Solicitor: Compensation fundApplicant suffering loss owing to dishonesty of solicitor - applicant applying to respondent's compensation fund for grant - respondent rejecting application - whether respondent's decision irrational - whether reasons for rejecting grant inadequate - application dismissedR v Law Society, ex parte Mortgage Corporation: Queen's Bench Division: Administrative Court: Hallett J: 15 November 2000The applicant was a mortgage lender.

It offered a loan to L, a solicitor and sole practitioner, and his wife to remortgage their home.

The loan was to be secured by a first charge over the property.

There was already a charge over the property in favour of Lloyds Bank, which needed to be postponed.

The applicant authorised L to act on its behalf and for himself.

A report on title was produced by K, who purported to be a solicitor, but was in fact L's secretary.

The applicant released the funds.L failed to obtain a deed of postponement from Lloyds Bank, and he subsequently defaulted on the mortgage.

There was no dispute that L had acted dishonestly.

Consequently, the applicant applied to the respondent for compensation for the loss that it suffered due to L's dishonesty.

The respondent's compensation fund subcommittee (the committee) found, among other things, that the applicant: (i) had failed to take preliminary precautions; (ii) was on notice that L was a sole practitioner, in which case ordinary business practice would have dictated that another firm sign the report on title; and (iii) was so imprudent as to have materially contributed to its own loss.

The committee resolved to reject the claim in its entirety, and refused to grant compensation from the fund.In an application for judicial review, the applicant sought to quash the respondent's decision.

It was submitted that the reasons given in the respondent's resolution and decision letter were inadequate and that it was, as a result, impossible to assess the rationality of the decision.

The applicant further contended that the decision was, in any event, irrational.

It was submitted that the applicant should have been awarded a reduced grant, and that the appropriate question for the committee to have asked itself was what reduction was appropriate, having regard to the degree to which the applicant was at fault.Held: The application was dismissed.

It was unfortunate that the respondent's reasons did not provide a little more detail, which would have made its decision clearer.

However, the reason why its decision was brief was that it felt that the matter was straightforward, and that its reasons were obvious.It should have been obvious to the applicant that it was dealing with a sole practitioner, acting on its behalf and for himself as borrower.

The applicant released funds without making proper inquiries.

The respondent's decision, assessing the applicant's conduct as imprudent, was perfectly rational.

The applicant had had its answer and knew why the grant had been refused.

The committee was not obliged to ask itself what proportion of a grant the applicant was to receive.

The committee asked itself the right questions and its decision not to make a partial award could not be said to be irrational.Nigel Giffin and Timothy Harry (instructed by Barlows, of Guildford) appeared for the applicant; Patricia Robertson (instructed by Wright Son & Pepper) appeared for the respondent.