the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Will the introduction of adjudication in Professional Negligence cases have the same impact as the introduction of a similar scheme in the Construction Court?

On 1 February 2015 a voluntary pilot scheme for the adjudication of solicitors’ professional negligence claims was launched. Mr Justice Ramsey was to consider three test cases (with a quantum value of £100,000 or less) with feedback on those cases due to be provided by June 2015. It is now nearly November 2015, and not much has been heard: the latest update is that only one pilot case has been adjudicated upon, with the Adjudicator being 1 Chancery Lane’s Ivor Collett. There are presently no other pilot cases in train, but all signs point to determination that other pilot cases should be heard in the next few months. However, it was clear from the excitement provoked by the announcement of the scheme that there was an appetite within the industry for alternative means of dispute resolution for solicitor’s negligence claims. The confidentiality of adjudication proceedings are of great interest, particularly to defendant solicitor’s firms, for whom adverse publicity can be very problematic. No other legal sector has been as affected by the introduction of adjudication as the construction sector. Adjudication has been used as a form of dispute resolution for construction claims arising during or after completion of projects for many years pursuant to the statutory right to adjudicate under the Housing Grants, Construction and Regeneration Act 1996 (which was later amended by the Local Democracy, Economic Development and Construction Act 2009). Key advantages of adjudication (as applicable to professional negligence claims) are:  1. It is possible to obtain a reasoned judgment enforceable in Court for much lower cost than using Court proceedings. 2. The scheme can work with the pre action protocol claim and response letters as submissions from the parties. 3. The PNBA have appointed a panel of 5 adjudicators for the pilot all with many years of experience in this type of claim on standard terms of business and cost. 4. The scheme itself is designed as a precedent which can be adapted by agreement for individual cases – adaptations agreed will be useful in assessing the feedback. 5. Interlocutory points/preliminary issues could be adjudicated if a barrier to other forms of ADR like mediation and/or as a cheaper and quicker alternative to Court hearings. 6. The meeting and process could be agreed as similar to mediations at similar cost. Whilst the decision of an adjudicator is only temporarily binding, as Mr Justice Ramsey (a veteran of the introduction and expansion of the adjudication in construction dispute scheme) comments in his introduction, experience has shown that parties do not usually seek a final determination through the courts and accept the decision as a means of settling the dispute. The scheme is run along similar lines to that for construction disputes though there are some differences and, in particular, parties can adapt two aspects. The first relates to the binding nature of the decision and the second concerns costs:1. The parties can agree that the decision will be temporarily binding until it is finally determined (by litigation, arbitration or agreement) or they can agree that it will be finally binding. 2. If the parties so choose, the adjudicator will have power direct one party to pay the other’s reasonable costs and if appropriate can be given directions to enable him/her to determine those costs subject to a cap of £5,000. The parties can also agree for the adjudicator to have no such power and each party would therefore bear their own costs.Related disputes can be referred to adjudication together and a decision from the adjudicator is to be provided within 56 days of his or her appointment (which can be extended by agreement). The 56 day deadline is also applicable to the time between an adjudication being agreed upon as the way forward, as opposed to the rather more rigid 28 days in construction adjudications. It is hoped that the extra flexibility will make the scheme easier to prepare for. The pilot is not a statutory scheme. The Ministry of Justice will be involved in further discussions once the feedback has been analysed which will consider whether adjudication should be included as part of civil procedure in professional negligence claims. It may therefore be some time before the report into the pilot scheme is finalised. If the results are positive, and the scheme is expanded, it will be interesting to see if the impact on the professional negligence sector is as striking as in construction (where the number of construction disputes litigated in the Construction Court has dropped to 22% of what it was in 1995, when the scheme was introduced). My view is that while adjudication will undoubtedly assist the swift and ready resolution of some lower-value solicitor’s negligence cases, the very fact of those limitations will ensure that the impact is not as fulsome as has been noted in the construction sector. Until the result of the pilot scheme are released, the sector remains in the dark. 

Mitchell II: The Revenge

  Mitchell has been ‘softened’.  On Friday, the Master of the Rolls delivered his judgment in the three cases of Denton v TH White Ltd: Decadent Vapours Limited v Bevan & Ors.: Utilise Limited v Davies and Ors.  In essence, the Court of Appeal declared that Mitchell had been “misunderstood” and emphasised that the new CPR 3.9 entailed a clear three stage test.  The “Guidance” section starts from paragraph 24… It is necessary to identify and assess the seriousness of the failure to comply.  If the breach is insignificant then the court is unlikely to need to spend much time on 2 & 3.  This is a shift away from the old classification of triviality, which was criticised.  Further, past defaults are immaterial; The court must consider why the default occurred, albeit this is not derived from CPR 3.9 per se; The court will evaluate all of the circumstances so as to deal justly with the application including factors (a) and (b) from CPR 3.9, namely (a) for litigation to be conducted efficiently and proportionately; and (b) to enforce compliance with Rules and Orders.  These factors were to be given particular importance. Interestingly, Jackson LJ gave a dissenting judgment.  In his view, factors (a) and (b) should be given no greater weight than “all the circumstances” of a case.  Whilst that difference in opinion made no difference in these three appeals, it certainly could do in other cases. Overall, the Denton et al. judgment has sought to engender (or reintroduce?!) more of a balancing exercise into this assessment.  The Court of Appeal further emphasised that it expected a spirit of co-operation to continue in litigation, such as I alluded to in my previous post on Mitchell.  Indeed it confirmed that the courts should penalise “opportunistic” parties in costs. Accordingly, the Court of Appeal concluded that it did not expect many 3.9 applications to be contested henceforth.  It wants an end to this genre of satellite litigation.  Nevertheless, I have a nasty feeling that we haven’t heard the end of this subject.  I will let you know if there is to be a trilogy…

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

Mitchell revised?

A little light relief for Friday afternoon. A decision of Males J started doing the rounds last week:  Vivek Rattan v UBS AG, London Branch [2014] EWHC 665 (Comm). It is well worth a read, not least because it is short. The case concerned misselling (or as the Claimant put in its skeleton argument “misspelling”) of investments. The Claimant took the point that the Defendant’s costs budget had been filed less than the required seven days before the relevant CMC. Applying Mitchell (which of course also involved late service of a costs budget) the Claimant contended the Defendant was only entitled to court fees. Males J described this argument as “manifest nonsense”. That might seem surprising. Is this the start of the tide turning against the harshness of the Mitchell regime? It is nothing of the kind. Reading the case itself dispels any such a notion. The Claimant’s solicitors had written to their opponents asking for confirmation that they would file their budget “on 28 February 2014”; the Defendant’s solicitors agreed that they would file it “by 28 February 2014”. They filed it on 28 February 2014. That was six, not seven, clear days before the CMC. What is the difference between this case and Mitchell? As Males J put it with heavy irony, “the unsophisticated reader might think that [the correspondence] was the clearest possible agreement that a costs budget exchanged on 28 February 2014 would be in time but [Counsel for the Claimant] submits that such a reader would have failed to grasp the true subtlety of this correspondence”. The judge rejected this submission holding: “It is clear that there was an agreement. Even if [the Claimant’s] strained construction of the correspondence had been justified, the Defendant’s solicitors understanding of the position was entirely reasonable. If relief from sanctions had been necessary, which in my judgment it was not, the case for such relief would have been overwhelming”. In this author’s view, Rattan does not signal a dilution of the Mitchell principles. Instead, it is an illustration of the difference between a genuine Mitchell point and one which is, in the words of Males J, merely “futile and time-wasting” and will be discouraged by the courts. As Leggatt J put it in Generali Romania Asigurare Reasigurare SA v Ardaf SA Insurance & Insurance Co [2014] EWHC 398 (Comm): “The decision ... in Mitchell ... has rightly been described as a “game changer” [...]. It is important for litigants to understand, however, how the rules of the game have changed and how they have not. The defendants in this case have sought to rely on Mitchell to turn to their tactical advantage a short delay by the claimants in providing security for costs which in itself had no material impact on the material impact on the efficient conduct of litigation. [...] The defendants’ stance disregarded the duty of parties and their representatives to cooperate with each other in the conduct of proceedings and the need for litigation to be conducted efficiently and at proportionate costs. It stood Mitchell on its head.”

The Return of the Omni Ombudsman

Our regular readers will recall that we recently blogged about the Legal Ombudsman’s interest in providing redress for clients of non-legal professionals. This is not the only area where LeO's domain may expand. The Legal Services Consumer Panel reported last year that non-client third parties should have a right of redress from LeO. The Panel has since looked into the  2,184 complaints from non-clients that LeO turned away last year for want of jurisdiction. Earlier this week the Panel published 39 case studies to illustrate the sorts of complaints that might merit redress by LeO. The case studies include conveyancing horrors, aggressive debt recovery, unpleasant experiences at court and failures to administer estates properly. A number of the case studies concern situations in which the legal professional would or might owe a duty of care to the complainant. LeO's rules allow for a complaint to be dismissed or discontinued if it would be more suitable for the issue to be dealt with by a court, but the Panel thought that the costs of going to court meant that redress by LeO might be the only realistic prospect of getting justice for some complainants. As a change to the classes of complainant to LeO requires an order of the Lord Chancellor under the Legal Services Act 2007 it might be sometime before non-clients can obtain redess from LeO. In the meantime the case studies should provide a rich source of inspiration to those setting interview questions, tort examinations and moot problems.  

The Determination of Consequential Issues after Trial and the Apparently Biased Judge

Who should determine any questions as to costs at the conclusion of a trial? The standard – and it seems almost always correct – answer, would be the trial judge himself. The rationale is obvious and entirely sensible – that such ancillary issues should be determined by the tribunal which heard the case from which the such issues arise. However, the Court of Appeal last week suggested that this is not the universal rule, in the volubly-named case of Mengiste & Anor v Endowment Fund For The Rehabilitation Of Tigray & Ors: subnom Re An Application For Wasted Costs: (1) Endowment Fund For The Rehabilitation Of Tigray (2) Addis Pharamaceutical Factory Plc (3) Mesfin Industrial Engineering Plc v Rylatt Chubb [2013] Ewca Civ 1003. In this case, the Appellant solicitors appealed the decision of Mr Justice Peter Smith sitting in the Chancery Division below ([2012] EWHC 2782 (Ch)) in refusing to recuse himself from hearing a stage one application for wasted costs, and making such an order against them, in favour of the Defendant’s solicitors. The Appellants submitted that the judge should have recused himself after making such findings about them without hearing evidence, without warning, and without affording them the opportunity to address the court. Additionally, it was submitted that the stage one order should not have been made as the required prima facie strong case of improper, reckless, or negligent conduct had not been satisfied. The Court of Appeal (Arden, Patten, McFarlane LJJ) allowed this appeal in part. They held that whilst the usual rule was for the judge on a substantive application to deal with consequential issues as to costs, even when he had previously made adverse findings towards a party. However, the instant case was exceptional and the judge indeed had showed apparent bias. It was held that thus, he should have recused himself from hearing the wasted costs application because his criticism of the Appellants (which was held to have been designed to ward off an application for a wasted costs order against an expert witness in the case), was made in anticipation of an application that was never in fact made. The Court of Appeal further held that the judge had expressed his criticisms in absolute terms, failing to leave room for any explanation; and that the repetition of the criticisms and their severity made them extreme and unbalanced. Consequently, the stage one cost order was set aside. As to the second ground of appeal, the Court of Appeal noted that the Appellant solicitors has admitted seriously breaching their obligations as regards the instruction of experts to give evidence. It was held also that they had failed to invite the court to ignore and disregard certain offending passages in the expert’s report, which went beyond the proper boundaries of his role and expertise. As a result, it was held that the Appellant had failed to establish that indeed no judge could have concluded that a stage one order was appropriate in the circumstances. Whilst this decision undoubtedly affords guidance to the practitioner and the litigant, it is unlikely to have much practical impact upon judicial behaviour, given the necessity for judges at first instance to identify and (at least implicitly) accept the presence of the appearance of bias in themselves. Rather, the judgments oblique effect upon such tribunals may (perhaps it is optimistic to suggest) act as a further reminder upon judges not to risk putting themselves in such a position in the first place.

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.  

Testamentary Capacity and Solicitor Negligence

The conclusion of a recent Study undertaken by Robert Hunter, heads of trusts litigation at Herbert Smith and Dr Claire Royston, a consultant psychiatrist and medical director of Four Seasons Health Care, should serve as a stark warning for practitioners in this area. Its conclusion has been that it has found solicitors lacking when making this judgment as to the potential testator’s capacity. The Study took place over three years, looked at the responses of some 91 solicitors and 92 consultant psychiatrists to two films showing an elderly man visiting his solicitor to give instructions for the drawing up of a new will. The subject of the film was portrayed as a formerly successful business man, who disclosed he had suffered a stroke. He was shown to have “excessive function deficits covered by a social veneer”. The films converged as to good and bad interview techniques, and afterward the participants were asked questions concerning essentially whether than man in the film had capacity.  The presence of such a disorder could potentially have meant that the man lacked testamentary capacity. It was thus considered that it was crucial for the participants to correctly identify this fact and give it consideration. The conclusions of the Study are potentially concerning for the legal profession:  (a) from the film showing the bad interviewing techniques:  (i) only 2% of the solicitors recognised that the client had a mental disorder, (compared to 73% of the psychiatrists); and  (ii) only 33% of the solicitors concluded that the client potentially lacked testamentary capacity; and  (b) however, from the film showing the good interviewing techniques:  (i) 60% of the solicitors, recognised that the man had a mental disorder (as compared to 84% of the psychiatrists); and  (ii) 90% of the solicitors came to the correct conclusion as to the potential lack of capacity.  Dr Royston has been widely quoted in the legal press as saying “These results clearly demonstrate the difficulties faced by solicitors in forming a judgment about the mental capacity of certain clients that may arise from poor interview techniques, for example using leading or closed questions…This is a sensitive subject but it is important that improvements are made in order to protect the rights of vulnerable clients.” Mr Hunter is reported as suggesting that “The study confirms what many lawyers specialising in probate litigation have long suspected. It is too easy for solicitors to confuse social graces with mental ability… There is an unacceptable level of risk that some solicitors are letting the public down because they do not realise that inappropriate interviewing techniques can conceal their client’s lack of mental capacity. In my experience when solicitors do become aware of a capacity issue, basic safeguards requiring the seeking of medical opinion are frequently disregarded without good reason.” The authors of the Study propose reforms, including essentially greater regulation of the solicitors profession, increased training obligations and the enshrining of the adherence to the “Golden Rule” with professional sanctions to be imposed for not doing so.  But solicitors have long had a professional obligation to consider carefully this issue.Solicitors have long had guidance on the correct means of judging the testamentary of their clients. Under the Solicitors Code of Conduct 2007 the starting point is in the Guidance to Rule 2, paragraph 6(1)(a)(3)(iii): "where you may be dealing with a client who does not have mental capacity as defined in the Mental Capacity Act 2005 … special circumstances apply. You need to bear in mind that the question of capacity relates to the particular decision that needs to be made, and it is, for instance, entirely possible for someone to lack capacity to make certain decisions but have the capacity to instruct a solicitor on other matters. To ensure that you comply with the law you need to have regard to the provisions of that Act and its accompanying Code.” In this new world of an ‘outcomes focused approach’ the SRA Handbook ed 23.12.11 IB(1.6) obliges a solicitor: “in taking instructions and during the course of the retainer, having proper regard to your client's mental capacity or other vulnerability, such as incapacity or duress” Potentially this limited Study shows there may be an issue in the profession as to assessing capacity. The most obvious conclusion of the Study is that asking the correct questions and correctly interpreting the answers according to the correct tests in law is of paramount importance. These are not necessarily matters which can or should be resolved with regulation (although this may generate useful publicity), but most obviously resolvable by better training. If indeed this is down to training or a lack of understanding of the law, such an issue can and should be easily remedied by a contentious practitioner and/or his or her firm. Any practitioner who is not sufficiently competent in this area, but continues to assess the capacity of those wishing to make a will, shall increasingly do so at his or her peril. The end of the recession is sadly not in sight. People will continue to increasingly exhibit avariciousness in hard times, particularly if family property is involved (such as grandma's proverbial council house in Chelsea, bought in the 1980s for £40,000 and today worth £2M) . The practitioner who does not fully discharge his or her contractual and tortious duties owed to testators, (their estates) and their beneficiaries will face potentially far more serious implications than the “professional sanctions” suggested by the authors of the Study, in the form of what could well amount to a very significant professional negligence claim.