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Law Society set for trial over ‘Find a Solicitor’ entry

Case may have important ramifications for the security of conveyancing, says judge

29 August 2017

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The Law Society has failed to strike out a negligence claim brought by a law firm that became the victim of property fraud after using the representative body’s highly publicised ‘Find a Solicitor’ (FAS) search facility.

In The Law Society of England and Wales v Schubert Murphy [2017] EWCA Civ 1295, Lord Justice Beatson, sitting in the Court of Appeal, upheld an earlier ruling by Mr Justice Mitting and refused Chancery Lane’s application for summary judgment and/or for the claim to be struck out because of the fact-sensitive nature of the case. Lady Justice Gloster, vice president of the Civil Division, and Sir Terence Etherington, the Master of the Rolls, agreed.

Giving judgment, Beatson LJ said: “Notwithstanding the undoubted difficulties in establishing that a regulatory or professional body owes a duty of care to its members or to the public, the determination of whether a duty arises in the present circumstances is fact-sensitive. It requires the answers to several questions which cannot be determined without further inquiry into the facts.”

The Law Society was initially refused permission to appeal against Mitting J’s ruling by Lord Justice Briggs in 2015, but this was later granted by Lady Justice Hallet after a hearing.

Solicitors firm Schubert Murphy is claiming damages for negligence and for a contribution under the Civil Liability (Contribution) Act 1978 for losses suffered by the firm and its client after the Law Society’s FAS facility confirmed the existence of the vendor’s solicitor, Mr John Dobbs, and his firm, Acorn Solicitors.

It transpired, however, that neither Dobbs nor Acorn was real and Schubert Murphy became the victim of a fraud. It had transferred the purchase price to the fraudster after it had been given what purported to be a solicitor’s undertaking to discharge the vendor’s mortgage over the property. The fraudster absconded with the funds without discharging the mortgage.

An investigation by the Solicitors Regulation Authority established that the fraudster had stolen the identity of a retired solicitor with a different name, then applied to the SRA first for a practising certificate, and later for approval to practise as a recognised sole practitioner under the name Acorn Solicitors from an office in Rotherham.

Schubert Murphy’s client brought a claim against the firm alleging negligence and breach of trust. Those proceedings were settled in 2011 by the firm’s professional indemnity insurers who now sue to recover the costs they incurred. The Law Society refused to compensate the firm or its client from the Solicitors Compensation Fund because the fraudster was not a solicitor. Schubert Murphy dissolved after the proceedings.

In his ruling, Beatson LJ said the underlying claim raises the important question of whether the Law Society has a duty of care where information is provided by a digitised system online rather than in response to an inquiry made in person, over the telephone, or in a letter.

He said that “a regulator such as the Law Society does not generally owe a duty of care in relation to the way it carries out its regulatory functions”, but, he added, making information available through the FAS facility “is arguably an additional step going beyond what it was required to do, and thus providing an additional but voluntary service”.

“The Law Society specifically encouraged the use of the facility to find solicitors rather than licensed conveyancers or other professionals and did not recommend any other checks.

“By choosing to provide the facility, and in the light of the nature of the facility, I consider that it is arguable that the actions of the Law Society, which has control over the registration of solicitors, created the risk that it would be relied on and the opportunity for fraud and did so in a way going beyond the confines of its statutory regulatory obligations.”

Sir Terence Etherington, added that the outcome of the case will turn on matters of fact which have not yet been fully explored and also on important issues of principle and policy.

A Law Society spokesman said: “We note the judgment and will be considering it in detail over the coming days. It would be inappropriate for us to comment further at this stage.”

Matthew Rogers, reporter

matthew.rogers@solicitorsjournal.co.uk | @lex_progress

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Regulation