This is a response from Niten Chauhan acted for P & P Property, and has been for the last 4 years, regarding the latest ruling on ‘P & P Property Limited –v- Owen White & Catlin and others (“P&P”)’ & ‘Dreamvar –v-Mishcon de Reya and Others (“Dreamvar”)’
JPC Law represented P&P, a small ‘father and son’ property development company who fell victim to a substantial property fraud almost 5 years ago. They have now succeeded before the Court of Appeal in their argument that Owen White & Catlin (“OWC”), the solicitors who acted for the fraudulent seller, were liable to repay to P&P the money they had paid for the property, £1,030,000.00 plus consequential damages and costs.
The reason given by the Court of Appeal for this decision was that upon receipt of the money, OWC held it on trust for P&P and were to pay the money to the genuine owner in return for the transfer of the property. In OWC paying that money to their client, who unbeknown to them was a fraudster, no genuine completion took place between the parties and they were found to have transferred the money in breach of trust.
It had already been decided at first instance that if a trust existed then OWC would not be entitled to relief under the Trustee Act 1925 as there had been a number of deficiencies in the client due diligence process carried out by OWC. OWC sought to challenge this before the Court of Appeal but their appeal was dismissed.
In addition, P&P were also allowed their appeal against the Deputy Judge’s dismissal at first instance that OWC were in breach of the undertaking at Paragraph 7(i) of the Law Society’s Code for Completion by Post 2011 given to P&P’s solicitors relating to the transfer of the Property.
Furthermore, the Court of Appeal accepted that OWC had warranted that it had the authority from the true owner of the property and not simply that they were acting on the authority of the individual who had instructed them. Whilst this has fundamentally changed the legal position as outlined in previous authorities nonetheless OWC were not found liable for breach of warranty of authority as the Court of Appeal determined that there was no material reliance on the warranty in P&P’s particular case.
Equally, in the Dreamvar case, Mishcon de Reya (“Mischcon”) also had some success before the Court of Appeal in determining that Mary Monson Solicitors Limited (“Mary Monson”), who acted for the seller in that matter, should be held liable for having been in breach of trust for paying the purchase money to their fraudulent vendor client. In turn, just as OWC, Mary Monson were also found liable for a breach of undertaking.
However, the Court of Appeal was still not prepared to grant Mishcon relief from liability to Dreamvar notwithstanding Mary Monson were now found to be in breach of trust and breach of undertaking. Therefore, both firms of solicitors have to make contributions in order to share the liability to Dreamvar (either by agreement or further determination of the Court). This shall undoubtedly sit uneasy with many in both the legal profession and also the insurance industry given that the Deputy Judge at first instance had determined in the case of Dreamvar that notwithstanding Mishcon had acted reasonably it was a firm that was insured for an event such as this and was therefore, far better able to meet or absorb the loss suffered as a result of the fraud than its former client.
There is no doubt, going to be significant debate about the latter but for now, JPC are pleased that P&P has finally seen justice prevail and this, in turn, will give a glimmer of hope to other victims of fraudulent property transactions be they large organisations, small companies such as P&P or every day people who were simply trying to buy their next home.