P&P Property Limited –v- Owen White & Catlin (A Firm) and Crownvent Limited t/a Winkworth
Dreamvar (UK) Limited –v- Mishcon de Reya (a firm) and Mary Monson Solicitors Limited
Next week, the long awaited combined hearing of the above cases shall be heard before the Court of Appeal. The hearing has been listed for 4 days and shall be presided over by 3 Lord/Lady Justices with 4 QCs a number of junior barristers and representatives from 5 firms of solicitors in attendance including Niten Chauhan, Partner in our Commercial Litigation department who has acted for P&P Property Limited for over 4 years after they were the innocent victims of a property fraud.
P&P is a property development company who purchased a property, after they were approached by a firm of estate agents marketing the same for a quick sale only to later discover that the true owner of the property was the victim of identity fraud and they were, in turn, victims of a substantial property fraud – as a result of which it lost in excess of £1 million.
In turn, P&P issued proceedings against the vendor’s solicitors, Messrs Owen White & Catlin LLP and the estate agents, Messrs Winkworth for their part in allowing the property to be sold to them by a fraudster and claimed (1) breach of warranty of authority, (2) breach of trust and (3) breach of a duty of care/negligence against the parties.
Unfortunately, judgment went in favour of both Defendants because the Deputy Judge in the High Court was not able to establish that either party owed P&P any duty given that they did not act for them in the transaction. However, he did go so far as to say in his judgement that if there had been a duty established between P&P and the Defendants then OWC would have been in breach of trust (for having paid away £1.03 million to a fraudster instead of the true owner of the property) and Winkworth would have been in breach of a duty of care.
As a result, JPC Law immediately sought permission to appeal on behalf of P&P on the basis that the Judge had erred in law to establish a duty of care between the parties and notwithstanding P&P were the innocent victim in this matter they had achieved no redress.
After hearing compelling arguments from JPC Law and their Counsel, Gary Blaker QC of Selborne Chambers the Trial Judge himself agreed that this was a highly complex area of law and required clarity and therefore, granted oral permission for P&P to appeal his own judgement and for the matter to be heard before the Court of Appeal instead. (“Dreamvar”) in which the vendor’s solicitor, Mary Monson solicitors were found not to be liable to the innocent purchaser, Dreamvar (notwithstanding certain failings on their part had been identified) because the Judge followed the decision in P&P, namely, that no duty could be established between the vendor’s solicitor and the innocent purchaser.
Thereafter, though judgment was delivered in in a similar property fraud matter, that of Dreamvar (UK) Limited –v- Mishcon de Reya (a firm) and Mary Monson Solicitors Limited (“Dreamvar”) in which the vendor’s solicitor, Mary Monson solicitors were found not to be liable to the innocent purchaser, Dreamvar (notwithstanding certain failings on their part had been identified) because the Judge followed the decision in P&P, namely, that no duty could be established between the vendor’s solicitor and the innocent purchaser.
However, the remainder of the decision in Dreamvar sent shockwaves through the legal community because the Judge then went on to find that even though the purchaser’s own solicitor, Mishcon de Reya had been found not to have been guilty of any wrongdoing they were instead held liable to account to the innocent purchaser for their loss simply as a result of the fact that as a firm of solicitors they had professional indemnity insurance in place.
This was particularly controversial given that many conveyancers subsequently argued that the purchaser’s solicitor neither acted for the fraudulent vendor nor had any means to independently verify his ID.
As a result, Mishcon de Reya immediately applied for and successfully obtained permission to appeal the decision of the High Court too. In turn, the Court of Appeal came to the conclusion that given the both the P&P case and the Dreamvar case had similar facts and legal arguments that the two matters should be joined and heard together before the Court of Appeal.
THE LAW SOCIETY
Furthermore, because of the widespread confusion over the scope of a solicitor’s liabilities caused by both cases and what reasonable checks were required during the buying process the Law Society issued a Property Fraud Practice Note to provide additional guidance as well as warn practitioners on how to protect themselves from ID fraud.
However, given the significant importance of the Court of Appeal’s decision for the legal profession, both as a result of the practical application to a conveyancing transaction but also how this might affect firms’ insurance premiums in the future, the Law Society has also been granted permission to intervene in the hearing itself.
All eyes are on this upcoming hearing given that whatever the outcome it shall be a landmark decision which will change the face of conveyancing in England and Wales in the future.
For more information on this case, please contact Niten Chauhan.