The Law Society of England and Wales v Schubert Murphy (A Firm)

Whether a professional or regulatory body owes a duty of care for information published through an online database cannot ordinarily be resolved at strike-out or summary-judgment stage where the answer depends on proximity, the purpose and presentation of the service, user identifiability and policy consequences. A regulator generally owes no duty for exercising its statutory regulatory functions. A voluntarily provided facility may nevertheless go beyond those functions and arguably create an assumption of responsibility or a source of danger. An automated online response is not necessarily different in principle from a response by telephone. Whether the response was a representation, and whether a duty would be fair, just and reasonable, required factual inquiry.

Schubert Murphy used the Law Society’s online Find a Solicitor facility to check a purported solicitor and firm acting for the vendor in a conveyancing transaction. The facility confirmed their apparent existence, but both were fraudulent. After funds were transferred and the mortgage was not discharged, Schubert Murphy faced a claim from its client and sought recovery from the Law Society for negligence and contribution.

Mitting J refused the Law Society’s application for summary judgment or strike-out: [2014] EWHC 4561 (QB). The Law Society appealed, arguing that the loss was caused by a third-party fraudster, that its statutory registration functions could not create a duty, and that the online response was not a representation. The central issue was whether those arguments made the claim legally hopeless without a trial.

1. Appeal dismissed. The Court of Appeal held that the claim was not hopeless and that Mitting J had correctly refused summary judgment and strike-out. The court did not determine that a duty of care existed.
2. A regulator generally owes no duty of care for the exercise of its regulatory functions. However, under Smith v Littlewoods Organisation Ltd [1987] AC 241, third-party deliberate wrongdoing may give rise to liability where special circumstances exist, including an assumption of responsibility or the negligent creation or permission of a source of danger. The voluntary Find a Solicitor facility arguably went beyond the Law Society’s statutory obligations under the Solicitors Act 1974 and Legal Services Act 2007.
3. Yuen Kun Yeu v Attorney-General of Hong Kong [1988] AC 175 was distinguishable. That case concerned discretionary regulatory decisions about registering and deregistering a deposit-taker, without communication between the claimant and regulator. Here, the status of a solicitor was arguably a question of fact, and the Law Society had provided information directly through a facility it encouraged the public to use.
4. The Caparo Industries plc v Dickman [1990] 2 AC 605 inquiry into foreseeability, proximity and whether a duty would be fair, just and reasonable required fuller evidence. Relevant matters included the purpose and presentation of the facility, whether users could be identified, the intended class of users, likely reliance without independent inquiry, and the consequences for conveyancing and insurance. Gooden v Northamptonshire County Council [2002] PNLR 18 was of limited assistance because individual identification was a disputed factual issue.
5. The fact that the response was generated automatically online rather than given by telephone did not determinatively prevent proximity, assumption of responsibility or a representation. The response was factual and was at least arguably a representation. The observation in T (a minor) v Surrey County Council [1994] 4 ER 577 that a bare confirmation of registration would have been accurate did not assist the Law Society, since the present claim concerned a false representation that an imposter and firm were genuine.
6. The Master of the Rolls and Gloster LJ agreed. The unresolved factual and policy questions, including the implications of Trustee Act 1925, section 61, were matters for trial.

• Court of Appeal (Civil Division): appeal dismissed. The court upheld the refusal of summary judgment and strike-out.
• High Court, Queen’s Bench Division: Mitting J refused the Law Society’s application for summary judgment or strike-out: [2014] EWHC 4561 (QB).