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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT, QUEENS BENCH DIVISION
MR JUSTICE MITTING
 EWHC 4561 (QB)
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
THE MASTER OF THE ROLLS
LADY JUSTICE GLOSTER, VICE PRESIDENT, CIVIL DIVISION
LORD JUSTICE BEATSON
|| The Law Society of England and Wales
Schubert Murphy (A Firm)
Timothy Dutton QC, Rupert Allen (instructed by Bevan Brittan LLP) for the Appellant
Charles Dougherty QC, Matthew Thorne (instructed by XL Catlin Services SE) for the Respondent
Hearing dates : 13 July 2017
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Beatson :
- The question before the court is whether it is arguable that the appellant, the Law Society of England and Wales ("the Law Society"), owes a duty of care to solicitors and others who use its online "Find a Solicitor" facility. The Law Society appeals against the Order of Mitting J dated 17 December 2014 dismissing its application for summary judgment and/or to strike out the claim brought by the respondent, Schubert Murphy, a firm of solicitors which used "Find a Solicitor" to check on the person and the firm named as the solicitor to the vendor of a property its client, a Mr Christofi, wished to purchase. Permission to appeal was refused on the papers on 29 May 2015 by Briggs LJ, but was granted by Hallett LJ on 16 December 2015 after a hearing.
- Schubert Murphy claimed damages for negligence and for a contribution under the Civil Liability (Contribution) Act 1978 in respect of losses suffered by the firm and Mr Christofi as a result of the Law Society's online response to its search on the "Find a Solicitor" facility. The search was about the status of a Mr John Dobbs and a firm, "Acorn Solicitors". The response confirmed the existence of Acorn Solicitors with an address in Rotherham and that its principal was John Dobbs, a registered solicitor. There was in fact no such solicitor and no such firm. Schubert Murphy was the victim of a fraud. It had transferred the purchase price to the fraudster after it had been given what purported to be a solicitor's undertaking to discharge the vendor's mortgage over the property. The fraudster absconded with the funds without discharging the mortgage. The principal issue is whether there is a real prospect of Schubert Murphy establishing that: (a) the Law Society owed it a duty of care as a result of the entry on its "Find a Solicitor" search function, or (b) placing the names of Mr Dobbs and Acorn in the database amounted to a representation at all.
- Because the website is widely used by solicitors and the general public, the underlying claim raises the important question whether a duty of care arises, here by the Law Society, where information is provided by a digitised system online rather than in response to an inquiry made in person, over the telephone, or in a letter. The judge considered the outcome could have important ramifications for the security of conveyancing and the sort of inquiries conducted by a solicitor who is unfamiliar with the person who is representing the counterparty in a transaction. More generally, the question is whether solicitors and members of the public who rely on the "Find a Solicitor" (hereafter "FAS") facility do so at their own risk.
- I am grateful for the helpful submissions of Mr Tim Dutton QC and Mr Rupert Allen on behalf of the Law Society and of Mr Charles Dougherty QC and Mr Matthew Thorne on behalf of Schubert Murphy.
- The remainder of this judgment is organised as follows. Part II sets out the material legislative and regulatory provisions concerning the Law Society's obligations to maintain a list of all solicitors on the Roll. Part III summarises the factual background to the appeal. Part IV summarises the judgment below. Part V summarises the positions of the parties. Part VI contains my analysis of the law and the reasons for my overall conclusion, which is summarised in the next paragraph.
- I have concluded that the judge was correct to refuse the Law Society's application for summary judgment or for the claim to be struck out. Notwithstanding the undoubted difficulties in establishing that a regulatory or professional body owes a duty of care to its members or to the public, the determination of whether a duty arises in the present circumstances is fact-sensitive. It requires the answers to several questions which cannot be determined without further inquiry into the facts. These include whether the relationship between Schubert Murphy and the Law Society was sufficiently proximate, whether Schubert Murphy was individually identifiable, and the wider purpose and consequences of imposing or not imposing a duty in these circumstances. Accordingly, I would dismiss the appeal.
II The legislative and regulatory framework:
- The Law Society is the body which has the responsibility for the representation and regulation of solicitors in England and Wales. Its regulatory responsibilities under the Solicitors Act 1974 ("the 1974 Act") are delegated to the Solicitors Regulation Authority ("the SRA"), which, although not a separate legal entity from the Law Society, is functionally independent from it.
- Section 6 of the 1974 Act obliges the Law Society to keep a list of all solicitors "on the Roll". Section 10A of the 1974 Act requires the Law Society to keep a register of all solicitors who hold practising certificates.
- The regulatory objectives of the approved regulator, i.e. the SRA, are stated in Part 1 of the Legal Services Act 2007 ("the 2007 Act"). They include, see section 1(1)(d) of the 2007 Act, "protecting and promoting the interests of consumers". The Law Society is obliged, under section 28 of the 2007 Act, to act in a way which is compatible with the regulatory objectives, so far as is reasonably practicable.
- At the material times, the relevant regulations were the Solicitors (Keeping of the Roll) Regulations 1999 ("the 1999 Regulations") and the SRA Practising Regulations 2009 ("the 2009 Regulations"). They were both replaced by amended regulations on 6 October 2011.
- Regulation 2B of the 1999 Regulations requires the Roll to be kept in electronic form. Regulation 2D provides that:
"(a) Entries on the Roll under (a), (c), (d), (e), (g) and (h) must be available for inspection by any member of the public during office hours without charge, except that the SRA may in exceptional circumstances, and if it considers that to do so would be in the public interest, withhold the address of a solicitor's principal place of business.
(b) The date on which a solicitor's name was
(i) removed from or
(ii) struck off
the Roll must be made available to a member of the public on request."
- Regulation 2.2 of the 2009 Regulations provides:
"Where application is made under regulation 2 for a practising certificate or for replacement of a practising certificated the SRA must grant the application if:
(a) the applicant's name is on the Roll of solicitors;
(b) the applicant is not suspended from practice as a solicitor;
(c) the applicant has supplied satisfactory evidence that he or she will comply with or be exempt from the Solicitors' Indemnity Insurance Rules; and
(d) the application is made in accordance with these Regulations,
and the SRA must not grant the application unless conditions (a) to (c) are met."
- Regulation 4 of the 2009 Regulations deals with applications to be a recognised sole practitioner. Regulation 4.2 provides:
"(a) The SRA may grant an application under regulation 4 if the applicant:
(i) will be practising as a sole practitioner from an office in England and Wales;
(ii) is not, and is not about to be made, subject to a condition on his or her practising certificate or registration which would prohibit practice as a sole practitioner;
(iii) has adopted a name under which his or her firm is to be recognised, and which complies with rule 7 of the Solicitors' Code of Conduct; and
(iv) complies with (or has a waiver of) rule 5.02 of the Solicitors' Code of Conduct; and
(v) complies with the Solicitors' Indemnity Insurance Rules in respect of his or her firm."
- The Law Society has given advice to solicitors about the problem of fraud in conveyancing transactions, in particular the present scenario of fraudsters posing as conveyancing solicitors before absconding with the purchase funds. It has done so in a Practice Note dated 15 April 2009 and in its Conveyancing Handbook. The Practice Note recommends checking the status of the person acting for either party in a conveyancing transaction with their regulatory body. Paragraph 4.3 states:
"Identify other solicitors or conveyancers. 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.
The glossary to the Practice Note states that the use of the word "should" denotes "good practice for most situations in the Law Society's view", and also that:
"If you do not follow this, you should be able to justify to oversight bodies why the alternative approach you have taken is appropriate, either for your practice or in the particular retainer."
The Conveyancing Handbook states at §1.10.3:
"…If the identity of the other party's solicitor is not known, his or her status should be checked with the Law Society."
III The factual background:
Schubert Murphy was formerly a firm of solicitors in Winchmore Hill in London. The partners were Pamela Murphy and Caroline Schloss but the partnership was dissolved after the events which have given rise to these proceedings. On 30 April 2010, Mr Christofi instructed Schubert Murphy to act on his behalf in relation to the proposed purchase of a property at 30 Parkgate Avenue, Hadley Wood in Hertfordshire ("the property"). Mr Dobbs, allegedly operating under the trading style of 'Acorn Solicitors' ("Acorn"), was purportedly instructed to act for the vendor.
On 10 May 2010, Mrs Murphy carried out the search for Mr Dobbs and Acorn using the FAS facility on the Law Society's website to which I have referred on behalf of Schubert Murphy. The evidence of Amy Tschobotko, the solicitor with conduct of these proceedings on behalf of the Law Society, is that the details of solicitors and firms made available through the FAS facility were automatically extracted from the database maintained by the SRA for the purpose of discharging its statutory regulatory functions.
The names "John Dobbs" and Acorn Solicitors were entered on the Roll of solicitors and on the "Find a Solicitor" facility, and Schubert Murphy received a response to Mrs Murphy's search confirming the existence of Acorn Solicitors and that its principal was John Dobbs. At the material time (see  EWHC 4561 (QB) at ), the FAS facility 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."
On the same page, it is also stated that:
"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 firstname.lastname@example.org."
Mrs Murphy relied upon the information obtained as confirmation that Mr Dobbs was a genuine solicitor and that Acorn was a genuine legal practice.
On 18 May 2010, Mr Dobbs and Acorn purportedly gave a solicitor's 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 was completed. Acorn, however, did not discharge the existing mortgage over the property in accordance with the purported undertaking and the existing mortgagee brought possession proceedings against Mr Christofi, who had to make payments to the mortgagee to retain possession. On or about 9 June 2010, Schubert Murphy contacted the SRA and informed it that Acorn had failed to discharge the existing mortgage over the property, that it appeared to have ceased trading, and that the monies transferred to Acorn might have been stolen.
On 18 June 2010, the SRA commenced a forensic investigation into Mr John Dobbs and Acorn, which ultimately 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. The judge stated (see  EWHC 4561 (QB) at [5(iv)]) that he 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 applying 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. After the conclusion of its investigation, the SRA removed Mr Dobbs' name from the Roll of solicitors and revoked his registrations as a solicitor with a valid practising certificate and as a recognised sole practitioner trading as Acorn. On 7 September 2010, Mr Christofi brought a claim against Schubert Murphy alleging negligence and breach of trust. Those proceedings were settled on 25 October 2011 by Schubert Murphy's professional indemnity insurers who now sue to recover the costs they incurred.
I add that the Law Society refused to compensate Schubert Murphy or Mr Christofi from the Solicitors' Compensation Fund on the ground that the case fell outside the remit of the Fund because the purported 'solicitor' was not in fact a solicitor.
IV The decision below:
In his judgment dated 17 December 2014, Mitting J ("the judge") refused to strike out the claim or to enter summary judgment for the Law Society. He considered that the decision of the Judicial Committee of the Privy Council in Yuen Kun Yeu v Attorney-General of Hong Kong  AC 175 is of limited assistance to the Law Society because (see ) it does not establish that in no circumstances can a regulator be responsible for economic loss caused by a regulated person or company. It only decided that a financial regulator owed no duty to see that members of the public minded to deposit money with a regulated deposit taking company did not suffer loss through the affairs of such companies being conducted in a fraudulent or imprudent fashion. In the present case (see ), it was not alleged that the Law Society failed to exercise due care in an assessment of the honesty or competence of "John Dobbs" or to have made any representation to anyone about his honesty or competence:
"All that [the Law Society] are said to have done is to have entered his name on the Roll and Register of solicitors as entitled to practise when, if they had exercised proper care, they would not have done so and, having done so, told the claimants and through them Mr Christofi that he was so entered."
The judge stated (at ) that it was accepted by the Law Society that the first part of the three-part test in Caparo Industries plc v Dickman  2 AC 605, reasonable foresight of loss to the claimant, is satisfied because the loss was foreseeable. He also stated that it was accepted by the Law Society that a factual enquiry would be necessary to ascertain whether the third part of the test - fairness, justice and reasonableness - is established. He stated that he would identify what "at least some of those facts might be", because as well as analysing the three parts of the test independently, it was necessary to analyse the interaction of the three parts with each other. He stated (at ) that:
"… [A]t least the following facts would need to be established: (i) What are the defendants required to do and what in fact do they do to check the identity of an applicant for entry on the Roll or Register and his entitlement to be so entered? Whether the decision involves an exercise of judgment or is simply a box-ticking exercise or semi-automatic. Whether there are circumstances which should alert those responsible for making checks to anomalies in applications which require investigation. What resources are available to the defendant to permit them to make checks to a satisfactory standard? (ii) What, if any, additional financial burden would be imposed by carrying out checks sufficient to eliminate or more likely minimise the risk of fraudulent entry on the Roll. (iii) What is the scale of the problem? How many fraudulent applications are detected each year and what would be the financial exposure of the defendant if it were to be held liable for careless failure to carry out adequate checks? (iv) What insurance is available and at what cost to the defendant and/or those practising as solicitors in the conveyancing market if liability for carelessness on the part of the defendant is acknowledged or disavowed. (v) To what extent, if at all, can the defendant escape a liability which it might otherwise have for an erroneous answer given personally by an employee by telephone or by letter or by email by relying on an automated response given by a page on its website?
He concluded (at ) that "it is only if those questions can be answered in a manner unequivocally favourable to" the Law Society that its application could succeed "unless, however answered, no duty of care could be held to exist".
He then addressed Mr Dutton's submission that no duty could exist which turned on the issue of proximity, the second part of the Caparo test. The judge (at ) considered the requirement was "somewhat difficult to define". He stated (at ) that there could be no question of proximity at the time that Mr Dodds was placed on the Register and the "Find a Solicitor" facility because any duty would have been to the public at large. If the defendant's answer to the claimant's enquiry about Mr Dobbs amounted to a representation, plainly there was a relationship of proximity (see ), and, after referring to a telephone inquiry of the Law Society, stated (see  - ) that "the manner in which an enquiry is made and answered, whether it be personally by human beings or electronically by computers, does not affect determinatively the outcome of the claim".
As to whether the act of carelessness giving rise to the claim must coincide temporally with the occurrence of harm, the judge observed (at ) that in negligence claims generally there is no such requirement, and that "in representation cases … there is no requirement that carelessness which gives rise to an erroneous representation must occur coincidentally with the giving of the representation". He concluded (at ) that, if (which he was required to assume) "the representation was erroneous because of carelessness … it does not matter that that carelessness occurred at a time when the person to whom the representation was made was not personally in contemplation of the [Law Society] and its employees". He also stated (at ) that it was not necessary for him to go on to consider whether the Law Society assumed responsibility for the accuracy of the Roll and Register.
The judge considered (see  and ) that the circumstances of the case raised a question of much wider importance by calling into question the security of current conveyancing practice and that this "may be a powerful factor in support of recognising the existence of a duty of care coincident with [the Law Society's] statutory duty". The wider importance arose because the undertaking given by the vendor's solicitors, who (the judge observed) will usually act for the mortgagee as well, that they will discharge any secured debt out of the purchase monies, is the principal guarantee that the purchaser has that he will obtain clear title. The protection of the Solicitors' Compensation Fund where the vendor's solicitors do not discharge the mortgage is only available where the person giving the undertaking is a solicitor. He also stated (at ) that even though a trust is imposed upon the solicitor to apply the purchase monies to effect the transfer of the property to the purchaser, it is unsatisfactory that a purchaser should be put at risk of the exercise of discretion under section 61 of the Trustee Act 1925 in a manner unfavourable to him in circumstances in which he cannot reasonably have expected to have been put at risk of any loss whatsoever.
In the penultimate paragraph of his judgment, the judge stated that the Law Society:
"… is accordingly encouraging ordinary members of the public to rely on its published information about who is a solicitor. If an ordinary member of the public reliant on that information consults an imposter operating an office on a high street near him and entrusts that person with money, as people are [apt] to do with solicitors, then if he loses it, he might well be rather shocked to find that he had no recompense against the representative and regulatory body that held out that person as a solicitor on its website." ()
V The submissions of the parties:
There are four principal limbs to Mr Dutton's overarching submission that the judge's judgment is inconsistent with authority and flawed as a matter of principle. He submitted that the judge made the following errors:
(a) He failed to start his analysis with the fact that the direct and immediate cause of the loss was the fraud of a third party, the supposed "Mr Dobbs" and not the Law Society.
The Law Society also criticised the judge for attaching weight to issues concerning the security of current conveyancing practice and the theoretical risk that the client of a solicitor who released funds to a fraudster posing as a solicitor might fail to recover substantial damages for breach of trust from his own solicitor. I consider this as part of the analysis of the test in Caparo. The judge was also criticised for considering that it was not necessary to decide whether the Law Society assumed responsibility for the accuracy of the Roll and Register. I have concluded that while it may have been better for the judge to have dealt with this, the criticism is misplaced in view of his conclusions on the test in Caparo.
(b) He concluded that the decision in Yuen Kun Yeu v Attorney-General of Hong Kong  AC 175 could be distinguished and was of limited assistance. He did not recognise that the registration of Mr Dobbs and Acorn by the SRA did not suffice to give rise to a duty of care on the part of the SRA. Moreover, he did not find that, because the information provided by the FAS facility in response to online requests was only that which the Law Society is obliged to provide pursuant to its statutory regulatory functions, providing such information does not give rise to a duty of care on the part of the Law Society.
(c) In relation to the threefold test in Caparo Industries Plc. v Dickman  2 AC 605 (also a strike out/summary judgment case),
(i) He held that Schubert Murphy had a prospect of establishing that there was a sufficient relationship of proximity to give rise to any duty of care merely because the Law Society provided information through the FAS facility, and
(ii) He concluded that the question of whether it was fair, just and reasonable to impose the alleged duty of care could not be resolved in favour of the Law Society without a trial.
(d) He held that Schubert Murphy had a real prospect of establishing that the Law Society had made a representation by providing through the FAS facility the information (i) about Mr Dobbs and Acorn, and (ii) that Mr Dobbs and Acorn were listed on the Roll of solicitors and other registers.
Mr Dougherty, on behalf of Schubert Murphy, submitted that the Law Society had failed to demonstrate that its claim was hopeless. The Law Society's conduct was above and beyond its regulatory duties. It voluntarily provided the FAS facility. It specifically advised its conveyancing solicitors to use the FAS facility. The website stated that "when choosing a solicitor, you can be confident that they are professionally qualified and properly regulated". Mr Dougherty submitted that, when Schubert Murphy used the facility to make its inquiry, the Law Society's response was a direct representation to the firm that Mr Dobbs was a genuine solicitor and Acorn was a genuine firm.
In support of the first limb of his submissions, Mr Dutton relied on Smith v Littlewoods Organisation Ltd.  AC 241 for the proposition that where the direct and immediate cause of loss was a third party, "special circumstances" are required to justify imposing liability on a defendant. In that case, Lord Goff (at 270) stated that when the claimant is seeking to hold the defendant responsible for having failed to prevent a third party from causing damage to the claimant by the third party's own deliberate wrongdoing, "it is not possible to invoke a general duty of care; for it is well recognised that there is no general duty of care to prevent third parties from causing such damage". He submitted that the "special circumstances" principle applies here because the fraud of a third party, the supposed "Mr Dobbs", caused the loss, but there were no special circumstances (such as a specific assumption of responsibility) in this case.
I reject this. It is true that a regulator such as the Law Society does not generally owe a duty of care in relation to the way it carries out its regulatory functions. But making information available through the FAS facility is arguably an additional step going beyond what it was required to do, and thus providing an additional but voluntary service. The Law Society specifically encouraged the use of the facility to find solicitors rather than licensed conveyancers or other professionals and did not recommend any other checks. By choosing to provide the facility, and in the light of the nature of the facility (and the information on it such as that to which I referred at  above), I consider that it is arguable that the actions of the Law Society, which has control over the registration of solicitors, created the risk that it would be relied on and the opportunity for fraud and did so in a way going beyond the confines of its statutory regulatory obligations under the 1974 and 2007 Acts.
It is therefore arguable that, depending on a fuller consideration of the facts, this case may fall within one of the situations recognised by Lord Goff in Smith v Littlewoods where a defendant may be held responsible where the direct and immediate cause of the claimant's loss was the fraud of a third party. His Lordship stated (at 272D-H) that "special circumstances", such as a specific assumption of responsibility, a special relationship between the defendant and the third party by which the defendant is responsible for controlling the third party, or where the defendant negligently causes or permits a source of danger to be created are required in order that a defendant "may be held responsible in law for injuries suffered by the pursuer through a third party's deliberate wrongdoing". I consider that at this stage of the proceedings, absent any findings of fact, it cannot be said that there is no prospect of showing that this case falls within the last of these categories. Moreover, the circumstances surrounding provision by the Law Society of the FAS facility are, in my judgment, such as to mean that it cannot be said that there is no prospect of it being found at trial that it did assume responsibility in relation to the information provided by using the facility.
The second limb of the Law Society's case largely relies on the decision of the Judicial Committee of the Privy Council in Yuen Kun Yeu v Attorney-General of Hong Kong  AC 175 in which Lord Keith (at 195D) stated that it would be "strange" if the common law were to impose on a regulator tortious duties additional to those which he had under the relevant statutory framework. Since the registration of Mr Dobbs and Acorn is not sufficient to give rise to a duty of care on the part of the SRA, and the information provided by the Law Society through the FAS facility is the same as that which the SRA is obliged to provide in the discharge of its statutory regulatory functions, Mr Dutton submitted that there is no prospect of showing that the Law Society is under a duty of care to users of the facility.
At the hearing, it was accepted by Mr Dutton that, had Schubert Murphy telephoned the Law Society to ask whether Mr Dobbs was a genuine solicitor, the Society's response might have been subject to a duty of care. The distinction Mr Dutton principally relied on was between a response to a personal inquiry and a response to an online inquiry, although at times it appeared to be one between such an inquiry and one in which the Law Society is asked whether a person is on the Roll or listed on the other registers compiled and maintained by the SRA in the discharge of its statutory regulatory functions. The proposition at the heart of Mr Dutton's written submissions was that in substance all that was obtained from the FAS facility was the latter information, which did not go beyond that which the SRA was under a statutory obligation to make available to the public under the 1999 and 2009 Regulations (summarised at  –  above). He submitted that (as Schubert Murphy had conceded before the judge) the mere fact that Mr Dobbs' name was entered by the SRA on the Roll and that the details of "Mr Dobbs" and Acorn were listed on the other registers compiled and maintained by the SRA in the discharge of its statutory regulatory functions would not in itself suffice to establish that any duty of care was owed, and that the automatic provision of that information in response to an online search did not affect the position.
I also reject this limb of the argument. I do so in part for similar reasons to those for which I rejected the first limb, that a full factual inquiry may well show that the provision of the FAS facility went beyond what the Law Society was obliged to do as part of its regulatory functions. It is also important to note that in Yuen Kun Yeu the claim was by a person who had lost money when a registered deposit-taker went into liquidation against the regulator. The alleged negligence was that the regulator should have known that the deposit-taker had run his business fraudulently and should either have refused to register the deposit-taker or have deregistered it before it went into liquidation. The court held that decisions to register and to deregister involved the exercise of discretion by the regulator as to the fitness of the regulated person or entity which did not give rise to a statutory duty to potential depositors. It was in that context that Lord Keith stated that it would "be strange" for a common law duty of care to be imposed upon the statutory framework. The present case is distinguishable from Yuen Kun Yeu because whether someone is a solicitor is not a question of discretion or judgment: it is a question of fact and because there had been no communication between the claimant and the regulator. I also reject this limb of the argument for reasons which I develop below when considering whether this is a case like Caparo, in which it can properly be said at the strike out/summary judgment stage that the threefold test laid down in that case cannot be satisfied.
I turn to the threefold test in Caparo. In the light of the Law Society's concession that the loss was foreseeable, my focus is on whether it can be said that there is a need for a trial as to whether there is sufficient nexus between the Law Society and Schubert Murphy, whether the online request for information established a relationship of sufficient proximity between them, and whether it is fair just and reasonable to impose a duty of care in these circumstances.
In my judgment, in the absence of findings of fact, it is hard to say that in no conceivable circumstances could there be a relationship of proximity between the Law Society and Schubert Murphy. The answer to this question demands consideration of the purpose of the FAS facility and the way it is presented to individuals. In Caparo, Lord Oliver considered the purpose of a representation and whether it was necessary for the respondents in Hedley Byrne v Heller  AC 465 to be aware of the actual identity of the advertising firm (see 638B). He observed:
"What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice ("the adviser") and the recipient who acts in reliance upon it ("the advisee") may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment."
Mr Dougherty submitted that the wording used on the FAS facility's web page, and the way the function was deployed by the Law Society, show that its purpose was to identify genuine solicitors. I consider that, on the material before the court, the FAS facility appears to actively encourage use of solicitors rather than other conveyancers. It may therefore be necessary at trial to consider the extent to which providing the FAS facility goes above and beyond the Law Society's regulatory function, and is more akin to marketing. The question of proximity is plainly policy-driven and, on the facts as presented at this stage of the proceedings, this case is not in my judgment suitable for disposal on an application to strike out the claim or for summary judgment. As Lord Roskill stated in Caparo (at 628), phrases such as 'foreseeability', and 'proximity', are not precise definitions but "[a]t best they are but labels or phrases descriptive of the very different factual situations which can exist in particular cases and which must be carefully examined in each case before it can be pragmatically determined whether a duty of care exists and, if so, what is the scope and extent of that duty".
Here, in addition to consideration of the wider purpose of the search function, a full factual inquiry into the way the website works and the specific relationship between the Law Society and Schubert Murphy is necessary. It is necessary to consider what the Law Society in fact does and the extent to which it could identify an individual user of the FAS facility. Mr Dutton argued that it is unreal to suggest that the visibility of the IP address would identify Schubert Murphy. However, it is impossible to determine this question without further and more detailed consideration of the facts. It is insufficient simply to rely on the fact that users of the FAS facility are anonymous and that its entries are viewed at least a million times each month. Findings of fact are needed in order to assess the significance of the fact that the information was given by the Law Society's website directly to Schubert Murphy in response to its inquiry. Is that, as Mr Dougherty submitted, an important pointer to the recognition of a duty of care, or is the position, as Mr Dutton submitted, more akin to the provision of information to the world at large because any member of the public could have made the same inquiry about "Mr Dobbs" and Acorn?
Findings of fact will also assist in determining the extent to which similar authorities can be relied on in the circumstances of this case. Mr Dougherty relied on Gooden v Northamptonshire County Council  PNLR 18 as a case where the Council went above and beyond its statutory duty to maintain a list of the streets maintainable at public expense when responding to a specific enquiry about certain roadways. I consider that Gooden's case is of limited assistance to Schubert Murphy's case. It was relevant in that case, that, when responding to the enquiry, the council was aware of the identified individual purchaser. Here, however, the extent to which an individual making a request to the FAS facility can be identified by the Law Society is a disputed factual question. It is necessary to consider how "automatic" the response is, and whether it is possible or practicable to identify an individual through that person's unique IP address or in any other way.
There is also the question whether, even if there is no duty to the world at large, there is a sufficient nexus between the Law Society and conveyancing solicitors as a group because of the advice about the problem of fraud in conveyancing transactions given by the Law Society in the Practice Note and the Conveyancing Handbook to which I referred at  and  above. Mr Dougherty submitted that irrespective of whether the Law Society owes a duty to other third parties for other purposes, the information supplied to Schubert Murphy was supplied for the specific purpose envisaged by the Law Society, namely its use in conveyancing transactions. He relied on the advice about the problem of fraud in conveyancing transactions given by the Law Society in the Practice Note and the Conveyancing Handbook and the words of Lord Bridge in Caparo at 621E-F for the submission that there is a sufficient nexus between the Law Society and conveyancing solicitors as a group. Lord Bridge posited a situation in which the defendant knew that the information would be communicated to the claimant "specifically in connection with a particular transaction or transactions of a particular kind … and the [claimant] would be very likely to rely on it for the purposes of deciding whether or not to enter upon that transaction or upon a transaction of that kind".
I have some doubt as to whether the fact that the Practice Note advises the conveyancing community to protect themselves against fraud itself suffices to create the nexus required for a duty. I also consider that further and more detailed consideration of the facts is needed to determine whether a distinction between conveyancing solicitors and others is sustainable. It might seem artificial to limit a duty to conveyancing solicitors and the conveyancing context. Solicitors involved in other types of transactions and lay people may also use the FAS facility to check on a person named as the solicitor of the counterparty to the transaction. What is the difference between the position of an inquiry of the FAS facility by a conveyancing solicitor and one by another kind of solicitor or a member of the public which produces a response with the name of a person who is not a genuine solicitor or a firm which is not a genuine legal practice? But a duty to all who use the facility is very wide-ranging and requires a full consideration of its possible implications. Determining that would not, in my judgment, have been appropriate on an application for strike out and/ or summary judgment without findings of fact.
As to whether it is fair, just and reasonable for the Law Society to be under a duty, Mr Dutton relied on the fact that information provided through the FAS facility was in substance the information by the Law Society through the SRA in accordance with its statutory obligations. He submitted that the FAS facility is simply a more convenient way for the public to access some of the information which is made available through the SRA pursuant to its statutory obligations as the regulator. It was for this reason that he criticised the judge for attaching weight to issues concerning the security of current conveyancing practice and the theoretical risk that the client of a solicitor who released funds to a fraudster posing as a solicitor might fail to recover substantial damages for breach of trust from his own solicitor.
Again, I consider that it is 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 this function, in particular the implications for the security of current conveyancing practice. Where a party checks with the Law Society as to whether a person is a solicitor, the party checking will, if told that he or she is, then believe that the person is backed by insurance or the Solicitors' Compensation Fund in the event that funds are not properly handled. 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. A full trial is a more appropriate forum for determining questions such as the potential cost to solicitors who suffer losses in reliance on the incorrect information provided by the Law Society's FAS facility, and whether the effect of an absence of a duty of care would be materially to increase the cost of their professional indemnity insurance. Such evidence as there was before us in these proceedings suggests this is a matter of dispute: see the statements of Ms Tschobotko, §38.4(f) and (g) and Mr Koh, §37.
I have referred (at  above) to the fact that it was accepted at the hearing that a duty of care might be imposed if Schubert Murphy had telephoned the Law Society to ask if Mr Dobbs was a genuine solicitor and whether there is or can be a principled distinction between an automatic response from a website compared to a telephone conversation. Mr Dutton submitted that a user of the FAS facility would not take the fact that details were provided through the FAS facility as providing any greater assurance that they were genuine because an enquiry is answered instantly. This, however, overlooks the fact that there is no substantive distinction between the method by which an inquiry is answered, whether it is answered on the phone or online. It may be that the real distinction is whether the information given went beyond what the Law Society was obliged to provide do as part of its regulatory functions. A person who makes a telephone enquiry may ask the adviser for more than merely to check whether an individual has been registered and the adviser may provide more information. This does not, however, necessarily preclude a duty arising even if the adviser does no more than simply to confirm whether an individual is on the Roll and the Register.
Digitalisation is one of the policy and regulatory objectives of having an electronic Roll and Register and encouraging individuals to find a solicitor online by using the FAS facility. If the Law Society may owe a duty of care when answering a query about whether a solicitor is on the Roll by telephone, but not online, then there is a real risk that those policy objectives would be impaired or even defeated. Individuals would call up the Law Society, rather than using the website, which may have enormous time and resource consequences for the Law Society. If no duty arises in respect of responses to inquiries to the FAS facility, the Law Society may simply refer all other forms of inquiry to the facility (there is some evidence before the court that this is sometimes done). It will be necessary to consider in full the impact of imposing or not imposing a duty on the Law Society in respect of the FAS facility. Determining such questions is more appropriate after the factual situation has been ascertained by evidence which has been tested at a trial. I consider that the judge was correct to conclude that it would have been inappropriate to do so in an application for strike out and/ or summary judgment.
I finally turn to the "no representation" limb of Mr Dutton's submissions. The principal reason, Mr Dutton argued, that the responses do not involve any representation, either to the general public or to solicitors who do conveyancing work involving a mortgage, that the relevant individual or entity is in fact entitled to be entered on the Roll and in the registers or that the statutory requirements for such entries were satisfied, is (as I stated at  above) because the responses did not provide information other than that with the SRA was obliged to provide in the discharge of its statutory regulatory functions.
Mr Dutton also relied on the case of T (a minor) v Surrey County Council  4 ER 577. In that case, the mother of T, an injured baby who was under a year old, sued the council for failing to cancel the registration of a child minder who had previously cared for S, a four-month old child who suffered serious injury probably through shaking, and for negligent misstatement in stating that it knew of no reason why the baby could not safely be left with that child minder. The council had been unable to resolve whether the child minder had caused the injury to S and had not cancelled her registration, but advised her that she should consider minding children between the ages of two and five in future.
Scott Baker J held (see 597-600) that no duty of care was owed in relation to the discharge of statutory duties concerning the registration and de-registration of child minders, but that a duty did arise and was breached in respect of the statement that the council knew of no reason why T could not safely be left with the child minder. This was because it was a voluntary statement relating to matters only known to the council through the performance of its statutory duty, and it was held to be a negligent misstatement.
The Law Society relies on Scott Baker J's obiter comment, that there would have been no liability if the council had simply told T's mother that the child-minder was a registered child-minder. I do not consider that this comment assists the Law Society. This is because, in T's case there would not have been liability because, as Scott Baker J stated, the statement "would have been an accurate statement" (see 600H). In the present case, Schubert Murphy's claim is for a misrepresentation to the effect that Mr Dobbs and Acorn were a genuine firm and a genuine solicitor.
I also reject the submission that there is no prospect of showing that the Law Society's response involved a representation. It did provide a response to Schubert Murphy's online inquiry. That response was of a factual nature and, while its exact scope may be the subject of legitimate dispute, I accept Mr Dougherty's submission that it is not arguable that there is no representation at all. The reasons I have given at  above in relation to the first limb of Mr Dutton's submissions, that making information available through the FAS facility is arguably an additional step going beyond what the Law Society was required to do, and that the Law Society specifically encouraged the use of this voluntarily provided service, are also of relevance here. So is the need to consider at trial the extent to which providing the FAS facility is akin to marketing to which I referred at  above.
For the reasons given at  -  above and summarised at  above, I would dismiss this appeal. Before leaving this case, I observe that, when refusing permission to appeal, Briggs LJ noted that the Law Society advanced powerful reasons why it has a very strong prospect of a successful defence to the claim but concluded that on a full appeal the court would be unlikely to reverse a discretionary decision that the issue deserved a trial. He was also concerned that a full appeal at this stage might cause significant delay. In my judgment, both these assessments were correct.
I agree with both judgments.
The Master of the Rolls:
I agree that this appeal should be dismissed for the reasons given by Beatson LJ.
The Judge's discretionary case management decision to refuse the Law Society summary judgment or an order striking out the claim was not vitiated by any material error of principle and was not outside the bounds of a proper exercise of judicial discretion. On the contrary, I consider that his decision was plainly correct.
As Beatson LJ has clearly explained, the outcome of the case will turn on matters of fact which have not yet been fully explored and also on important issues of principle and policy. Those issues arise in the context of a digitised process of responding to enquiries about solicitors and their firms and involve consideration of whether tortious liability is or should be different according to whether an inquiry is made and answered personally, for example on the telephone, or alternatively online. It also involves the policy consideration as to who, in the type of conveyancing situation with which these proceedings are concerned, should properly bear the irrecoverable loss caused by the fraudster to the innocent client in circumstances where, for example, the client's solicitor in a conveyancing transaction is relieved in whole or in part under the Trustee Act 1925 section 61 or the solicitor does not have adequate insurance to cover the entire loss to the client. Such policy considerations are not suitable for determination on an application for summary judgment or strike out on the present state of the evidence.
Note 1 These were made pursuant to power in section 28 of the Solicitors Act 1974 (before 19 August 2003) by the Master of the Rolls with the concurrence of the Lord Chancellor and the Lord Chief Justice, and since that date by the Master of the Rolls with the concurrence of the Secretary of State and the Lord Chief Justice. [Back]
Note 2 These were made by the SRA Board pursuant to powers in the Solicitors Act 1974 and Schedule 14 to the Courts and Legal Services Act 1990, with the approval of the Legal Services Board under paragraph 19 of Schedule 4 to the Legal Services Act 2007. [Back]
Note 3 The Solicitors (Keeping of the Roll) Regulations 2011 and the SRA Practising Regulations 2011 were made by the SRA Board, under sections 28, 79 and 80 of the Solicitors Act 1974, with the approval of the Legal Services Board under paragraph 19 of Schedule 4 to the Legal Services Act 2007. [Back]
Note 4 See also Regulation 10.3 of the SRA Practising Regulations 2009.
Note 5  EWHC 4561 (QB). [Back]
Note 6 See Yuen Kun Yeu v Attorney-General of Hong Kong  AC 175 at 195, discussed at  and  below. [Back]
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