P&P Property Limited v Owen White & Catlin LLP Dreamvar (UK) Limited v Mishcon de Raya [2016] EWCA Civ. 1082

P&P Property Limited v Owen White & Catlin LLP and Dreamvar (UK) Limited v Mishcon de Reya [2018] EWCA Civ. 1082 were conjoined appeals that raised common issues about the liability of solicitors and estate agents in cases involving identity fraud. In both cases a fraudster ("F") posed as the owner of a property, instructed solicitors and selling agents to act for him, exchanged contracts and completed in accordance with the Law Society Code for Completion by Post (2011) ("the Code"). The frauds were discovered prior to registration, but inevitably by that point the purchase monies had disappeared.

The Dreamvar cases consider important questions concerning the scope of solicitors' trust obligations and duties of care, wherever they are in the conveyancing chain, together with issues of warranty of authority and the meaning and effect of the Code. Perhaps most importantly, they gives a clear steer as to how the Court of Appeal sees the role of section 61 of the Trustee Act 1925 when solicitors seek to be relieved from liability for breach of trust.

David Halpern QC of 4 New Square represented Dreamvar (UK) Limited and Ben Patten QC and Katie Powell, also of 4 New Square, represented Owen White & Caitlin LLP and Mary Monson Solicitors Limited. The decision of the Court of Appeal is considered by Nicole Sandells QC and Nicholas Broomfield.

The facts and the decision of the Court at first instance

The facts of the two cases are remarkably similar. In P&P Property Limited v Owen White & Caitlin LLP a developer, P&P Property Limited ("P&P") made an offer to purchase 52 Brackenbury Road ("52BR"), which was registered at HM Land Registry in the name of Mr Harper. F, pretending to be Mr Harper, telephoned Owen White & Caitlin LLP ("OWC") first indicating that he intended to raise a mortgage against 52BR, and later instructing OWC that he intended to sell it. F instructed Winkworth that he required a rapid sale, as a result of which 52BR was marketed for 75% of its market value. Winkworth relied upon OWC to check the identity of the vendor.

OWC failed to carry out comprehensive identity checks, and there were a number of inconsistencies and discrepancies in the information provided to OWC (e.g. various signatures were inconsistent, F gave different addresses and bank statements provided by F to OWC should, in the trial judge's judgment, have led OWC to make further enquiries). Nevertheless, on 4 December P&P made an offer to purchase 52BR which F accepted.

On 12 December the deposit of £103,000 and a further sum of £327,000 provided by the mortgagees was transferred to OWC. On the basis of a request from OWC that this money could be used to complete the purchase of a property in Dubai, P&P's solicitors agreed that the £430,000 should be held by OWC as agent for the vendor. The balance (£600,000) was transferred to OWC on 12 December and the net proceeds of sale were paid to F on the same day. The contract and transfer documentation were signed for F by OWC. F's fraud was discovered on 17 January 2014 following an application to register P&P's title at HM Land Registry.

After discovery of the fraud, P&P brought claims against OWC relying on breach of warranty of authority, breach of undertaking, negligence and breach of trust. It also sued Winkworth for breach of warranty of authority and in negligence. In summary, P&P alleged that both OWC and Winkworth held themselves out as having the authority of the true owner, the real Mr Harper, and were negligent in not carrying out adequate identity checks on F and (in the case of OWC) did not have authority to disburse the purchase monies to their client other than on completion of a genuine sale. At first instance Mr Robin Dicker QC dismissed each and every one of P&P's claims ([2016] EWHC 2276 (Ch)) and P&P appealed the decision to the Court of Appeal.

In Dreamvar (UK) Limited v Mishcon de Reya a small developer ("Dreamvar") was informed by estate agents Douglas & Gordon ("D&G") that a client was looking for a quick sale of a property at 8 Old Manor Yard, Earl's Court, London SW5 ("8OMY"). Dreamvar inspected 8OMY, which was vacant, and had an offer of £1.1m accepted.

Dreamvar instructed Mishcon de Raya ("Mishcon") to act on the purchase, acknowledging that there would not be time to carry out all of the necessary searches. Mishcon's letter of retainer did not expressly deal with the terms and circumstances under which the purchase monies would be held and/or released to the vendor or his solicitors.

D&G sent a memorandum to Mishcon naming Mr David Haeems as the vendor and stating that his solicitors were Mary Monson Solicitors Limited ("MMS"). On 3 September MMS indicated that it had not received proof of Mr Haeems' ID and was therefore unable to send out the contract pack. In fact, MMS never met Mr Haeems and took no proper steps to verify his identity. MMS acted for F, and not the true Mr Haeems, the owner of 8OMY. Notwithstanding this, on 11 September Mishcon received from MMS the draft contract, office copy entries and TA06 and TA10 forms, each apparently signed by Mr Haeems.

It was agreed that completion would take place in accordance with the Code and that MMS would send the purchase monies to another firm of solicitors, Dennings. On 17 September Mishcon sent the purchase monies to MMS on terms that MMS hold it to Mishcon's order pending obtaining indemnity insurance to cover the risk that there were adverse rights of way over 8OMY. That took place later the same day, and exchange and completion took place simultaneously that afternoon.

Dreamvar started work on 8OMY, but after an application was made to register...