Source: http://pnblawg.co.uk/category/professional-negligence/?page=4
Timestamp: 2019-04-20 08:17:57+00:00

Document:
A common concern for many claimants and their lawyers in litigation is whether the defendants have effective insurance cover and can thus satisfy any judgment obtained them. When a claimant discovers that he only has a “paper” judgment, he often looks to blame his solicitor. This is what happened in the recent case of Dowling v Bennett Griffin (a firm)  EWHC 1995 (Ch) in which Mr Dowling (“D”) failed to establish negligence by Bennett Griffin (“the Solicitors”) in the original litigation. As part of the earlier litigation, D had brought a counterclaim against P, who was later substituted for P’s limited company, APAL. The service of D’s counterclaim unfortunately led to the other parties’ insurance cover being avoided and the subsequent judgment in favour of D being of little value. One argument that the judge, Kevin Prosser QC, considered in some detail was whether the solicitors ought to have obtained disclosure of the other parties’ insurance cover during the course of the proceedings. D criticised Bennett Griffin (“the Solicitors”) for failing to insist on disclosure of the insurance as a condition of APAL’s substitution for P as defendants to the counterclaim. The Judge rejected this argument because he considered that the court had no jurisdiction under the CPR or Third Parties (Rights against Insurers) Act 1930 to make this order. He noted that his conclusion was consistent with West London Pipeline & Storage Ltd v Total UL Ltd  UKHC 1296) and previous authorities such as Bekhor v Bilton  QB 923 and Cox v Bankside Members’ Agency  CLY 4122. This case provides a timely reminder of the principle that insurance details are unlikely to be discoverable so long as the insured remains solvent.
The case of Santander UK Plc v R A Legal Solicitors (a firm)  EWHC 1380 (QB) contains a timely review of “mortgage fraud” cases and of the circumstances in which a solicitor might successfully obtain relief under section 61 Trustee Act 1925 (see further Karen Shuman’s posting “Section 61 Trustee Act 1925 and the Three Wise Men”). The brief facts were as follows: the defendant solicitors (“RA”) acted for V, the purchaser and V’s lender (“Abbey”), which provided V with a loan of £150,000. RA dealt with Sovereign Chambers LLP (“Sovereign”), which fraudulently presented itself as acting for S, the registered owner of the property. S had no intention of selling the property and was ignorant of Sovereign’s fraud. As a result of Sovereign’s deception, RA paid over the purchase monies (including £150,000 loan) to Sovereign in the belief that it was completing the sale. Completion did not take place and Abbey did not receive a valid charge over the property. The monies were never recovered. As part of its claim, Abbey sued RA for breach of trust. Applying Lloyds TSB Bank Plc v Markandan & Uddin  EWCA Civ 65, and Nationwide Building Society v Davisons Solicitors  EWCA Civ 1626, the Judge held that RA had no authority to release the trust funds in the circumstances in which it did. Therefore by paying away the trust property (i.e. the advance) without receiving genuine documents to complete the transaction, the solicitors were in breach of trust. In deciding that RA was entitled to relief under section 61 Trustee Act, the Judge decided that the correct approach was similar to that adopted in cases concerning relief under section 727(a) Companies Act 1985, such as Barings Plc v Coopers v Lybrand (No 7)  EWHC 1319. Thus a person may have acted “reasonably” for the purposes of the statutory provision even though he/she acted negligently if their negligence was “technical and minor in character” and not “pervasive and compelling”. The Judge concluded that RA had acted reasonably: none of the criticisms made of the solicitors were sufficiently serious or involved such a departure from ordinary and proper standards as to cut them off from the court’s discretion to relieve them of liability. The Judge also observed that the law generally (although not invariably) leant towards confining the responsibility of professional people to a duty to take reasonable care and in particular, it did not readily impose on them responsibility for loss resulting from the fraud of others. This case provides further analysis as to how a court might exercise its discretion under section 61 Trustee Act and it illustrates the point that a solicitor guilty of negligence that was “technical and minor in nature” might still obtain relief.
What's the chance of that?
The Commercial Court gave short shrift to parties calling insurance experts to opine on meaning of a widely used construction insurance policy. The case of Aspen Insurance UK Limited v Adana Construction Limited  EWHC 1568 (Comm) concerned cross claims for declarations as to whether the claimant insurer was contractually bound to cover the defendant contractor under the terms of a combined liability insurance policy. The defendant was joined in proceedings for damages for personal injury sustained by a crane driver following the collapse of some foundation piles. One issue of note in this case was the way the trial judge treated the issue of insurance experts. The Claimant was given permission at the CMC to call expert evidence from an Insurance expert with wide experience of the combined contractors' liability insurance policy placed in the Lloyd's Market and of the market in which such insurance is placed. The expert was to address the contention that there was a conventional understanding as to the division between public liability and product liability, with the latter cover 'kicking in' exclusively once the Defendant's works had been handed over. According to the Claimant such conventional understanding formed part of the factual matrix of the policy and it was said that that understanding was of assistance in construing the terms of the contract. The judge at the CMC gave permission but left the issue of the admissibility of the expert evidence to the trial judge. At the start of the trial the judge expressed reservations about the relevance and admissibility of the expert evidence but agreed to hear it. The Claimant duly called their expert. The Defendant called evidence in rebuttal. In his judgement Mackie J did not mince his words when expressing his views on the use of such experts: "I expressed reservations about the relevance and admissibility of this evidence at the outset but agreed to hear it. In one sense the Claimant got what it deserved, first responsive evidence from the Defendant even more inadmissible than its own and secondly emergence of a recent example of the Claimant having acted inconsistently with its alleged market understanding .... [the experts'] evidence was irrelevant". The experts had given evidence that included admitting that it was from their interpretation of the contract that they drew their views. On issues of contractual interpretation parties would be well advised before attempting to call expert evidence as to industry use or practice relating to those terms, to conduct a proper analysis of the reason that evidence is necessary. If the evidence simply corroborates one party's understanding of the interpretation then the evidence is likely to be inadmissible or irrelevant. However if a party could demonstrate that industry knowledge and practice informed the contractual intentions of both parties in relation to the disputed provisions then it may be appropriate to request permission for such experts.
In the case of Susan Berney v Thomas Saul (T/A Thomas Saul & Co)  EWCA Civ 640, the Court of Appeal has provided further guidance as to the date of the accrual of a cause of action in a solicitor’s negligence case. Ms Berney (“MB”) instructed Thomas Saul & Co (“TS”) in 1999 to act for her in a personal injury claim following a road traffic accident, for which liability had been admitted. In 2004 MB instructed new solicitors, who advised her that, given the significant delay in serving particulars, the claim was likely to be struck out. As a result of facing such significant litigation risks, MB felt obliged to settle her claim for £25,000 plus costs in November 2005. The question for the Court of Appeal (Moses, Rimer, Gloster LJJ) was: when did MB’s cause of action accrue for the purposes of limitation. However the Court of Appeal did not agree with this reasoning. MB submitted that limitation ran from the date her claim was settled, and thus her professional negligence claim was in time. (a) actual damage can be understood to be any detriment, liability or loss (including contingent liabilities) capable of assessment in money terms; and (b) a useful formulation to consider was "when was the claimant worse off financially by reason of a breach of the duty of care than he would otherwise have been?" (applying Forster v Outred & Co  1 W.L.R. 86, and Nykredit v Edward Erdman Group Ltd  1 W.L.R. 1627). Further, it was held that it was incorrect to construe MB’s claim as one for diminution of the value of her chose in action rather than one for the loss as a result of having to settle the personal injuries claim. Although there was a litigation risk that she might not get permission to serve her particulars of claim out of time, this was extremely small. Liability had been admitted, and to strike it out would have denied her access to the court (Price v Price  EWCA Civ 888 considered). Nor was there any reason to suppose that her claim would have been limited to a particular sum. Whilst it was clear that medical evidence was continuing to be sought and that the November 2005 settlement reflected the litigation risk and costs risks, it could not be said that she had suffered actual financial loss prior to that date. Accordingly, MB’s professional negligence claim was in time. Moses LJ, further held that it did not follow that actual damage had not been suffered earlier necessarily from the fact that there was a settlement. He held that there was a real risk that prior to the date of settlement an application to extend time for service of particulars might have been granted only on condition that MB's claim was confined to the sum originally claimed or such lesser sum based on the disclosed evidence. However, that did not affect the result on the facts of the instant case. A (further) salutary aspect for legal professionals to note in this case comes from Sir Richard Buxton, who in granting permission to appeal to the Court of Appeal on 8 November 2012, stated: “… I also take the view that the court should tread cautiously before striking out cases that(apparently) reflect a failure of legal professional service.” This, and indeed the judgment of the Court of Appeal itself, may well be taken to suggest the affordance judicial sympathy for claimant parties in similar cases. This may well translate to a degree of lenience when it comes to calculating such limitation periods. The judgment of Gloster LJ could also be interpreted to suggest a certain degree of criticism of the judicial treatment of MB before the courts below. Few would deny that it was no mean feat of MB to continue to prosecute her claim before the Court of Appeal despite having had her argument dismissed twice previously, before two ascending levels of judge. It is likely that the recent judgment in her case may be taken as a warning by county court judges to ensure that potential lines of argument taken by litigants-in-person are properly ventilated, especially in proceedings where draconian measures such as strike outs are sought. This of course may have a significant impact upon the nature of future litigation, if – as widely predicted – the civil courts continue to see an exponential rise in unrepresented litigants.
1,300 solicitors firms are facing the prospect of having to find alternative insurance following the decision by the Latvian Financial and Capital Markets Commission to withdraw the operating licences for insurer Balva. According the press release on the FCMC's website, Balva must now launch a winding-up process by appointing a liquidator but all its insurance policies are still effective. Where a qualifying insurer is subject to an "insolvency event", unless there is a waiver, affected firms are required by rule 6 of the SRA Indemnity Insurance Rules to place insurance with another qualifying insurer or enter the assigned risks pool. The SRA's position is that there has not yet been an "insolvency event". However, even if the withdrawal of Balva's operating licence is not an "insolvency event", it seems likely that the appointment of a liquidator will be.
The Court of Appeal in Heron v. TNT (UK) Ltd  EWCA Civ.469 considered whether or not solicitors who failed to obtain ATE Insurance for their client in a personal injury case and who failed to admit that to him - but without any conscious impropriety - should be subject to a non-party costs order. The defendant's insurers argued that thereby the solicitors had become a "real party" to the litigation, the person "with the principal interest" in its outcome or that they were acting primarily for their own sake - all phrases derived from the main authorities. The court, upholding the judgment below, decided they had not. As Leveson L.J. put it, if the defendant was right, "every act of negligence by a solicitor in the conduct of litigation (thereby giving rise to a conflict) which means that an opposing party incurs costs which might not otherwise have been incurred would be sufficient." The law does not go that far.
In Boyle v Thompsons Solicitors  EWHC 36 (QB) Mr Justice Coulson considered the scope of a solicitor’s duty in resolving conflicts of expert medical evidence. The claimant (“Mrs B”) claimed damages from the defendant solicitors (“the Solicitors”) for their allegedly negligent conduct of her compensation claim to the Criminal Injuries Compensation Authority (“CICA”). The CICA claim related to injuries sustained as a result of an assault on Mrs B by her former partner in November 2001. Mrs B applied to the CICA for compensation and in 2003 it made a final award of £5,150. This figure proved to be unacceptable to Mrs B and she instructed the Solicitors to lodge an appeal on her behalf. By the time of the appeal hearing in 2006, Mrs B had taken early retirement on medical grounds. The principal issues in the appeal became the extent to which her PTSD was permanent (which meant she could never work again) and whether the PTSD was solely due to the November 2001 assault. The appeal was not straightforward because the medical evidence was contradictory. There was evidence from Dr T, Mrs B’s treating psychiatrist, to the effect that the PTSD was permanent and was solely caused by the November 2001 assault. However there was also evidence from an independent psychologist, M suggesting that the PTSD was not permanent and could not be solely attributed to the assault. Furthermore Mrs B had been the victim of a number of assaults, of which only the November 2001 passed the CICA threshold test and thus qualified for compensation. In addition Mrs B had a history of depression. The CICA Panel rejected Mrs B’s appeal, deciding (amongst other matters) that the cause of Mrs B’s PTSD was multi-factorial, that the PTSD was not permanent and that it was not the cause of her retirement. Mrs B sued the Solicitors. Notwithstanding that the Solicitors had asked M, the psychologist, to reconsider her opinions in the light of Dr T’s views, Mrs B argued in effect that they should have made further approaches to M, the psychologist, in an attempt to “beef up” her evidence in relation to the permanent nature of the PTSD and its causation. In finding that the solicitors were not negligent, Mr Justice Coulson noted an important feature of the CICA scheme, namely that applicants were required to disclose all medical reports obtained. He considered that the solicitors had acted appropriately in asking M to reconsider her views in the light of Dr T’s evidence. It was an unrealistic criticism of the solicitors that they should have done something more about the difference in views between M and Dr T. It was not for the solicitors to “manipulate the evidence of the independent expert, particularly in a CICA claim..” where all reports had to be disclosed to the Panel. In the circumstances the solicitors did all that they reasonably could and Mrs B’s claim was dismissed. As a postscript, the judgment also contains an useful analysis of quantum, where the underlying action concerns a CICA claim.
A recent decision of Mr Justice Edwards-Stuart in the Technology And Construction Court (“TCC”) in Webb Resolutions Ltd v JV Ltd t/a Shepherd Chartered Surveyors  EWHC 509 (TCC) considers lawyers’ obligations when drawing up court orders. The Claimants were assignees of a centralised mortgage lender suing the Defendant surveyors in respect of three allegedly negligent loans. The issues in the current litigation include the validity of the various assignments, whether or not the lender was negligent or failed to mitigate its losses, and whether the individual valuations were made negligently. This action is one of many such claims brought by the Claimants against surveyors – e.g. Webb Resolutions v E Surv Ltd, which John Bryant considers in his posting on 7 February 2013. At a CMC held last year, Mr Justice Edwards-Stuart directed that the issues of the validity of the assignments and the lender’s negligence should be tried first and the issue as to the individual valuations be tried separately. He limited disclosure and the exchange of witness evidence to the assignment and lending issues. The Claimants’ solicitors and counsel were, as is the usual practice in the TCC, asked to prepare a draft order for agreement with the Defendant’s legal team. In his judgment, the Judge described what happened thereafter as being in his experience “unique”. Three days after the hearing, the Defendant was provided with a draft order that “bore no relation” to what the court had directed. In effect the draft order provided for disclosure, exchange of witness evidence and expert evidence on all issues, as opposed to the Judge’s more limited directions concerning the lending and assignment issues. Not surprisingly the Defendant was unable to agree the Claimants’ draft order and therefore provided its own version. The Claimants’ lawyers responded by returning the Defendant’s draft with extensive amendments, which were in turn unacceptable to the Defendant’s legal team. In the course of correspondence with the parties’ solicitors, the court indicated that the Defendant’s draft reflected the order made at the CMC but that it was open to the Claimants to apply for a variation. Notwithstanding that indication, the Claimants did not agree to the Defendant’s version of the order until shortly before a further CMC. At the CMC the Defendant applied for a costs order against the Claimants’ solicitors. Mr Justice Edwards-Stuart noted that if a party was charged with drawing up an order, it was the duty of its solicitors and counsel to produce a draft that “fairly reflects what they think the judge decided or directed…” What the Claimants’ solicitors had done in the instant case was produce an order that reflected the directions that they or their clients would like to have had, but not what the court ordered. This was, in the Judge’s view, “wholly unacceptable…. [and] not just unreasonable… [but] verging on the contumelious…” In making a costs order against the Claimants’ solicitors, the Judge stated that solicitors and counsel “had to give effect to court orders…. They [were] not to attempt to manipulate them to their own or their client’s perceived advantage…” On a practical note, the Judge observed that where parties cannot agree precisely on what the judge directed (or intended to direct), the point or points in issue are usually raised with the court in correspondence and resolved by the judge without a further hearing. Further it is always open to a party unhappy with a draft to apply for either a variation of the order (under the provision giving permission to restore) or permission to appeal.

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