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Honest Law Firm Excused from Breach of Trust Liability

In the context of a residential property transaction, a firm of solicitors that released £200,000 in bank funds without authority after falling victim to a sophisticated fraud has been excused from any potential liability to Banco Santander by the High Court on the basis that it acted honestly and reasonably.

SantanderThe firm had been deceived by a forged document, emanating from an apparently reputable source, into releasing the funds at the behest of persons who claimed to act for the vendor. The result of the money’s release prior to completion was that the bank never obtained a charge over the property.

The firm acknowledged that it had been at fault in certain respects and the court found that, in deliberately releasing the funds in the mistaken belief that completion would swiftly follow, the firm had acted in breach of trust. However, the court went on to rule that there was no causal connection between the criticisms made of the firm’s conduct of the transaction and the bank’s loss.

In dismissing the bank’s restitution and damages claims, the court also ruled that the firm had acted honestly and reasonably and ought fairly to be excused from the consequences of its breach of trust by operation of section 61 of the Trustee Act 1925.

Noting that the law generally confines the responsibility of professional people to a duty to take reasonable care, the court found that none of the criticisms of the firm were sufficiently serious, or involved such a departure from ordinary and proper standards, as to cut it off from the court’s discretion to relieve it of liability.