If you are involved in conveyancing transactions, either as an estate agent or as a conveyancer, hopefully you have been following the progress of the Dreamvar case?
Bizarrely, we still speak to lots of conveyancers who either haven’t, or don’t seem that interested and see it as an issue for their Professional Indemnity Insurance broker.
It’s time to focus on this Court of Appeal judgement and work out quickly how you are going to safeguard your firm before it happens to you. Contrary to most commentary that we have seen, there is an easy answer.
Dreamvar is a case where a small property company had been duped into buying a property from a fraudulent vendor. The fraudster stole the money from the true seller.
The court found the buyer’s solicitors, Mishcon de Reya, innocent of negligence, but they had a strict liability for both a breach of trust (for paying away the sale price to the fraudster in a transaction which was a nullity), and a breach of undertaking for not having the true owner's authority.
The Court of Appeal has upheld this decision and the case is reported in an article published in Todays Conveyancer on the 15th of May 2018.
The conclusion is that the seller’s conveyancer, who pays away the purchase monies for a transaction which is a nullity will be in breach of trust, even where the purchaser's solicitors are also liable.
The vendor's solicitor will also usually warrant it has authority to act on behalf of the actual seller and will incur liability for breach of such warranty, if it is relied upon.
The decision means, in effect, that solicitors and their professional indemnity insurers are likely to underwrite the legitimacy of the property transaction, on a strict liability basis.
What does this mean for you? Well, basically an impossible situation has just got a lot worse.
If you really still think that you can always spot and avoid a fraud, I am afraid that you are delusional. The sophisticated fraud cases that we (and your PI brokers) see, would leave you in no doubt that if your firm and your client is going to be picked on, by someone who knows what they are doing, then probably the outcome is not going to be good.
And it is clear now, that regardless of whether you have taken all reasonable precautions and are not negligent, that the courts are not necessarily going to save you.
Several articles that we have read conclude that the insurance brokers need to be creative and find new insurance solutions. But this misses the fact that there has been insurance available for this risk for the last 10 years.
You should speak to your preferred professional indemnity insurance broker, who may be able to help you. DUAL has fraud policies either for individual transactions (expensive of course) and now a new block policy solution if you (and your PI broker and insurer) wants to sleep more soundly at night. The block policy is available for less than 50 pounds per transaction.
In each case, we will waive our rights against you and your PI insurer, as long as you are using modern anti-fraud techniques, that we can tell you about subject to terms and conditions.