Professional negligence claims for failed litigation 1. This talk is limited to failures to comply with Court orders which result in cases being struck out or seriously weakened. Solicitors duties 2. The relationship of a solicitor and client is primarily a contractual one, governed by the terms of the retainer. 3. Solicitors also owe a concurrent duty of care to their clients in tort 1. 4. For the purposes of this talk, which focuses on professional negligence claims arising from procedural failures, there is no need to distinguish between the two. Standard of care 5. In Henderson v Merrett Syndicates, the House of Lords held that: The extent of his [the solicitor s] duties depends upon the terms and limits of [the] retainers and any duty of care to be implied must be related to what he is instructed to do The test is what a reasonably competent practitioner would do having regard to the standards normally adopted in his profession 6. The duty of care and skill can be expressed as a number of general obligations: The obligations of a lawyer are the following: (1) To be skilful and careful; (2) To advise his client on all matters relevant to his retainer, so far as may be reasonably necessary 2 ; (3) To protect the interest of his client; (4) To carry out his instructions by all proper means; (5) To consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him; (6) To keep his client informed to s uch an extent as may be reasonably necessary, according to the same criteria. 3 1 Midland Bank Co Ltd v Het, Stubbs & Kemp [1979] Ch 384 and Henderson v Merrett Syndicates [1995] 2 AC 145 2 The precise scope of that duty will depend upon the extent to which the client appears to need advice. An inexperienced client will need and will be entitled to expect the solicitor to take a much broader view of the scope of his retainer and of his duties than will be the case with an inexperienced client, per Donaldson LJ in Carradine Properties Ltd v D J Freeman & Co (1982) 126 Sol Jo, cited with approval in Virgin Management v De Morgan Group plc [1996] NPC 8, CA). 3 Tiffin Hldg Ltd v Millican 49 D.L.R. (2d) 216, per Riley J
What amounts to breach? 7. Ordinarily, this question involves consideration of the level of expertise professed by the legal representative; the nature of the mistake (whether a point of law or not); the relevance of any advice sought or received from counsel etc. 8. As a general rule, if a solicitor errs in carrying out a straightforward task of the kind customarily undertaken by the profession (such as complying with an order), he is unlikely to escape a finding of negligence/breach of duty. Limitation 9. As stated above, solicitors owe their client concurrent duties in contract and the tort of negligence. A client may rely upon either cause of action if it provides a more favourable regime as to limitation 4. 10. The limitation period in both contract and tort is six years from the date on which the action accrued, unless an extension applies under the Limitation Act 1980. 11. Section 14A provides a special time limit for negligence actions where facts relevant to the cause of action are not known at date of accrual. That period is either (a) six years from the date on which the cause of action accrued; or (b) three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above. (5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action. 12. There is a long stop date of 15 years within which claims must be brought (section 14B). 4 Henderson (ibid)
13. In contract, the cause of action accrues at the date of the breach of duty. In negligence, it is the date when the negligence first causes legally recoverable loss. It is not always easy to determine when a litigant has suffered a loss. 14. If the case has been struck out because of failure to comply with an order, it is probably that date or, arguably, the date of any failed application for relief from sanctions. 15. But if the case has been weakened rather than struck out (i.e. because the claimant cannot rely on particular evidence), the situation is less clear. 16. In Berney v Saul (t/a Thomas Saul & Co) 5, the claimant was involved in a road traffic accident. She instructed the defendants to act on her behalf. The accident took place on April 20, 1999. On April 16, 2002, just before the three-year limitation period expired, her solicitors issued protective proceedings. Unfortunately, the claim form named the wrong defendant and the Particulars of Claim were not attached. 17. On 8 August 2002, after the three-year limitation period had elapsed, a claim form that named the correct defendant was served, although, again, no Particulars of Claim were attached. Service was accepted. At that stage, the Defendant did not take the point that the correct defendant was joined after the expiry of the three-year limitation period. 18. Settlement discussions stalled and the claimant lost faith in her solicitors. She instructed new ones in March 2004. 19. In June 2004, the new solicitors told the claimant that she was vulnerable to an application for strike out, given the significant delay in serving the Particulars of Claim. There was then further delay related to obtaining medical evidence. Finally in April 2005, the defendants offered to settle the claim for 25,000, indicating that they would oppose any application for leave to file the Particulars of Claim out of time. 20. Claimant's counsel advised that the chance of obtaining leave was very low. The claimant felt bound to accept the Defendant s offer and the matter was settled in November 2005. 5 [2013] EWCA Civ 640
21. The claimant did not issue proceedings against her first solicitors until January 2011. The defence alleged that the claim was statute-barred. It stated that the limitation period expired in June 2010 because the claimant was aware by June 2004 that she had suffered damage. 22. The Court of Appeal held that the cause of action accrued not when the culpable conduct occurred, but when the claimant first sustained damage. That was essentially a factual issue, but the following principles were relevant: (a) actual damage was any detriment, liability or loss capable of assessment in money terms, and included liabilities which might arise on a contingency; (b) a useful formulation was to consider when was the claimant worse off financially by reason of a breach of the duty of care than he would otherwise have been? 23. In Ms Berney s case, the Court held that the first date on which she was worse off financially was 1 November 2005, when her claim was settled. Contributory negligence 24. The Law Reform (Contributory Negligence) Act 1945, s1(1) provides: Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant s share in the responsibility for the damage. 25. The defence is available where the solicitor can prove a causal connection between the fault of his client and the loss alleged. 26. Therefore, if the client s co-operation is required to comply with a Court order (e.g. an order for service of witness statements) and despite repeated attempts to take instructions none are forthcoming, it is arguable that there should be some reduction for contributory negligence. 27. Determining the amount of reduction is essentially an exercise of judgment on matters of fact and degree 6. The relevant factors are generally taken to be the blameworthiness of each party and the causative potency of the relevant conduct 7. 6 Griffin v Mersey Regional Ambulance [1998] PIQR P34 7 Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1995] 2 All ER 769
28. However, it is hoped that where a client repeatedly failed to respond to correspondence, the solicitor would have either (a) applied for an extension of time before the date for compliance; or (b) ceased to act and made an application to come off record. The assessment of damages 29. These cases constitute claims for the loss of a chance: the opportunity of pursing the original claim to a successful conclusion. 30. Therefore, the damages to be awarded are the benefit from the claim succeeding discounted by the risk of failure 8. 31. The assessment is subject to the usual issues of causation, foreseeability and remoteness (which will not be considered here). The 7 stage approach: (1) Decide the date on which the personal injury action should have concluded if pursued with reasonable expedition; (2) Assess the damages (including interest) that would have been recovered on that date, less any reduction for contributory negligence (in the original action); (3) Deduct the recoverable benefits that would have been offset against the damages, together with any interim or settlement payments made; (4) Add interest from the notional date of trial; (5) Add any damages due to professional negligence; (6) Add interest due on these extra damages; (7) Multiply the resultant figure by the percentage chance of success in the original action. 8 Kitchen v Royal Air Force Association [1958] 2 All ER 241
(1) Date of conclusion 32. Ordinarily, the Court has to determine the value of the case at the date of a notional trial or settlement. 33. Since personal injury cases rarely come to trial quickly, it is often appropriate to adopt a date between four and five years post-accident. 34. Strike-out cases may be treated differently. In Hunter v Earnshaw 9, the accident occurred on 1 November 1984 and the claim was struck out on 15 July 1997. Garland J held that the claimant had lost a chose in action which should be valued at the moment of its loss. Accordingly, the personal injury damages fell to be assessed as at the date of the striking out order. (2) Assessing PI damages 35. Damages are determined on standard PI principles, as at the notional date of trial/settlement. This means that: General damages are assessed according to the tariff applicable at this notional date, not the date of the professional negligence trial; Past special damages are assessed up to this date; Interest on general damages and past losses is calculated up to this date; All subsequent financial loss counts as future loss from this date; and The relevant principles of law are those that applied on this date, regardless of subsequent reforms or changes. 36. In a case which has been damaged by the breach rather than struck out, any damages or interim payments received must be deducted. 37. Thereafter, it is necessary to decide whether contributory negligence would have been found against the claimant in the original PI action. If so, the appropriate percentage deduction must be applied. 9 [2001] PNLR 42
Subsequent developments 38. In general, the Court must consider the claimant s prognosis at the notional trial date and any subsequent progress or deterioration is ignored. Similarly, damages should be based on the evidence that was or could have been available then. 39. These general principles have been qualified by the Court of Appeal in three cases. 40. In Charles v Hugh James Jones & Jenkins 10, Swinton Thomas LJ, with whom Sir Richard Scott VC and Robert Walker LJ (as they then were) agreed, said: It is right, as Mr Jackson submits, that the judge's task is to assess damages that the claimant would have recovered at the notional trial date. However, in appropriate circumstances, in my view, a judge may well be assisted in coming to a view as to the damages which would have been awarded at the notional trial date by knowledge of what had in fact occurred. Although a judge at the notional trial date is making an assessment, it is to be hoped that it is an accurate assessment and evidential matters which would assist in that task are, to my mind, capable of being received in evidence. So far as the evidence of Dr Roberts is concerned, the point does not arise in an acute form in this case for reasons which I will explain in a moment. I would be prepared to accept that if some entirely new condition which can be attributed to the accident, manifests itself for the first time after the notional trial date it may be that it has to be ignored. I would wish to reserve any final opinion in relation to that. However, in contrast, if a condition has manifested itself prior to the notional trial but the prognosis was somewhat uncertain at that trial date, in my judgment the judge is entitled and, indeed, should, take into account what has in fact occurred. As Mr Marshall, on behalf of the respondent, points out in his skeleton argument it would be absurd, and in my judgment wrong, if, for example, at the notional trial date the medical evidence indicated that there was a strong probability that the claimant would in future suffer some adverse medical consequence as a result of the injuries sustained in the accident, but it was shown as at the date of the actual hearing that there was no such risk, that the claimant should recover damages in respect of it. Similarly, if there was evidence as at the notional trial date that the probability was that the claimant would never work again, but at the actual trial date he or she had obtained remunerative employment, it would be wrong not to take that fact into account. Equally, if the evidence was less certain as to the claimant's prospects of obtaining employment at the notional trial date, but it was quite certain as at the actual trial date that she would be unable to go back to work again, that is a fact which can properly be considered by the judge. In my judgment, it would be absurd and wrong in principle to disregard such evidence. (emphasis added) 41. In Dudarec v Andrews 11, the claimant was injured in a road traffic action. His solicitors negligently delayed the action so that it was struck out for want of prosecution in 1996. He issued proceedings against his solicitors in 2002. The court ordered a trial of the preliminary 10 [2000] 1 WLR 1278 11 [2006] EWCA Civ 256
issue of whether the claimant had failed to mitigate his loss by not having an operation to correct an aneurism which he said prevented him from working. 42. A scan in 2004 showed that there was in fact no aneurism. The experts agreed that they would have wanted the 2004 scan performed in 1996 for the notional trial. The Court of Appeal therefore held that it would not have been unreasonable in 1996 to refuse an operation for a problem that did not exist, and damages for loss of earnings were awarded until 2004. 43. Smith L.J. went on to agree with the comments made in Charles, and suggested that if the claimant died of unrelated causes between the notional and actual trial date, or won the lottery and gave up work, those matters should be taken into account. 44. Finally, in Whitehead v Searl 12 e PM gave birth to a child with spina bifida. She claimed that this should have been diagnosed antenatally and that, in those circumstances, she would have had a termination. The claim was progressed negligently slowly by the defendant solicitors. PM committed suicide after the time when the claim should have been brought to trial. In a claim brought by the estate, the Court of Appeal held that there would be a windfall if PM's death was ignored and the court should not proceed to assess damages on that footing. (3) Recoverable benefits 45. Section 1 of the Social Security (Recovery of Benefits) Act 1997 only applies to compensation payments directly due to personal injury. 46. Therefore: (a) damages paid by a negligent solicitor for loss of a chance to sue for that injury, do not result in repayment to the Compensation Recovery Unit; and (b) the claimant can only recover the net sum that he ought to have received in the original personal injury action. (4) Interest on PI award 47. The claimant is entitled to interest up to the notional date of trial and additional interest until the conclusion of the professional negligence claim. 12 [2008] EWCA Civ 285
48. The Court of Appeal considered the basis of this interest in Pinnock v Wilkins & Sons 13. It declined to lay down any general guidelines governing the award of interest in professional negligence case against solicitors. It held that judges are entitled to use their discretion. (5) Professional negligence damages 49. The claimant is entitled to any extra damages that have resulted from his solicitors delays or negligence (subject to questions of remoteness/foreseeability). 50. The most obvious of these is costs. The failure of the original personal injury action may have left the claimant with a liability for (a) his own legal costs; and/or (b) the other side s costs 14. 51. Where the delay causes financial prejudice to the claimant, he may also be able to recover the resultant loss and expense. This may include interest on a new loan that he had to take out or interest on an existing loan that he would otherwise have repaid from his damages. Such recovery is subject to the duty to mitigate 15. 52. A claimant may also lose the following as a result of his solicitors negligence: a. The right to place all or part of his damages in a personal injury trust; b. His entitlement to provisional damages under s32a of the Senior Courts Act 1981 or s51 of the County Courts Act 1984; c. His entitlement to periodic payments pursuant to s2 of the Damages Act 1996; d. His right to a structured settlement under s5(1) of the Damages Act 1996. (a) A personal injury trust 53. A personal injury trust is an important facility for those living off means-tested benefits whose entitlement to them will be removed by receipt of substantial lump sum damages. 13 (1990) Times, 29 January 1990 14 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 1 All ER 543 15 Former doubts as to the validity of such heads of loss, based on the House of Lords decision in Liesbosch Dredger v SS Edison [1933] AC 449 that a claimant s impecuniosity could not been taken into account have been laid to rest by Lagden v O Connor [200]3 UKHL 64. In Lagden, their Lordships held that a wrongdoer had to take his victim as he found him and to pay for the consequences if it was reasonably foreseeable that the injured party would need to borrow money or incur some other expenditure to mitigate his damages.
54. Paragraph 12 of schedule 10 (capital to be disregarded) to the Income Support (General) Regulations 1987 only applies where the funds of a trust are derived from a payment made in consequence of any personal injury to the claimant. Damages awarded for professional negligence do not fit this criterion. 55. The value of this lost right can be calculated by the assessing the income support, housing or other benefit that would have been received if a personal injury trust had been set up. (b) Provisional damages 56. Pursuant to section 32A of the Senior Courts Act 1981 and section 51 of the County Courts Act 1984, the entitlement to provisional damages only arises out of an action for damages for personal injury. Consequently, a claimant whose PI action has failed due to his solicitor s negligence may justly argue that he has lost the right to return to court for a further award if the existing risk of serious illness or deterioration caused by the original defendant s negligence materialises. 57. The right to provisional damages can be a real benefit, for instance to a claimant with asbestosis who is at risk of developing lung cancer or mesothelioma. 58. This loss has to be calculated on a lump sum basis, taking account of the risk that the illness or deterioration will materialise. However, it is easy to see how this method could result in significant loss to those claimants who later develop the anticipated condition. (c) Periodic payments 59. Periodic payments are particularly useful for younger claimants with substantial damages for future care 16. 60. Quantification of the loss of this right is an uncertain exercise, not least because the 100% principle applies equally to the assessment of damages in the form of a lump sum as it does to periodical payments 17. Thus, if a claimant believes that his solicitor was negligent in advising him to accept a lump sum, rather than consider periodic payment, he may struggle to establish 16 Following the endorsement of ASHE 6115 by the Court of Appeal in Thompstone v Tameside Hospital NHS Foundation Trust [2008] EWCA Civ 5 (and related cases) 17 Flora v Wakom (Heathrow) Ltd [2006] EWCA Civ 1103; Thompstone (ibid)
that he has suffered a recoverable loss unless he can prove that the lump sum was an undervaluation. 61. The correct course may be to calculate the claim on a lump sum basis and add a sum for the loss of opportunity to recover the damages in the form of periodic payments. Evidence from financial experts would be required to establish, so far as possible, the alleged value of the lost benefit. (d) Structured settlements 62. A similar problem arises with structured settlements. Section 5(1) of the Damages Act 1996 provides that the entitlement to such a settlement only arises in personal injury claims. 63. The combination of a lesser lump sum coupled with an annuity is, in theory, of equal value to receipt of all the damages in a single lump sum. 64. It seems that the correct way to compensate for this lost right is to calculate the damages on a lump sum basis and add a further sum to cover the claimant s inability to enter into a structured settlement. (6) Interest on professional negligence damages 65. This should be calculated from the notional trial date at half the special account rate. (7) Prospects of success of the original action 66. Even the best case is rarely free from risk. Therefore, it may be appropriate to make some discount for the hazards of litigation. 67. The leading case is Kitchen v Royal Air Force Association in which Lord Evershed MR stated 18 : What the court has to do (assuming that the plaintiff has established negligence) in a case such as the present is to determine what the plaintiff has by that negligence lost. The question is, has the plaintiff lost some right of value, some chose of action of reality and substance? In such a case, it may be that its value is not easy to determine, but it is the duty of the court to determine the value as best it can. 18 [158] 2 All ER 241 at 251
68. In Harrison v Bloom Camillin 19, Neuberger J adopted an arithmetical approach to this calculation. He held that the claimants had a 65% chance of establishing negligence, combined with an 80% chance of winning on the issue of causation. Accordingly, he awarded them 52% (65% x 80%) of the full value of their initial claim. 69. In Hanif v Middleweeks 20, the Court of Appeal pointed out that this arithmetical approach is only valid when the issues to which the percentages applied are separate and independent. If the issues involve, in part, the same considerations (i.e. credibility), then success on one issue could mean that success on the other was more likely. In such cases, the Court needs to take a broader view of the chances of success. 70. Subjective factors may be taken into account, including attitudes towards settlement. In Griffin v Kingsmill 21, the Court of Appeal assessed the claimant s prospects of success at trial at 85%. However, they reduced this to 80% in view of the fact that the mother of the 12 year old claimant was very cautious in her approach and probably would have accepted an offer at this level. 71. In the majority of cases, the negligent solicitors are unlikely to persuade the court that the claim had no value whatsoever. The fact that they were bringing the action is evidence that they thought it had some prospect of success. 72. If the solicitors wish to say that the case was hopeless they will need good evidence to rebut this initial factual presumption. In Mount v Barker Austin (A Firm) 22 Simon Brown L.J. considered that the applicable principles were as follows: (1) the legal burden lies on the claimant to prove that he has lost something of value; that is a case with real and substantial rather than merely negligible prospects of success; (2) the evidential burden lies on the defendants to show that despite acting for the claimant in the litigation, it was in fact of no value to their client; 19 [2000] Lloyd s Rep PN 89 20 [2000] Lloyd s Rep PN 920 21 [2001] EWCA Civ 934 22 [1998] P.N.L.R. 493. This dictum has been cited and relied on in a large number subsequent lost litigation cases, for instance Sharif v Garrett & Co (A Firm)[2001] EWCA Civ 1269 and Sharpe v Addison [2003] EWCA Civ 1189.
(3) if the court has greater difficulty in discerning the strength of the claimant s claim than it would have at the time of the original action, that counts against the defendant solicitors and not the claimant; and (4) the court is likely to be generous to the claimant when assessing his prospects of success. Lost opportunity to defend proceedings 73. Where a solicitor fails to put in a defence or to take some other procedural step, with the result that his client loses the opportunity to contest a claim, the court must consider the merits of the proposed defence. 74. The damages should represent the value of the opportunity which has been lost, and many of the principles which have been discussed above will be applicable. A worked example (1) The personal injury action should have been tried on 13 February 2010; (2) Personal injury damages (including interest) would have been 202,000 after 20% deduction for contributory negligence (i.e. full value of 252,500); (3) Deduct recoverable benefits of 2,000; (4) If the professional negligence case is concluded on 13 February 2012, judgment debt interest at 16% (8% p.a. x 3) on 200,000 is 32,000; (5) Add professional negligence damages (i.e. costs ordered from the original action) of 20,000; (6) Add interest to those damages at half the special account rate at 100; (7) 75% prospects of success of the original action x total of 252,100 = 189,075. Miscellaneous 75. Claims for professional negligence are no longer personal injury claims. As such, it is not the 1,000 small claims track PI limit that applies, but the 10,000 limit. 76. In fast and multi-track value cases, mediation may be the best way of saving costs.
Gemma Scott 6 February 2014