A solicitor acting for its client is not necessarily impliedly warranting the identity of his client, nor aspects of the underlying transaction, only that he has authority to act on the client's behalf.
The claimant in Excel Securities Plc V Masood & Ors, agreed to make a short-term commercial loan to the borrower upon terms including satisfactory proof of identity and residence. The loan was to be secured on the borrower's property. The borrower instructed the defendant solicitors to act on his behalf in the transaction and supplied copies of his driving licence and utility bills and original identification documents to them. The defendants advised the claimant's solicitors that they were instructed to act by the borrower.
Following completion of the loan it became apparent that there had been a fraud and that the borrower had stolen the property owner's identity. The charge over the property was vacated. The claimant then commenced proceedings for damages for breach of warranty of authority against the defendants. They alleged the defendants had not acted for the real owner of the property and had wrongly warranted that the identity of their client was the property owner and that the property owner had signed the facility letter. The claimant sought summary judgment. The defendants argued that all they had warranted was that they had authority to act on behalf of a client who represented himself to be the property owner.
The court held that to recover damages, the claimant had to show that it had relied upon the warranty allegedly given and had not relied upon its own enquiries as to the identity of the borrower. This issue could only be dealt with at trial with all the available evidence. It was not clear here that the defendants had impliedly warranted either the identity of their client or his title to the property. They had warranted only that they had authority to act on behalf of their client. The court should be slow to impose an absolute, unqualified obligation amounting to a guarantee of the identity of a client and his title to property. Far from the defendant having no real prospect of successfully defending the proceedings, the court felt that the claimant itself was unlikely to succeed.
Things to consider
This case makes it clear that solicitors innocently acting for a fraudster in such a situation are not always going to be the easy target for recovering damages where the fraudster has disappeared. A person acting on behalf of another is not normally deemed to warrant any particular attributes of his principal. The default position is that professionals are expected to exercise reasonable care in undertaking their obligations. Knowledge of special facts, or clear language, would be needed to impose any stricter obligations upon them.