pnBlawg

the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Getting your hands on an undisclosed expert report

When the other side wants to change expert are you entitled to their original expert’s reports and other documentation containing the substance of the expert’s opinion? This was the question considered in the case Allen Tod Architecture v Capita Property and Infrastructure Ltd ([2016] EWHC 2171) - a professional negligence claim by an architect against a structural engineer in the TCC. Unsurprisingly the claimant in that case resisted disclosure on the grounds that the documents and reports sought were privileged. The claimant had grown exasperated by his expert’s delays and shortcomings and so turned to an alternative expert. At paragraph 32 of his judgment the judge set out the authorities and principles to be applied when considering whether to grant permission to a party to change expert:  (1) The court has a wide and general power to exercise its discretion whether to impose terms when granting permission to a party to adduce expert opinion evidence (2) In exercising that power or discretion, the court may give permission for a party to rely on a second replacement expert, but such power or discretion is usually exercised on condition that the report of the first expert is disclosed (and privilege waived - see Vasiliou v Hajigeorgiou [2005] 1 WLR 2195) (3)  Once the parties have engaged in a relevant pre-action protocol process, and an expert has prepared a report in the context of such process, that expert then owes a duty to the Court irrespective of his instruction by one of the parties, and accordingly there was no justification for not disclosing that report as a condition for changing expert (see  Edwards-Tubb v JD Wetherspoon plc [2011] 1 W.L.R. 1373)  (4) The court's power to exercise its discretion whether to impose terms when giving permission to a party to adduce expert opinion evidence arises irrespective of the occurrence of any ‘expert shopping’. It is a power to be exercised reasonably on a case-by-case basis, in each case having regard to all the circumstances of that particular case.  (5) The court will require strong evidence of ‘expert shopping’ before imposing a term that a party discloses other forms of document than the report of expert A (such as attendance notes and memoranda made by a party's solicitor of his or her discussions with expert A) as a condition of giving permission to rely on expert B (see (BMG (Mansfield) Ltd v Galliford Try Construction Ltd  [2013] EWHC 3183)  In the case of Allen Tod itself the judge found that there was no real reason for making a distinction between the expert’s final report, draft or provisional reports or other documents setting out his opinion: neither would have been discloseable if the expert had remained the claimant’s expert. He ordered disclosure of the original expert’s notes and preliminary report as a condition of permitting the claimant to rely on the new expert and he also ordered disclosure of any document in which the original expert had provided his opinion. To the extent any other material was contained in any such document, it was to be redacted before disclosure.

Property fraud - liability of seller's solicitor to innocent buyer

Purrunsing v A’Court & Co and House Owners Conveyancers [2016] EWHC 789 (Ch) is the latest case concerning conveyancing solicitors’ liabilities towards innocent victims of property fraud. It considers the question of the purported seller’s potential liability to an innocent purchaser and how the nature and extent of the test for relief under Section 61 of the Trustee Act 1925 interacts with the fact that the seller’s solicitor does not ordinarily owe the buyer a duty of care.     C attempted to buy a property in Wimbledon. He instructed D2. The purported seller instructed D1. Contracts were exchanged, and C duly paid the purchase price (£470,000) to his solicitors, D2, who passed the monies on to D1. D1 paid the monies into a bank account abroad, on the purported seller’s instructions.   Before C was registered as proprietor, the fraud was discovered. The purported seller could not be found and none of the purchase monies have been recovered.   All parties accepted that there had been no genuine completion of the transaction. This meant that both solicitors were liable to C for breach of trust for paying away the purchase monies without completion. However, D1 and D2 both sought relief under Section 61 of the Trustee Act 1925, contending they acted honestly and reasonably and ought fairly be excused for the breach of trust. C also sued D2 for breach of contract and negligence, which D2 denied.   D1 argued that, because it acted for the purported seller and not for C, and did not owe C a duty of care, the “reasonableness” test should be applied more favourably to D1, as D1’s liability in equity should not exceed its liability in common law.   Judge Pelling rejected this argument, on the basis that D1 was as much a trustee of the purchase monies as D2, questions of duties of care were not relevant, and there was no justification for treating D1 more favourably than D2 in this regard. However, what D1 and D2 had to do to meet the reasonableness test might be different, given their different roles.   The criticism of C’s solicitor, D2, was that it had raised Additional Enquiries of the seller to establish whether there was a link between the seller and the property. These had not been answered satisfactorily. However, D2 had failed to inform C either that these questions had been asked, or that the answers were not satisfactory. Accordingly, C was unaware of the risk of proceeding with the purchase.     The judge held that this was a breach of duty and that, by reason of it, D2 should not be granted relief under Section 61.   D1 also failed to establish entitlement to relief under Section 61:-   D1, on the judge’s findings, had not complied with the Money Laundering Regulations. D1 ought to have undertaken enhanced due diligence. It was irrelevant that these regulations did not form part of a duty owed by D1 to C. D1 knew a number of factors which ought to have caused D1 to question whether the seller was the true owner of the property. These included:     The property was unoccupied The property was unencumbered The property was of comparatively high value The Office Copy Entries contained an address for service in Cambridge which was not the address the seller provided The seller had not provided any documents linking him to the property There was an unexplained inconsistency between the seller’s responses in the Home Use Form about building works and information coming to light on a local authority search A previous sale was brought to an end by the seller when he was asked questions about his employer in circumstances when these could have been expected to be easy and quick to answer and should not cause any delay on completion. If D1 was to avoid liability, it would have to show that any departure from best or reasonable practice did not increase the risk of loss by fraud. D1 failed to carry out its money laundering obligations in accordance with reasonable practice and this contributed to the fraud. It was irrelevant that this was not a case of money laundering. D1 was required to undertake the money laundering checks. It did not comply with reasonable practice in this regard and this increased the risk of the fraud which took place.   The judge found that D1 and D2 should bear equal liability for the loss.       

Professionals, allegations of fraud, and witness credibility

The headline outcome from Mansion Estates Ltd v Hayre & Co (A Firm) (2016) is HHJ Saffmann considering that it is no less “inherently improbable” that a solicitor would set out to mislead the court than any other person, and going on to find that the Defendant’s documents were “materially compromised”. This was not a case where the judge could find one party had “misremembered” or made an innocent error: he had to decide which witness to prefer, with the corollary that, essentially, the other witness was dishonest.   The judgment sets out a very helpful summary of the ways in which a judge may decide who to believe, and the factors that are likely to be important:-   a) Inherent probability, while extremely important, should not be considered in a vacuum: it would be quite wrong to assume in all cases that serious conduct is unlikely to have occurred Re B (Children) [2008] UKHL 35.   b) The judge referred to the tests summarised, extra-judicially, by Lord Bingham, namely:- The consistency of the witness’s evidence with what is agreed or clearly shown by other evidence, to have occurred; The internal consistency of the witness’s evidence; Consistency with what the witness has said or deposed on other occasions; The credit of the witness in relation to matters not germane to the litigation; The demeanour of the witness.  c) The considerations noted by Gillen J in factors Thornton v NIHE [2010] NIQB 4: The inherent probability or improbability of representations of fact; The presence of independent evidence tending to corroborate or undermine any given statement of fact; The presence of contemporaneous records; The demeanour of witnesses; The frailty of the population at large in accurately recollecting and describing events in the distant past; Does the witness take refuge in wild speculation or uncorroborated allegations of fabrication? Does the witness have a motive for misleading the court?  d) Following Mumtaz Properties v Ahmed [2011] EWCA 610, over and above “demeanour” the judge should consider what other independent evidence was available to support the witness. Contemporaneous written documentation was of the greatest importance in assessing credibility and could be significant not only where it was present and oral evidence could be checked against it, but also where it might be conspicuous by its absence and inferences drawn.

No dual test for remoteness, says the Court of Appeal

The test for remoteness in tort is damage that is reasonably foreseeable. However the test for remoteness in contract is damage that ought to be in the reasonable contemplation of the parties. There are differences between the two. Damage can be reasonably foreseeable (in which case it satisfies the remoteness test in tort) but also highly unusual or unlikely, such as a particularly lucrative contract (in which case it does not satisfy the remoteness test in contract). So where there are two concurrent causes of action, such when a professional is sued, which test should be applied to the damages claimed?   In Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 a three-judge Court of Appeal has held that, where the claimant has concurrent causes of action in both negligence and breach of contract against the defendant, it is the more restrictive contractual test for remoteness that will apply to any losses.     The facts concerned negligence in the drafting of a partnership agreement. The Defendant was supposed to draw up the agreement to provide for the investors’ capital to be locked in to the partnership for at least 42 months, to give the partnership time to work. In fact the agreement provided that investors could withdraw capital at any time during the first 42 months. An important investor withdrew a large sum of money during that time. The claim was that but for the negligence that allowed the investor to withdraw capital, there would have been enough money to enable the partnership to open a New York trading office which would have generated lucrative profits. At first instance, Nugee J held that the losses claimed were not recoverable under the contractual test for remoteness but were recoverable under the more generous tortious test, and that the Claimant was entitled to choose which test to apply when bringing the claim. Accordingly the claim succeeded. The Court of Appeal upheld the judgment but on different grounds. It held that when there are concurrent causes of action in contract and in tort, the contractual test for remoteness applies and the tortious test does not. However it also found that on the facts, the losses claimed ought to have been within the reasonable contemplation of the parties and so were recoverable notwithstanding that the more generous test of remoteness did not apply. The Court recognised that the decision might throw up some anomalies. It may give a client who receives free legal advice from a solicitor (who therefore does not have a contract with the solicitor) a more generous right to damages than someone who does have a contract. It may also mean that a client who sues a solicitor and a barrister for negligence may have a more generous claim against the barrister (with whom he does not have a contract) than he does against the solicitor (with whom he does have a contract). Roth J stated that he imagined that in such a situation, the contractual test for remoteness would apply but that this would have to be left to another case to be decided. In any event the case is a welcome clarification of the law.            

Costs Budgeting: are incurred costs untouchable?

How do you get around costs budgeting? One might have thought that incurring as much by way of costs as you can before the CCMC: Practice direction 3E 7.4 states that the court may not approve costs incurred before the date of a budget. In CIP Properties Ltd v Galliford Try Infrastructure [2015] EWHC 481 Coulson J came up with an order which would prevent parties to litigation trying to get around the process. In the recent case of GSK Project Management Ltd v QPR Holdings Limited [2015] EWHC 2274 Stuart-Smith J made a similar order (will it become known as a ‘Coulson Order’ or a ‘CIP Order?) In GSK Stuart-Smith J was managing the costs in a dispute over works carried out at Queens Park Rangers’ Loftus Road ground. The claim was essentially for £805,675 of unpaid sums due under the contract and there was a counterclaim for defective works. The claimant’s costs budget was for £824,038 and it stated that over £310,000 had been incurred already. The budget therefore exceeded the sums at stake. The defendant’s budget was £455,554 in total although, as the judge commented, a comparison was not appropriate because of the very different hourly rates; comparing the hours was therefore more illuminating. ‘Broad brush’ or detailed approach? Stuart-Smith J commented that experience in the TCC had shown that most costs budgeting reviews can and should be carried out quickly and with the application of a fairly broad brush. He said that ‘only exceptionally will it be appropriate or necessary to go through a Precedent H with a fine tooth-comb, analysing the makeup of figures in detail.’ This, however, he considered an exceptional case because the aggregate sum was so disproportionate to the sums at stake and the length and complexity of the case. Proportionality: The judge’s starting point was that a case would have to be wholly exceptional to render a costs budget of £824,000 proportional for the recovery of £805,000 plus interest. It was not. There were no novel or difficult issues of law, there was only a handful of witnesses, trial had only been listed for 4 days and it was not a document heavy case. He took the view that good reason would need to be shown to justify more than half the figure of £825,000 on proportionality grounds. Reasonableness: the judge rejected the submission that his starting point should be the other party’s budget as parties have different roles and responsibilities. However he accepted he should have regard to it as it ‘may provide useful indicators’. The judge rebuffed a submission that the Defendant had underestimated the resources necessary for the litigation with the comment that such a submission would “probably require evidence and not mere assertion”. That evidence was not available. Pre-action costs: the lesson to draw from the judge’s comments is that if pre-action costs/hours are high then a judge is likely to expect solicitors to be ‘well on top of the case by the time of issue’. If little progress has been made the judge is likely to consider the time has ‘not been reasonably or proportionately incurred.’ The judge said that if he could approve pre-action costs he would have approved £13,500 rather than the £43,067 incurred. Issue/statements of case: the incurred costs for this phase were £246,908. The judge was very critical of the lack of explanation of what had been done during the hours billed given they were so high. He ultimately concluded that £115,000 would have been a reasonable and proportionate expenditure on this phase. Remaining phases: the judge took a hatchet to the remaining phases of the budget on the basis of what he considered reasonable and proportionate. By the time he had finished he had reduced it to £422,622 which, as “it turns out” (he observed), was almost exactly the same as his first assessment of proportionality of the sums being estimated. He then rounded the budget up to £425,000. The court’s difficulty: The problem for the judge was that his £425,000 would have involved substituting his figures for incurred costs which he was not entitled to do. The judge referred to the options Coulson J had set out in CIP Properties (AIPT) Limited v Galliford Try Infrastructure Limited [2015] EWHC 481 (TCC) namely: Order a new budget Declining to approve the claimant’s costs budget Set budget figures and allowing the relevant party to take their chances on incurred costs Refuse to allow any further costs Coulson J settled on (iii) but identified the difficulty: it potentially enabled the claimant to ride roughshod over the budgeting process. The incurred costs were untouchable (£310,000 in GSK ) in the budgeting process but if they were allowed on assessment, they would potentially enable the claimant to exceed the budget set at the CCMC. Coulson J’s way around this was to say effectively to any subsequent costs judge, “if you assess the costs incurred above my figure then you will have to reduce the amount for later work because my estimate will need to be adjusted accordingly.” He put it in a more judicial way setting out the figure he approved for each phase and making the following comment: “I take that figure into account when assessing each element of the prospective/estimated costs dealt with below. To the extent that the claimant recovers more than £x.xx on assessment under this head, it would mean that more work had been legitimately done in the earlier stages of the case than I thought, which would in turn mean that less remained to be done in the future. Thus the prospective costs figures approved below would fall to be reduced by an equivalent sum.” Stuart-Smith J adopted the same approach and stated “in this way the incurred costs/approved costs budget will be a total of £425,000.” He referred succintly to “97(a) of CIP Properties”. The judge concluded by describing the costs estimate as “grossly excessive” being overstated by almost 100%. He made the claimant pay the costs of the issue and ordered the claimant’s solicitors to bring the terms of the judgment to the attention of any paying client who had retained them and to notify the court when it had been done.

Schubert Murphy v The Law Society

In Schubert Murphy v The Law Society [2015] P.N.L.R. 15 (QBD), Mitting J refused to strike out a claim by solicitors who alleged that it had suffered loss during a conveyancing transaction as a result of relying upon misinformation on the Law Society’s "Find a Solicitor" website. Someone calling themselves John Dobbs submitted and obtained a practising certificate to operate as a sole practitioner under the trading name of Acorn Solicitors. A Mr Khristofi decided to buy a house and instructed Schubert Murphy. The vendor was represented by Acorn Solicitors. Schubert Murphy checked the Solicitors Regulation Authority (SRA) and noted Acorn Solicitors were regulated. The Law Society’s practice note on mortgage fraud (dated 15 April 2009) urged solicitors as a matter of good practice to check their directory "Find a Solicitor" or the directory of Licensed Conveyancers if they were dealing with a firm they were unfamiliar with. During the conveyancing Acorn Solicitors gave the standard undertaking to discharge the existing mortgage out of the purchase monies paid by Mr Khristofi. Mr Khristofi moved into the house to discover the £735,000 purchase price had not been used to discharge the mortgage; Acorn Solicitors were a sham and the undertaking worthless. Mr Khristofi faced eviction proceedings by Lloyds Bank who held a first charge over the property. Mr Khristofi brought proceedings against Schubert Murphy (for negligence) which was settled. Schubert Murphy then brought proceedings against the Law Society for breach of statutory duty and/or negligent misstatement. The Law Society sought to strike out the claim on the basis it did not owe Schubert Murphy a duty of care. Mitting J refused to strike out the claim and held the matter should go to trial. The existence or not of a duty of care vested in the SRA in respect of its duties under ss. 10(1) and 10A of the Solicitors Act 1971 depended on an analysis of general factors and specific factors. Having regard to issues concerning the protection of the public a strike out was not appropriate as in theory if the Law Society was correct it called into question the security of current conveyancing practice. Furthermore that could be a factor in recognising the existence of a duty of care which coincided with the Law Society’s statutory duties when considering applications for the entry onto the Roll of Solicitors and their registration. This was because the Law Society, by encouraging members of the public to rely on its published information about who is a solicitor could be shocked to discover they had no route for recompense against a representative and regulatory body that held out a person as a solicitor on its website when in fact they were not. It is not clear from the judgment whether the Law Society’s website for its "Find a Solicitor" contained an appropriately worded disclaimer in 2010 when the fraudulent transaction occurred. It does now and includes the wording "Find a Solicitor is not intended to be the way in which the Law Society fulfils its statutory duties under the Solicitors Act 1974 to keep an official register of all solicitors available for inspection by the public" and goes on to advise viewers to inspect the official register. The Law Society contended that a body in its position and exercising a statutory duty owed no duty of care to those who may be injured economically by carelessness (relying on Yuen Kun-Yeu v Attorney General of Hong Kong [1988] A.C. 175). Mitten J held reliance on the case noted above was of little assistance as it did not establish that in no circumstances could a regulator not be responsible for economic loss. Further it was a not case where the Law Society made a representation or failed to exercise due care in an assessment of honesty or competence of "John Dobs", but instead it just entered his name on the Roll and register him as entitled to practise when if they had exercised proper care they would not have done so. Mitten J also held that in negligence claims generally there was no requirement that the act of carelessness giving rise to the claim must coincide temporally with the occurrence of harm. Furthermore in a representation case it did not matter the alleged carelessness happened at a time when the person to whom the representation was made was not personally in the contemplation of the defendant. Mitten J was concerned about the possible impact on conveyancing practise as in cases where solicitors are involved negligence can be rectified by a payment from the Solicitors Compensation Fund. However counsel for the Law Society submitted only where a solicitor gives an undertaking that fails will compensation be paid as there is no remit or obligation to make payments for failed undertakings given by people posing as a solicitor. So how does a member of the public or a solicitor obtain independent verification of the information on the "Find a Solicitor" website? The official register could be inspected and the Law Society telephoned. However the SRA will not necessarily release information about a person’s route to entry on the Roll on the basis of data protection principles. Should such a body like the Law Society be allowed to comprehensively disclaim responsibility for information when it urges the public to check the information it publishes and urges solicitors, as a matter of good practice, to also check? J Mitting gave judgment on 17 December 2014-does anyone know what is happening with this case?                

The "new approach" to applications for extensions of time to appeal

A recent judgment of the Court of Appeal has extended the spectre of the robustness of the 'Jackson Reforms' yet further. Although the approach courts now take is somewhat softer following the Court of Appeal's judgment in Denton, there is no doubting that the earlier decision in Mitchell has changed the landscape of litigation, at least in cases where concession or relief is sought and where default is a factor.   Much like the aforementioned cases, known by the name of the most easily-remembered party, the conjoined appeals of Regina (Hysai) v Secretary of State for the Home Department / Fatollohipour v Alibadibenisi / May v Robinson (2015) The Times Law Reports 22/1/15, are likely to be most easily referred to (for obvious reasons) by the names of the parties to the final appeal.   Here, Moore-Bick LJ giving the concurred-with judgment of the court (Tomlinson LJ and King J), held that retrospective applications for extensions of time for filing a notice of appeal should be treated in the same way as an application for relief from sanctions and that the court should take a similarly rigorous approach to the same. This notwithstanding, the Court was particularly at pains to point out that such a robust approach should not encourage parties to act unreasonably and refusing to cooperate in the hope that this will provide  a litigation advantage. The court proffered the following guidance relevant to appeals in civil cases:     shortage of funds was not a good reason for a delay;   the fact a person was a litigant in person was of no significance when the court assessed the seriousness and significance of a failure to comply with rules and directions of the court. The more important question was whether it amounted to a good reason for the failure which occurred. This will depend on the specific facts of a case, however the mere fact of being a litigant in person did not afford good reason for default; and   the court should usually decline to hear argument as to the underlying merits of the appeal, other than in cases where the merits were patently either very strong or very weak, as to do so routinely would unreasonably use up unnecessary court time and drive up costs.