Where not one but multiple professionals appear to have been negligent, an injured party can be left feeling all the more bewildered and dismayed. Regrettably, the same party can then be faced with the added dilemma of having to decide which to sue. In this article, we discuss the issues to consider in what can be a complex decision-making process.

The occurrence of professional negligence 

The range of activities undertaken by traditional and emerging professions is vast and increasing. As a result, the circumstances in which professional negligence claims can and do arise is virtually limitless. However, legal liability on the part of multiple professionals tends to fall neatly into three distinct categories. These are:

• Joint tortfeasors / wrongdoers
• Independent tortfeasors / wrongdoers, causing the same damage
• Independent tortfeasors / wrongdoers, causing different damage

In determining which to sue when there are potentially multiple defendants, the starting point is often to identify into which of these categories a particular claim is likely to fall. We shall therefore examine each in turn.

·       Joint tortfeasors

Claims falling into this category arise where the cause of action against each professional is exactly the same, which is likely to be the case where the same evidence would support an action against each of them individually. As Lord Justice Sargent explained in The Koursk (1924), for a claim to fall within this category:

“There must be a concurrence in the act or acts causing damage not merely a coincidence of separate acts which by their conjoined effect cause damage.”

Therefore, joint liability will usually arise as a matter of fact where an error or omission is committed by multiple defendants acting in concert, and as a matter of law where the liability of one party is attributable to another.

As a matter of fact, and by way of example, joint liability arose in the case of Brooke v Bool (1928). Here a landlord and his lodger were examining different ends of a service pipe in the claimant’s shop, which they thought might be the source of a gas leak. Each of them took turns in using a naked light. On the turn of the lodger, an explosion occurred, which caused damage to the claimant’s goods. In a claim for compensation against the landlord only, and amongst other grounds, the court held that the landlord was liable to the claimant for the gross recklessness of his lodger, which occurred in pursuance of a concerted enterprise of the landlord and the lodger and was their joint tort.

As a matter of law, joint liability commonly arises in cases of employee negligence, where the employer is deemed by operation of the common law to be vicariously liable for the actions of its employee. It also arises in claims against the partners of a professional firm who, by virtue of the provisions contained within sections 10 and 12 of the Partnership Act 1890, are deemed jointly and severally liable for errors and omissions of any partner acting “in the ordinary course of the business of the firm”.

In cases where liability is joint, it is sufficient to prove that one individual defendant is in breach of duty and has caused loss for the purpose of establishing liability on the part of multiple defendants. Further, where one professional defendant is sued, and negligence is successfully established, it will be liable to pay compensation for 100% of the loss caused.

It may therefore be sufficient to sue one professional party only, notwithstanding that another professional party may be responsible, either partly or more significantly, for the loss suffered. Where multiple defendants are sued, and liability is established against more than one of them, each will be individually liable for (up to) 100% of any compensation payable.

·       Independent tortfeasors, causing the same damage

Claims within this category arise with reasonable regularity in professional negligence circles. In these cases, the activities and mistakes of the professionals concerned will be independent of each other, but will nevertheless give rise to the same loss.

A typical scenario is where a client concurrently retains a solicitor and a barrister to advise and represent him/her in an underlying claim. This was the case in Hickman v Blake Lapthorn (2005), where the claimant sought compensation from the defendant solicitors and defendant barrister for negligence in connection with the settlement of a personal injury claim. When advising on settlement terms, the barrister had given advice on a ‘best-case’ scenario basis and had failed to take account of the likelihood that the claimant would not be able to work in the future. Meanwhile, the solicitor, who was the less experienced of the two and acting largely as an observer, had failed to raise the possibility that the claimant might never find employment. The court found that the independent errors of both had resulted in a substantial under-settlement.

Another common scenario within this category arises in relation to conveyancing transactions, where both solicitors and surveyors are concurrently retained to advise on a combination of legal and property related issues. Such was the case in Theodore Goddard v Fletcher King Services Ltd (1997), where the client company claimed compensation from its appointed solicitors and surveyors for their failure to ensure that an upwards-only rent review provision was included within the leases prepared for its commercial premises. Having settled the client’s claim in full, the solicitors then commenced proceedings against the surveyors for a contribution to the settlement. The court found that the surveyors had also been negligent and were liable for 20% of the settlement sum.

While in both of the above case examples, the professionals involved were retained concurrently, claims within this category can also arise where multiple professionals act in succession. In the Australian case of Macpherson & Kelley v Kevin J Prunty & Associates (1983), the claimant had instructed two firms of solicitors in succession in relation to his personal injury claim. The first firm delayed forwarding the claimant’s case file to the second firm, who then missed the limitation deadline for the claim, having assumed that proceedings had already been issued. Both were found to have acted negligently and liability was apportioned 80:20 against the first firm.

In this category, in contrast to joint tortfeasors, and to establish liability, an injured party will need to prove that each individual defendant has acted in breach of duty and has caused loss. However, as in the case of joint tortfeasors, where liability is successfully established against one professional, it will be liable to pay compensation for 100% of the recoverable loss.

Again, therefore, it may be sufficient to sue one professional party only, notwithstanding that another professional party may be responsible, either partly or more significantly, for the loss suffered. Where multiple professionals are sued, and liability is established against more than one of them, it is likely that any compensation payable will be apportioned between tortfeasors, so that each becomes severally liable for an individual percentage share.

·       Independent tortfeasors, causing different damage

Claims within this category arise where the activities and mistakes of the professionals concerned are independent of each other and give rise to losses which, in at least some respects, are different.

This was the case in Nationwide Building Society v Dunlop Haywards (DHL) Ltd and another (2009), where a building society claimed against valuers in deceit and against solicitors in negligence in relation to a loan of £11.5m it had made for the purchase of a commercial property, which itself had been overvalued. As against the surveyors, the court found that the claimant was entitled to recover around £21 million, representing (amongst other losses) the net amount of the advances, the lost interest on alternative advances, the cost of wasted staff and the loss of opportunity to reduce back-stop lending facilities. As against the solicitors, the claimant was entitled to recover (subject to defences of contributory negligence and contractual limitation) around £13 million, representing the net amount advanced and the lost interest on alternate advances, less the value of the property. This was due to the distinction between loss not reasonably foreseeable which was only recoverable because the valuers were fraudulent, and the foreseeable loss for which both defendants were liable.

In this category, and to establish liability, an injured party will again need to prove that each defendant has acted in breach of duty and has caused loss. Each professional against whom a claim is successfully made will then be severally liable for the loss it has caused and not in any way liable for the loss caused solely by others. Accordingly, and to recover all loss, it will be necessary to sue each professional party.

Other material factors to consider

While the context in which the professional negligence occurs is a starting point in determining which defendant to sue, there are also a number practical and commercial considerations that should be taken into account. These are examined below.

·       Legal merits of the claim

The merits of the claims against multiple professional parties is a particularly relevant consideration in claims involving independent tortfeasors which cause the same damage. This is because 100% of the loss suffered may be recovered from just a single party. If the evidence against one professional appears to be much better than that against any of the others, it may not be necessary or desirable to proceed against those others.

Equally, however, if there is a substantial risk that one of the professional parties may be successful in escaping liability, perhaps by arguing that it reasonably relied on information and/or advice provided by another, or by arguing that the actions of the latter constituted a new and intervening act which absolves it of liability, it may well be desirable to sue multiple professionals in order to be more assured of success.

·       Cost implications

Allied to the legal merits of pursuing claims against multiple professionals are the cost implications, which are often highly significant.

While it is unusual for a professional defendant to recover costs against an unsuccessful claimant at the pre-action stage of litigation, once legal proceedings have been issued the general rule is that costs follow the event. Therefore, if the claim against one professional is discontinued, struck out or lost, there is a real risk that the claimant party will not only have to bear its own costs in relation to the failed claim, but also those costs reasonably incurred by the successful professional. Where the level of compensation recovered from the remaining defendant(s) is less than the aggregate amount of these costs, this will ultimately result in a net loss for the claimant.

In some cases, it is possible to obtain an order from the court requiring the losing defendant to pay the costs of both the claimant and the successful defendant. This is called a Sanderson Order. Alternatively, and less favourably, the court can order the claimant to pay the successful defendant’s costs, but allow those costs to then be recovered from the losing defendant(s) as part of the costs of the action. This is called a Bullock Order.

However, it should be noted that the court has a very wide discretion when determining the appropriate order as to costs, making the outcome inherently uncertain and all the more difficult to predict.

In addition to the issue of recovering costs is the preceding issue of funding costs. Where multiple parties are engaged in litigation the process invariably becomes more time consuming and, in turn, more costly. Where available funds are limited, it may well be preferable to sue one professional to the exclusion of others, to minimise the costs burden.

·       Resolution timetable

While the court will control the litigation timetable once proceedings have been issued, the involvement of multiple defendants is likely to have an adverse effect on the time it takes to resolve the claim. Where multiple parties are involved, it often takes longer to reach a consensus on procedural issues. Delays can also arise in the scheduling of meetings and court hearings, where the limited and competing availability of multiple representatives and expert witnesses has to be taken into account.

·       Financial standing

The actual or perceived financial standing of a defendant is a significant commercial consideration when deciding which professional to sue. While many professionals carry insurance to cover any damages or costs awarded against them, it is not in every case that such cover will be available and/or sufficient.

It is axiomatic that a judgment or award obtained against a defendant with no financial means is of limited practical value. Therefore, it may be prudent not to sue multiple defendants and to be more selective, where there is a real risk of impecuniosity on the part of certain professional defendants.

·       Strategic implications

There can be tactical advantages and disadvantages in suing multiple defendants, both in the context of professional negligence claims and more widely. On the one hand the prospects of achieving a settlement might improve where the burden of paying compensation can be shared between multiple parties. However, this needs to be balanced against the risk that the intransigence of one defendant might become pervasive, making it all the more difficult to compromise the claim against the other(s), either at an early stage or at all.

Conclusion

As will be apparent from our examination above, deciding who to sue where mistakes have been made by multiple professionals can add additional layers of complexity to an already complicated professional negligence claim.

It should be noted that the issues addressed by this article are certainly not exhaustive and there may well be additional factors that will need to be taken into account. As is often the case in this area, there are few hard and fast rules and the best approach is likely to depend very much on the individual circumstances of the case. For these reasons, in addition to many others, it is often wise to be proactive after discovering grounds for a professional negligence claim, avoiding delay where ever possible.

Ultimately, and with so many imponderables, the decision as to which defendant to sue may require the exercise of an element of judgment, the correctness of which may not become clearly apparent until after the claim has run its course. However, this should not be mis-construed as a justification for guesswork or nonchalance, for the gravity of the decision of which defendant to sue warrants far greater attention than that.

Further legal assistance

As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals, including claims against solicitors, accountants, insurance brokers and surveyors.

If you are considering bringing a claim for professional negligence, and if you believe that the value of your claim is likely to exceed £100,000, we would be happy to discuss the matter with you.

Most of our clients fund their claims under a private retainer and almost all our instructions commence on this basis. However, in some cases and where requested, we may then be able to offer an alternative form of funding.

To arrange an initial consultation with us, and in the first instance, please complete our Contact Form or email us at mail@pnclegal.com.

At PNC Legal there is much more than just the fact that we specialise exclusively in resolving claims for professional negligence that sets us apart from most other solicitors.

An article by solicitors explaining how you can reduce legal costs may seem counter-intuitive and, if you are a sceptic, something to be approached with due caution. However, in this case, it is born from an altruistic desire to inform you about how significant costs can be incurred in professional negligence claims and the steps available to you to reduce them.

While this article is primarily intended for anyone contemplating a claim for professional negligence, and draws on our extensive experience of resolving these types of claims, the recommendations we make do have much wider application. Indeed, a number of the recommendations could have averted some of the fee disputes we have encountered, time and again, between clients and their solicitors in other areas of legal practice.

Our top tips

While not an exhaustive list, here are our top tips to reduce legal costs:

1.      Use a specialist solicitor

While it is undoubtedly the case that our view is skewed by our experience of acting in professional negligence claims, after financial damage has been done, it never ceases to alarm us when we encounter clients who have instructed a solicitor who has limited experience in the area of law concerned. In many of these cases, the client has decided to instruct the solicitor because they, or perhaps a family member or friend, have previously instructed the same solicitor, or another solicitor in the same firm, on an entirely distinct matter and were happy with the service that they received.

While a positive experience of instructing a particular solicitor or firm should not be ignored, it does not automatically follow that you will receive the same level of expertise and service from that solicitor or firm, in a matter involving another area of legal practice. Therefore, in our opinion, it is much more important that you consider the credentials of the individual solicitor who will be dealing with the new matter and that you are discerning in your selection. In the context of professional negligence claims, and to assist you with this task, we have published a related and unbiased guide: How to find the Best Professional Negligence Solicitors

By instructing a specialist solicitor in relation to a professional negligence claim, you should reduce the amount of time and expense that will be incurred in investigating your claim and the law that applies to it. In both cases, there is considerable skill in determining what enquiries to undertake and what not to. Similarly, and in conducting your claim, there is often considerable skill required in determining which legal arguments to deploy and which not to and in the presentation of those arguments.

For these reasons, you should be aware that while a junior solicitor in a traditional law firm may be offered to you at what appears to be a comparatively modest hourly rate, inexperience, inefficiency and supervisory duplication can ultimately result in more legal expense, rather than less. Indeed, junior solicitors may well be recommended to you because they are more profitable for the firm concerned, rather than because they will provide you with the highest quality of advice or best value.

2.      Pre-define authority and reporting requirements

When it comes to making decisions about a case and being kept informed of developments, it is perfectly understandable that different clients will have different requirements. However, if you agree at the outset of any appointment what discretion the solicitor may exercise and with what regularity updates are required, you can save time and money.

Invariably, the less discretion given to a solicitor, and the more time spent reporting to you, the greater your costs will be. However, this can be adjusted over time, perhaps to reflect an increase in trust or a change in your circumstances.

You can also reduce legal costs by agreeing the format that updates and reports should take. Advising by telephone is often quicker and cheaper than providing written advice. However, where the issues are complex and/or numerous, advice in writing can afford you greater time for reflection, as well as provide you with a clear paper trail should any later audit be required.

3.      Provide multiple documents in good order

Professional negligence claims frequently involve a considerable amount of underlying paperwork, either in the form of correspondence or legal/technical documents. To advise on them, it will often be necessary for a solicitor to undertake a forensic examination of these documents in order to establish clearly and chronologically what background events have resulted in your financial loss and to establish which of those events are material to your claim.

The process of obtaining and collating documents can be extremely time consuming and, in turn, can add substantially to the costs of investigating a professional negligence claim. Therefore, identifying the background documents in your possession, ingathering documents in the possession of third parties and presenting those documents to your solicitor in a clear and chronological order can result in a considerable cost saving.

While it may be a judgment call as to whether or not to attempt to ingather all readily available documents before instructing a solicitor, it is almost always prudent not to present the solicitor with multiple copies of the same document or, alternatively, to mark those copies clearly as duplicates.

Whether to provide underlying documents in electronic or hard copy form is often a worthwhile consideration and one that is best determined in consultation with your solicitor. There can be cost implications in each case and a range of factors to weigh up.

4.      Provide clear and timely instructions

Regrettably, not all solicitors advise in clear terms and sometimes you may find it difficult to know what recommendations are actually being made and, in turn, what instructions are required. In other cases, however, if a solicitor has to chase you for instructions or seek clarification in relation to ambiguous instructions it can add unnecessary, and potentially irrecoverable, costs to your claim.

While it may seem obvious to many, you should also be aware that follow up meetings and discussions will add to your costs. In some cases, these are beneficial and can offer a clearer understanding of the issues, as well as an opportunity to explore alternative strategies. However, discussion for discussion’s sake is likely to add unnecessary costs which cannot ultimately be recovered from the professional defendant, even if your claim is successful.

5.      Insist on cost estimates

As a matter of professional conduct, and in accordance with section 8.7 of the Code of Conduct for solicitors published by the Solicitors Regulation Authority, all clients must receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter.

In professional negligence claims, as in other types of specialist litigation where the conduct and duration of the claim can be heavily influenced by the actions of the opposing party and by the court, it can be extremely difficult to stipulate with certainty what the eventual costs will be. However, it should be possible to provide you with a reasonable estimate of the costs involved, based on a number of assumptions if necessary.

The advantages of a cost estimate are numerous. In terms of reducing costs, and while it can be time consuming and costly to produce a detailed estimate, this usually puts the issue of costs firmly in the mind of the solicitor and client. It also allows for an empirical review to be undertaken, particularly if an over-run occurs. Because cost estimates can serve to manage expectations, they should also reduce the potential for cost disputes, which themselves can and do give rise to additional cost and expense.

While it may be possible to agree a fixed or capped fee in relation to a specific litigation task and with a view to reducing potential costs, you should note that such arrangements are distinct from a cost estimate. While the latter operates as a guide to the costs likely to be incurred, it does not by itself limit your liability to such costs.

Further comments

Professional negligence claims are renowned for being more complex than other, more routine, forms of litigation and can often involve a front-loading of costs. However, equipped with our above tips, we sincerely hope that you will be able to obtain the legal advice you need with greater cost efficiency and satisfaction than you might otherwise have done before.

The scope of a solicitor’s duty to warn a client about issues and risks on which he or she has not been specifically instructed, can be difficult to determine. Nevertheless, duty to warn claims are not uncommon and Cathal Anthony Lyons v Fox Williams LLP is the latest example to be decided by the courts.

Background

The claimant was the Chief Financial Officer and Managing Partner of Operations for Ernst & Young (“EY”) in Moscow. In 2006, and while riding his motorcycle, the claimant was involved in a serious road traffic accident, which resulted in most of his right foot being amputated and the replacement of his right shoulder with a metal prosthetic.

At the time of the accident the claimant benefited from two types of insurance policies. The first were Accidental Death and Dismemberment (“AD&D”) policies underwritten by Colonial Medical Insurance Company Ltd, while the second were Long-Term Disability (“LTD”) policies underwritten by AGF Insurers.

In 2007 the claimant instructed the defendant firm of solicitors to advise him on whether EY had misrepresented the scope of cover that was available to him under the AD&D policies, with a view to commencing a compensation claim against it. At the same time, and through EY, the claimant pursued his policy claims under both the AD&D and LTD policies.

In the event, and while arguments continued as to the availability of insurance cover for the claimant’s injuries, any legal claim the claimant could pursue in relation to the AD&D and LTD policies became time-barred.

Allegations

In turn, the claimant commenced legal proceedings against the defendant firm alleging, amongst other matters, that it had been negligent for failing to advise him to bring a legal claim against the LTD insurers or otherwise to protect his claims and prevent them from becoming time-barred.

In doing so, the claimant contended that from the outset he had expected the defendant to advise him on his LTD claims, that he had discussed the LTD cover with the defendant and that, in the course of acting for him, the defendant had been supplied with a copy of the relevant LTD policies.

Decision of the High Court

At first instance, the judge rejected the contention that it was ever part of the defendant’s retainer to advise the claimant about the claims under the LTD policies. He found that the original letter of engagement did not include advice on this issue and he largely rejected the claimant’s evidence that it had been expanded to include these matters.

The judge also found that the defendant was under no duty to warn the claimant of any risks associated with the LTD policies. This is because the defendant did not become aware of any risk or potential risk to the claimant and, in turn, it was not objectively unreasonable for it to omit to flag any such risk to the claimant. Accordingly, he dismissed the claimant’s claim.

Decision of the Court of Appeal

The claimant was granted permission to appeal to challenge the judge’s dismissal of the claim based on the absence of any duty to warn. In doing so, the claimant alleged that either the defendant had a duty to warn him in substantive terms about his rights under the LTD policies and what needed to be done to prevent them from becoming time-barred, or that it had a duty to warn him that he needed to obtain legal advice about the LTD claims.

In his leading judgment, and having recorded the events that had given rise to the claim, Patten LJ observed that:

‘…the solicitor’s obligation to bring to the client’s attention risks which become apparent to the solicitor when performing his retainer does not involve the solicitor in doing extra work or in operating outside the scope of his retainer. The risks in question are all matters which come to his attention when performing the tasks the client has instructed him to carry out and which therefore as part of his duty of care he must make the client aware of.’

Patten LJ went on to find that the advice that the defendant was allegedly under a duty to give was co-extensive with its retainer and that here, it had already been found that the defendant was never instructed to advise on the LTD policies, nor otherwise required to examine them. Further, and contrary to the claimant’s assertion, the defendant had not advised him to ‘postpone’ dealing with the LTD claims, which were ongoing and which were being handled on his behalf by EY.

Accordingly, and unanimously, the Court of Appeal determined that the defendant had not been under a duty to warn the claimant about his rights under the LTD policies, nor under a duty to warn him of the need to obtain legal advice about the LTD claims. Therefore, the appeal was dismissed.

Comments

This decision reaffirms that in assessing whether or not a solicitor (or other professional adviser) is under a duty to warn a client about a potential risk, the starting point will be to consider the terms and scope of the retainer under which the professional was originally engaged. Of course, those terms can change over time, either by agreement or by conduct, and so subsequent events can be important too.

This decision also recognises that any assessment of liability is fact sensitive and some of the interesting, and case specific, features here include the fact that the claimant was a sophisticated individual, that another professional party, EY, was already acting on the claimant’s behalf in relation to his LTD claims and that by the time the claim came to trial the claimant had already received substantial compensation by virtue of a payment under his AD&D policies.

What this decision does not do, is establish a general rule which absolves professional advisers of any duty to warn their clients about risks of which they may not be aware and there will undoubtedly be more professional negligence claims based on the duty to warn in the future.

For examples of other cases in which the courts have found that a duty to warn not only existed, but was not suitably discharged, please see our previous article: A tale of the unexpected

Further legal assistance

As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals, including claims against other solicitors.

If you would like to arrange an initial consultation with us, free of charge or commitment, please do not hesitate to contact us on 0800 195 4983 or by email at mail@pnclegal.com.

At PNC Legal there is much more than just the fact that we specialise exclusively in resolving claims for professional negligence that sets us apart from most other solicitors.

Towards the end of last month, The Law Society published its latest report on the state of the professional indemnity insurance market for medium and small firms of solicitors practising in England and Wales. The report, which is commissioned annually, provides an interesting insight into the workings of this market, as well as an important indication of its current state of health.

Prior to 1 September 2000, solicitors’ professional indemnity insurance cover was provided by the Solicitors Indemnity Fund, which was a mutual fund to which all solicitors contributed. However, since that date, and with the primary aim of reducing policy premiums, professional indemnity insurance cover has been provided on the open market.

Some professions still obtain professional indemnity insurance cover, or E&O (viz. errors and omissions) cover as it is sometimes called, through a mutual scheme. These include barristers, who obtain cover through the Bar Mutual Fund, and architects, many of whom obtain cover through Wren Insurance Association Ltd.

Methodology

The Law Society’s report is based on a telephone survey of 605 firms, ranging in size from sole practitioners up to 25 partners. The sample of firms contacted was supplied by The Law Society and representative of a total of 9,316 member-firms in this size category. This itself, represents approximately 99% of the total number of firms of solicitors currently operating in England and Wales.

Key findings

The conducted survey examined a range of issues, including the cost to firms of purchasing professional indemnity insurance, the amount of cover purchased by solicitors and the market share held by the insurers and brokers operating within it.

Some of the key findings of interest are that:

• The traditional policy commencement date of 1 October is still the most popular date upon which firms renew their professional indemnity insurance cover;
• An increased number of firms (34%) have taken out policies which exceed the traditional 12 months duration;
• The vast majority of firms (76%) chose to renew with their existing insurer;
• Travelers remained the largest insurer of solicitors with 15% of the surveyed market, followed by AM Trust with 14% of the market and QBE with 8%;
• In the majority of cases it was the recommendation of brokers which determined a firm’s choice of insurer, followed closely by the level of premium charged;
• Premiums have remained stable over the last year and equate to approximately 5% of a firm’s annual turnover;
• The mean policy excess paid by firms is approximately £5,000;
• The proportion of firms contacting just one broker has risen again this year to 74%, and in comparison to only 47% in 2013-14;
• The proportion of firms purchasing additional ‘top up’ cover, over and above the minimum cover required by the Solicitors Regulation Authority, was broadly unchanged, although the mean amount of cover purchased increased by 11% to £7.155 million;
• The median cost of run-off cover purchased by solicitors upon closure of their practice remained at 300%.

Comments

Overall the survey makes for encouraging reading. For the profession, it depicts a mature market that is well supported by an established network of experienced brokers. For consumers, whether they be business entities or private individuals, it suggests that solicitors are taking their insurance obligations seriously and purchasing additional cover where necessary, to protect their clients against financial loss in the unfortunate event that professional negligence should occur.

The defence of ex turpi causa non oritur actio has long been recognised by English law. It is founded on the principle that a right of action will not arise from a base cause and means that compensation will not generally be recoverable for breach of a contract tainted by illegality.

In the recent case of Stoffel & Co v Maria Grondona, the Court of Appeal was required to consider whether the defence of ex turpi causa was available to conveyancing solicitors facing a claim for professional negligence, where they had failed to register the transfer of a residential property, which it later transpired was associated with a mortgage fraud perpetrated by the Claimant.

Background

In 2000 Maria Grondona (“the Claimant”) entered into an agreement with Cephas Mitchell whereby she would secure mortgage loans in respect of various residential properties, which Mr Mitchell would let to tenants and manage. Eventually, and upon disposal of the properties, Mr Mitchell and the Claimant would each receive 50% of the profits.

In October 2002, the Claimant purported to purchase the leasehold interest in 73b Beulah Road, Thornton Heath, Surrey CR7 8JG (“the Property”) from Mr Mitchell in the sum of £90,000. She did so with the assistance of an advance from Birmingham Midshires, in the sum of £76,500, which was to be registered as a charge against the Property.

Stoffel & Co, a firm of solicitors, was instructed by the Claimant, Mr Mitchell and Birmingham Midshires to undertake the conveyancing required. Unfortunately, however, it failed to register with the Land Registry either the transfer from Mr Mitchell to the Claimant, or the release of an existing charge, or the charge granted by the Claimant in favour of Birmingham Midshires. As a consequence, Mr Mitchell remained the registered proprietor of the Property and was able to obtain further advances under the charge still registered against it.

The Claimant subsequently defaulted on the payments due to the Birmingham Midshires, who issued debt proceedings against her. In turn, the Claimant brought a claim for professional negligence against Stoffell & Co.

Decision at first instance

Giving judgment in the Central London County Court, Her Honour Judge Walden-Smith found that the Claimant and Mr Mitchell had engaged in mortgage fraud intended to deceive Birmingham Midshires into making the advance used by the Claimant to purchase the Property.

Applying the decision in Tinsley v Mulligan, she also held that whether the Claimant’s claim was defeated by the principle of ex turpi causa depended not on whether the illegality was closely connected, or inextricably linked, with the claim against the Stoffel & Co, but whether the Claimant relied upon that illegality to found her claim. On the facts of the case, she concluded that the Claimant did not have to rely upon the illegality to bring her claim and that accordingly, the defence of ex turpi causa did not apply.

Finally, and by way of compensation, the judge awarded the Claimant the sum of £78,000, together with interest, representing the value of the Property unencumbered as at the date of the negligent omissions made by Stoffel & Co in November 2009.

Issues on appeal

On appeal, Stoffel & Co submitted that as the Supreme Court in Patel v Mirza had subsequently overruled the reliance test in Tinsley, the decision at first instance was no longer sound and applying the new test, the Claimant should not be entitled to recover compensation from her illegal behaviour and active involvement in a mortgage fraud.

The Claimant cross-appealed. While accepting that the correct test to apply was that enunciated in Patel, she argued that she was nevertheless entitled to recover compensation for professional negligence. Further, and as to the amount of such compensation, she argued that this should be in the sum of approximately £143,000, representing the total amount of her outstanding liability to Birmingham Midshires under her mortgage account.

Judgment on appeal

Giving the leading judgment of the Court of Appeal, and amongst other matters, Lady Justice Gloster held that:

• The judge had been wrong to conclude that the Claimant’s mortgage application and agreement was a sham, which was not affected by her separate finding that the sale agreement between Mr Mitchell and the Claimant was tainted with illegality, its objective being to deceive institutional lenders;
• Had Stoffel & Co registered the transfer at the Land Registry, the legal title in the Property would have passed to the Claimant despite the illegal agreement, but the absence of registration meant the Claimant was only entitled to an equitable interest in the Property;
• There was no public interest in allowing negligent conveyancing solicitors to avoid their professional obligations, simply because of the happenstance that two of the clients for whom they acted were involved in making misrepresentations to a mortgagee financier;
• There was a genuine public interest in ensuring that clients using the services of solicitors are entitled to seek civil remedies for professional negligence against a defendant arising from a legitimate and lawful retainer which was entered into between them;
• It would be entirely disproportionate to deny the Claimant’s claim.

Lady Justice Gloster further held that the judge had been correct to conclude that the Claimant’s loss was limited to the value of the Property as at November 2009, rather than a sum calculated by reference to the Claimant’s ongoing debt obligation to Birmingham Midshires.

Comments

Ex turpi causa is not a defence that is frequently relied upon in professional negligence claims but, as the decision in this case demonstrates, it does arise from time to time. In assessing its merits, the court is likely to examine:

1. The underlying purpose of the prohibition which has been transgressed;
2. Any other relevant public policies which may be rendered ineffective or less effective by denial of the claim; and
3. The possibility of overkill unless the law is applied with a due sense of proportionality.

As with any defence and in order to determine its true merits, careful consideration will need to be given to the factual circumstances to which it is sought to be applied. Where, as here, the defendant is clearly at fault, it is likely to be all the more difficult for it to persuade the court that issues of public policy should weigh in its favour, so as to deprive an injured party of compensation for the financial loss caused to it.

Further legal assistance

As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals, including claims against solicitors.

If you would like to arrange an initial consultation with us, free of charge or commitment, please do not hesitate to contact us on 0800 195 4983 or by email at mail@pnclegal.com.

At PNC Legal there is much more than just the fact that we specialise exclusively in resolving claims for professional negligence that sets us apart from most other solicitors.

While professional negligence solicitors may appear to be in abundance, it is as well to understand that no two solicitors will be the same. Therefore, in this guide, we highlight and explain seven key features to consider when seeking to identify the best professional negligence solicitors to instruct in relation to your particular claim.

Introduction

This guide pre-supposes that you have already decided to instruct solicitors to advise you and/or to act on your behalf. If, however, you remain uncertain about whether to instruct professional negligence solicitors or not, you may find it helpful to read our related guide: Professional negligence claims – Do I need a solicitor?

The purpose of this guide is not to present you with a single ‘one size fits all’ solution to the question of who best to instruct. Clearly, the solicitors who may be best in one scenario will not necessarily be best in another. Moreover, the notion of what is ‘best’ can be highly subjective, being interpreted in different ways by different people.

Rather, in preparing this guide, our aim is to equip you with a better knowledge and understanding of the key features to have in mind while conducting your search, so that you are better placed to make an informed decision on what is best for your needs.

Doing your research

Which solicitors you ultimately instruct can have a significant bearing on both the outcome of your claim and your experience of it. If you have already suffered at the hands of one professional, you may well be cautious about instructing another and it is not unheard of for one professional negligence claim to turn into another. Therefore, limitation periods permitting, it is important to take the time to get it right.

Undertaking some independent research is rarely time wasted and the internet can be a good place to start. However, while the information available online is extensive, it can also be overwhelming and daunting. This is all the more so if you have not had to instruct  professional negligence solicitors before, and do not know what to look out for.

Key features to consider

To assist you in this process, we set out below those key features that we consider you should have at the forefront of your mind.

1.  Defendant and/or claimant solicitors

The majority of professional negligence solicitors work either exclusively for defendants or exclusively for claimants. This is largely due to the potential for actual and commercial conflicts of interest.

Those professional negligence solicitors acting for defendants will often be appointed by a professional indemnity insurer and be one of a select number of firms on a pre-appointed panel. Often, these firms will act for, and depend for work from, a number of different insurers. Rarely, therefore, will they accept instructions to act for a claimant whose claim may ultimately be notified to an existing insurer client or a potential insurer client.

Both for political and commercial reasons, those professional negligence solicitors who regularly act for claimants against professional policyholders will not usually be appointed by professional indemnity insurers. As a result, they have much less of an opportunity to act for defendants. Equally, and in many cases, they have no desire to do so, preferring to align themselves with the victims, rather than the perpetrators, of professional negligence.

As a consequence, it is relatively rare to find solicitors who have experience of acting for both claimants and defendants, let alone solicitors who act regularly for both claimants and defendants.

When looking to instruct an individual professional negligence solicitor, and as a first step, it is worth ascertaining if he or she acts exclusively for defendants or for claimants or, if they accept instructions from different sides, how regularly they do so.

Whether it is best to instruct a solicitor who acts only for claimants, in preference to one who acts on different sides, is certainly a factor to consider. Those solicitors acting on only one side may assert that they are more sympathetic to their client’s plight. Those solicitors regularly acting on different sides of claims may assert that they have the distinct advantage of being able to provide their clients with far greater insight and objectivity.

2. Experience

Professional negligence claims are renowned for both their complexity and their intricacy. Experience of dealing with them is therefore one of the most important factors to consider when appointing solicitors.

However, ascertaining the true experience of solicitors can be difficult. This is because most firms of solicitors with a litigation practice will list professional negligence amongst the myriad of litigation areas in which their employees ‘specialise’. This is notwithstanding that professional negligence claims are not an everyday occurrence and that the reality in many cases, is that experience is extremely limited, if it exists at all. Where some experience does exist, it is often part of a broader general litigation practice, covering such areas as personal injury, debt recovery or landlord and tenant disputes.

While historically solicitors (and other legal professionals) were admired for the breadth of their practice, an ever-increasing body of law has turned the tables on this viewpoint. Now it is more usual, and perhaps more logical, to observe that the more practice areas advertised by solicitors, the less safely it may be assumed that they are a specialist in any one of them.

In ascertaining experience, clarity should also be sought as to the experience of the individual who will actually be undertaking the work. In some instances, and to their dismay, clients discover that the person working on their claim is not the person with whom they were first in contact but a junior solicitor or, worse still, a ‘lawyer’ with limited or no professional qualifications at all. While in these situations supervision by an experienced solicitor is all the more critical and may offer some reassurance, it can also have adverse cost implications too (as addressed further below).

Therefore, in identifying the best professional negligence solicitors for you, you might well wish to ask for examples of the cases the person likely to be handling your claim has previously worked on and is currently working on. You might also think carefully before instructing a firm of solicitors simply on the basis that you, your company or your family have habitually retained them to act on other legal matters in the past.

3. Professional & client endorsements

Endorsements from independent legal directories, such as the Legal 500 or Chambers & Partners, offer additional confirmation of the expertise and standing, not just of professional negligence solicitors but solicitors generally. However, the liberal usage of such endorsements by some firms, means that a certain amount of caution should be exercised before relying on them.

In some instances, the endorsement or quotation displayed is in fact an endorsement of the firm, not the individual solicitor being made available to handle your claim. In other instances, the endorsement may be personal to the solicitor in question but relate to a different area of practice to the one in which they are to be potentially instructed.

You should also note that because of the length of time it takes to compile the directories, their content is inevitably based on historic information and testimonials. In some cases, these can be in excess of 12 months behind.

Other endorsements, such as client testimonials found on websites and reviews posted on Google, can also provide an indication of expertise, as well as client experience. However, you should not take these endorsements at face value and should be careful to note whether they are specific to the particular solicitor or team of solicitors you are considering.

4. Underlying subject matter

A conundrum for some people wishing to pursue a professional negligence claim, is whether it is best to instruct a solicitor who specialises in the underlying area of law from which the claim arises, or to instruct a solicitor who specialises in professional negligence. For example, if you have suffered financial loss as a result of a negligent conveyance, should you instruct another conveyancing solicitor or a professional negligence solicitor to pursue your claim?

While both may be able to offer knowledge and insight that is in some way relevant, we would strongly suggest instructing the latter. If technical input or practitioner experience is required this can (and usually is) sourced from an expert witness, particularly if the professional considered to be at fault is not a solicitor.

That said, where specialist legal knowledge is required, it can be an advantage to instruct a professional negligence solicitor who has ready access to, and therefore the ability to consult with, colleagues practising in the area of law concerned.

5. Physical location

Advances in travel and modern technology mean that geography has become much less relevant than it once was. Nevertheless, when it comes to purchasing legal services there can still be an instinctive desire to instruct a local solicitor. While instincts should not be ignored lightly, neither should they be followed blindly and without assessment. In our experience, and when probed, the notion of what is regarded as ‘local’ has not been fully considered, and nor has the rationale for imposing it as a limiting criterion.

Geographically, some may consider ‘local’ as being within either their home town, city or county. Others may regard it as their own region, or indeed their own country. When considered, some may foresee instructing solicitors within close physical proximity as being likely to make it easier to attend meetings. Others may assume that it will be more likely that the solicitors will be familiar with the local judiciary.

However, for the vast majority of professional negligence claims, the reality is that ‘in person’ meetings are very rarely required and communication by telephone, email and indeed video link are faster and more efficient. It is also the case that the majority of claims are resolved without court proceedings, with only a tiny percentage ever reaching trial. Further, where meetings are required, and unless the geography is extreme, the solicitor, client, expert and/or counsel, simply travel.

Therefore, while geography is a factor to consider, our experience is that in the vast majority of cases it is one that is considerably less important than others and is not one that should itself determine which are the best professional negligence solicitors to instruct.

6. Hourly rates

In contrast to location, cost is often an important factor in deciding which solicitors to instruct. Whether they are acting under a private retainer or under a ‘no win, no fee’ agreement, most professional negligence solicitors will calculate their fees based upon an hourly rate. However, as solicitors are not currently required to advertise their rates, and very few do, this can make a price comparison more difficult.

Rates can vary significantly and tend to be most heavily influenced by the level of experience the solicitor has. This means that, hour for hour, those at the junior end are comparably less expensive than their more senior colleagues. Rates can also be influenced by location, with solicitors working in the primary legal and financial centres (Birmingham, Bristol, Leeds, London & Manchester) charging more than those in secondary cities and towns. Finally, rates can be affected by the structure of the law firm itself, so that traditional firms with greater operating costs tending to charge higher rates than their new-model counter-parts.

However, it is important not to confuse cost with value. In many firms, junior solicitors (and increasingly unqualified paralegals) are employed to work on claims at what may appear at first blush to be an attractive comparable rate. However, when comparing rates, you should be aware that as many junior solicitors (and paralegals) are learning on the job, they will often take longer to perform a task and will invariably require a greater amount of supervision. In turn, this can lead to greater expense and make the perceived rate saving illusory. Equally, and due to inexperience, the compensation ultimately recovered by junior solicitors (and paralegals) can be at a lower level than might otherwise have been achievable. As a consequence, the net cost to you as the client can be much greater than you anticipated, again making the perceived economy a false one.

Although experience is extremely valuable, it comes at a price and should be balanced against both affordability and proportionality. If, for whatever reason, you do not have, or cannot secure, the resources needed to instruct an experienced solicitor, or if the value of your claim is very modest, then a junior solicitor may well be the best option for you, notwithstanding the potential cost implications highlighted above.

Therefore, in summary and when considering hourly rates, it is important not to confuse cost with value and to be clear on what is both affordable and proportionate to your claim.

7.  Personal chemistry

Personal chemistry is perhaps the most subjective of all the considerations, but no less important for it. Professional negligence claims can be very stressful for those involved. They can also involve a high degree of trust, as well as an element of collaboration, sometimes over an extended period of time. For all of these reasons, you might favour a professional negligence solicitor who is able to provide you with a service that is both personal and tailored, in preference to approaching the many, frequently faceless, claims management companies and large-scale litigation practices, whose adverts are prolific on the internet and across social media.

Equally, you should satisfy yourself, so far as it is possible to do so, that the solicitor you are intending to instruct is someone you feel comfortable communicating with and can be confident in.

Conclusion

Ascertaining the best professional negligence solicitors to instruct will require you to consider a number of features. Those listed above are key in our view, but the list in not exhaustive and others may come into play, depending on your circumstances.

We very much hope that, equipped with the information in this guide, you will feel more confident in identifying and selecting the best solicitors for you and that you are able to achieve a more satisfactory outcome to your claim as a result.

Further legal assistance

We do act for clients nationwide, to resolve claims against a wide range of professionals. If you would like to arrange an initial consultation with us, free of charge or commitment, please do not hesitate to contact us on 0800 195 4983 or by email at mail@pnclegal.com.

While you are not required to instruct a solicitor in order to pursue a professional negligence claim, there can be some real advantages in doing so. In this guide, we examine ten key issues that you may wish to consider when deciding whether to instruct a solicitor or go it alone.

Introduction

Historically, and as a result of the wide availability of legal aid, the decision about whether or not to instruct a solicitor to pursue a professional negligence claim was relatively easy. However, following the withdrawal of legal aid by successive governments and increases to the cost of obtaining legal advice, the same cannot be said today.

While conditional fee agreements (also known as ‘no win, no fee’ arrangements or CFAs) have provided an attractive alternative to legal aid for many litigants, these too have now become a victim of their own success.

Following the introduction on 1 April 2013 of the Legal Aid Sentencing & Punishment of Offenders Act 2012, the success fees associated with CFAs ceased to be recoverable from defendants and, instead, became payable by the successful claimant, usually by way of a deduction from the compensation recovered. For many claimants, this made instructing a solicitor more expensive and, in turn, a more difficult decision to make.

Considerations to have in mind

While funding a professional negligence claim is often one of the first considerations to have in mind when deciding whether or not to instruct a solicitor, it should not be the only one. Below, and starting with affordability, we examine those factors that we consider should loom large as part of your decision-making process.

1.    Affordability

Instructing solicitors is rarely cheap and there is usually a positive correlation between the fees charged and the experience on offer. However, there are a number of different funding options available for professional negligence claims, as we explain in some detail in the Fund a claim section of our website. It is also worthwhile noting that by instructing a solicitor, you may well be able to gain access to funding opportunities that would not otherwise be available to you as a litigant in person.

However, the issue of affordability is not limited to considering whether you have or can raise the funding needed to instruct a solicitor. A related consideration is whether you can afford not to. In the absence of an experienced solicitor, there is the potential for any claim to take much longer to resolve and, in turn, any compensation to take much longer to recover. There is also a greater risk of incurring a costs liability in favour of the defendant party, as a result of procedural irregularity. Finally, and at worst, there is the heightened risk of a valid claim being struck out by the court.

Therefore, affordability is an issue that requires more than a one-dimensional assessment and is certainly something that you should really consider in the round.

2.    The nature of the dispute

Sometimes it can be unclear whether, properly categorised, the conduct of the adviser in question amounts to professional negligence, an issue of inadequate professional service, or a matter of professional misconduct. In some instances, the conduct might lie across each of these categories, but that is certainly not so in every case.

Generally, it is only the former (professional negligence) that is likely to sustain a claim for significant financial compensation and to justify the instruction of a solicitor. Complaints in relation to inadequate service are commonly dealt with by ombudsmen, while matters of misconduct are the preserve of regulators, such as the Solicitor Regulation Authority (SRA) or the Institute of Chartered Accountants for England & Wales (ICAEW).

3.    Proportionality

Professional negligence claims are invariably complex and, as a result, can be costly to pursue. If the value of your claim is relatively modest, it is quite possible that the costs of instructing a solicitor to pursue it will outweigh any compensation you recover. If the value of your claim is less than £10,000, you are likely to have much less chance of recovering your costs, even if you are successful. Moreover, even if the value of your claim exceeds £10,000, a successful claimant will rarely recover all of their costs.

If your claim is of modest value, you may decide to retain a solicitor to undertake a limited number of tasks, while undertaking others yourself. Alternatively, you may decide that it is not proportionate to instruct a solicitor at all.

4.    Timing

As part of your decision-making process you may also wish to consider when it might be best to instruct a solicitor. In some cases, and in an effort to save costs, you may decide to undertake the initial stages of a professional negligence claim yourself, with a view to instructing a solicitor at a later date, should you consider it necessary.

That is certainly an option open to you but, before settling on it, you may wish to consider some of the risks that you may be running in doing so. These include the risk of inadvertently prejudicing your claim in the early stages and/or delaying its resolution, both of which could make your claim more expensive to resolve in the long run.

5.    Equality of arms

Most professionals take out a professional indemnity insurance policy to protect themselves against any professional negligence claims made against them. This has a number of advantages for claimants, which we explain elsewhere in our guide: Professional Indemnity Insurance – A Claimant’s Guide.

When a professional negligence claim is made, it is likely to be referred to an insurer and then to an internal claims adjuster. The adjuster will usually be a solicitor, with specialist training and experience in dealing with professional negligence claims. In accordance with the terms of the policy, the adjuster will usually determine, often behind the scenes, how your claim is dealt with. If necessary, the adjuster will also appoint an external solicitor, sometimes covertly, from its panel. Again, the appointed solicitor will be a specialist, often within a large commercial law firm, who deals exclusively with professional negligence claims. Their fees will be met by the insurer.

While the fact that the professional concerned will benefit from the advice of a team of specialist solicitors does not mean that you need to retain your own specialist solicitor, it is as well to understand what you will be up against and that there will be a serious inequality of arms should you decide not to do so.

6.    Personal experience

It is rare that claimants have any prior experience of pursuing a professional negligence claim. While on one level this is a positive state of affairs, if this is also true in your case, it does present you with a significant disadvantage and may well be a factor to take into account as part of your decision-making.

Equally, however, if you benefit from technical expertise in the area giving rise to the claim or some experience in other areas of litigation, you might feel more confident in dealing with your claim personally. However, in our experience, it is rare to encounter two claims that are the same and we would caution you against assuming that one experience will serve as a reliable precedent for the other.

7.    Complexity

Professional negligence claims are notorious for their complexity. This can arise from the underlying events and evidence to which they relate, the legal principles which must be applied and/or the procedure that must be followed in pursuit of them. Even where it is clear that the professional has made a mistake, complications can arise in establishing (both as a matter of fact and law) that the professional caused loss and the nature and amount of that loss. Again, and by itself, this does not necessitate the instruction of a solicitor, but it should certainly be an important consideration.

8.    Time commitment 

Given their complexity, professional negligence claims generally require a significant time commitment, even for those solicitors who are experienced in dealing with them. For anyone who is not, the commitment will be all the greater. If you are retired and/or have no other commitments, this may not be a significant issue for you. However, if you have other work or family commitments, you may simply not have the time, nor the inclination, to dedicate to pursuing any claim yourself.

It is important to note that even if you do instruct a solicitor, there is still likely to be some time commitment required from you, albeit significantly less that if you dealt with any claim personally.

9.    Emotional stress

Whether you are pursuing a professional negligence claim in a personal capacity or on behalf of a business, you should not under-estimate the emotional effect it can have on you. By its very nature, the claims process is an adversarial one and tempers can be tested. Having a solicitor who is able to shield you from and defuse confrontational exchanges is often an advantage that is not foreseen at the outset by those who have not previously been involved in litigation.

10.  Strategy

Our final factor for consideration is the strategic implications for your professional negligence claim. In deciding between instructing a solicitor and acting in person, an early consideration should be the effect that this will have on the defendant adviser (and its insurer). In the absence of legal representation, there is likely to be greater doubt as to your commitment and resolve, as well as your credibility, which may encourage it to defend, rather than settle, your claim. The fact that the adviser’s (and in turn its insurer’s) potential liability for costs will be much reduced if you have not retained a solicitor, may also encourage it to reject or prolong your claim.

While it remains fair to say that litigants in person enjoy some procedural allowances over those that are legally represented, a string of recent court decisions have confirmed that such leniency is by no means limitless. A prime example of the approach taken can be found in the relatively recent case of Reynard v Fox, where a professional negligence claim by a litigant in person against an insolvency practitioner was struck out on the grounds of procedural irregularity. The circumstances of the case are more fully reported in The Law Society Gazette.

It would also be a mistake to assume that as a litigant in person, the court may (or is likely to) be more sympathetic and/or more generous when determining your claim. This is most unlikely to be the case.

Alternative options

Unfortunately, there are few alternative options to instructing a solicitor or acting alone. However, you might wish to consider contacting a Citizens Advice Bureau for advice and assistance or, possibly, a local law centre that undertakes pro-bono work.

Conclusion

Professional negligence claims are inherently complicated and while this does not present an insurmountable hurdle to acting in person, you should carefully consider a range of factors before resolving to do so.

If you do decide to instruct a solicitor, you will no doubt wish to retain the best that you can. To assist you in identifying who this might be, we have produced a related guide: How to find the Best Professional Negligence Solicitors. In this guide we set out seven key features that you should look out for as part of any search.

Further legal assistance

As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals.

If you would like to arrange an initial consultation with us, free of charge or commitment, please do not hesitate to contact us on 0800 195 4983 or by email at mail@pnclegal.com.

At PNC Legal there is much more than just the fact that we specialise exclusively in resolving claims for professional negligence that sets us apart from most other solicitors.

This month the Law Society of England and Wales has published its annual statistics report for 2017. The report offers a comprehensive account of the make up of the solicitors’ profession, providing data not just on solicitors in private practice, but also on those employed in-house.

The report advises that as at 31 July 2017:

• There were 181,968 individuals on the Roll of solicitors, up from 175,160 the previous year and representing an increase of 3.9%;
• There were 139,624 solicitors with practising certificates (and therefore entitled to act as a solicitor within the definition of the Solicitors Act 1974), an increase of 2.4% on the previous year and an increase of almost 30% since 2007;
• There were 93,155 solicitors working in private practice, compared to 91,166 solicitors in 2016. These represented 66.7% of all practising certificate holders;
• There were 9,488 private practice firms registered in England & Wales, a modest increase on the 9,430 firms recorded the previous year. This growth came exclusively from an increase in the number of sole practitioners;
• Sole practitioners represented the largest category of private practice firm at 45%, with the second largest category being 2-4 partner firms at 41%. The smallest category was firms with 81+ partner at 0.6%;
• The number of practising certificate holders working in-house was 42,215, representing 30.2% of all certificate holders. Of these, 18,766 (representing 13.4% of all certificate holders) were employed in commerce and industry;
• For the first time ever, the number of female practising certificate holders (69,995) has exceeded the number of male certificate holders (69,629); and
• The number of black, Asian and minority ethnic groups amongst practising certificate holders has also risen to 16.5% in 2017, up from 16% in 2016 and up from 7% at the start of the millennium.

The report also records that for 2015/16 turnover for the profession totalled £23.1 billion, of which £9.64 billion (41.7%) was generated by those firms with 81+ partners.

Overall, the report indicates that the profession remains in reasonable health and has not yet reached the point of saturation feared by many. However, the impact on growth of Brexit in the near future, and AI and technology in the longer term, remain to be seen. As does the impact of consolidation within the profession, a trend which seems likely to continue, particularly in the highly competitive mid-tier sector.

A copy of the full report is available from the Law Society, priced at £99.

The duty to mitigate loss arises as soon as an individual or business suffers loss at the hands of a professional adviser and can give rise to much confusion and uncertainty. In this article, and using case examples, we examine the nature of the duty and how it operates in practice.

The nature of the duty to mitigate

The duty to mitigate has long been recognised by the courts and is rooted in the common law. It serves as a counter-weight on the scales of justice, balancing the interests of claimants seeking to recover compensation for the losses they have incurred, with those of defendants from whom it is payable.

Principally, the duty requires claimants to take all reasonable steps to avoid the losses arising as a result of a professional’s mistakes and to take no unreasonable action which would exacerbate those losses. Should claimants fail in this regard, the court will prevent them from recovering those losses which were unreasonably incurred.

The duty to mitigate is not exacting and in deciding whether or not a claimant has failed to comply with it, the court will often afford a claimant a reasonable degree of latitude. In Banco de Portugal v Waterlow & Sons Ltd, Lord Macmillan put it this way:

“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.”

Although the principle is commonly expressed in terms of ‘duty’, it should be noted that this is as much for convenience as anything else. Strictly speaking, claimants are not possessed of a legally enforceable obligation, owed either to themselves or another, to mitigate their loss. Instead, they are prohibited from recovering such loss or damage as they elect to incur or fail to avoid.

A classic and authoritative statement of the principle was given in Dunkirk Colliery Co v Lever in 1878. Here James LJ said:

“What the [claimants] are entitled to is the full amount of the damage which they have really sustained by a breach of the contract; the person who has broken the contract not being exposed to additional cost by reason of the [claimants] not doing what they ought to have done as reasonable men, and the [claimants] not being under any obligation to do anything otherwise than in the ordinary course of business.”

Failing to comply with the duty to mitigate

When responding to claims for professional negligence, it is not uncommon for defendants to allege that claimants have failed to mitigate their loss. However, whether or not such an allegation is valid is a question of fact, to be determined having regard to all the circumstances of the case. It is not a question of law.

Moreover, the onus is on defendants to prove that claimants have failed to comply with their duty to mitigate: it is not for claimants to prove that they have so complied. For defendants, who have already been found to be at fault and to have caused the claimants loss this can be a challenging, but not necessarily insurmountable, task.

To guard against a finding that they have failed to comply with their duty to mitigate, claimants should always pause to consider what action (legal or otherwise) they could take, as well as what action they could desist in taking, in order to reduce the amount of financial loss they might suffer as a consequence of the professional’s mistake and, in either case, what the consequence of doing so might be.

Regardless of the perceived gravity of the professional’s mistake, if it is later determined by the court that the claimant failed to take reasonable steps to mitigate or avoid financial loss, it is likely to reduce any compensation award to that lesser sum that would have been suffered had such steps been taken. In some cases, the court may decline to award compensation at all.

Accounting for benefits secured

A secondary strand to the duty to mitigate concerns the accountability of benefits secured by claimants as a result of any avoidance action actually taken.

Irrespective of whether or not a duty to take a particular form of mitigatory action arises, if such action is taken to avoid some or all of the loss that would otherwise have arisen, and it is successful, claimants will usually be required to give credit for it. Claimants will not usually be permitted to recover losses which they have been able to avoid.

The costs of mitigation

In seeking to mitigate their loss, claimants will frequently incur additional expense and, in the context of professional negligence, often additional professional fees.

In some cases, such as those involving litigation against a third party, these additional costs may be awarded against, and recovered from, that third party. But even then, it is rare that all such costs will be recovered.

Where costs are incurred in taking reasonable steps to mitigate a loss, those costs are generally recoverable as damages from the professional, in addition to any residual losses. This is so even if the mitigatory action taken has been unsuccessful and/or has served to exacerbate the overall loss.

Professional continuing to act

One issue that frequently arises in professional negligence claims, is whether the professional who made the mistake should be permitted to take any further action, either to correct the mistake made or to reduce its financial effect. This should be considered carefully and on a case-by-case basis.

Some of the factors which are likely to be relevant in deciding whether or not to permit the professional to continue to act are:

• Whether the professional’s duty to act in the best interests of their clients, and not to prefer their own interests over those of their clients, may be compromised;
• Whether the professional may reasonably be considered as competent to act, having regard to their historic conduct and/or the nature of the further action contemplated;
• What prejudice, financial or otherwise, may be caused by allowing the professional to act;
• The effect it may have on any later allegation raised by the professional, that there has been a failure to mitigate.

To enable clients to make a fully informed decision on this issue, and to avoid the risk of falling foul of professional conduct obligations, a professional would usually be expected to advise their clients to consider obtaining independent legal advice.

Professional negligence case examples

There is a plethora of case examples in which the duty to mitigate has arisen. These range across the litigation spectrum. However, each of the cases summarised below arose in the context of a professional negligence claim.

Pilkington v Wood

In Pilkington the claimant had instructed the defendant solicitor in relation to the purchase of a residential property in Hampshire. However, a defect existed in the vendor’s title to the property, which could have been, but was not, discovered by the defendant prior to the purchase.

While negligence was admitted by the defendant, he alleged that by not pursuing legal proceedings for breach of covenant against the vendor of the property, the claimant had failed to mitigate his loss.

Giving judgment in the High Court, Harman J. held that the duty to mitigate did not go so far as to oblige an injured party, even under an indemnity, to embark on a complicated and difficult piece of litigation against a third party, as was being advocated here. Accordingly, there had been no failure to mitigate by the claimant.

Walker v Geo. H. Medlicott & Son (A firm)

In Walker the claimant was a disappointed beneficiary under the will of his late aunt. In a claim for professional negligence, he alleged that the defendant firm of solicitors instructed by his aunt to draft her will, had failed to include a specific devise of her house in his favour.

While the defendant solicitors admitted that they owed a duty of care to the third party claimant, they denied that they had been negligent in preparing the will. On appeal, they further alleged that in failing to pursue a claim for rectification of the will, the claimant had failed to mitigate his loss.

In a unanimous judgment, the Court of Appeal held that there were no grounds upon which to interfere with the judge’s decision at first instance, that the claimant had failed to adduce sufficient evidence upon which to base a finding of negligence. However, further and more pertinently, the court held that by not first pursuing rectification proceedings, which required essentially the same evidence and which were regarded as desirable on policy grounds, the claimant had also failed to mitigate his alleged loss.

Iggleden & Iggleden v Fairview New Homes (Shooters Hill) Ltd

In Iggleden the claimants had purchased a new-build residential property from the defendant developers. Shortly thereafter, a range of defects manifested themselves, a number of which were significant. This in turn led to a protracted dispute between the parties as to the extent of the defects and the scope of the works required to rectify them.

Legal proceedings were eventually issued by the claimants seeking by way of damages, the costs of undertaking the rectification works. In response, the defendant alleged that the claimants had failed to mitigate their loss by not accepting the defendant’s offer to undertake all necessary works without charge.

In the Technology & Construction Court, HHJ Coulson QC held it was not unreasonable of the claimants to say that they did not want the defendant to return to the property to undertake further work. He further held that it would take a relatively extreme set of facts for it to make it appropriate to deny a homeowner financial compensation for admitted defects and leave him with no option but to employ the self-same contractor to carry out the necessary rectification works.

Herrmann v Withers LLP

In Herrmann the claimants had instructed the defendant firm of solicitors on the purchase of a residential property in Kensington, London, for £6.8 million. Although the solicitors had advised the claimant that the property enjoyed a statutory right to use a nearby communal garden, such entitlement was subsequently disputed by members of the garden committee.

The defendant solicitors denied that they had been negligent and alleged that in failing to accept an offer of a 50-year licence for £25,000 from the garden committee, the claimants had failed to mitigate their loss.

Giving judgment in the High Court, Newey J. held that the defendant had been negligent in failing to warn the claimants that the statutory right enjoyed by the property was uncertain. However, he further held that in failing to accept the garden committee’s offer, the claimants had acted unreasonably and failed to mitigate their loss. He therefore reduced the damages he awarded to the claimants, which included (i) the estimated costs of negotiating the licence; (ii) the diminution in the value of the property; (iii) the legal costs arising from the dispute with the garden committee; and (iv) damage for distress and inconvenience.

Conclusion 

As the above case examples demonstrate, arguments over the duty to mitigate can be extremely fact sensitive and complicated. For this reason, it is often wise to seek independent legal advice at an early stage.

Some of the advantages of seeking independent advice are that it can enable claimants to:

• Identify those legal options that may be available to them to mitigate their loss;
• Determine the lengths that must be gone to in order to comply with the duty to mitigate and, thereby, avoid later criticism from the court;
• Take action to extinguish or reduce their financial loss in a time and cost efficient way;
• Assess the wider implications of allowing the professional at fault to continue acting and, in particular, whether, and if so to what extent, this may cause prejudice;
• Counter any assertion that they have failed to mitigate their loss, on the basis that they acted in reasonable reliance upon the advice of a professional third party.

Generally, the reasonable costs incurred in obtaining independent legal advice on the options that may be available to mitigate any loss caused, or likely to be caused, are recoverable as damages from the negligent professional.

Further legal assistance

While this article is intended to both raise awareness and offer insight into the duty to mitigate in professional negligence claims, it should not be relied upon as a substitute for formal legal advice.

As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals, including claims against solicitors, accountants, insurance brokers and surveyors.

If you are considering bringing a claim for professional negligence, and if you believe that the value of your claim is likely to exceed £100,000, we would be happy to discuss the matter with you.

Most of our clients fund their claims under a private retainer and almost all our instructions commence on this basis. However, in some cases and where requested, we may then be able to offer an alternative form of funding.

To arrange an initial consultation with us, and in the first instance, please complete our Contact Form or email us at mail@pnclegal.com.

At PNC Legal there is much more than just the fact that we specialise exclusively in resolving claims for professional negligence that sets us apart from most other solicitors.

Last month the Solicitors Regulatory Authority (SRA) issued a consultation paper on a range of reforms it proposes to make to the professional indemnity insurance requirements for solicitors. If adopted, these would affect the profession and the public alike and so we summarise and comment on them below.

Professional indemnity insurance

All solicitors in private practice are required to purchase professional indemnity insurance (PII). Amongst other liabilities, PII covers the financial loss for which a solicitor is found liable to another party, as a result of an actionable mistake made during the course of professional practice.

A more detailed account of what PII is, what benefits it provides to companies and individuals wishing to pursue a claim for professional negligence and how it operates in practice, can be found in our guide: Professional Indemnity Insurance: A Claimant’s Guide

The minimum terms and conditions (MTCs)

The MTCs are the terms by which each professional indemnity insurer authorised to provide mandatory cover for solicitors (often referred to as ‘primary layer’ insurance) must comply. The MTCs are determined by the SRA and dictate the minimum level of cover required by solicitors. They do not prevent solicitors purchasing additional cover (often referred to as ‘excess layer’ or ‘top up’ insurance) over and above the primary layer.

The MTCs were introduced on 1 September 2000, when the profession moved from a mutual insurer, in the form of the Solicitors Indemnity Fund (SIF), to the open market. They are supplemented by the SRA Indemnity Insurance Rules and the Participating Insurers Agreement.

Why are any reforms needed?

According to the SRA, its review of the MTCs is part of a wider push to modernise its approach to regulation, by making it simpler and more focussed. It also appears to be a response to the conclusion reached by the Competition and Markets Authority in its Legal services market study, that the profession needs to be more open and competitive in order to better serve the public.

As a precursor to the consultation, the SRA has undertaken an analysis of 10 years of insurance claims against law firms, covering the period 2004 to 2014. The results have been published in its report, Reflecting on Solicitors Professional Indemnity Insurance (PII): market trends and analysis of historical claims data. Amongst other matters, and for the period in question, the report advises that:

• A total of approximately £1.6 billion in damages and costs was paid out to users of legal services by participating professional indemnity insurers;
• Approximately £0.6 billion was incurred defending claims;
• Of the payments made to users of legal services 51% arose from conveyancing work;
• Of all the claims giving rise to an indemnity payment 98% were settled for under £580,000;
• Of all claims against solicitors 24% were made between 3 – 6 years after the occurrence of an actionable event, while 10% were made between 6 – 15 years after an actionable event.

The proposed changes

The changes being proposed by the SRA are set out in detail in its 93-page consultation paper: Protecting the users of legal services: balancing cost and access to legal services.

In summary, the SRA is proposing to:

• Reduce the minimum level of insurance cover currently required for each claim, from £2 million for sole practitioners/partnerships and £3 million for LLPs, to £500,000;
• Establish a separate minimum level of cover of £1 million for each conveyancing related claim;
• Introduce a separate component in the insurance policy wording, without which firms would not be covered for conveyancing services;
• Exclude compulsory cover for financial losses suffered by financial institutions, as well as corporate and other large business clients;
• Afford greater flexibility around defence costs, such as the ability to apply a policy excess;
• Introduce a cap for the level of run-off cover required of £3 million for firms who have provided conveyancing services and £1.5 million for all others, aggregated over the existing 6-year mandatory run-off period.

Some comments

While it is conceivable that the current MTCs may be hampering openness and competition within the solicitors’ profession, this is not readily apparent from the empirical evidence provided within the SRA’s consultation paper.

Moreover, and contrary to that suggestion, data published in The Law Society’s Annual Statistics Report, indicates that both the total number of solicitors practising and the total number of solicitors in private practice has grown significantly over the last 20 years, from 68,037 and 55,673 respectively in 1996, to 136,176 and 91,166 respectively in 2016.

That suggestion appears to be further undermined by data published on new firm authorisations. On 12 September 2016, The Law Society Gazette reported that official statistics suggested that more than 1,000 new firms would be created in 2016, a 30% increase on the prior two years. Meanwhile, the SRA’s Regulated population statistics report that over the 12-month period to the end of February 2018, 745 new firms have opened in England & Wales. It would seem, therefore, that for the duration of the MTCs supply and competition within the legal market has been strong.

Nevertheless, compared to many other professions, the insurance burden placed on solicitors is a heavy one and it seems right, therefore, to review it periodically. Almost 20 years on from the creation of the MTCs, now would certainly seem an appropriate juncture at which to consider whether they remain fit for purpose in their present form.

In doing so it might be observed that it is precisely because the mandatory insurance burden on solicitors is so onerous, that the financial protection afforded to the public is generally better than for any other profession. This, in turn, enables a considerable amount of trust to be placed in the hands of individual solicitors and, collectively, the profession at large.

Limits of indemnity

While the MTCs may seldom be a specific consideration for individual clients when purchasing legal services, there is a real risk that reducing the protection they provide, in particular by lowering minimum indemnity limits, could easily undermine that long-established trust placed in the profession. Certainly, in an information age where bad news travels fast and wide, it is not difficult to imagine how a few unfortunate incidents of under-insurance exposed in the national press and on social media, could result in considerable reputational damage. Far from encouraging members of the public to seek the legal help and support they require, it could deter them from doing so and, in turn, actually reduce supply and competition within the legal market.

It seems doubtful too that any premium savings made by firms as a result of reducing the minimum limits of indemnity would lead to a significant reduction in the cost of providing legal services. This is because policy premiums already recognise that most claims fall within the first £500,000 of cover. Therefore, the cost of the remaining cover currently required is likely to be much lower in comparison. Further, such premiums are individually quoted, taking into account the specific risk profile of the insured firm or practice. Accordingly, and with other overheads generally rising, it is also doubtful that this could or would allow any meaningful saving to be passed on to those purchasing legal services.

That said, and on the understanding that the original rationale for a higher limit of indemnity (£3 million for any one claim) for LLPs is not borne out by historic claims data, there may well be some logic in applying the existing limit of indemnity for sole practitioners and partnerships (£2 million for any one claim) uniformly, regardless of a practice’s legal structure.

Defence costs

The introduction of some flexibility around defence costs might also be beneficial for the public and the profession alike. For the public, it could certainly mean that lower value claims are settled more readily, as firms seek to avoid the direct cost of instructing defence solicitors. For the profession, this might result in a genuine premium saving, both as a direct result of re-apportioning risk and as an indirect result of incentivising improvements to risk management.

Providing for an additional and specific defence costs excess, rather than simply extending the current policy excess provisions to cover defence costs as well, is likely to be more effective in this regard. Of course, consideration would also then need to be given to the ancillary terms governing the payment of such an excess.

However, it is not in all cases that the instruction of defence solicitors creates a barrier or delay to the resolution of claims. In many cases, the involvement of specialist solicitors, who possess greater objectivity and often a much deeper understanding of the legal issues involved than an insured practice or its insurers, can expedite and facilitate, rather than stifle, the resolution of a claim.

Run-off cover

It is encouraging that the SRA has not suggested that the run-off period be reduced from the mandatory 6 years currently required. This provides much needed protection for the public and the profession alike, in circumstances where mistakes can and do go undiscovered for some time after they are made. This is discussed in more detail in our article: Claims against closed professional firms and practices.

However, the introduction of a cap or tapering of cover might go some way to addressing the reported difficulties some solicitors face in closing their practices, while at the same time protecting the public from the adverse effects of a disorderly closure.  The present requirement, that all practices maintain 6 years of run-off cover with a limit of indemnity of either £2 million or £3 million per claim dependent upon the practice structure, is expensive and, in some cases, it seems, unaffordable.

A reduction in the level of insurance cover after a practice has closed, rather than before, may well be more acceptable in the mind of the public. That said, there is at least some risk that it might also discourage purchasers of legal services from relying on new and potentially transient entrants to the market and so undermine future growth and competition. In any event, prior to implementation, a more thorough assessment of the associated benefits and specific arrangements would be required.

Conclusion

Balancing the clear benefits of the strong financial protection provided by the current MTCs against the concomitant burdens is no easy task and the prospect of reaching a universal agreement on how this should be achieved is likely to be extremely narrow.

It will be interesting to see what views the SRA receives from stakeholders and what conclusions it ultimately reaches. For our part, we consider that the SRA should be slow to erode the ‘gold standard’ protection currently provided to the public and should only seek to do so where it is satisfied that there is a clear and persuasive case.

The consultation closes on 15 June 2018 and those wishing to respond should complete the online consultation questionnaire available on the SRA’s website.