An estate agent and a law firm have successfully defended a claim brought against them after they acted for a bogus seller.

The case considered for the first time the liability of an estate agent – in this case, a Winkworth franchisee –  to the buyer.

It also seems to have said that an agent can only do so much to probe the identity of the seller, its client. In this very important case, please also see Rob Hailstone’s commentary that immediately follows this story.

The property in question was unoccupied and sold to the innocent purchaser for £1.03m, with the sale completing in December 2013. The £927,000 balance of funds was transferred to the imposter’s bank account in Dubai.

The fraud was only discovered when the real owner walked past his house the following month, only to see builders ripping out the kitchen.

By that time, the fraudster and the money had long gone.

A claim against Crownvent trading as Winkworth, and the law firm Owen White & Catlin, was brought by the purchaser, P&P Property.

The background to the case, P&P Property Ltd v (1) Owen White & Catlin (2) Crownvent Ltd t/a Winkworth, was that the bogus seller posed as Mr Harper who was the real owner of the property in Hammersmith, London. The bogus seller had stressed wanting a quick sale.

The claim made against both Winkworth and the law firm was that they had breached their duty of care. A claim was also brought against the solicitors for breach of warranty of authority and breach of trust.

The law firm had been instructed by someone who said they were Mr Harper, but was not the owner of the property.

However, Deputy High Court Judge Robin Dicker ruled that while solicitor checks are designed to reduce the risk of fraud, they could not eliminate it. The law firm had carried out the usual checks on “Mr Harper’s” identity. The firm had not given a warranty that the client was the registered title holder.

The Judge also found that Winkworth was not in breach of warranty of authority, although he said there was nothing in principle to prevent such a claim.

The court also accepted that Owen White & Catlin had acted for the seller, not the buyer.

P&P contended that they had relied on the representations of the law firm and that there was a duty of care towards them.

However, Judge Dicker rejected this, saying that it was P&P’s own solicitors who owed the purchasers a duty of care. The judge said that Winkworth had acted for the seller and not “crossed the line” where it had assumed a duty of care to the seller.

Crownvent, trading as Winkworth, was represented by Mills & Reeve, who said that if a seller’s solicitor or estate agent have to make good the losses, then “they are equally innocent victims”.

The solicitors argued: “No matter how good the money-laundering checks, sophisticated frauds will still occur.

“It therefore feels like an area where some statutory scheme should step in, or where the insurance market should find a solution to protect buyers.

“Until then, the decision will be of considerable relief to solicitors, estate agents and their insurers.”

The ruling in the case is different from that earlier this year which found both the buyer’s and seller’s solicitors equally liable in breach of trust to a buyer who was the victim of a property fraud: Purrunsing v A’Court & Co and House Owners Conveyancers Ltd.

Yesterday evening, a spokesperson for Winkworth told EYE: “This matter involving one of our franchisees has only recently been brought to our attention. However, on review of the judgement, the ruling is clear that there is no case to answer with all claims made against the Winkworth franchisee failing.  We have no further comment on the matter at this time.”

See also next story.