The Law Society has failed to strike out an application that stated the body owes a duty of care to its website users after a fraudulent solicitor and law firm was listed on its “Find A Solicitor” function.

The Court of Appeal rejected the Law Society’s case that it was unarguable that it could owe a duty of care to solicitors and the public after it listed a sham firm of solicitors, Rotherham-based Acorn Solicitors, and a non-existent lawyer, John Dobbs, on its website.

Schubert Murphy, a now disbanded firm that operated in north London, claimed damages for negligence in respect of losses suffered by the firm and its client after fees were sent to the sham firm.

The firm says it is no longer trading because of the incident and that its client is also out of pocket. They argue they were not able to benefit from the Law Society’s compensation fund because the sham firm did not exist.

The sham firm in question is not to be confused with Acorn Solicitors, a genuine entity in Taunton, Somerset.

Schubert Murphy was advised by XL Catlin Services SE, which instructed 2 Temple Gardens’ Charles Dougherty QC and Matthew Thorne at 4 Pump Court, while The Law Society was represented by Fountain Court’s Timothy Dutton QC and Rupert Allen, taking instruction from Bevan Brittan.

Schubert Murphy claimed the Law Society owes a duty of care to the public and solicitors, as the body itself recommends the public uses its “Find A Solicitor” function to establish whether firms and solicitors are genuine.

The Law Society argued that as a regulator it could not owe a duty of care and that it could not be liable for information, even if it is wrong.

Lady Justice Gloster rejected The Law Society’s argument, ruling: “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.

She continued: “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 if the facility (…) 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.”

Dougherty said: “This is an important decision. If the Law Society had been successful in their strike out application it would have set an unfortunate precedent: that professional and regulatory bodies could never be liable for inaccurate statements made on websites as to who is – or is not – authorised or regulated by them, however careless they were.

“Conveyancing transactions require that each side is confident that the other side’s legal representative is genuine, and accordingly will be covered by insurance, or in default the Law Society Compensation Fund, if anything goes wrong. The only entity which can say whether a law firm is genuine or not is the Law Society. That is why it is of paramount importance that the Law Society website, which law firms and members of the public rely on, is accurate.”

A Law Society spokesperson said: “We note the judgment of the Court of Appeal and will be considering it in detail over the coming days. It would be inappropriate for us to comment further at this stage.”

In May, the Competition Appeal Tribunal ruled against The Law Society in a row over whether the body had abused its dominant position in the market by making members complete training in mortgage fraud and anti-money laundering (AML), with conditions meaning they must obtain the courses through the Law Society.

Legal line-up

For the claimant, Schubert Murphy

2 Temple Gardens’ Charles Dougherty QC and 4 Pump Court’s Matthew Thorne, instructed by XL Catlin Services SE

For the defendant, The Law Society

Fountain Court’s Timothy Dutton QC and Rupert Allen, instructed by Bevan Brittan.