The Practical Lawyer


Fraud – Dreamvar

Dreamvar is a nightmare for conveyancing solicitors and their insurers.

It is the CA appeal in the notorious case involving Mishcon de Reya who acted for an innocent buyer in a property fraud; while they were not negligent, they were held to have been in ‘breach of trust’ in paying away their client’s money – with the court refusing to grant relief of that breach of trust (under s61 TA 1925). Because of the outcry, the case was rushed to the CA – with the same outcome. There were two parallel cases heard by the CA. Both involved property companies that had been duped into buying properties from fraudsters who were not the true owners of the properties being sold. One of the companies, Dreamvar, sued its solicitors (Mishcon de Reya) and the seller’s solicitors; the other company only sued its seller’s solicitors (not its own solicitors). Four possible strands of liability were identified:

Buyer’s solicitors – breach of trust: in both cases, the buyer’s solicitors had not been negligent. They had no reason to suspect that the seller’s solicitors had not carried out adequate ID and money laundering checks. But, there had been a ‘breach of trust’ in paying away the client moneys, and such liability is strict. The only hope for the solicitors was to persuade the court to exercise its discretion to grant relief (s61 TA 1925). The High Court pointed to the fact that the solicitors had indemnity insurance and were thus ‘far better able to absorb’ the losses than their client. The CA agreed with that logic. Accordingly, a non-negligent solicitor acting for a buyer can expect to be liable in breach of trust when paying moneys out to a fraudster’s solicitors, and there is unlikely to be any relief granted under s61.

Seller’s solicitors – breach of trust: the Code of Completion only permits the seller’s solicitors to release the moneys to their clients when ‘completion’ has occurred. However, the exchange of purchase money for forged documents is not ‘completion’ (‘nothing can come of nothing’). Hence, the breach of the Code of Completion will mean there has been a breach of trust and the seller’s solicitors will be liable. Since this is a breach of trust, the solicitors can of course apply for relief under s61 TA 1925; not surprisingly, given the refusal of relief to the innocent buyer’s solicitors, the CA would not exercise its discretion in favour of the seller’s solicitors. Hence they were fully liable.

Seller’s solicitors – breach of undertaking: the Code of Completion also says that the seller’s solicitor undertakes ‘to have the seller’s authority to receive the purchase money on completion’. Accordingly, there will have been a breach of undertaking for which the seller’s solicitor is liable.

Seller’s solicitors – breach of warranty of authority: the seller’s solicitor had personally signed on behalf of the seller. This made them potentially liable for breach of warranty of authority (ie the warranty that they were acting for the person authorised to sell the property). This was a misrepresentation. Interestingly, however, on the facts, this claim failed – merely because there was no evidence to show that the buyer had ‘relied’ on the representation (in retrospect, what the buyer’s solicitors should have done was to have specifically stated that they would be relying on that warranty of authority if the solicitor signed on behalf of the client).

Negligence: neither the buyer’s solicitors or the seller’s solicitors were held to have been negligent. But, given the publicity surrounding this litigation it is likely that a solicitor doing the same thing in the future could be found to have been negligent (eg for failing to get specific assurances about due diligence checks; failing to make it clear that there was a reliance on the ‘warranty of authority’ representation – in short, it could be negligent not to learn the lessons of this litigation).

But, however one looks at it, there is a clear policy decision to shift liability from the innocent buyer onto the innocent(?) solicitors and their indemnity insurers. Dreamvar v Mishcon de Reya [2018] EWCA Civ 1082 (this case report is available in full at


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