Coatman & Anor, R (on the application of) v Council for Licensed Conveyancers

The compensation scheme covers losses connected with the purported practice of licensed conveyancers, not merely losses suffered by their clients or arising from the core transfer of land. An activity which begins outside the regulatory scheme may give rise to a regulated or purportedly regulated transaction. The receipt and misappropriation of money intended for a conveyancing transaction may therefore fall within the scheme. So may the dishonest failure to create a promised legal charge, since creating a charge is a disposition of an interest in land. A regulator must assess the whole transaction and the capacity in which money was received. It cannot reject eligibility by focusing only on an unregulated loan-broking activity or by requiring the applicant to have been the conveyancer’s client.

The claimants sought judicial review of decisions by the Council for Licensed Conveyancers’ Licensing and Practice Committee refusing applications for compensation from the Council’s fund. They had paid substantial sums in purported bridging-loan transactions arranged through McKenna & Co, a licensed conveyancing practice. The Committee rejected the claims at the jurisdictional stage, without investigating the facts, on the basis that the losses arose from unregulated loan broking and did not concern conveyancing services.

The court proceeded on agreed facts and treated the claimants’ cases at their highest. The central issues were whether the alleged losses were connected with the practice or purported practice of licensed conveyancers under section 21(2) of the Administration of Justice Act 1985, and whether the promised creation of legal charges constituted conveyancing services.

1. The claim succeeded. The Committee’s determinations were quashed, and the applications were remitted to the Council for reconsideration.
2. Section 21(2) of the Administration of Justice Act 1985 and Rule 13 of the Compensation Fund Rules provide two routes to eligibility: loss caused by negligence, fraud or dishonesty in connection with the practice or purported practice of a licensed conveyancer; and loss caused by failure to account for money received in connection with that practice. The provisions extend to purported conveyancing services and do not require the claimant to have been the conveyancer’s client.
3. The statutory definition of conveyancing services is narrow, but an unregulated activity may subsequently give rise to a regulated or purportedly regulated activity. Money received for use in a property transaction and intended to be paid to a vendor is capable of being received in connection with an ancillary conveyancing service. The fact that the loan was initially brokered outside the scheme does not alter the capacity in which the money was purportedly received.
4. The creation of a legal charge is a disposition of an interest in land. An agreement by a licensed conveyancer, or someone acting with apparent authority on its behalf, to prepare and obtain such a charge is itself a conveyancing service under section 11(3). It is not excluded merely because it arose from an unregulated loan arrangement or was described as an adjunct to that arrangement.
5. On the agreed facts, the claimants’ capital losses were capable of qualifying under both statutory routes. Loss of interest and penalties was arguably recoverable on the legal-charge basis, but that question was unnecessary to decide.
6. The Committee misdirected itself by concentrating on the initial loan solicitation, overlooking the purported conveyancing role in receiving the money and arranging security, disregarding the words “or purported practice”, and failing to consider the failure to account. Its decision was therefore flawed in law and irrational on the agreed facts.