When trying to avoid conveyancing fraud it has been good practice for many years to check that the seller is represented by a genuine solicitor.  We have seen too many examples of mortgage fraud in which fake solicitors have absconded with purchase monies.  If the solicitors are not genuine it is all too easy for a fraudster to ‘sell’ a property in exchange for huge sums, with the fraud victim left behind without their cash or an asset.

One way to verify whether the seller/their legal representatives are genuine is to check that the solicitor is registered at the Law Society.  The Law Society is required to keep a public ‘Roll’ of all solicitors who are qualified, hold a practicing certificate and are regulated by the Law Society.  I am listed there personally, as is Wright Hassall LLP as a firm. 

But what if the information there, ostensibly fully vetted by the venerable Law Society, is wrong? 

That is what happened when Mr Christofi tried to buy 30 Parkgate Avenue, Hadley Wood.  He instructed his own solicitor Pamela Murphy of Schubert Murphy to act for him.

On 10 May 2010, Mrs Murphy carried out the search for the seller’s solicitor, John Dobbs of Acorn Solicitors, using the FAS facility on the Law Society's website.     The names John Dobbs and Acorn Solicitors were entered on the Roll of solicitors and on the Find a Solicitor facility. Schubert Murphy received a response confirming the existence of Acorn Solicitors and that its principal was John Dobbs.

The FAS website contained the following information: 

"Find a Solicitor. This section contains our searchable database to help you find a solicitor, advice on what to expect, guides to common legal problems and what to do if things go wrong."

"When choosing a solicitor, you can be confident they are professionally qualified and properly regulated. Regulation is carried out by the Solicitors Regulation Authority. To check the SRA record of a solicitor or regulated entity, call 0870 606 2553 or email operations@sra.org.uk."

Mrs Murphy relied on the information obtained as confirmation that Mr Dobbs was a genuine solicitor and that Acorn was a genuine legal practice.

However, they were not.

On 18 May 2010, Mr Dobbs and Acorn gave an undertaking to discharge an existing mortgage over the property. Schubert Murphy then transferred the deposit and completion monies for the purchase to a bank account nominated by Acorn. The sale of the property completed. Acorn, however, did not discharge the existing mortgage over the property and the existing mortgagee brought possession proceedings against Mr Christofi, who had to make payments to the mortgagee to retain possession. Shortly afterwards Acorn appeared to have ceased trading and the £735,000 transferred to them had disappeared.

In June 2010 the SRA investigated and concluded that Mr Dobbs was not a genuine solicitor and that Acorn was not a genuine legal practice. The investigation established that the fraudster had stolen the identity of a retired solicitor with a different name.  They had apparently procured the registration in the name of Dobbs by submitting a deed poll in support of an application to the SRA to amend the name of the retired solicitor to John Dobbs, then applied to the SRA first for a practising certificate, and later for approval to practice as a recognised sole practitioner under the name "Acorn Solicitors" from an office in Rotherham.

Mr Christofi brought a claim against Schubert Murphy alleging negligence and breach of trust. Those proceedings were settled but Schubert Murphy's professional indemnity insurers sued the Law Society to recover the costs they incurred.   The question was whether the Law Society owed a duty of care to solicitors using the FAS website.  The Law Society said not and asked the court to strike out the claim before trial.

However, the court decided that it was at least arguable that the Law Society did owe a duty of care and refused to strike out the claim. It will now continue to trial at which there will be a more detailed investigation into how the FAS website operates and a full consideration of whether the Law Society owes a duty of care (and if they do, in the usual course, whether the duty was breached and whether that caused loss.)

The court was not prepared to say the Law Society owed no duty at this early stage, because the Law Society specifically encouraged the use of the facility to check solicitors.  In doing that they created the risk that it would be relied on and also an opportunity for fraud.  They went beyond the strict statutory regulatory obligations.

Another consideration is whether there was a sufficiently close link between the Law Society and solicitors using the website information for a conveyance.  Here the application of the law starts to become more difficult because in practical terms it seems obvious that solicitors need to rely on information published on this particular website, even though there was no specific link between the user of the information and the Law Society.  The court discussed the possibility that, had Mrs Murphy telephoned the Law Society for the information, that would make it more likely that a duty of care arose; which only makes the law sound archaic.

The wider question of whether it is fair, just and reasonable to impose a duty of care in these circumstances also needs to be considered.  There will now be an opportunity to consider as a matter of public policy who, in this type of conveyancing situation, should bear the irrecoverable loss caused by the fraudster to the innocent client.   

We will monitor this case with interest.  It deals with the essential general principles of how a duty of care can arise, but needs to consider those principles in the context of websites.  Making publishers of information on web sites liable to unknown third parties for misinformation seems unlikely: it would also be a significant event if a regulator were to be found liable when carrying out its regulatory function.  However, when a publisher of information specifically drives professionals to a website to protect them/their clients, this is surely an area where the publisher needs to take care to ensure that data is correct.  FAS should remain a potent weapon in conveyancing fraud prevention and if it is to retain that potency it needs to be reliable; even if that is at the price of a duty of care.

About the author

Susan Hopcraft Partner

Susan advises on all aspects dispute resolution particularly in the financial services sector. She has extensive insurance, professional negligence and restrictive covenants experience. She deals with claims against solicitors, valuers, surveyors, brokers and accountants, fraud issues, recoveries for lenders and bank mis-selling.