Solicitors would be well-advised to refuse to pay client funds to third parties

If, during the course of a retainer, a solicitor becomes aware of a risk or potential risk of which the client may not be aware, the solicitor is under a duty to bring it to the client’s attention: Credit Lyonnais SA v Russell Jones & Walker [2002] EWHC 1310 (Ch); [2002] 2 EGLR 65. However, solicitors are not normally under a duty to advise on the commercial wisdom of a transaction, particularly if clients are experienced businessmen or women. The question that arose in Lennon v Englefield [2021] EWHC 1473 (QB); [2021] PLSCS 105 was whether a conveyancer should have investigated an individual, or a firm, to whom she had been directed to pay the proceeds of the sale of a property worth £1.25m. The individual had assisted the seller with the sale and all instructions and paperwork had been channelled through him. The seller’s solicitor was unable to provide any paperwork indicating that she had checked the seller’s identity. Nor did she query references to the seller’s mother. Had she done so, she might have discovered that the beneficial owner of the property was not the seller, but the seller’s mother. However, further enquiries would have established that the seller’s mother had directed the sale and appointed the agent herself, because he had been a trusted adviser since 2004. Furthermore, she was happy for the proceeds of sale to be paid into his client account when the transaction completed in 2013. Unfortunately, the agent was not the solicitor that the seller’s mother believed him to be. He was struck off the roll in 1991 and had served a six-year prison sentence for stealing £900,000 from his firm’s client account. And, when the seller’s mother asked for her money in 2017 – having been content to leave it in his safekeeping and having received just £216,259 from him, which he paid to her as and when she needed money – the balance had disappeared. An internet search would have revealed the agent’s past, and a search against his firm, a limited company, would have revealed that it was balance sheet insolvent. But the High Court ruled that the seller’s solicitor was not liable for the loss of the money. Non-compliance with money laundering regulations did not give rise to a cause of action. Such duties are owed to society as a whole to prevent money laundering, and the client is actually the person under scrutiny (P&P Property Ltd v Owen White & Catlin LLP [2018] EWCA Civ 1082; [2018] EGLR 27), as opposed to someone who can rely on the rules to sue his or her own solicitors if such checks are overlooked. And the question of undue influence did not arise, because there was no indication that the seller was giving the agent the money personally. The conveyancer did not know that the seller and her mother believed the agent to be a solicitor. And clients are entitled to choose their own facilitators. Furthermore, it was not part of the retainer, nor was it reasonably incidental to the work, to investigate the agent or his company. Nor was it necessary for the conveyancer to obtain verbal confirmation from the seller (to whom she had, apparently, never spoken) of her written instructions to send the proceeds of sale to the agent because the seller’s instructions were clearly expressed and it was not the conveyancer’s duty to proffer advice about the commercial wisdom of her client’s actions. Allyson Colby, property law consultant