The Court of Appeal has reversed a ruling that held a solicitors’ firm liable for a loss after being tricked by a bogus practice.
The High Court had ruled that Davisons Solicitors of Sycamore House, Calthorpe Road, Edgbaston had to repay £185,620 to the Nationwide Building Society, but the appeal court yesterday overturned this decision.
They said that whilst the firm had committed a breach of trust it should be excused and relieved of liability for it.
In the case a solicitor called Mr Gill established a properly authorised practice known as Rothschild at Pitman Building, Corporation Street, Birmingham.
Unfortunately, in October 2008 someone pretending to be Mr Gill notified the SRA of an intention to open a branch office of the Rothschild practice in Small Heath, Birmingham.
The SRA did not recognise that the source email address was not the same as that previously used by the practice and included the supposed new office on the Law Societies ‘Find a Solicitor’ website from the end of October 2008.
This branch office subsequently defrauded Davisons Solicitors who believed they were interacting with a legitimate entity.
This fraud led to Nationwide Building Society seeking damages of £185,620.00, from Davisons.
Giving judgment yesterday in Davisons Solicitors v Nationwide Building Society  EWCA Civ 1626, the Chancellor of the High Court Sir Andrew Morritt, sitting with Lord Justices Sulllivan and Munby, said: “The loss sustained by Nationwide was caused by the fraud of an unconnected third party.
“Even if Davisons had insisted on answers to requisitions on form TA13 and on separate written undertakings it is probable that the impostor would have complied, the matter would have proceeded to apparent completion by post and the impostor would have disappeared with the balance of the purchase money.
“The lapse from best practice, if any, did not cause the loss to Nationwide. Given that Mr Wilkes acted both honestly and reasonably I can see no ground on which Davisons should be denied relief from all liability.”
Nationwide have said they are considering what action to take following the judgment.
The Law Society said of the decision: “The judgement provides important clarification about conveyancing practice.
"We will study this and consider the ramifications for conveyancing practitioners and the extent to which the Society’s forms and guidance need amendment in the light of it.”