the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Failure to obtain ATE Insurance: Non-party costs

The Court of Appeal in Heron v. TNT (UK) Ltd [2013] EWCA Civ.469 considered whether or not solicitors who failed to obtain ATE Insurance for their client in a personal injury case and who failed to admit that to him - but without any conscious impropriety - should be subject to a non-party costs order.  The defendant's insurers argued that thereby the solicitors had become a "real party" to the litigation, the person "with the principal interest" in its outcome or that they were acting primarily for their own sake - all phrases derived from the main authorities.  The court, upholding the judgment below, decided they had not.  As Leveson L.J. put it, if the defendant was right,  "every act of negligence by a solicitor in the conduct of litigation (thereby giving rise to a conflict) which means that an opposing party incurs costs which might not otherwise have been incurred would be sufficient."  The law does not go that far.        

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.

Disclosure under the Professional Negligence Pre-Action Protocol: Webb Resolutions Ltd v Waller Needham & Green [2012]

Non-compliance by claimants with their disclosure obligations under the Professional Negligence Pre-Action Protocol can prove an expensive mistake.  Webb Resolutions Ltd v Waller Needham & Green [2012] EWHC 3529 (Ch) shows why.   The Claimant, a purchaser of mortgage loans from institutional lenders – c.f. the preceding post – wished to sue the Defendant solicitors who had been engaged by the original lender.  In July 2010 it sent the Defendant a Letter of Claim.  After initial exchanges the Defendant wrote in January 2011 requesting sight of 12 classes of documents which it said it needed to prepare its Letter of Response.  The Claimant asserted that the documents were for the most part unnecessary and that no more would be provided until liability was admitted.  In May 2011 the Claimant made a Part 36 Offer on the usual 21-day terms.  The Defendant objected that it could neither serve a Letter of Response nor advise on the merits of the offer without receipt of the requested documents.   The Claimant was having none of that.  In September 2011 it went ahead and issued proceedings.  In its Defence the Defendant pleaded extensively from the Protocol and repeated its stance regarding the documents.  In March 2012 the Claimant provided standard disclosure, inspection took place, and in May 2012 the Defendant accepted the Part 36 Offer made a year earlier.   As the offer had been accepted after expiry of the 21-day period the automatic costs provision in rule 36.10(1) – defendant pays all – no longer applied, and instead costs became a matter for the court’s discretion under rule 36.10(4).  The default setting in that situation is that the claimant gets his costs up to the date when the relevant period expires, and the offeree is liable for the offeror’s costs thereafter until acceptance: rule 36.10(5).  The court should depart from the normal order only if it would be unjust not to, having regard to all the circumstances but in particular the four matters set out in the analogous rule 36.14(4): SG v Hewitt [2012] EWCA Civ 1053.   In this case the normal order would have resulted in the Defendant paying all of the Claimant’s costs both before and after issue.  However the judge (John Baldwin QC sitting as a deputy) was underwhelmed by the Claimant’s conduct.  He noted that the stated aim of the Protocol (paragraph A2) is to establish a framework in which there is an early exchange of information so that the claim can be fully investigated and, if possible, resolved without the need for litigation.  He found that although the Defendant’s early requests for disclosure were overambitious the Defendant had made out a good case for why it needed some of the documents and the Claimant, if acting reasonably, would have supplied copies of the files and not merely extracts from them.  By failing to do so the Claimant offended against the letter and the spirit of the Protocol.  That justified a departure from the normal order.   What order to make instead?  The judge began by holding that the Defendant should pay the Claimant’s costs incurred up until the end of the 21-day period (i.e. until June 2011), notwithstanding that the Defendant had been awaiting sight of the documents since the previous January.  He rejected the Defendant’s argument that the Claimant’s costs should be disallowed from that earlier date, reasoning that that would place the Defendant in a better position than if it had accepted the Claimant’s Part 36 Offer in time and the automatic costs order under rule 36.10(1) had taken effect.  It would be “rare indeed”, he said, that a party could improve his position on costs by waiting till the relevant period had expired, so as to take advantage of the more flexible position under rule 36.10(4).   In so saying the judge was perhaps overlooking two things.  First, it didn’t follow that settlement by acceptance of the Claimant’s Part 36 Offer was the best the Defendant could have hoped for.  Given the judge’s finding that the Claimant’s conduct had reduced the prospects of early settlement he could have concluded that, if the disclosure had been provided promptly, the case would probably have settled earlier even than June 2011 - for example, as the result of acceptance of a Part 36 Offer made by the Defendant upon viewing the documents.  (The Defendant had in fact made its own offer as early as December 2010, albeit at a nuisance level.)  So the judge wasn’t bound to treat all costs incurred prior to the end of the 21-day period as necessarily beyond the reach of his discretion.   Secondly, the automatic costs order under rule 36.10(1) is not quite as inflexible as it looks.  In Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91 the Court of Appeal held that although the rule deprived the court of its general discretionary powers under rule 44.3, nonetheless on any detailed assessment the costs judge could still disallow entire sections of the claimant’s bill of costs on the footing that they were costs "unreasonably incurred": rule 44.4(1).  The Court cited as an example (at [24]) that if the costs judge considered that the claimant had acted unreasonably in refusing an offer to settle made before proceedings were issued, he was entitled to disallow all the costs post-issue.  (See too Re (Edwards & Anor) v Environment Agency & Ors [2010] UKSC 57 at [21].)  So if the judge in Webb Resolutions had deprived the Claimant of some of its costs incurred before June 2011 he wouldn’t necessarily have been rewarding the Defendant for its delay: even if the matter had concluded with an acceptance of the Claimant’s Part 36 Offer, a costs judge could have disallowed just such costs on a detailed assessment anyway.   As for the costs incurred after June 2011, the judge felt unconstrained by the automatic rule and adopted a harder stance.  He held that it was significantly more likely than not that such costs would not have been incurred at all had the Claimant acted reasonably and responded properly to the letters of request for disclosure: by implication, the matter would have settled.  Therefore the Claimant, far from having its costs in respect of that period, should be ordered to pay the equivalent costs incurred by the Defendant.   One further point is worth making.  For the purposes of rule 36.10(1) “the relevant period” for accepting a Part 36 offer means, in the case of an offer made more than 21 days before trial, the period stipulated in the offer letter “or such longer period as the parties agree”: rule 36.3(1)(c)(i).  So a defendant who receives a Part 36 offer at a time when the information available to him is incomplete should be wary of negotiating any extension of time for acceptance until after provision of the missing documents.  If the defendant then accepts the offer within the extended period he will deprive himself of any opportunity to recover any of his own costs from the claimant, because the automatic rule will take effect.  Even if he then delays acceptance until after the extended deadline, he is still likely to be met with the argument that he must bear all the claimant’s costs up to the deadline on the authority of Webb Solutions.  Better, then, to protest at the claimant’s breach of the Protocol and let the original acceptance period go by default.    

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