Dreamvar (UK) Ltd v Mischon De Reya (A Firm)
| Jurisdiction | England & Wales |
| Judge | David Railton |
| Judgment Date | 20 December 2016 |
| Neutral Citation | [2016] EWHC 3316 (Ch) |
| Docket Number | Case No: HC-2015-002013 |
| Court | Chancery Division |
| Date | 20 December 2016 |
[2016] EWHC 3316 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr David Railton QC
(sitting as a Deputy High Court Judge)
Case No: HC-2015-002013
David Halpern QC (instructed by Healys LLP) for the Claimant
Jeremy Cousins QC and Peter Dodge (instructed by Triton Global Limited t/a Robin Simon) for the First Defendant
Ben Patten QC (instructed by BLM LLP) for the Second Defendant
Hearing dates: 1, 2, 4, 7 and 8 November 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
DEPUTY JUDGE David Railton QC
David Railton QC (sitting as a Deputy High Court Judge):
Introduction
In September 2014 a Mr David Haeems was the registered owner of a freehold mews house at 8 Old Manor Yard, Earl's Court, London SW5 (“the Property”). The Property was unoccupied, and unencumbered. On 17 September 2014 a fraudster impersonating Mr Haeems purported to sell the Property to the Claimant, Dreamvar (UK) Limited (“Dreamvar”), for £1.1 million. In exchange for the purchase price, the fraudster gave Dreamvar a forged transfer document. The fraud was discovered in November 2014, before Dreamvar had been registered as the owner of the Property. By that time the fraudster, and the money he received from Dreamvar, could no longer be found.
By this action Dreamvar seeks to recover the loss it has suffered as a result of this fraud from the solicitors instructed by it on the purported purchase, Mischon de Reya (“MdR”), the First Defendant, and also from the solicitors instructed by the fraudster, Mary Monson Solicitors Limited (“MMS”), the Second Defendant. There is no suggestion that either firm was in anyway complicit in any part of the fraud, and it is common ground that they both acted honestly and innocently in carrying out their respective roles in the purported transaction.
Dreamvar's claims against MdR are for negligence (in contract and in tort) and for breach of trust. It will be necessary to consider the particular claims made in greater detail later, but in summary terms, Dreamvar's claim in negligence is put in two ways. The first is based on what is said to be the failure by MdR to identify a number of features relating to the transaction which individually or collectively should have alerted it to there being a real risk of fraud, and then failing to advise Dreamvar accordingly. MdR denies that there were any features of the transaction which should have alerted it to an increased risk of fraud, or that it was under any obligation to advise Dreamvar that there was such a risk. It also does not accept that even if a solicitor acting reasonably had advised Dreamvar that there was a risk of fraud, such advice (in the terms in which it could reasonably have been given) would have led to Dreamvar withdrawing from the transaction, or otherwise avoiding the consequences of it.
The second way in which the claim in negligence is put against MdR, which was introduced by way of amendment at the start of the trial, is an alleged failure by MdR to seek an undertaking from MMS that it had taken reasonable steps to establish its client's identity. In making this amendment, Dreamvar made clear that it did not assert that the seeking of such an undertaking represented standard conveyancing practice in 2014, or that there was anything in the public or professional domain that alerted solicitors acting for purchasers to the need to seek such an undertaking. It nonetheless asserts that conveyancing practice was unreasonable in failing to provide such protection. MdR contends that this allegation is unsustainable, in that in not seeking such an undertaking it was following established conveyancing procedure, to which the leading elements of the profession had directed their minds, and that accordingly it cannot be criticised for not doing so.
The claim against MdR for breach of trust starts with the common ground that the purchase monies, when paid by Dreamvar to MdR, were held on trust by MdR. Dreamvar contends that MdR was only authorised to release these purchase monies on completion of the purchase of the Property, which in this context meant a genuine completion of a genuine purchase. In this case there was no genuine completion, or genuine purchase, and accordingly in releasing the purchase monies to the fraudster MdR was (it contends) in breach of trust. MdR's case is that it was authorised by Dreamvar to release the purchase monies in exchange for undertakings from the vendor's solicitors (MMS) given in accordance with standard conveyancing practice, and that accordingly it was not in breach of trust. In the alternative, should it be held to have been in breach of trust, MdR seeks relief under s.61, Trustee Act, 1925, on the grounds that it acted honestly and reasonably, and ought fairly to be excused.
Dreamvar's claims against MMS are for breach of warranty of authority, breach of trust and breach of undertaking. The claim for breach of warranty of authority is again put in two ways. The first is that in acting for the person who was purporting to sell the Property, MMS warranted that it had the authority of the registered owner of the Property, i.e. the real Mr Haeems. If such a warranty were given, it is common ground that it was broken, in that MMS did not in fact have the real Mr Haeems' authority to do anything, but had been instructed only by the fraudster, purporting to be Mr Haeems. MMS however disputes that any such warranty was given, and asserts that the only warranty was that MMS had a client or principal, for whom it was acting. That warranty was not broken, because it did indeed have a client, albeit not (as matters turned out) one who was the registered owner of the Property, or able to sell it to Dreamvar.
The second way in which the claim for breach of warranty of authority is put against MMS is that it warranted that it acted for the person claiming to be Mr Haeems, the registered owner of the Property, and that it had exercised reasonable care and skill in establishing his identity as such. This alternative case is based on the contention that in conveyancing practice the purchaser's solicitor expects and relies on the vendor's solicitor to carry out appropriate due diligence in relation to its client, including the necessary money laundering checks. If this warranty were given, it was broken, in that – as set out further below – MMS has admitted that it did not undertake such identity checks on the purported vendor as would have been taken by a competent solicitor. MMS however contends that no such warranty was given, and that in any event, even if reasonable care had been exercised, the chances were that the fraud would still have occurred.
The claim for breach of trust against MMS is based on the contention that in receiving the purchase monies from MdR (on behalf of Dreamvar), MMS held the monies on trust for Dreamvar, and was only authorised to part with them on a genuine completion of a genuine transaction, which never happened. MMS disputes that it received the monies on trust at all, and further contends that even if that were wrong, it was in any event authorised to release them on completion, whether or not the completion was a genuine completion of a genuine sale. In this connection MMS relies heavily on the terms of the Law Society Code for Completion by Post (2011 edition) (the “Code”) which MdR and MMS agreed would apply. If, contrary to MMS's case, it was in breach of trust in parting with the purchase monies, MMS (by reason of its admitted lack of competence in checking its client's identity) does not contend that it should be relieved of liability under s.61.
The claim for breach of undertaking was originally raised by MdR against MMS as part of its cross-claim for contribution from MMS. On the last day of the trial, Dreamvar applied to amend to adopt the claim, and as the amendment raised no new issues of substance, MMS did not object to it. It is accordingly the third claim by Dreamvar against MMS. It is based on the terms of paragraph 7(i) of the Code, which it is said amount to an undertaking by MMS to have the authority of the real Mr Haeems, i.e. the registered owner of the Property, to receive the purchase monies on completion. MMS again disputes that the Code has that effect, and contends that the undertaking required and given by paragraph 7(i) refers simply to its client.
In addition to the claims by Dreamvar against MdR and MMS, there are also claims by MdR against MMS, whereby MdR seeks an indemnity or contribution from MMS in respect of any liability it might be held to have to Dreamvar. These claims are in part based on the provisions of the Civil Liability (Contribution) Act, 1978, whereby if MMS and MdR are liable to Dreamvar in respect of the same damage, the Court may order contribution between them in such amount as may be found to be just and equitable having regard to the extent of their respective responsibility for the damage in question. MdR also contends that MMS was in breach of the express or implied terms of the agency between them created by the adoption of the Code, and was in breach of a duty of care in tort owed by it as agent, and is accordingly liable in damages to MdR in the amount of any liability MdR may have to Dreamvar. For its part, MMS in turn seeks a contribution from MdR under the 1978 Act should both it and MdR be found liable to Dreamvar.
In support of its position on each of the claims made against it, MMS relies heavily on a recent decision of Mr Robin Dicker QC, sitting as a Deputy High Court...
To continue reading
Request your trial
-
P&P Property Ltd v Owen White & Catlin LLP
...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......
-
The Law Debenture Trust Corporation P.L.C. v Ukraine, represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine
...1981 is to compensate the claimant for being kept out of its money (see e.g. the summary in Dreamvar (UK) Limited v Mishcon de Reya [2016] EWHC 3316 (Ch)). In the present case, the relevant party for these purposes is plainly the Noteholder, not the claimant Trustee. (As it happens in this......
-
Professional negligence: Another decision on liability for identity theft leaves the law uncertain
...Dreamvar (UK) Limited v (1) Mishcon de Reya (a firm) and (2) Mary Monson Solicitors Limited [2016] EWHC 3316 (Ch), Mr David Railton QC, sitting as a Deputy High Court Judge in the Chancery Division of the High Court of Justice decided that a buyer's conveyancing solicitors were liable to th......
-
Identity Fraud Alert!
...(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 ......
-
Real Estate Bulletin - August 2017
...(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 ......