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Ally Tow
Ally Tow,
SENIOR ASSOCIATE - CHARTERED LEGAL EXECUTIVE
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Auctioneers bear the costs of fraudulent identity
17 October 2012

The High Court has recently been asked to assess the liability of auctioneers who sell property without proper authority.

In Greenslade Estates Ltd (“Greenslade”) v Chana & Strettons Ltd ("Strettons") [2012], the Court found that Strettons were liable to pay damages to Greenslade for losses suffered as a result of the fact that the sale did not complete.

In September 2009 Strettons, a large firm of chartered surveyors and auctioneers, offered a property for sale at an auction. Mr Robert Steinberg, attended the auction on Greenslade’s behalf but the property did not sell as it failed to reach its reserve price. Immediately after the auction, however, Greenslade approached Strettons direct and made an offer to buy the property for £670,000. Strettons, having obtained authority from the seller, accepted the offer and thereafter signed the memorandum of sale as agent for the seller.

Shortly thereafter Strettons were contacted by the first defendant who alleged he was the owner of the property and that he did not want to sell the property. The completion of the property did not take place nor was there any response to Greenslade’s notice to complete. Accordingly, at the beginning of December 2009 Greenslade issued proceedings.

The first defendant filed a defence alleging that he was the owner of the property and that he was not a party to the sale agreement. Another party called Mr Karan Singh had assumed his identity in order to obtain monies by way of a fraudulent transaction.

Strettons had relied on representations made by the fraudulent seller’s solicitors together with photographic evidence provided as regards his identity but accepted that this was no defence to Greenslade’s claim of breach of warranty for authority. As a result, the Court held Strettons liable to pay damages to Greenslade for its loss – i.e. the difference between the value of the property less the agreed purchase price.

In the end the majority of the trial was dedicated to assessing the amount of damages to be paid, Strettons’ alleging that the valuation date should be calculated as at the date when the sale should have completed (i.e. October 2009) and Greenslade relying on the case of Suleman v Shahsavari [1988] alleging it should be the date of the trial (i.e. December 2012).

Having considered the parties’ respective positions the Court found that it would be just for the valuation to be determined as at the date of the trial. The valuation of the property was to be agreed later between the parties but given that Greenslade considered the property to be worth at least £1m at the date of purchase it is likely Strettons had to pay damages of a sum in excess of £330,000.

This case highlights the importance for auctioneers of ensuring they do all that they reasonably can to verify the identity of a seller. To do otherwise would be to risk payment of substantial damages to a purchaser notwithstanding the fact that the auctioneers themselves may be considered as having been innocent victims of fraud.

For more information about the issues in this article to find out more about how the Dispute Resolution team can help you please contact Ally Tow on 0118 952 7206 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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