bto solicitors - Corporate & Commercial Business Lawyers Glasgow Edinburgh Scotland

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Landmark Decision in Case of Identity Fraud

06 September 2012

A landmark decision was announced on 5 September 2012 by the Inner House of the Court of Session in Edinburgh in relation to a case involving the stolen identity of innocent individuals.

At an earlier stage of the case, after hearing all of the evidence, Lord Glennie granted absolvitor (effectively dismissal of the cases) in both actions in which the pursuers, both companies in the business of secured lending to individuals and corporate borrowers, were suing for significant damages against firms of solicitors who had acted for the Borrowers in the loan transactions. Separate solicitors had acted for the Lenders who were pursuing the cases. The Court decision is important as it confirms that there is no material difference between the law of Scotland and the law of England on this matter and, being a decision of the Inner House, it will have wide significance to practitioners north and south of the border.

In the cases of Cheshire Mortgage Corporate Limited v Longmuir & Co and Blemain Finance Limited v Balfour & Manson LLP the claimants sought to sue solicitors who had not acted on their behalf under the principle of acting “in breach of their warranty of authority”.  The claimants argued that the solicitors had warranted that they had authority to act on behalf of the true individuals as owners of the properties over which the loans were to be secured. The Court has held, now at an appeal court level, that all that the solicitors represented was that they held instructions by certain named individuals.  The Court has determined that the solicitors did not warrant that they acted on behalf of the true individuals of those names.

The decision is a triumph for the Law Society of Scotland Master Policy Insurers and bto solicitors’ Partner Derek Allan, who heads up the firm’s band 1 ranked Professional Indemnity team.  Derek, through the Law Society of Scotland Master policy, has been running these cases with Counsel for over five years.

Derek Allan said: “The decision of the Court is significant in the sense that this is the first time that a decision has been handed down by an Appeal Court in Scotland (the Inner House) on this area of the law and it is considered that this is a good and sound decision for the benefit of the profession at large as otherwise, there would be a situation where all solicitors were held to be guaranteeing the identity of their clients.

Identify fraud is definitely a growth area and I am currently dealing with several fraud cases for the Law Society of Scotland Master Policy Insurers. bto is delighted with today’s result as these were the first such cases that had proceeded to Proof on this issue in Scotland.  The decision will be of considerable interest to solicitors in England as well as Scotland who may unwittingly find themselves acting on behalf of parties who turn out to be fraudsters.”

“The level of service has always been excellent, with properly experienced solicitors dealing with appropriate cases" Legal 500

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