Solicitors who paid away money to an imposter selling a house he did not own have been made to reimburse the duped buyer’s losses by the Court of Appeal. The ruling will mean that solicitors will need to make even more stringent checks on a seller’s identity before acting on their behalf.
The imposter obtained a false driving licence and TV licence in the property owner’s name and arranged for these to be certified as true copies by a solicitor. He then posed as the owner of the property and put it on the market though estate agents. An offer of over £1m was quickly made for the house in London by a small property company called Dreamvar.
Dreamvar instructed solicitors Mishcon de Reya (Mishcon) to handle the purchase, while the imposter appointed Mary Monson Solicitors (MMS) to act in the sale. MMS accepted the fraudster’s false documents as proof of identity and started the sale process.
The transaction went through and was only picked up as bogus when HM Land Registry refused to register the transfer. By that time the sale proceeds had been paid to the imposter – who had vanished with the money.
Dreamvar sued its solicitor to recover its losses. At the same time Mischon and Dreamvar both sued MMS for damages. In the first hearing in the High Court, the judge ruled that Mischcon was liable for breach of trust as it had not paid the money to the genuine owner. MMS escaped liability. The judge concluded that Mischcon’s insurance cover made it “far better able to meet or absorb” the losses than Dreamvar.
The case went to appeal, where the judge upheld the ruling that Mischcon was liable for breach of trust but added that MMS were also liable – because a seller’s solicitors warrants that they act on behalf of the genuine owner. Both law firms were ordered to contribute to Dreamvar’s losses.
“The fundamental issue is how a buyer’s solicitor can verify the seller’s identity or the stringency of the identity checking procedures of the seller’s solicitors,” said James Burgoyne, Director – Claims & Technical, Brunel Professions. “The decision in the appeal to still find the buyer’s solicitor responsible has caused concerns that there will be yet another loss of insurance market appetite for conveyancing firms.”
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