The 2016 English case of Dreamvar (UK) Ltd v Mishcon de Reya illustrates the importance of knowing your client and exactly who you are acting for. This case related to a property in London which was being sold quickly. It was not occupied and there was no mortgage over the property.
A fraudster, claiming to be Mr Haeems (who was the real owner) produced a forged transfer document and provided this to the purchaser, a company called Dreamvar Limited. As the seller wanted to sell the property quickly, and the buyer wanted to complete quickly, the transaction completed quickly. The purchase price was £1.1 million.
However when the purchaser’s solicitor went to register their client’s title at the Land Registry, a discrepancy was spotted between the property address and the address on the fraudster’s ID. No link could be established between the fraudster’s address and the property address. The real Mr Haeems was contacted and he disclaimed all knowledge of the transaction. By the time the fraud was spotted, it was too late and the money had been released to accounts in China.
Dreamvar asserted various causes of action against both the buyer’s and seller’s solicitor and the buyer’s solicitor claimed a contribution from the seller’s solicitor in the event they were found liable.
A claim was made against the seller’s solicitor that they had warranted or undertaken that the seller was genuine but the court held no warranty was given to that effect.
In respect of the claim made against the buyer’s solicitor, they had received assurances that the seller’s solicitor had verified the seller’s identity. The judge was satisfied that the buyer’s solicitors had taken care and it was reasonable of them not to think this was an identity fraud.
The Judge accepted the firms involved had acted honestly and innocently in carrying out their respective roles but further went on to rule that the buyer’s solicitor’s firm was a City of London firm who had insurance to cover the loss suffered in full, and was in a better position than the buyer to face the consequences. The ‘only practical remedy’ therefore was for the whole loss of £1.1 million to be carried by the buyer’s solicitors.
The outcome seems particularly harsh on the buyer’s solicitor who seemingly did nothing wrong but had to bear the consequences of a fraudster, represented by the seller’s firm. This case highlights the onus and importance of solicitors ensuring they know the identity of their client in a matter, and also ensuring the solicitor on the other side of a transaction is aware of the identity of their client. Moreover, clients should exercise caution when dealing with a seller and ensure they know who they are dealing with, particularly if it is a high value transaction.
Michael Duffy is a Property Solicitor at Worthingtons Solicitors, Belfast and deals with transactions in both Northern Ireland and in England and Wales. He can be contacted at email@example.com or on 028 9043 4015.