Identity Fraud Alert!

We have previously written about a number of cases involving fraudsters who sell residential property they do not own (see our Real Estate Bulletin - Summer 2016).

The case of Dreamvar UK Limited v (1) Mischon de Reya (2) Mary Monson Solicitors Limited [2016] EWHC 3316 ch should serve as a warning to all parties dealing in residential property. The claim against two different firms of solicitors arose out of the purported sale of a property by a fraudster. The judgment (which is proceeding to an appeal) has wide-ranging implications in both the property and insurance markets and for estate agents.

The facts

The Claimant, Dreamvar UK Limited ("Dreamvar") was a small property development company. The managing director of Dreamvar instructed Mishcon de Reya (MdR) to advise on the purchase of a residential property in Earls Court ("the Property"). Mr David Haeems was the registered owner of the Property. In September 2014 a fraudster purporting to be Mr Haeems ("the Vendor") offered the Property for sale, marketing it through a reputable estate agent. The Vendor instructed Mary Monson Solicitors ("MMS"), a firm based in Manchester.

Exchange and completion occurred simultaneously on 17 September 2014 following which MdR paid Dreamvar's £1.1 million purchase monies to MMS, who transferred this on to the Vendor. Some months later, but prior to registration, the Land Registry noticed some inconsistencies in the documentation. It was discovered that the Vendor was a fraudster with no proprietary interest in the Property and the Land Registry would not complete the registration. By this stage the Vendor had disappeared, leaving Dreamvar with substantial losses.

Dreamvar sought to recover the losses it had suffered as a result of the fraud from its solicitors, MdR, and from the vendor's solicitors, MMS.

The claim

Dreamvar brought claims against MdR for:

Negligence in failing to advise as to the risk of identity fraud, especially given the unusual features of the transaction, including the speed insisted on. Negligence in failing to obtain an undertaking from MMS that it had taken reasonable steps to confirm the identity of Mr Haeems. Breach of trust in releasing the monies to the fraudulent seller. Dreamvar and MdR brought claims against MMS for:

Breach of an undertaking that it had the authority of the real Mr Haeems. Breach of warranty of authority. In acting for the Vendor it was alleged that MMS had warranted that it had the authority of the...