P&P Property Ltd v Owen White & Catlin LLP
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lord Justice Floyd,Lord Justice Patten |
| Judgment Date | 15 May 2018 |
| Neutral Citation | [2018] EWCA Civ 1082 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/3971, A3/2017/0393 & A3/2017/0506 |
| Date | 15 May 2018 |
and
[2018] EWCA Civ 1082
Lady Justice Gloster
(Vice President of the Court of Appeal, Civil Division)
Lord Justice Patten
and
Lord Justice Floyd
Case No: A3/2016/3971, A3/2017/0393 & A3/2017/0506
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr David Railton QC: HC 2015 002013
Mr Robin Dicker QC: HC 2014 001212
Royal Courts of Justice
Strand, London, WC2A 2LL
Gary Blaker QC and Chris de Beneducci (instructed by JPC Law) appeared for P & P Property Limited
Ben Patten QC and Katie Powell (instructed by BLM LLP) appeared for Owen White & Catlin and Mary Monson Solicitors Limited
Ivor Collett (instructed by Mills & Reeve LLP) appeared for Crownvent Limited
David Halpern QC (instructed by Healys LLP) appeared for Dreamvar (UK) Limited
Jeremy Cousins QC and Peter Dodge (instructed by DWF LLP) appeared for Mishcon de Reya (a firm)
David Holland QC (instructed by The Law Society) provided written submissions on behalf of the Intervener
Hearing dates: 27 & 28 February and 1 & 2 March 2018
Approved Judgment
These appeals raise common issues about the liability of solicitors and estate agents in cases involving identity fraud. In both cases the fraudster posed as the owner of a registered property in London. He instructed solicitors and agents to act for him on the sale of the property and genuine purchasers were found. The purchasers instructed their own solicitors, and proceeded to exchange of contracts and completion in accordance with the Law Society Code for Completion by Post (2011) (“the Code”). Following completion, but before registration of title, the fraud was discovered but the fraudster and the purchase money have, of course, disappeared.
In P&P Property Ltd v Owen White & Catlin LLP the purchaser (“P&P”) brought a claim not against its own solicitors (Peter Brown & Co) but against the vendor's solicitors (“OWC”) relying on breach of warranty of authority; breach of an undertaking; negligence and breach of trust. It also sued the selling agents (Crownvent Limited who trade as Winkworth) for breach of warranty of authority and in negligence. In summary, P&P contend that OWC and Winkworth held themselves out as having the authority of the true owner to conclude the sale of the property; were negligent in not carrying out adequate checks (in accordance with the Anti- Money Laundering Regulations) to establish the identity of their client; and (in the case of OWC) had no authority to disburse the purchase monies to their client other than on the completion of a genuine sale. In Dreamvar (UK) Ltd v Mishcon de Reya the purchaser brought proceedings against its own solicitors (“MdR”) for negligence and breach of trust and against the vendor's solicitors (Mary Monson Solicitors Ltd (“MMS”)) for breach of warranty of authority, breach of an undertaking and breach of trust. It did not allege negligence against MMS but there has been a late application by Dreamvar, which we have heard together with these appeals, for permission to re-amend the particulars of claim to add a claim for damages in negligence.
In P&P the trial judge (Mr Robin Dicker QC) dismissed all the claims against both OWC and Winkworth: see [2016] EWHC 2276 (Ch). P&P appeals against the judgment on all issues. In Dreamvar the judge (Mr David Railton QC) dismissed the claim against MdR for negligence but found that the firm was in breach of trust in releasing the purchase monies in relation to a fraudulent sale: see [2016] EWHC 3316 (Ch). The judge declined to grant MdR relief from the consequences of their breach of trust under s.61 of the Trustee Act 1925. He dismissed all the claims against MMS but indicated that had he found MMS to have been in breach of trust he would have granted relief to MdR (but not to MMS) under s.61. MdR does not appeal the judge's finding that it acted in breach of trust in releasing the purchase monies. But both it and Dreamvar challenge the judge's findings that there was no breach of trust or breach of undertaking by MMS. If successful, MdR will seek relief under s.61 for the same reasons as the judge would have been minded to grant it in such circumstances but Dreamvar opposes this. Dreamvar also appeals against the judge's finding that MdR were not negligent. It contends that MdR should have obtained an undertaking from MMS only to use the purchase money to complete a true sale of the property. This part of the appeal falls away if we conclude (contrary to the judges in both cases) that undertakings to that effect were in fact given by the vendor's solicitors under paragraph 7(i) of the Code.
Dreamvar does not appeal against the judge's dismissal of its claim based on breach of warranty of authority. The solicitor at MdR (Ms Curtis-Goulding) accepted in her evidence that she did not treat MMS as warranting that it had the authority of the true owner to sell the property and did not rely on any such warranty.
The facts
There is no challenge to the findings of fact made in the two cases and I need therefore do no more than to summarise the basic facts as found at trial in order to consider the issues of principle which arise. It will, however, be necessary to refer later to some of the more detailed findings when I come to consider issues such as relief under s.61 and the claim that the vendor's solicitors in each case owed the claimant a tortious duty of care.
P&P
P&P is a property investment company. On 4 December 2013 it made an offer of £1.03m for a property at 52 Brackenbury Road, London W6 which was shown on the register of title at HM Land Registry as having been owned since 1989 by a Mr Clifford Harper. The property was not occupied by Mr Harper and had been let out to a succession of tenants. In July 2013 it was let to someone claiming to be Mr Mark Armstrong. On 20 November 2013 OWC were telephoned by someone who said that he was Clifford Harper who had a property in Hammersmith with no mortgage which was worth about £1.2m. He wanted to raise a loan of £800,000 on the property by way of bridging finance to enable him to buy another property and he wanted to complete the borrowing within 10 days.
The supposed Mr Harper (whom I shall call the vendor) was put through to Ms Joyce Lim. She then emailed to the address he had given her various documents including an anti-money laundering (“AML”) leaflet and informed him she would need to take steps to verify his ID and address. It was evident from the telephone numbers on the client questionnaire form that the vendor either lived or worked abroad. On 26 November he contacted Ms Lim and told her that he would be coming back to the UK at the end of that week and would come to her office. She opened a file in the name of Clifford Harper and told him to bring his passport and two recent utility bills.
An appointment was arranged for Friday 29 November. By then Ms Lim had spoken to a solicitor (Mr Neiland) at Bradley & Jeffries who was instructed by Funding 365 Limited, the proposed lender. At the meeting the vendor gave Ms Lim a business card and his passport which indicated that he was born on 25 May 1966. He also provided a partially completed ID verification form giving the property as his current address and stating that he had lived there for 10 years even though it was apparent that he was now working abroad. The office copy entries for the property also, as I have said, indicated that it had been purchased by Mr Harper back in 1989. The vendor produced only one utility bill showing proof of address but said that he would arrange for his bank statements to be couriered to her.
On 2 December the vendor emailed Ms Lim (purportedly from Dubai) and told her he wanted to complete by Friday 6 December. By then the lender (Funding 365) had been pressing the vendor to produce evidence of his residence in Dubai including his contract of employment and bank statements but the vendor then told Ms Lim that, instead of obtaining the bridging loan, he now wished to sell the property.
On 2 December the vendor also telephoned a Mr Hunt at Winkworth and told him that he needed to complete the purchase of another property by 15 December and therefore needed to find a cash buyer quickly for his London property. On the same day Ms Lim received the results of her AML search which came back as “Referred” because it was not possible to “uniquely identify the applicant at his address”. It was also impossible to verify his date of birth from the available databases including the electoral roll. Notwithstanding this Ms Lim made no further attempts to verify the vendor's identity and accepted him as a client.
To obtain a rapid sale Winkworth (on the vendor's instructions) marketed the property for £1m which represented a discount of 25% on its current value. The agents were given a mobile number, an email address and an address in Dubai for the vendor but relied on Ms Lim to carry out the necessary AML checks instead of doing that for themselves as required by the AML Regulations. The judge rejected Mr Hunt's evidence that he had been told by Ms Lim that Winkworth could rely on the AML checks which she had carried out.
The bank statements were provided to Ms Lim on 3 December. They were not full copies of the statements but only the front pages. What was disclosed indicated that the vendor was often in the UK and the judge considered that the contents of the statements should...
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