Category: Insurance case law · Reviewed by Chrissie Anderson, Client Executive · Last reviewed June 2026
The Court of Appeal decision establishing that purchasers’ solicitors hold purchase monies on trust and may be liable for breach of trust where the sale is fraudulent, even absent negligence, and that vendors’ solicitors may be liable for breach of warranty of authority.
The appeal joined two conveyancing-fraud cases, Dreamvar and P&P Property, both involving fraudsters impersonating the registered proprietor of unencumbered London property and selling it to innocent purchasers who lost the purchase monies once the fraud was discovered.
In Dreamvar, a property investment company contracted to purchase a London property for £1.1 million. Dreamvar was advised by Mishcon de Reya as its solicitors. The vendor was represented by a firm, Mary Monson Solicitors, instructed (without their knowledge of the fraud) by a person purporting to be the true owner. The fraudster’s identity checks at the vendor solicitors’ firm had been carried out but failed to expose the impersonation. The transaction completed under Law Society Code for Completion conditions. Dreamvar’s solicitors transferred the purchase price; the funds were forwarded to the fraudster and lost.
When the fraud emerged Dreamvar could not register title (because the true owner had never sold) and sought to recover the £1.1 million. It claimed against Mishcon de Reya for breach of trust in releasing the funds otherwise than for a genuine purchase, against the vendor solicitors for breach of warranty of authority (that they had authority to act for the true vendor), for breach of trust on the same basis, and for breach of an undertaking under the Code for Completion.
In P&P Property v Owen White & Catlin LLP, a similar fraud took place. P&P paid approximately £1.03 million for a London property only to discover that the vendor’s solicitor had been deceived by a fraudster impersonating the true owner. P&P sued its own solicitors (Lawrence Stephens), the vendor’s solicitors (Owen White & Catlin) and the estate agents.
The two appeals were heard together because they raised common questions about the liability of solicitors in identity-fraud conveyancing.
Several issues arose. First, did the purchaser’s solicitor hold the purchase monies on trust until completion, and if so, what amounted to a breach of that trust where completion proved a nullity because the vendor was a fraudster? Second, did the vendor’s solicitor warrant to the purchaser’s solicitor that it was authorised to act for the true registered proprietor; and if so was that warranty breached where the apparent client turned out to be a fraudster? Third, what was the scope of the undertaking implied by adoption of the Law Society Code for Completion by Post in such a transaction? Fourth, should relief from liability be granted to solicitors under section 61 of the Trustee Act 1925 on the ground that they had acted honestly and reasonably?
The Court of Appeal held that the purchaser’s solicitors held the funds on trust for the purchaser, that the trust authorised release only on a genuine completion of the purchase being effected (i.e. transfer of title), and that release of the funds in a fraudulent transaction was therefore a breach of trust even where the solicitor had been deceived without negligence. The court declined to grant relief to Mishcon de Reya under section 61 of the Trustee Act 1925; while the firm had acted honestly and reasonably, on the balance of the equities (including its insurance position) relief should not be granted because the consequences would otherwise fall on a wholly innocent purchaser.
On the vendor’s solicitor’s position, the court held that breach of warranty of authority was made out: by acting in the transaction the vendor’s solicitor had warranted that it was authorised to act for the true registered proprietor and that warranty was breached when the apparent client turned out to be an impostor. Liability also attached for breach of trust in respect of the purchase monies once received, and breach of undertaking under the Code for Completion in P&P.
The court accordingly held both purchaser’s and vendor’s solicitors liable in the respective transactions, with detailed apportionment between the firms. Mishcon de Reya’s appeal against the section 61 refusal was dismissed.
A purchaser’s solicitor receiving funds for the completion of a property purchase holds those funds on trust for the purchaser, with authority to release them only on completion of a genuine transaction effecting transfer of title. Release in a fraudulent transaction is a breach of trust regardless of the absence of negligence. A vendor’s solicitor warrants to the purchaser’s solicitor that it has authority to act for the true registered proprietor; that warranty is breached where the apparent client is an impostor. Relief under section 61 of the Trustee Act 1925 will not ordinarily be granted to a solicitor where its insurance is available to bear the loss and the alternative is to leave a wholly innocent client uncompensated.
Dreamvar is one of the most significant solicitors’ professional indemnity decisions of the last decade. It dramatically reshaped the risk profile of conveyancing-fraud claims by establishing that solicitors on both sides of a fraudulent transaction can face strict liability via breach of trust or breach of warranty of authority, irrespective of negligence. This created acute pressure on the solicitors’ PI market, where conveyancing fraud claims now form a substantial proportion of notified losses.
For PI underwriting and broking the case has several consequences. First, identity-verification procedures and source-of-funds checks in conveyancing firms are now a core underwriting question and a critical risk-management discipline. Second, firms undertaking high-value or unencumbered-property conveyancing represent a heightened risk and should expect more searching enquiry from insurers. Third, the court’s reluctance to grant section 61 relief because PI insurance was available has been controversial but emphasises that the PI policy itself is treated by the courts as part of the broader allocation of loss.
Conveyancing firms have responded by tightening client onboarding, adopting digital identity tools and applying the SRA’s evolving guidance. Insurers and brokers have responded with detailed PI proposal-form questions on identity verification, panel referrals to specialist firms, and in some cases conveyancing-loss aggregations or sub-limits.
Dreamvar (heard together with P&P Property under the same neutral citation) is required reading for any solicitor’s PI broker and for clients with significant conveyancing exposure.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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