Introduction

In our fast modern world the ability to search a database and rely on the result is paramount. Take a common occurrence, searching for a solicitor. The Law Society’s “Find a Solicitor” (FAS) is widely used by the public and business’; and more importantly by the legal profession to verify whether a person is a ​qualified solicitor as they say.

Risk

Given the risk of fraud in property transactions checking the identity of a solicitor is critical. The Law Society has issued guidance on this (Mortgage Fraud 31 July 2014):

Fraudsters may pose as a solicitor or a conveyancer acting for either party to add greater legitimacy to the transaction. If you do not know them, you should check the recognised directory of their professional body.

In the context of conveyancing, checking that a solicitor is genuine is paramount as undertakings given by the solicitor form a key part of the process. In Briggs & Anor v Law Society [2005] EWHC 1830 (Admin) (19 July 2005) the Court noted:

Undertakings are the bedrock of our system of conveyancing. The recipient of an undertaking must be able to assume that once given it will be scrupulously performed. If property purchasers and mortgage lenders cannot have complete confidence in the safety of the money they put into the hands of a solicitor in the course of a property transaction, our system of conveyancing would soon break down.

Update

A recent case (The Law Society of England and Wales v Schubert Murphy (A Firm) [2017] EWCA Civ 1295 (25 August 2017)) raises the very interesting point as to whether solicitors and members of the public who rely on the FAS facility do so at their own risk.

In this case, Schubert Murphy claimed damages for negligence against the Law Society in respect of losses suffered by the firm and their client as a result of a search of FAS. They had been instructed to act for a client who was purchasing a property. A solicitor and principal of a firm was purportedly acting for the vendor. Schubert carried out a search using FAS and the results confirmed the existence of the Vendor’s solicitor and firm. All seemed genuine.

However there was no such solicitor and no such firm. Schubert Murphy was the victim of a fraud. The firm had transferred the purchase price to the fraudster after they had been given what they purported to be a solicitor's undertaking to discharge a mortgage over the property.

The Issues

Did the Law Society owe Schubert Murphy a duty of care as a result of the entry on its FAS? The issues of duty of care are complex and the reader is referred to the judgment for the full arguments advanced by the parties.

The Law Society maintained there was no such duty and had applied for the claim to be struck out. At first instance the judge refused to strike out the claim as the circumstances of the case raised a question of wider importance by calling into question the security of current conveyancing practice.

On appeal to the Court of Appeal the Law Society submitted that the decision of the Judge was wrong on the basis:

  1. The direct and immediate cause of the loss was the fraud of a third party and not the Law Society.
  2. The information provided by the FAS in response to the online requests was only that which the Law Society was obliged to provide pursuant to its statutory functions and in providing such information that did not give rise to a duty of care on the part of the Law Society.

The Decision

The Court of Appeal held that the judge was correct to refuse to strike out the claim. Whist there were difficulties in establishing that a professional body owed a duty of care to its members or to the public, that determination was fact-sensitive and required the answers to several questions which could not be determined without further inquiry into the facts. Thus it was necessary for the court to undertake a full factual inquiry into the consequences of the imposition or not of a duty on the Law Society's use of the FAS.

The court observed that there were implications for the security of current conveyancing practice. Where a party checks whether a person is a solicitor and are told that he or she is and thus importantly backed by insurance or the Solicitors' Compensation Fund. If the person was not in fact a solicitor, the victim would unknowingly have assumed a higher risk in going ahead with the transaction, and, in the event of fraud, would suffer loss.

Conclusion

The Law Society’s appeal was dismissed and the issue of whether it owes a duty of care in respect of the FAS will have to be determined at a later date.

The issue is a fundamental one given that in the context of fraud the real issue is who bear’s the loss?

We live in interesting digital times!