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the professional negligence blog

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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.

Knowledge of negligence – Section 14A of the Limitation Act

Section 14A of the Limitation Act is extremely challenging and has given rise to a considerable body of case-law.   One particularly vexed question is the extent of knowledge required where lawyers are sued for providing allegedly negligent advice on an underlying claim. In particular, does the claimant to have to know that the advice given by the lawyers was wrong? Or is that excluded by Section 14A(9), which provides “Knowledge that any acts of omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above”. This has now been answered by the Court of Appeal in Chinnock v Veale Wasbrough [2015] EWCA Civ 441.   In 2001 Ms Chinnock sought the advice of solicitors and a barrister in respect of a potential wrongful birth claim against an NHS Trust. The thrust of the claim was that clinicians had failed to inform Ms Chinnock of the significant risk of foetal abnormality (1:13), and also failed to tell her that a radiologist had “strongly suspected” there was some major abnormality with the baby, but could not define it.   Ms Chinnock’s legal team advised her, in light of medical evidence, that she did not have a viable cause of action against the NHS Trust. Given this, she was advised not to serve the Claim Form that had been issued. The legal team informed Ms Chinnock that if she was dissatisfied, she could seek alternative advice.   Ms Chinnock was extremely surprised and disappointed with the advice. Nonetheless, she followed it. The Claim Form was not served.   In 2009 Ms Chinnock consulted different solicitors as she was getting divorced. They advised her that the legal team had been negligent in 2001. Ms Chinnock brought a professional negligence claim against them.   Ms Chinnock’s claim was dismissed by Dingemans J, who held that the solicitors were not negligent. This was upheld on appeal.   The decision on limitation was much more controversial. Dingemans J held that Ms Chinnock had actual knowledge within Section 14A(5) of the Limitation Act in 2001, and so the professional negligence claim was time-barred. At that time, Ms Chinnock knew the identity of the legal team, and she knew she was not pursuing the wrongful birth claim because of their advice. The judge held that the fact she did not know that advice was negligent was irrelevant, because of sub-section (9).   The majority of the Court of Appeal (Jackson and Longmore LJJ, Roth LJ dissenting on this point) disagreed with this analysis, holding that in 2001 Ms Chinnock knew all material facts, save that (1) that the advice in 2001 had been wrong, and (2) that this error had been negligent. Whilst Ms Chinnock did not need to know the (alleged) error was negligent for her to have actual knowledge, she did need to know that the advice had been wrong. As such, there was no actual knowledge.   However, given Ms Chinnock was deeply unhappy with the advice she had received, it would have been reasonable for her to obtain alternative legal advice well within the primary limitation period for the professional negligence claim. This was conceptually similar to Forbes v Wandsworth Health Authority [1997] QB 402.

Adding a new cause of action after expiry of limitation

It is well known that a court can permit a party to amend its case to plead a new cause of action even though, had it been starting such a claim in freestanding proceedings, it may have been statute-barred. CPR 17.2 provides that the court “may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”.   What if the parties cannot agree as to whether the limitation period for the new claim has expired or not? Such a situation can arise where there is a dispute as to a claimant’s date of knowledge. In Chandra v Brooke North [2014] TCLR 1 Jackson LJ said (at paragraphs 65-67) that there are essentially two options. The court can treat it as a “conventional amendment application”. It will not descend into factual issues seriously in dispute, but rather will consider whether the defendant has a “reasonably arguable case on limitation”. If the court refuses permission to amend the claimant can issue fresh proceedings in respect of the new claim; the defendant can plead its limitation defence and the limitation issue can be determined at trial (often as a preliminary issue).   0 0 1 346 1973 1 Chancery Lane 16 4 2315 14.0 Normal 0 false false false EN-US JA X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Cambria; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin; mso-ansi-language:EN-US;} On whom does the burden lie to prove or disprove the limitation defence? That was issue for the Court of Appeal in Mercer v Ballinger [2014] EWCA Civ 996. The Master of the Rolls decided that the burden was on the Claimant to prove that the Defendant did not have a reasonably arguable limitation defence. Thus he held (at paragraph 27): “The claimant is after all in effect inviting the court to make a summary determination that the defence of limitation is unavailable. If the availability of the defence of limitation depends upon the resolution of factual issues which are seriously in dispute, it cannot be determined summarily but must go to trial. Hence it can only be appropriate at the interlocutory stage to deprive a defendant of a prima facie defence of limitation if the claimant can demonstrate that the defence is not reasonably arguable.”

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.