In a society where fraud is becoming more prevalent, we are warned that vigilance needs to be tighter than ever. As conveyancers, we adhere to strict compliance, regulatory and due diligence rules including ID, residence and bankruptcy checks and meeting our clients face to face to verify their identity but even this is not a safeguard to fraud.
On 15th May 2018, the Court of Appeal handed down its long awaited judgment on the case of Dreamvar (UK) Ltd v Mishcon De Reya (now commonly known as the “Dreamvar case”). This controversial and highly debated case which sought to clamp down on fraudulent sellers has gone further to clarify that both the solicitors representing the seller and the buyer bear liability as to risk in a fraudulent transaction.
The buyer, Dreamvar, a small property company purchased a residential property from the purported seller who turned out to be a fraudster. The fraudulent seller presented the driving licence and TV licence of the true owner of the property having obtained it and represented this to his solicitor after having these certified by another firm. The obligations of law firms are to check the identity of their client by seeing the originals of identification documentation or certified copy documentation by another solicitor having seen the originals, the latter of which occurred in this case. The solicitors certifying the ID documents did not pick up on the discrepancies and thus the fraudulent seller was able to present this to the solicitors instructed to carry out the conveyance. The transaction proceeded to a swift completion and the completion funds transferred to the fraudster.
The judgment handed down in this case held that solicitors representing fraudulent property sellers share liability with the solicitors acting for the innocent buyers. This means that responsibility to verify parties extends to both solicitors. Although, the firms were acting honestly in this case, however the case turned on breach of trust by both the firms acting in the normal course of business.
This blog has been prepared on 11th June 2018 by Dhrina Solanki, a Solicitor at MTG Solicitors.