Schubert Murphy v Law Society [2014] EWHC 4561 (QB)

The High Court has given the go-ahead for a negligence claim against the Law Society to proceed, having declined to strike the claim out on the Law Society's application. The negligence claim seeks compensation for losses arising out of the reliance by a firm of solicitors on inaccurate information published on the Law Society's Find a Solicitor website, which is essentially a publicly accessible version of the Roll of Solicitors (the Roll).

Factual background

Schubert Murphy (S) is a firm of solicitors whose client, B, had contracted to buy a property from a seller whose solicitors were Acorn Solicitors (Acorn). Having not previously dealt with Acorn, a partner of S had searched the Find a Solicitor website and satisfied him/herself that Acorn existed and that its principal, John Dobbs, was a solicitor.

This check was undertaken against the background of a warning note published by the Law Society in 2009 about the possibility of fraudsters posing as solicitors. The note’s advice about mitigating this risk included checking the Find a Solicitor website.

In fact, "John Dobbs" had fraudulently obtained entry onto the Roll by submitting a deed poll to the Law Society suggesting that a genuine solicitor (who had retired) had changed his name to John Dobbs.

In accordance with standard conveyancing practice, Acorn provided an undertaking to S's client to use the sale proceeds to pay the mortgage over the property. However, instead of paying off the mortgage, John Dobbs misappropriated the money.

S's professional indemnity insurers reached a settlement with B to compensate him for the misappropriation of his purchase money. The insurers then brought a subrogated claim in negligence against the Law Society on the basis that S had relied on inaccurate information published on the Find a Solicitor website.

The High Court case – the existence of a duty of care

The Law Society applied to have the case against it struck out on the basis that it disclosed no reasonable grounds for bringing the claim and/or that it had no reasonable prospect of success. It argued primarily that a body exercising a statutory function, as the Law Society was in maintaining the Roll, owed no duty of care to those who might be injured economically by carelessness on its part in the performance of its duties.

However, the court found instead that the existence of a duty of care depends on the careful analysis of a number of facts and circumstances including, as a starting point, the three-part test in Caparo v Dickman [1990] 2 AC 605. This can be summarised as:

  • was the damage which occurred foreseeable?
  • was the relationship between the parties sufficiently proximate?
  • is it fair, just and reasonable in all the circumstances to impose a duty of care?

The Law Society accepted that the first part of the Caparo test was satisfied, namely that loss was foreseeable, and that a factual enquiry would be necessary into the third part, namely whether it would be reasonable and just to impose such a duty of care.

The court found that proximity, the second part of the Caparo test, was established through the fact of S having made an enquiry of the Law Society with respect to Acorn and John Dobbs, and the Law Society having answered that query via the Find a Solicitor website.

The Law Society accepted that it made no difference in principle how the answer to S's enquiry was given, i.e. whether electronically or in person by some other means such as on the telephone. Additionally, the court found that there was no requirement for the carelessness at issue (in this case the addition of "John Dobbs" to the Roll) to have taken place at the same time as the representation was made to S that Acorn and John Dobbs were legitimate.

The case is eminently suitable for a trial

The court also found that the circumstances of the case raised a question of wider importance, namely the security of current conveyancing practice. It observed that, in the event that purchase funds were misappropriated by a genuine solicitor (or the employee of such a solicitor), a claim could be made against the Solicitors' Indemnity Fund.

However, that fund would not cover theft of such funds by persons merely pretending to be solicitors. In circumstances where genuine solicitors dealing with imposters had taken reasonable care to satisfy themselves of the imposters' credentials but were nonetheless caught out, the client of those solicitors might be left without any recourse, being unable to sue his/her own (genuine) solicitors for negligence or make a claim on the Compensation Fund.

The court concluded that this "might be a powerful factor in support of recognising the existence of a duty of care coincident with its statutory duty when considering applications for entry onto the Roll of Solicitors and their registration".

The court also noted that the Law Society encouraged members of the public to rely on its published information about who is a solicitor (i.e. the Find a Solicitor site), and stated that a member of the public who had relied on this information might be shocked to find that he/she had no recompense against the public body which had held that person out to be a solicitor.

These factors, in the court's view, made the case eminently suitable for trial.