Industry awaits Dreamvar judgement following much anticipated hearing

Property professionals are now awaiting the judgement of the Dreamvar (UK) Limited -v- Mishcon De Reya and others and P & P Property Limited -v- Owen White & Catlin LLP and others following last week’s much-anticipated hearing.

An intervention from the Law Society saw the Court of Appeal hear that smaller firms could be priced out of the conveyancing market if the decision over a fraudulent property purchase is able to stand.

The controversial ruling was made last year, where firm Mishcon de Reya was ordered to pay over £1 million after one of its clients was tricked into purchasing a property from a fraudster.  The judgement sounded alarm bells for many professionals in the conveyancing market, indicating that the solicitors of the buyer would be liable for the losses in such cases.

According to the Gazette, the hearing saw Mishcon de Reya contest the alleged failure to secure the undertaking from the supposed vendor’s solicitors that reasonable steps had been taken to establish the client’s identity.

Highlighting the potential consequences of the appeal being rejected, the Law Society sought to intervene.

In a written submission, David Holland QC of Landmark Chambers also drew attention to the possible impact on insurance premiums in cases one solicitor is held liable, but where neither party is at fault. According to the Gazette, this read: ‘If either [solicitors] are held liable in circumstances where neither has been at fault, then there is a possibility that the insurance premiums of those conducting conveyancing business, and thus the cost to the public of residential conveyancing, will rise.

‘While larger firms may be able to absorb such costs and/or adapt to continue to do business in an economic way, the Law Society fears that this may drive smaller firms out of the market, thus reducing choice.’

Chancery Lane also stated that the rejection of the appeal could bring changes to conveyancing.

Taking the view that the ruling will inevitably impact on other areas of law too was Steven Porter. The Partner and Commercial Practice Group Leader from JPC Law is also a legal representative of P&P Property Limited. Outlining two facts which he believes are irrefutable, he stated that:

  • both P&P and Dreamvar are totally innocent parties who were in no position to prevent the frauds
  • whatever the outcome of the case, a party or parties will emerge from case carrying the loss arising from the fraud

As well as acknowledging the difficulty in identifying a solution, he also highlighted that the measures to make a property less vulnerable to fraud are not watertight.

As an example, he referred to fraudulent transactions which are registered at HM Land Registry, stating that as the losing party can apply for compensations, it largely provides insurance against fraud. However, where the fraud emerges after completion but prior to registration, this insurance will not apply.

One suggestion he put forward was to amend the Conveyancing Quality Scheme Protocol, proposing that it should be compulsory for a buyer to take out fraud insurance on every transaction.

Whilst stating that this would not provide the perfect solution, he noted that it would provide a fairer means of dealing with the parties involved.


1 Comment

  • test

    What fraud insurance is Steven Porter talking about? Following the initial decision becoming known, CLI and First Title were still offering property buyers policies which had been available for many years which covered amongst other things the result of buying from a fraudulent seller. I effected a few of these policies for clients with CLI at the time, but it soon became clear that the insurance company had no idea what it was dealing with and asked questions the replies to which wd be of no value if they came from a fraulent seller. Both companies discontinued the policies in about March 2018. Prior to this, because of the large amount of extra work involved in dealing with the insurance company’s enquiries, I started telling clients I would make an additional charge of £250 plus VAT to investigate the fraud policy but absolutely no-one wanted to take this up.

    If the Dreamvar judgement is upheld, then, unless the insurance companies are currently dreaming up a sensibly priced universal policy for buyers, then the only solution I can see is for Solicitors to maintain a mutual fund to bail out firms who weren’t at fault but are found to be liable anyway. The unenviable position at the moment is that to cover myself, I have to be honest with my buyer clients and tell them that I don’t have any means at all of establishing whether a client of another solicitor is genuine or fraudulent and that they should employ a reputable firm of private investigators to make enquiries for them.

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