Fake house sale alert

Solicitors on both sides can be held responsible for losses incurred in fake house sale scams, according to a landmark Court of Appeal judgment in two joined cases.

Dreamvar UK v Mishcon de Reya & Mary Monson Solicitors [2018] EWCA Civ 1082 concerned property developer Dreamvar’s purchase of a £1.1m mews house. Mishcon acted for the buyer. Mary Monson acted for the vendor. Neither solicitor ever met the vendor, who took fake identity documents to a third firm of solicitors for certification on behalf of Mary Monson.

Only once the sale exchanged and completed was it discovered that the vendor was a fraudster who had impersonated the real owner.

Dreamvar sued Mishcon for negligence and breach of trust and claimed against Mary Monson for breaches of warranty of authority, trust and undertaking. Mishcon claimed against Mary Monson for breaches of trust, undertaking and agency agreement.

The Court of Appeal agreed that Mishcon had acted honestly and reasonably, which meant the court could grant relief against the firm’s breach of trust. However, it declined to do so in view of the catastrophic effect of the fraud on Dreamvar.

The court also found Mary Monson liable for a breach of undertaking, and ordered both firms to share the liability to Dreamvar.

Jerome O’Sullivan, partner at Healys, who acted for Dreamvar, said: ‘Solicitors should review the terms and conditions of their retainers in light of this ruling.

‘When acting for the purchaser, solicitors should make it expressly clear that they will rely on the vendor’s solicitor’s reasonable checks to verify the identity of their client. When acting for the vendor, solicitors should review their exclusion clauses.’

In the second case, solicitors Owen White & Catlin (OWC), who acted for a fraudulent seller, were held liable to repay property company P&P more than £1m that it paid for a property. OWC were found to have held the money on trust for P&P and transferred it in breach of trust since no genuine completion took place.