Schubert Murphy v The Law Society

News | Tue 14th Jul, 2015

In Schubert Murphy v The Law Society [2015] P.N.L.R. 15 (QBD), Mitting J refused to strike out a claim by solicitors who alleged that it had suffered loss during a conveyancing transaction as a result of relying upon misinformation on the Law Society’s “Find a Solicitor” website.

Someone calling themselves John Dobbs submitted and obtained a practising certificate to operate as a sole practitioner under the trading name of Acorn Solicitors. A Mr Khristofi decided to buy a house and instructed Schubert Murphy. The vendor was represented by Acorn Solicitors. Schubert Murphy checked the Solicitors Regulation Authority (SRA) and noted Acorn Solicitors were regulated. The Law Society’s practice note on mortgage fraud (dated 15 April 2009) urged solicitors as a matter of good practice to check their directory “Find a Solicitor” or the directory of Licensed Conveyancers if they were dealing with a firm they were unfamiliar with.

During the conveyancing Acorn Solicitors gave the standard undertaking to discharge the existing mortgage out of the purchase monies paid by Mr Khristofi. Mr Khristofi moved into the house to discover the £735,000 purchase price had not been used to discharge the mortgage; Acorn Solicitors were a sham and the undertaking worthless.

Mr Khristofi faced eviction proceedings by Lloyds Bank who held a first charge over the property. Mr Khristofi brought proceedings against Schubert Murphy (for negligence) which was settled. Schubert Murphy then brought proceedings against the Law Society for breach of statutory duty and/or negligent misstatement. The Law Society sought to strike out the claim on the basis it did not owe Schubert Murphy a duty of care.

Mitting J refused to strike out the claim and held the matter should go to trial.

The existence or not of a duty of care vested in the SRA in respect of its duties under ss. 10(1) and 10A of the Solicitors Act 1971 depended on an analysis of general factors and specific factors. Having regard to issues concerning the protection of the public a strike out was not appropriate as in theory if the Law Society was correct it called into question the security of current conveyancing practice. Furthermore that could be a factor in recognising the existence of a duty of care which coincided with the Law Society’s statutory duties when considering applications for the entry onto the Roll of Solicitors and their registration. This was because the Law Society, by encouraging members of the public to rely on its published information about who is a solicitor could be shocked to discover they had no route for recompense against a representative and regulatory body that held out a person as a solicitor on its website when in fact they were not.

It is not clear from the judgment whether the Law Society’s website for its “Find a Solicitor” contained an appropriately worded disclaimer in 2010 when the fraudulent transaction occurred. It does now and includes the wording “Find a Solicitor is not intended to be the way in which the Law Society fulfils its statutory duties under the Solicitors Act 1974 to keep an official register of all solicitors available for inspection by the public” and goes on to advise viewers to inspect the official register.

The Law Society contended that a body in its position and exercising a statutory duty owed no duty of care to those who may be injured economically by carelessness (relying on Yuen Kun-Yeu v Attorney General of Hong Kong [1988] A.C. 175).

Mitten J held reliance on the case noted above was of little assistance as it did not establish that in no circumstances could a regulator not be responsible for economic loss. Further it was a not case where the Law Society made a representation or failed to exercise due care in an assessment of honesty or competence of “John Dobs”, but instead it just entered his name on the Roll and register him as entitled to practise when if they had exercised proper care they would not have done so.

Mitten J also held that in negligence claims generally there was no requirement that the act of carelessness giving rise to the claim must coincide temporally with the occurrence of harm. Furthermore in a representation case it did not matter the alleged carelessness happened at a time when the person to whom the representation was made was not personally in the contemplation of the defendant.

Mitten J was concerned about the possible impact on conveyancing practise as in cases where solicitors are involved negligence can be rectified by a payment from the Solicitors Compensation Fund. However counsel for the Law Society submitted only where a solicitor gives an undertaking that fails will compensation be paid as there is no remit or obligation to make payments for failed undertakings given by people posing as a solicitor.

So how does a member of the public or a solicitor obtain independent verification of the information on the “Find a Solicitor” website? The official register could be inspected and the Law Society telephoned. However the SRA will not necessarily release information about a person’s route to entry on the Roll on the basis of data protection principles. Should such a body like the Law Society be allowed to comprehensively disclaim responsibility for information when it urges the public to check the information it publishes and urges solicitors, as a matter of good practice, to also check?

J Mitting gave judgment on 17 December 2014-does anyone know what is happening with this case?