pnBlawg

the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Friends become Enemies aka The Dangers of Free Advice

  We were often warned against giving legal advice to our friends.  As professionals, if we give advice of a professional nature, there is (surprisingly to me) a distinct possibility that it will be relied upon.  This accords with the well-established Hedley Byrne doctrine of liability for the assumption of responsibility.  When giving advice, this liability can arise even if we don’t charge for our services.  Negligent mis-statement is the ground usually pleaded but in the instant case it formed only a part of a Preliminary Issue determination as to the nature and scope of any duty owed by the friend/professional.   The parties were, in the one corner, a married couple and in the other corner, their erstwhile architect friend.  The architect gave recommendations to the couple about their proposed garden scheme.  An issue arose as to what duty she owed at the time (for alleged economic loss) and deciding this involved a full examination of the architect’s role and recommendations.   Given that the judge found it impossible to find the basic elements of a contract in the numerous email exchanges between the parties, and no money was charged or mentioned by the architect, this limb of the claim naturally fell away.  However, he found that the architect still owed a tortious duty of care because her advice had been formal, specialist and extensive.    You might recall from earlier this year that the newspapers seemed to like this story of people falling out over rather expensive landscaping.  Nevertheless, I prefer to think of this case as in the manner in which the TCC judge put it: a ‘cautionary tale’.    (1) PETER BURGESS (2) LYNN BURGESS v BASIA LEJONVARN [2016] TCLR 3

Crystal ball gazing: how does a judge assess loss of chance?

You can prove that a past event has happened but you cannot prove that a future event will happen. When the actions of a third party are relevant all that can be done is to evaluate the chance of that event happening. So when a claimant has proved as a matter of causation a real or substantial chance rather than a speculative chance of an event or events happening how does a court evaluate that loss of chance? In Joyce v Bowman Law Ltd [2010] EWHC 251 (Ch) J bought a property which was advertised with an option for the buyer to purchase the lower end of the garden if the seller’s application for planning permission was unsuccessful. J was keen to develop the land. He instructed B to act for him. Unfortunately the contract for sale contained a seller’s option, not a buyer’s option. B admitted negligence. J claimed loss of profit of £400,000: he would have developed the property and the additional land by building a large house. J argued that all the uncertainties concerning negotiating an option in the proper form, funding the redevelopment and obtaining planning permission should be reflected in a single percentage of 75%. He would recover damages of £300,000 on this basis. B argued that none of the consequential losses were recoverable as a matter of law, either because they were not within the scope of B’s duty of care, were not caused by the negligence or were too remote. B also argued that J had failed to mitigate his loss by building a smaller new house. It was held that J could only recover damages for his loss of profit if he could bring himself within the second limb of Hadley v Baxendale by showing that B had knowledge of the special circumstances which were liable to cause more loss. The judge found that B knew of J’s intention to make a profit from developing the property. It did not matter that B was not aware of the precise scale of the intended development; the knowledge was sufficient to give B knowledge of special circumstances outside the "ordinary course of things" of such a kind that a breach in those special circumstances would be liable to cause J loss. How did Mr Justice Vos assess the loss of chance? He found that the chances of: J being granted a suitably watertight buyer’s option were 85%; J exercising his option 100%; J being able to obtain planning permission or his plans 40%; and J obtaining funding for the development 85%. Multiplying these percentages gives a figure of 29%. On a finding of a loss of profit of £130,000 the Judge awarded damages of £37,700. In Tom Hoskins plc v EMW Law [2010] EWHC 479 (Ch) Mr Justice Floyd approached the task a little differently. This was a professional negligence claim against solicitors handling the sale of a portfolio of public houses and a brewery. The main issue was that E’s negligence caused T to complete transactions late and on relatively unfavourable terms. Although there were multiple contingencies (agreement to the terms, attempts to re-negotiate or extend the date for completion) the Judge considered it was wrong to apply a mechanistic approach of multiplying percentage by percentage. By way of illustration if the Judge had thought there was a 20% chance of the purchaser agreeing to provide a director’s guarantee and an 80% chance of completion occurring at the end of October that would produce a loss of chance of 16%. However this did not reflect the true chances of the deal being done. The Judge evaluated the overall chances of completion by the end of October at 50%. In Harding Homes v Bircham Dyson Bell [2015] EWHC 3329 (Ch) B acted for H in connection with a bank loan to finance a residential development. B included an all-monies clause by mistake in the guarantee. When H defaulted the bank demanded that the shareholders pay the sum due of £5.9m. Counsel for B argued that as the contingencies were truly independent so that the chances of one contingency happening were unrelated to the chances of the other contingencies happening the court should apply a mechanistic approach. Mrs Justice Proudman cited the decision in Tom Hoskins and decided that she should look at the chances of various contingencies happening in the round, not by applying percentage upon percentage. Although in the end it was irrelevant because the Judge found that causation was not made out and only nominal damages were awarded.   A mechanistic approach seems attractive: sequential logical steps with a percentage at each step then calculate the product of those figures. However it can skew the loss of chance and lead to a figure that does not truly reflect the overall chance that without the negligence the claimant would have negotiated or achieved a better outcome. After all damages are supposed to be compensatory in nature.

Caught out by the court fee: a forewarning on issuing claims protectively

Facts The case of Richard Lewis & Others v Ward Hadaway [2015] EWHC 3503 (Ch) concerned 31 professional negligence claims brought against a firm of solicitors relating to conveyancing transactions. In the pre-action correspondence, the individual claims were each valued in the hundreds of thousands with a collective worth of £9 million. However, when the Claimants’ solicitors filled in the claim forms, the anticipated value for each case was considerably understated. Each claim form was then amended prior to service to reflect its true worth and the balance of the appropriate fee was paid. All the claims were sent to the court very near to the end of the limitation period, eleven of which being delivered to the court before, but not issued by the court until after, the expiry of the limitation period.  The Defendant’s alleged that this system was an abuse of process and sought to strike out the claims. In the alternative, the Defendants sought summary judgment on the eleven claims issued after expiry of limitation alleging that they were statute barred.  On 21 December 2015 Mr John Male QC, sitting as Deputy High Court Judge in the case, delivered judgment. Judgment With regards to the strike out application, Judge Male opined that intentionally issuing a claim form lower than its true value amounted to an abuse of process. He added that such practices materially affect the court system’s cash-flow and that it would not be in the public interest to condone such behaviour. His reasoning was supported by the fact that the Claimants’ solicitors had previously been critiqued in several other cases for employing such a scheme.  Interestingly, he did not go on to strike out the claims. Following Zahoor v Masood [2009] EWCA Civ 650 he held that allowing the Claimants to continue with their claims in light of the abuse of process would not be “an affront to the court”, paragraph [84]. His decision was based on the following findings: the prejudice that would result to the Claimants was substantial, the abuse of process did not go to the root of the claim, the potential worth of the claims was high and the Defendant would still able to argue limitation in some of the cases. He then went on to consider the application for summary judgment in respect of eleven of the claims. After considering the relevant CPR, statutory provisions and case-law he concluded that the claims were statute barred. His reasoning was that for a claim to be brought for the purposes of the Limitation Act 1980, the Claimant must have done “all that was in their power to do to set the wheels of justice in motion”, Aly v Aly (1984), paragraph [105]. He held that this had not been done for the eleven claims as the Claimants could have paid the appropriate issue fee.   Comment Whilst it is important to appreciate that Lewis v Hadaway is a High Court decision and is subject to review by the appellate courts, the potential ramifications of this judgment are far reaching. The decision is likely to result in a flurry of interlocutory applications brought by Defendants to extinguish claims where the claim form is issued and the court fee is increased after issue. In turn, this is likely to generate satellite litigation against solicitors, particularly in the professional negligence sphere where there is no recourse for claimants to a discretionary extension of the limitation period. The ruling also raises pertinent questions about access to justice. Last year court fees were significantly increased with a 5% levy on all claims over £10, 000. It is questionable where the dual effect of this judgment and the increases leave a Claimant who is impecunious but the potential recipient of a high-value claim. Judge Man alluded to this situation and held that for “a financially strapped litigant…[i]t may well be that, in that sort of case, there would be no abuse of process”, however, he went on to say that this would only be the case where there was “complete transparency” between the parties as to the undervaluing of the claim forms, paragraph [58]. It is difficult to see why the Defendant’s solicitors would permit such course of action when they can simply have the claim struck out. Some consolation comes from the court fee remission system which is open to Claimants who have a small amount of savings and receive certain benefits or are on a low income. However, whilst this may assist those at the lowest end of the spectrum it fails to address the plethora of Claimants who do not fulfil this criterion. The judicial reasoning is also worthy of analysis. Judge Male’s s ruling on summary judgment was a technical one; if the issue fee is not correctly paid and the claim form is issued by the court outside the limitation period then the action will be statute barred. It is interesting to compare this to an identical scenario but where the claim form is issued by the court before expiry, the only difference being when the court issues the claim form. Given that the intention of the parties is the same and that the issuing of the claim form by the court is down to administrative chance, is there really any difference between these two cases? Either the Claimants in both scenarios did everything in their power to set the wheels of justice in motion, or, if it is deemed they did not because the correct fee was not paid then surely both claims should be summarily dismissed? A strict application of Judge Male’s ratio will cause arbitrary distinctions between cases and one is left wondering whether focusing on abuse of the process would have been a more pragmatic approach.