Sale of property – Solicitor – Law Society – Duty of care – Respondent solicitor using appellant’s online “Find a Solicitor” service to check identity of vendor’s solicitor – Vendor’s solicitor subsequently being found not to exist – Whether arguable that appellant owed duty of care to solicitors and others using online FAS facility
C instructed the respondent firm of solicitors to act on his behalf in relation to the proposed purchase of a property at 30, Parkgate Avenue, Hadley Wood in Hertfordshire. D, allegedly operating under the name of “Acorn Solicitors”, was purportedly instructed to act for the vendor. The respondent carried out a search for D and Acorn using the “Find a Solicitor” (FAS) facility on the appellant Law Society’s website. The respondent received a response on which it relied as confirmation that D was a genuine solicitor and Acorn a genuine legal practice.
D and Acorn purportedly gave a solicitor’s undertaking to discharge an existing mortgage over the property. The respondent then transferred the deposit and completion monies for the purchase to a bank account nominated by Acorn. The sale of the property was completed. However, Acorn did not discharge the existing mortgage over the property in accordance with the purported undertaking and the existing mortgagee brought possession proceedings against C who had to make payments to the mortgagee to retain possession. It was subsequently discovered that there was no such solicitor as D or the firm of Acorn Solicitors and that the respondent had transferred the purchase price to a fraudster who had absconded with the funds.
C brought proceedings against the respondent alleging negligence and breach of trust which were settled by the respondent’s professional indemnity insurers. The respondent then claimed damages for negligence and for a contribution under the Civil Liability (Contribution) Act 1978 in respect of losses suffered by the firm and C as a result of the appellant’s online response to its search on the FAS facility. The appellant refused to compensate the respondent or C from the Solicitor’s Compensation Fund on the ground that the case fell outside the remit of the Fund because the purported “solicitor” was not in fact a solicitor. The court dismissed the appellant’s application for summary judgment and/or to strike out the claim: see [2014] EWHC 4561 (QB).
The appellant appealed. The question was whether it was arguable that the appellant owed a duty of care to solicitors and others who used its online FAS facility.
Held: The appeal was dismissed.
(1) Although a regulator such as the Law Society did not generally owe a duty of care in relation to the way it carried out its regulatory functions, making information available through the FAS facility was arguably an additional step going beyond what it had been required to do and providing an additional but voluntary service. By choosing to provide the facility, and in the light of its nature, it was arguable that the actions of the appellant, which had control over the registration of solicitors, created the risk that it would be relied on and the opportunity for fraud in a way going beyond the confines of its statutory regulatory obligations. Therefore, it was arguable that, depending on a fuller consideration of the facts, the present case might fall within one of the situations where a defendant might be held responsible where the direct and immediate cause of the respondent’s loss had been the fraud of a third party. At this stage of the proceedings, absent any findings of fact, it could not be said that there was no prospect of showing that this case fell within the category of a defendant negligently causing or permitting a source of danger to be created. Further, the circumstances surrounding provision of the FAS facility were such that it could not be said that there was no prospect of it being found at trial that it had assumed responsibility in relation to the information provided by using the FAS facility: Smith v Littlewoods Organisation Ltd [1987] AC 241 applied.
(2) The court rejected the appellant’s argument that the mere fact that D’s name was entered by the Solicitors Regulation Authority (SRA) on the Roll, and that details of D and Acorn were listed on other registers compiled and maintained by the SRA in the discharge of its statutory regulatory functions, would not in itself suffice to establish that any duty of care was owed. A full factual inquiry might show that the provision of the FAS facility had gone beyond what the appellant had been obliged to do as part of its regulatory functions: Yuen Kun Yeu v Attorney-General of Hong Kong [1988] AC 175 distinguished. Caparo Industries plc v Dickman [1990] 2 AC 605 considered.
(3) In the absence of findings of fact, it was hard to say that in no conceivable circumstances could there be a relationship of proximity between the appellant and the respondent. That demanded consideration of the purpose of the FAS facility and the way it was presented to individuals. The question of proximity was plainly policy driven and, on the facts as presented at the present stage of the proceedings, this case was not suitable for disposal on an application to strike out the claim or for summary judgment. In addition to consideration of the wider purpose of the search function, a full factual inquiry into the way the website worked and the specific relationship between the appellant and the respondent was necessary. There was also the question of whether, even if there was no duty to the world at large, there was a sufficient nexus between the appellant and conveyancing solicitors as a group because of advice about the problem of fraud in conveyancing transactions given by the appellant. A duty to all who used the FAS facility was very wide ranging and required a full consideration of its possible implications. Determining that would be appropriate on an application for strike out and/or summary judgment without findings of fact. The judge had been correct to conclude that it would have been inappropriate to determine whether it was fair, just and reasonable for the appellant to be under a duty in an application for strike out and/or summary judgment: Caparo Industries plc v Dickman [1990] 2 AC 605 applied. Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 considered.
(4) The court rejected the argument that there was no prospect of showing that the appellant’s response had involved a representation. It had provided a response to the respondent’s online inquiry which was of a factual nature. While its exact scope might be the subject of legitimate dispute, it was not arguable that there was no representation at all.
Timothy Dutton QC and Rupert Allen (instructed by Bevan Brittan LLP) appeared for the appellant; Charles Dougherty QC and Matthew Thorne (instructed by XL Catlin Services SE) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of The Law Society of England and Wales v Schubert Murphy (a firm).
