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Solicitor's breach of trust and negligence

This page deals with three similar situations:
  • Mortgage fraud - relief from liability: The trust imposed on a mortgage advance sent to solicitors could only be discharged by completion of the purchase or the return of the money to the lender. Since this had not occurred the solicitors were in breach of trust. However, they would be relieved from liability under s61 of the Trustee Act 1925. They had acted honestly and reasonably, even if they had not complied with best practice, and ought fairly to be excused.
  • Solicitors' negligence - equitable compensation for breach of trust: Solicitors acted in breach of trust in relation to the circumstances under which they parted with a mortgage advance. Where some security was obtained, equitable principles of compensation required the court to have regard to causation and remoteness. Compensation would be assessed as the loss in value of the lender’s security, not the whole amount of the advance.
  • Failure to achieve completion: A solicitor who parted with a mortgage advance without achieving completion committed a breach of trust and would ordinarily be liable to repay the advance, but on the facts the solicitor had acted honestly and reasonably and ought fairly to be excused.

Mortgage fraud

Relief from liability under s61 of the Trustee Act 1925

Davisons Solicitors v Nationwide Building Society
[2012] EWCA Civ 1626

Summary

The trust imposed on a mortgage advance sent to solicitors could only be discharged by completion of the purchase or the return of the money to the lender. Since this had not occurred the solicitors were in breach of trust. However, they would be relieved from liability under s61 of the Trustee Act 1925. They had acted honestly and reasonably, even if they had not complied with best practice, and ought fairly to be excused.

Facts

The case involves a mortgage fraud involving a fictitious branch of a firm of solicitors, purportedly established by a genuine firm, and registered with the Law Society and Solicitors Regulation Authority.

A purchaser obtained an offer of loan from ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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