Dreamvar decision is bad news for conveyancers but good news for victims of property fraud

Imagine that you are walking down the road and notice that there are builders at your property carrying out extensive renovation works. Naturally, you walk into the property to find out what is going on only to be told that they have been engaged by the ‘owner’ of the property, a developer. To your horror, you learn that your property had been ‘sold’ to the developer by a fraudster. Do you still own the property? Who is to blame?

The sales proceeded swiftly, with the fraud only being revealed in one case when the true owner attended the property and in the other when documents were lodged with Land Registry

The above scenario may sound farfetched but is not an uncommon as a property owner may believe. This is almost exactly what happened in two recent cases: Dreamvar (UK) Limited v Mishcon de Reya, and P&P Property Ltd v Owen White & Catlin LLP.

The facts

Both cases involved a fraudster who purported to be the owner of a property and was looking to sell quickly. The fraudsters who purported to be the sellers were able to show prospective buyers around the properties and gave every appearance of being the true owners. The sales proceeded swiftly, with the fraud only being revealed in one case when the true owner attended the property and in the other when documents were lodged with Land Registry. By this time, the purchasers had paid substantial sums of money to the fraudsters who had now disappeared.

Who is responsible?

The question arose as to who should be responsible to the purchaser for the loss. Clearly, the fraudsters ought to be responsible but as they had now vanished, the prospects of ever recovering anything from them were highly unlikely. Claims were therefore brought by the innocent purchaser against the solicitors who acted for the fraudster for breach of trust.

In the first instance, the High Court decided that the solicitor acting for the fraudulent seller was absolved of blame, despite not having carried out sufficient checks on the identity of their client. Instead, the innocent buyer's solicitor was held liable for breach of trust in releasing funds other than to the true owner of the property. The cases subsequently went to the Court of Appeal.

Decision of the Court of Appeal

The Court of Appeal agreed that the solicitor for the innocent purchaser should be held liable but also held that the solicitor acting for the fraudulent seller was liable. This was on the basis that the completion monies were held on trust for the purchaser and that trust was breached when the purchase monies were paid to the fraudster.

The court then considered whether relief should be granted to the solicitors under s61 of the Trustees Act 1925. In short, this provides that where a trustee has acted in breach of trust, but has nevertheless acted honestly and reasonably and ought fairly to be excused, the court may relieve the trustee of liability.

The Court of Appeal refused to grant relief having regard to a number of failures by the 'seller's' solicitor (ie fraudster's solicitor) to carry out basic checks on the identity of their client. Even if the solicitor acting for the fraudster had carried out sufficient checks and acted honestly and reasonably, that may not necessarily have been sufficient to enable the solicitor to obtain relief. The solicitors were therefore held liable to the innocent buyer for the losses they incurred.


This case emphasises the need for solicitors on both sides to carry out thorough due diligence on their clients and for a buyer's solicitor to ensure the seller's solicitor has fulfilled their obligation in this respect. Any concerns should be raised with the client or the other party's conveyancer until both parties are satisfied as to the seller's true identity. Whilst this may be inconvenient and may slow down the conveyancing process, in a world where property fraud is on the rise and where there are over five million properties in the UK that are considered to be vulnerable to fraud, it is an absolute necessity.

The owners of the properties involved in these cases remained the owners, with the innocent buyers being able to recover their losses from both firms of solicitors involved. Whilst the case may cause concern for conveyancers, it is undoubtedly a good decision for an innocent buyer or owner who has the misfortune of being the victim of fraud.

If you have any queries in relation to issues raised in this article, please contact Adam King at [email protected].