Court Of Appeal Dreamvar And P&P

When a villain impersonates a property owner and runs off with the purchase money, which honest party should be liable for the loss: the true owner of the property, the seller's solicitor, the estate agent, the buyer's solicitor or the buyer?

This was the question for the Court of Appeal in the long-awaited decision of Dreamvar (UK) Limited v. (1) Mishcon de Reya and (2) Mary Monson solicitors and P&P Properties Limited v. Owen White and Caitlin.

The answer is, in short, that solicitors acting for both the buyer and the seller may be liable, but not the true owner, the buyer or the estate agent. While the outcome of the judgment may be straightforward to understand, the fallout arising from it may prove to be more problematic.

Facts

Both cases involved innocent parties who thought they had purchased properties in circumstances where a solicitor purported to act for the genuine owner. However, after the contractual completion date, but before registration of the transfer at the Land Registry, it transpired that the sellers were fraudsters who had disappeared with the money. Cumulatively, the purchasers, both small family companies, lost in excess of £2 million and unfortunately received no asset in return.

First instance

In the first claim, Dreamvar, the buyer issued claims against:

the seller's solicitor, Mary Monson, for breach of trust, breach of undertaking (as stipulated by the Law Society's Code for Completion by Post (the Code)), breach of warranty of authority and also negligence (which Dreamvar sought to be added on appeal); and its own solicitor, Mishcon, for negligence and breach of trust. All the claims against the seller's solicitor failed. Mishcon were held not to be negligent, but were held in breach of trust. Despite Mishcon having acted honestly and reasonably, the High Court refused to grant relief from its breach (under section 61 of the Trustee Act 1925) on the basis that it was in a better position to absorb the loss as it had insurance.

In the second claim, P&P, the buyer issued claims against:

the seller's solicitor, Owen White, for breach of warranty of authority, negligence, breach of trust and breach of undertaking; and the estate agent, Winkworth, for breach of warranty of authority and negligence. All claims against both defendants failed.

Court of Appeal

Dreamvar appealed the finding that Mishcon was not negligent and Mishcon appealed the section 61 finding.

P&P appealed the judgment on all the issues. Winkworth, the estate...