The "Find a Solicitor" website database will be familiar to many. It is essentially a searchable electronic version of the Roll of Solicitors, and is widely used by both solicitors and the general public to identify both firms and individual solicitors, either in order to instruct a lawyer or simply to check credentials. Indeed, the Law Society specifically recommends its use to those looking for legal advice. If, however, the information provided in the database is incorrect, is the Law Society responsible for any consequent loss? That question may now be determined in a public trial, after the Court of Appeal recently agreed with the High Court that a claim against the Law Society should proceed.
What happened?
Schubert Murphy (a law firm) acted for the purchaser of a residential property in North London in 2010. The seller was represented by a solicitor named John Dobbs, of Acorn Solicitors. Schubert Murphy had not come across either the solicitor or the firm before, and therefore checked the credentials of both Dobbs and Acorn in the ‘Find a Solicitor’ database on the Law Society website. Both were registered on the database, and Schubert Murphy relied upon the database confirmation when it subsequently accepted Dobbs' undertaking that the mortgage over the property would be discharged on receipt of the purchaser’s funds. Some £700,000 was duly transferred to Acorn, and promptly disappeared. A subsequent SRA and police investigation concluded that Dobbs had stolen the identity of a retired solicitor and that the listing on the "Find a Solicitor" database had been fraudulently obtained.
So, what could the purchaser do to reclaim his lost funds? Acorn was a sham, without the benefit of a professional indemnity insurance policy, so suing Dobbs and/or Acorn would have been a pointless exercise. However, the SRA operates a statutory fund expressly intended to compensate the victims of fraud by solicitors. The fund is often seen as providing a safety net if insurance falls short, but compensation is discretionary and generally limited to individuals and, depending on the circumstances, some small businesses and charities. Most importantly as the purchaser in this case found out, it pays out only in respect of losses caused by fraudulent solicitors. As Dobbs was not a genuine solicitor, the fund declined to compensate the purchaser and he was left with no option but to pursue a professional negligence claim against Schubert Murphy, his own solicitors. That claim was subsequently settled for a six-figure sum, following which Schubert Murphy issued the current claim, seeking to recover its losses from the Law Society. Schubert Murphy argues, in very simple terms, that the Law Society owed it a duty of care, as a user of the ‘Find a Solicitor’ database, to ensure the accuracy of its information.
The Law Society denied liability and applied for summary judgment and/or to have the claim against it struck out on the basis that, as a public body, it owes no duties to the general public in carrying out its statutory functions, such as maintaining the Roll of Solicitors. It was unsuccessful at first instance, and consequently appealed. That appeal has also now been dismissed.
The Court of Appeal recognised that a public body, such as the Law Society, does not generally owe a duty of care in relation to the way it carries out statutory functions. However, by making information available through the “Find a Solicitor” database, the Law Society was arguably going beyond its statutory duty to maintain the Roll, and was providing an additional (and voluntary) service, potentially akin to marketing. As the Law Society chose to provide this service, and arguably encouraged use of the service through wording on its website, the Court of Appeal determined that the Law Society’s actions could have created both the risk that the database would be relied on, as well as the opportunity for fraud. The court therefore agreed with the earlier High Court decision, that further factual inquiry is necessary before any final decision as to the Society’s liability may be reached. In particular, further enquiry as to the proximity of the relationship between the firm and the Law Society as well as the wider purpose and consequences of imposing/not imposing a duty in such circumstances will be necessary.
What does this mean?
First, this decision merely permits Schubert Murphy to proceed and it remains to be seen whether this issue will ever reach trial – the Law Society may not wish for a final determination on the point, and the claim against it may be settled. Alternatively, of course, with property fraud on the rise generally, the Law Society may wish to resolve any uncertainties once and for all, in which case it is entirely possible that, not only will there be a trial, but that the issue may even find its way to the Supreme Court. There are significant policy issues at play and, although as with all litigation there are pros and cons on both sides, it will be interesting to see which course the Law Society takes.
In the meantime, however, those using the "Find a Solicitor" database are in limbo, as it is clear that users can no longer be confident either that those listed on the database are genuine solicitors or that, in the event of error or fraud, compensation in some form (insurance, the fund, the Law Society) will be available. The reluctance of the lower Court (which was clearly shared by the Court of Appeal) to dismiss this claim, and the concern expressed as to the impact of any decision on the conveyancing process in the UK, shows that the courts are alive to the very real impact on millions of property buyers, but whether this ultimately results in any extension of the duty of care remains to be seen.
Schubert Murphy’s path is by no means an easy one, and the extent of the evidence it will now have to compile is significant. However, the firm may take heart from the decision of the High Court in Sebry v Companies House, in which Companies House was found liable for Sebry's losses following a mistake in issuing a notice of insolvency. A small incremental increase to the scope of duty of care is not, therefore, out of the question. If policy leans in favour of protecting the majority (property buyers) at the cost of a small imposition on the minority (the Society – although almost certainly the Society would seek to pass on any costs to the wider legal profession), and if Schubert Murphy can produce strong evidence, it may have a prospect of both recovering its own losses and changing the UK conveyancing landscape.
Points to take away
- In the absence of further guidance, the "Find a Solicitor" website database should not be treated as comprehensive or accurate – if you are looking for a solicitor or law firm, or wish to check the credentials of a solicitor or law firm, always call the Law Society to verify initial website results.
- Fraud in property transactions is rife – always be alert to the potential for fraud whether as a buyer or seller and do not dismiss any suspicions without further enquiry. It is better to carry out multiple cross-checks, or as a worst case scenario, to pull out of a transaction, than to risk very significant financial losses.
- If you should ever be the victim of a similar fraud, litigation in one form or another is almost inevitable and speed is the key to recovery. Always seek independent legal advice as soon as possible.
If you have any queries regarding this article, please contact Charlotte Whitaker or Andrew Burnette.