Is it all a Dreamvar or a nightmare?

Posted: 27/10/2021

Mortgage fraud relating to fraudulent property transactions can be a horror story that gives clients, lawyers and lenders sleepless nights. Is the situation getting better or are the devil fraudsters making more gains during this season of tricking or treating?

It is now three years since the Court of Appeal (CoA) considered the joint appeal that covered the two cases of P&P Property Ltd v Owen White & Catlin LLP and another and Dreamvar (UK) Ltd v Mishcon de Reya and another [2018] EWCA Civ 1082 (15 May 2018) (Dreamvar) on two separate cases relating to fraudulent property transactions.

Given the significantly increased use of technology such as biometrics and automated identity verification checks to on board clients, complete Know Your Customer (KYC), AML and source of funds checks, as well as electronic signatures, we look at the impact of Dreamvar and suggest some practical points to keep the fraud goblins at bay.

Factual background

In summary, both cases involved fraudsters who had posed as property owners and instructed solicitors to act on their behalf on a sale. The frauds were discovered when applications were made to register the change in ownership of the two properties with the Land Registry. Completion was to take place in accordance with the Law Society Code for Completion by Post (2011) (the Code). Unfortunately, both the fraudsters and the monies were not traced.   

The CoA found that:

  • Both the solicitors who had acted for the defrauded buyers and the fraudulent sellers were liable for breach of trust by transferring the completion monies in circumstances where it was not possible to complete the transactions, as they were not genuine transactions because the registered proprietor of the land was not involved.
  • Even though the fraudsters’ solicitors had not claimed that they were acting for the actual owner of the respective properties that were being sold, because they had agreed to adopt the Code, their undertakings were assumed to refer to the seller identified in the contract (i.e. the owner of the property) rather than the fraudster instructing the solicitor. As such they were in breach of undertaking by not obtaining the actual seller's authority.
  • While the buyer’s solicitors had not acted dishonestly, they could not be said to have acted reasonably. As there had been a series of failures to carry out relatively basic checks on the identity of their client, the CoA did not grant any of the solicitors involved in the transaction relief from liability under Section 61 of the Trustee Act 1925.

Legal impact

According to Westlaw Edge UK, the Dreamvar CoA case has only been cited in four cases since the judgment. While this is surprising, perhaps lawyers and their clients have taken heed of the warnings and recommendations given in the case.

Practical considerations

Following the Dreamvar case, we suggest that the following five practical considerations should be borne in mind to reduce the risk of the fraud goblins striking lucky.  

You should tell your lawyers to:

  1. Hold any loan monies on trust for you and use the loan monies only to effect completion of the proposed transaction.
  2. Seek a warranty from the sellers or borrowers’ solicitors that they are acting for the registered proprietors of the property or security that is being acquired.
  3. Ensure that the undertaking given by the sellers or borrowers’ solicitor includes an undertaking to use the loan monies only for completing the proposed purchase or security in their favour.
  4. Follow the Law Society’s Code for Completion by Post 2019 and, if appropriate, the Law Society Conveyancing Protocol 2019. This is because, as of 1 May 2019, the Law Society implemented a new Code for Completion by Post and an updated conveyancing protocol in light of the Dreamvar case.
  5. Ensure their instructions, as a starting point, mirror as closely as possible - but without breaching copyright - the UK Finance Mortgage Lenders’ Handbook for Conveyancers (formerly the CML Handbook).

Identity checks

It is well known in the industry that fraudsters are becoming more and more sophisticated in their attempts at fraud. The advent of advanced background ID checks, electronic ID verification and even electronic signatures has to some degree provided more security in KYC but also created more ghoulish opportunities for fraudulent activities. 

Key guidelines from the Dreamvar judgment and the ever-changing electronic world include:

  • Carry out proper due diligence on your clients and borrowers. Check the information provided.  Does it stack up or are there any inconsistences?
  • Question why the clients and/or borrowers are coming to you and their explanation of the purpose of the transaction, particularly if they are a new client or borrower.
  • Is there any sudden change in the transaction or an unexpected urgency?
  • Consider and put in place fraud prevention measures.


The lack of significant judgments following Dreamvar would appear to suggest that lenders and their lawyers have updated their practices to avoid the mistakes made by the parties in Dreamvar or at least the courts have not been asked to diverge from the decision.

Looking to the future, the increasing use of electronic ID verification and electronic signatures may further complicate the client due diligence processes for law firms but should hopefully reduce the likelihood of acting for fraudulent buyers.

Lenders, banks and other financial institutions should be conscious of where the obligations of client identity verification lie and ensure that appropriate undertakings are in place to avoid a repeat of the circumstances that led to Dreamvar and to ensure a dreamland rather than a nightmare this Halloween.

Penningtons Manches Cooper has significant experience of advising clients on reducing their exposure to risk and taking action to recover monies lost as a consequence of fraud so please do contact us if you are having any bad dreams.

Return to news headlines

Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority.

Penningtons Manches Cooper LLP