Beware The Fake Seller

To quote from the Nazi dentist played by Laurence Olivier in the movie Marathon Man; "Is it safe?"; well for a buyer's solicitor it may not be if there is a fake seller.

The judgment in Dreamvar (UK) Limited v. Mishcon de Reya is controversial, and will almost certainly be appealed, but it tells us many things about the risks of a conveyancing identity fraud, and gives pointers as to steps to mitigate them, in conveyancing transactions.

In summary; a house owned by the real Mr H was vacant. The fake Mr H obtained (real) identity documents and these satisfied MMS solicitors who accepted him as a client, as did an estate agent, for the sale of the house. Mr V's offer for it was accepted and he instructed his solicitors Mishcon de Reya to act on a quick purchase by his company Dreamvar, with apparently few if any of the usual searches.

The completion money was paid by Mishcon de Reya to MMS, who paid it on as instructed by the fake Mr H to another firm, and then it went to China. Much credit goes to the Land Registry for (unlike the two firms of solicitors) becoming suspicious; it could not correlate the fake Mr H's address with the real Mr H of the registered title. The real Mr H, it turned out, had been a victim of identity theft. The transaction was fraudulent and Mr V had lost his money.

His claim had several strands, but the one that succeeded was against his own solicitors Mishcon de Reya, for breach of trust, in that they had in breach of an implied term of their retainer released monies on a not genuine completion. Mishcon de Reya were neither dishonest nor negligent, and this claim against them was admitted on the balance of relative unfair consequences; Mishcon de Reya had insurance and Mr V did not and recovery from his solicitors was his only avenue for restitution of his lost money. The consequence for Mishcon de Reya though is a real cost to their excess and possibly their claims record.

It was admitted that MMS did not comply with "know your client"...