Court of Appeal holds law firm accountable for lender’s loss

The Court of Appeal has handed down its decision in Santander UK plc v RA Legal Solicitors. The decision will be much welcomed by lenders, following a string of breach-of-trust claims by lenders in which the courts have granted the completing conveyancer’s relief under section 61 of the Trustee Act 1925.

Section 61 of the Trustee Act 1925 absolves a trustee from personal liability for breach of trust if he has acted ‘honestly and reasonably’ and ‘ought fairly to be excused’ for breach of trust.

RA Legal was instructed to act for both the borrower and Santander (UK) in relation to the purchase of a London property. The vendor’s solicitor, Sovereign Chambers, did not pay any money to the vendor or discharge the mortgage registered against the property. Santander therefore received no charge over the property and the borrower was not registered as proprietor. Santander brought a claim for breach of trust against RA. Although RA had acted honestly throughout, the court at first instance held that RA had acted in breach of trust in releasing the funds without having obtained a legal charge over the property. However, the judge used his discretion under section 61 to relieve RA from liability for the breach of trust because he did not consider that RA’s conduct was sufficiently connected with Santander’s loss. While RA had departed from best practice, nothing it could have done would have prevented the fraud…

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