pnBlawg

the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Liability of third party funders / coverage re. costs in PL policies

The Court of Appeal handed down a judgment in the case of Legg & Ors v. Aviva [2016] EWCA Civ 97 yesterday. The case concerned the scope and application of the rule relating to a party’s ability to secure an adverse costs order against a third party who funded the unsuccessful claim by a claimant /defence of a defendant.  Additionally it concerned the proper approach to the interpretation of a “costs” term in the Defendant’s “Public Liability” policy.    The short message in relation to the first issue is that Insurers cannot choose to inter-meddle in litigation against their Assured without facing the costs consequences when the claim against the Assured is ultimately successful.  The choice for the Insurer is to decide whether or not the claim brought against its Assured falls within or outwith the cover afforded by the policy and to act consistently with that decision.  If the decision reached is that the claim is not covered by the policy terms then it should stay out of the litigation against its Assured and await any subsequent claim that may be brought against it under the provisions of the Third Party (Rights against Insurers) Act 1930, which it can then contest on that very ground.  If, on the other hand, the Insurer chooses to become involved in supporting its Assured in seeking to defeat the claim against the Assured it will probably be found to have chosen to become a third party funder in that litigation and, so, be at risk of an application under s.51 of the Superior Courts Act 1981.  The second message for Insurers is that, if they consent to the incurring of costs by an Assured in defending a claim, they will only avoid liability to meet the costs of the party which succeeds in its claim against the Assured if its policy wording quite specifically excludes liability for such costs.  Whether such an exclusion of liability for costs incurred with Insurers’ consent is a readily marketable product is another matter altogether.    

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.

No duty owed by a valuer for a developer’s loss of profit or loss of a chance on subsequent sale

Freemont (Denbigh) Ltd v Knight Frank LLP [2014] All ER (D) 165 (Oct)    On 14 October 2014 Stephen Smith QC sitting as a Deputy High Court Judge in the Chancery Division handed down judgment on five preliminary issues concerning a multi-million pound dispute over an allegedly negligent valuation of a development site.    HELD, although a valuer owes concurrent duties in contract and tort to a developer, the developer's claim for loss of profit or loss of chance of a subsequent sale, were outwith the scope of the valuer’s duty.    The Facts    The Defendant valuer Knight Frank LLP (“KF”) had been instructed to value a plot of land, approximately 17 acres in size, on the outskirts of Denbigh, North Wales. The landowner was seeking finance to develop the land.   The valuation report was prepared for the purpose of supporting the landowner’s application for finance from the proposed lender. The valuer was aware of this purpose. The valuation was subsequently relied upon by the Claimant, Freemont (Denbigh) Limited (“Freemont”), as a minimum price to accept when selling the land.   A number of offers to purchase the land were made to Freemont. These fell below KF’s minimum valuation and so were rejected. The failure to obtain an offer in excess of the minimum valuation caused a delay in the sale of the land and as a result, the land fell into disrepair and significantly reduced in value.   Loss claimed   Freemont claimed that it suffered loss of profit (by not accepting one of the developer's offers) and claimed damages for the same, together with damages for all subsequent marketing costs and costs of future disposal of the Development (giving credit for any future sale). Further or alternatively, Freemont claimed that it had suffered the loss of a chance to sell the Development.    The Decision    Stephen Smith QC gave judgment on five preliminary issues directed by Master Price on 12 August 2013. The common law position on the duty of care owed by a valuer was summarised as follows:   (1)   A duty of care in tort is likely to be owed to the person for whom the report was prepared (even though a contractual duty may also be owed to the same party);    (2)   The duty of care in tort is likely to be limited to the purposes for which the report was prepared;    (3)   A duty of care in tort may also be owed by a valuer valuing premises for mortgage purposes (at least if they are modestly valued residential premises), to the purchaser of those premises, if        a.     The valuer knows that his report is likely to be shown to the purchaser, and      b.    The purchaser intends to use the premises for his own residential purposes, and not let them, and      c.     The valuer knows that his report is likely to be relied upon by the purchaser for the purpose of deciding whether to purchase the premises; but    (4)   A duty of care in tort is unlikely to be owed by a valuer instructed to produce a report for a lender for security purposes, to an investor who relies on the report for other purposes.   Of the above four propositions, the first three were well-settled. The fourth however, could not be regarded as settled before the Court of Appeal’s decision in Scullion v Bank of Scotland plc [2011] 1 WLR 3212. In Scullion, Lord Neuberger MR held that a valuer acting for a lender did not owe a duty of care to a borrower where the loan was for a buy-to-let investment property.   Applying the reasoning of Lord Neuberger in Scullion, Stephen Smith QC held that questions regarding the valuation of the land for sale purposes were “tricky” and he rejected Freemont’s contention that KF knew or ought reasonably to have known that it would rely on the report when considering whether to sell the land in the future. In this instance therefore, the duty of care extended only to the provision of a report for the purposes of securing finance. KF had not negligently valued the land at such a low figure that Freemont had been unable to obtain the financing it had negotiated (paragraph 148).   This case is welcome news for valuers and their insurers and shows that the Court will look to the purpose behind the valuation report and that reliance upon the report will be limited to the purpose of the valuation report.

Mitchell re-visited:Court of Appeal hears three linked relief from sanctions appeals

On 16 and 17 June 2014 the Court of Appeal took the unusual decision to hear three appeals together which concerned relief from sanctions and the application of Mitchell principles. One of the appeals was from the decision in Utilise TDS Ltd v Davies [2014] EWHC 834 (Ch). Both the Law Society and Bar Council intervened arguing that the approach of the Court of Appeal in Mitchell had ‘spawned a new style of litigation’ where instead of actively working together to bring a case to trial, parties are focused on ‘catching each other out’. Appearing for the Bar Council, Mark Friston said the Bar has concerns about the way Mitchell is being applied. It has a ‘corrosive effect on cooperative conduct’ and has 'taken the civility out of civil litigation'. The Law Society argued that the test in Mitchell had been too narrowly drawn and that instead of 'trivial' breaches leading to relief being granted, the test should be whether the breach was 'immaterial', meaning that it had no detrimental effect on the course of the litigation. Judgment was reserved, however to see how the arguments unfolded take a look at the video on the Law Society Gazette website at http://www.lawgazette.co.uk/law/featured-broadcast-mitchell-sanctions-damaging-to-litigation-society/5041713.article.

Relief From Sanctions - The Pendulum Swings

    Two decisions delivered shortly before Easter suggest a change in the direction of the Mitchell pendulum. Chartwell Estate Agents Ltd v Fergies Properties SA [2014] EWCA Civ 506 is a "must read" decision of the Court of Appeal. It concerns the failure to exchange witness statements. Both parties had failed to serve witness statements whilst a squabble about disclosure rumbled on. The judge found that the breach was not trivial and there was no "good reason" for the failure. But the trial date was not imperilled and the claim would be doomed if relief was not granted. Even though the Mitchell criteria were not satisfied the judge granted relief. The Court of Appeal upheld the decision, emphasising that the default of the defendants was a factor that took the case outside of the Mitchell "expectation" that relief would be refused. Kaneria v Kaneria [2014] EWHC 1165 is a decision of Nugee J. The judge held that Robert v Momentum Services Ltd [2003] EWCA Civ 299 remains good law and Mitchell does not apply to applications for extensions of time made before the expiry of the relevant deadline. Such an application still has to be judged against the post-Jackson overriding objective but the concern to enforce compliance with rules, practise directions and orders does not have a paramount status.      

Limitation Periods and Solicitor Negligence

In the case of Susan Berney v Thomas Saul (T/A Thomas Saul & Co) [2013] 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 [1982] 1 W.L.R. 86, and Nykredit v Edward Erdman Group Ltd [1997] 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  [2003] 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.  

Fraud, forgery and conspiracy: Inferring Dishonesty

“The Bank was just able to put salt upon his tail - and only just.” So says a prison warder in Dickens’ David Copperfield of how Uriah Heep came to be convicted and sentenced to transportation for life for “fraud, forgery and conspiracy” in a “deep plot for a large sum” against the Bank of England. The Uriah Heeps of our times have practised mortgage fraud and their epilogues are pronounced by the Court of Appeal Criminal Division. In R v Kimani [2012] EWCA Crim 2881 the prosecution’s case was that Mrs Kimani’s signature appeared on a mortgage application form for a purchase from a “Mr Kibiku”; that “Mr Kibiku” was in fact Mrs Kimani’s husband; and that the purchase was a sham to release equity from a property already owned by the family. Mrs Kimani appealed her conviction, claiming be a woman dragged down by a mountain of evidence against her co-accused (her husband and a dishonest mortgage broker). She acknowledged that the application form had contained falsehoods, including as to her nationality and employment, but argued that there was no evidence that she knew that the application contained false information. So what was the salt upon Mrs Kimani’s tail? As Davis L.J. said, “The evidence against the appellant was essentially circumstantial, but it was none the worse for that”. There were a number of strands to the evidence: ·         A sum corresponding to the balance due on completion had appeared in her joint account on the day of the purchase ·         She was named as the landlord in a Council document prior to the purchase ·         A Council document completed by a tenant described her as the wife of “Mr Kibiku” These factors were specific to Mr Kimani but the Crown Court judge had also considered that the “generalities of the situation, her own knowledge of her own means” and the fact “that ordinarily an applicant would know of the content of an application form they signed” were matters from which the jury could be invited to infer dishonesty. I leave you with words of the penitent Uriah Heep which you may think have some resonance to our own banking troubles: “Before I come here, I was given to follies; but now I am sensible of my follies.”

Solicitor’s Negligence Cases in the Court of Appeal in 2012

As we look towards 2013 and back to all-but the last weeks of 2012, my attention is drawn to three interesting cases heard in the Court of Appeal regarding different allegations of professional negligence against solicitors:   ·                in Langsam v Beachcroft LLP, it was held that a solicitors’ “excessively cautious advice as to settlement of a claim”, was not in itself professionally negligent where it was premised upon non-negligent advice given by leading counsel. The case also held that in the circumstances, a six-month delay in delivering judgment had not affected the judge's findings of fact or law;   ·                in Swain Mason v Mills & Reeve, it was held that a firm of solicitors was not under a duty to advise on the adverse tax consequences that would arise on the death of a client, in circumstances  where he had not asked for any such advice, and the death occurred during a routine medical procedure and which the solicitors only knew of by chance. Also it was held that a decision not to accept an offer to mediate does not automatically have adverse costs consequences; and   ·                in Lloyds TSB Bank Plc v Markandan & Uddin, a firm of solicitors, when acting on behalf of a mortgage lender on the sale and purchase of a property, had committed a breach of trust when it transferred a mortgage advance to the vendors' purported solicitors without receiving the requisite documentation or a solicitor's undertaking. Whilst the solicitors were themselves a victim of the fraud, and thus relief could be afforded to a solicitor in such cases pursuant to section 61 of the Trustee Act 1925, it was right not to order it in the instant case due to inexcusable failings by the solicitors.   This article is a précis of a much longer article by Thomas Crockett in a 2012 Professional Negligence Case Review published by 1 Chancery Lane Chambers, which can be found at http://www.1chancerylane.com/documents/newsletters/ProfNegBriefing_December2012.pdf