would not get a round a Solicitor being bought for the information.

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