Professional Negligence against Property Conveyancers
Problem: In a notable instance of professional misconduct, two licensed conveyancers, James Marshall and Jeremy Kotze, breached the ethical and legal standards crucial in conveyancing.
Outcome: As a result of their actions, the Council for Licensed Conveyancers (CLC) took decisive action by permanently disqualifying both Marshall and Kotze. Alongside the disqualification, they must pay substantial fines and legal costs, reflecting the severity of their misconduct.
The Investigations and Decision
The Council for Licensed Conveyancers (CLC) described this case as “one of the most serious cases” they have ever seen. The case involving Marshall and Kotze was a complex one, marked by a series of violations against the CLC’s code of conduct and anti-money laundering (AML) rules.
The panel’s investigation revealed that they overcharged clients, participated in questionable Stamp Duty Land Tax (SDLT) avoidance schemes, and actively obstructed a client’s complaint. One of the most concerning aspects was their involvement in a scheme that included obstructing a client’s access to her file, which contained forged signatures. The case also brought to light severe issues with AML compliance, conflicts of interest, and unethical billing practices.
The CLC adjudication panel found them guilty and permanently disqualified them from practising. This decision was reached after a thorough investigation into their conduct as part of Stratega, an alternative business structure that ceased trading in June 2022. The firm had been under the CLC’s scrutiny for a couple of years, operating with around 10 staff from offices in Buckhurst Hill and Cheam.
The panel uncovered a range of serious issues in their conduct, including an unenthusiastic approach to AML compliance with poor client due diligence and wealth checks. In one instance, they transferred £2 million for a Qatari client without proper documentation, and in another case, they accepted insufficient information for a source of funds check.
The panel also highlighted the solicitors’ perception of their firm as low-risk for money laundering despite dealing with high-risk scenarios, such as transactions involving developers and overseas investors. This, according to the panel, demonstrated a lack of understanding of the risks involved.
Conflicts of interest were evident in their dealings, with Marshall supervising an unauthorised caseworker at Stratega who worked for the other side in multiple transactions. The panel questioned Marshall’s comprehension of conflict rules, especially considering Kotze’s dual role as the MLRO, creating a potential conflict of interest.
On billing, the panel revealed that Stratega had planned to charge £1,000 per file but attempted to maximise charges when this plan fell through. The lack of a systematic approach to billing and the absence of evidence for additional work raised further concerns.
In a public statement the CLC stated that:
“The panel found that there was no systematic approach to the respondents’ billing of these files, and there was no evidence to support the additional work billed… ‘It concluded that the respondents had planned on being paid £1,000 on each separate file, and when it became clear that was not to happen, they sought to charge as much as they could on the cases on which they had been instructed.'”
Furthermore, the solicitors facilitated SDLT avoidance by allowing subsidiary companies to advise on notional sub-sales to conveyancing clients. The most disturbing aspect involved obstructing a client’s access to her file and lying to her and the CLC about its destruction.
The panel said it “found this conduct to be extremely serious, and very far below the standard expected of licensed conveyancers.”
This client had concerns about an SDLT avoidance scheme and alleged forged signatures in the case files. The panel deemed this conduct extremely serious and below the standard expected of licensed conveyancers:
“The property had been bought with her husband and was part of the settlement when they divorced. Having initially been given digital access to the case file, the client raised concerns that she was signed up to an SDLT avoidance scheme about which she had no knowledge and claimed there were at least two forged signatures in the file. She received no response and could not access the digital file when she tried to again later in the year. She was told her file had been destroyed, but the panel found this was not true. The solicitors also lied to the CLC about the matter.”
As a consequence, the panel ordered permanent disqualification for Marshall and Kotze, emphasising the need to protect the public and uphold the profession’s reputation. They were also fined £10,000, and they were collectively ordered to pay costs of £44,000.
Assistance of Regulatory Outcomes in Professional Negligence Claims
A regulatory outcome, like the disqualification imposed by the CLC, can significantly bolster a professional negligence claim against a conveyancer. Such an outcome serves as a powerful piece of evidence, as it is an official recognition of misconduct or failure to adhere to professional standards. It provides a solid foundation for a legal claim, indicating that the professional in question has breached their duty of care. Clients or other affected parties can leverage this outcome to demonstrate negligence in their legal pursuit.
Moreover, a regulatory finding can help in quantifying damages, as it often includes a detailed account of the misconduct and its impact. In essence, a regulatory outcome provides a precedent and factual basis that can streamline and strengthen a professional negligence claim.
This recent case serves as an example of the severe consequences of conveyancer negligence and the importance of maintaining ethical standards in the profession. It highlights how important it is to carry out due diligence when choosing someone to handle life-changing transactions.
Our expert negligence lawyers typically adopt a parallel strategy of pursuing a regulatory complaint and professional negligence claim against the property professional where there are breaches of the regulatory codes, and to protect the public from further wrongdoing by the professional.
Common Examples of Negligence against Conveyancers
Negligence in conveyancing transactions can manifest in several ways, including:
- Failing to extend period to complete property purchase
- Failing to provide an accurate surveyor inspection report
- Failure to correctly advise on the stamp duty tax due (including any failures to make enquiries of any properties owned abroad)
- Failure to claim relief for Multiple Dwelling Relief (MDR)
- Failures or errors in drafting the contracts or lease documentation
- Missing the stamp duty holiday
- Inadequate AML checks
- Conflicts of interest
- Incorrect surveyor inspection report
- Incorrect/negligent valuations
- Failing to identify defects and restrictive covenants
- Not checking charges and restrictions on leasehold homes
- Failing to advise on boundary issues
- Failing to check ‘good title’
- Failing to identify hazardous materials
- Failing to provide an adequate report
Case Example – £75,000+ Successful Conveyancer Negligence claim
Our professional negligence lawyers acted for a construction company that purchased the freehold of a property located in London. However, the conveyancing solicitors acting in the property purchase failed to properly alert our client and advise that there were restrictive covenants which significantly affected the freehold reversion value of the property.
Our lawyers were instructed by the construction client and successfully settled the claim during the pre-action phase as the insurer’s solicitors sensibly admitted liability early without court proceedings having to be issued by our client.
The claimant client left the following feedback for our lawyers:
“Very satisfied with the way that Karim and his team took hold of a messy conveyancing professional negligence claim, and progressed it through to an amicable settlement in just over 6 months. Professional, courteous, knowledgeable, and also pragmatic with advice and strategy. I would not hesitate to recommend.”
If you have a professional negligence claim against a property professional that you would like to discuss with our expert negligence solicitors, please do not hesitate to call us for a Free Consultation on 0207 459 4037 or complete our booking form below.
