The money that changes hands in the course of a property transaction is an attractive target for fraudsters, and the Solicitors Regulation Authority (SRA) has warned of the serious and continuing risks posed by criminals who set up bogus law firms, or bogus branch offices of genuine law firms, in order to relieve lenders of their cash. Consequently, conveyancers are advised to check the identity of lawyers they do not know by consulting the appropriate professional directory. However, this may not always be enough to guard against being defrauded out of purchase money.
The question before the court in The Law Society of England and Wales v Schubert Murphy (a firm) [2017] EWCA Civ 1295; [2017] PLSCS 172 was: does the Law Society owe a duty of care to solicitors and others who use its online “Find a Solicitor” facility? Or do those who use the facility do so at their own risk?
Schubert Murphy had been instructed to act on behalf of a buyer in connection with the purchase of a property in Hertfordshire and had transferred the purchase price to a fraudster after accepting what purported to be a solicitor’s undertaking to discharge the vendor’s mortgage over the property. The fraudster who gave the undertaking absconded with the funds and it was subsequently revealed that he was not a solicitor and that his firm was not a genuine legal practice. It seems that the fraudster had stolen the identity of a retired solicitor and had persuaded the SRA to issue him with a practising certificate and approval to operate as a law firm.
The fact that the fraudster was not a solicitor meant that the Solicitors’ Compensation Fund could not pay out. The case fell outside its remit because the protection that it provides in respect of non-compliance with undertakings is available only where undertakings are given by solicitors. So Schubert Murphy settled a negligence claim by the purchaser and then pursued the Law Society for negligence and for a contribution to its losses under the Civil Liability (Contribution) Act 1978. The firm had checked the “Find a Solicitor” facility on the Law Society’s website at the very outset and had obtained confirmation that both the individual and the firm with whom it was dealing were registered with the Law Society.
The Law Society sought to have the claim struck out on the ground that, in supplying the information that it did, it was complying with its statutory regulatory functions, and that a regulator does not generally owe a duty of care in relation to the way in which it does so: Yuen Kun Yeu v Attorney-General of Hong Kong [1988] AC 175. But the Court of Appeal has decided that the facts need to be considered more fully and that the case involves important policy considerations, which were not suitable for determination on an application for summary judgment or strike out.
Meanwhile, the Law Society’s Find a Solicitor facility now states that: “While we try to ensure the accuracy of the information, the Law Society cannot accept any liability arising from your reliance upon it, or from the inclusion in it or omission from it of any data whatsoever.”
Allyson Colby is a property law consultant
