On the hook for another’s fraud — Santander (UK) plc v RA Legal Solicitors

By Hugh Evans and Sharon Duncan

In Santander (UK) plc v RA 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 section 61 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 it could not claim the benefit of the section.

In May 2009, RA Legal was instructed by the purchaser and Santander in connection with the purchase of a residential property. The purchase price was £200,000 for which Santander was lending £150,000. Sovereign Chambers was 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.

The standard terms upon which Santander instructed RA Legal required the firm to hold Santander’s £150,000 on trust until completion. As RA Legal released Santander’s advance to Sovereign without ‘completion’ (as defined by the Court of Appeal in Lloyds TSB PLC v Markandan & Uddin [2012] EWCA Civ 65) ever taking place, Santander sued RA Legal for breach of that trust…

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