In this article we review a series of claims made against negligent insurance brokers that have been successfully pursued through to trial.

The aim of this article is to offer an insight into the types of errors and omissions made by negligent insurance brokers that can give rise to a successful claim. It is not, and is not intended to be, an exhaustive account. Successful claims can arise from all manner of mistakes, not all of which have previously been considered by the courts.

It should be noted that while each claim listed below was pursued all the way to trial, the vast majority of professional negligence claims are resolved without the need to do so. Indeed, many claims are resolved without the need to issue court proceedings at all.

Failing to ascertain a client’s insurance needs

In the case of Standard Life Assurance Ltd v OAK Dedicated Ltd & Others the claimant commenced legal proceedings against both its insurers and its insurance broker. The claimant had been involved in the mis-selling of mortgage endowment policies and had paid compensation to over 97,000 investors. Although the individual payments averaged less than £10,000, collectively they totalled over £100 million.

When the claimant sought to recover these payments under its own professional indemnity insurance policy, its insurers asserted that a policy excess of £25 million applied to each investor claim, meaning that no indemnity payment was required under the policy.

At trial the judge found that the insurers had correctly applied the policy excess, such that no payments were due to the claimant under its policy. The judge further found that the ability to aggregate investor claims was critical to the claimant and that the insurance brokers had been negligent in arranging insurance cover which did not provide for this. The judge confirmed that:

‘It is the duty of a broker to identify and advise about the type and scope of cover which the client needs and, in doing so, to match as precisely as possible the risk exposures that have been identified within the client’s business with the coverage available.’

Failing to convey material information about a risk to an insurer

In McNealy v Pennine Insurance Co Ltd & Others the claimant, a property repairer and part-time musician, instructed the defendant insurance broker to arrange a motor insurance policy. Upon being asked what his occupation was, the claimant advised that he was a property repairer. The defendant then placed cover with an insurance company offering low rates to a restricted class of motorist, which excluded ‘whole or part-time musicians’.

In due course the claimant was involved in an accident and made a claim against his policy. However, his claim was rejected on the basis that he was a part-time musician and was excluded from cover. The claimant therefore commenced a professional negligence claim against the broker.

At both first instance and on appeal, the court concluded that the broker had known about the exclusions to the policy. It also found that the broker had been negligent in failing to ascertain from the claimant and disclose to the insurer the material fact that the claimant was a part-time musician. On appeal, the court stated that:

‘It was clearly the duty of the broker to use all reasonable care to see that the assured, Mr McNealy, was properly covered…the judge was quite right. The broker was liable for not taking proper care to effect the insurance, and he is therefore liable for the full amount of the claim.’

Failing to arrange insurance cover for a particular risk

In Transport & Trading Co Ltd v Olivier & Co Ltd the claimant had instructed the defendant insurance brokers to arrange insurance for a vessel owned by the claimant, known as the El Kahira. The cover required was for Particular Average Loss, being accidental and unforeseen loss caused by perils of the sea.

Unfortunately, while the vessel was in Algiers, a fire broke out. However, when the claimant sought to make a claim against its policy, the brokers were unable to produce a copy of it.  The claimant therefore commenced a professional negligence claim against the broker.

At trial, and based on the evidence before it, the court concluded that no policy had been placed. By way of damages, it therefore awarded the claimant the amount it had paid by way of policy premium which, unusually in this case, was greater than the value of its policy claim.

Failing to arrange insurance cover on terms requested by a client

In Dunlop Haywards (DHL) Ltd & Others v Barbon Insurance Group Limited & Others the claimants carried on business as property consultants, which included significant commercial property valuation work. After receiving a number of damages claims from various lenders arising from the negligent and/or fraudulent valuation reports provided by the first claimant (DHL), DHL made claims against its professional indemnity insurance policy.

However, DHL’s excess layer insurer declined cover on the grounds that the indemnity provided by its policy was limited to ‘commercial property management’ and did not extend to valuation services. In turn, DHL commenced a professional negligence claim against the defendant broker for failing to act in accordance with instructions. These were to obtain cover for DHL which was the same or equivalent to the cover it had previously enjoyed, which had included excess layer cover for valuation services.

In concluding that the brokers had been negligent, and endorsing the views expressed by the expert witnesses, the judge confirmed that an insurance broker would generally be expected to act:

‘…carefully to review the terms of any quotations’ and ‘to use reasonable skill and care to draw up a policy, or to ensure that a policy was drawn up, that accurately reflected the terms of agreement with the underwriters and which was clear and unambiguous, so that the client’s rights under the policy were not open to doubt.’

Failing to arrange insurance which meets the needs of a client

In Ground Gilbey Ltd & Another v Jardine Lloyd Thompson UK Ltd the claimants were the owners of Camden Market in London, where a substantial fire occurred after an LPG portable heater was left on in one of the stalls. The claimants claimed against their insurance policy, but cover was declined on the grounds that they had failed to comply with a Risk Improvement Measure (RIM) requiring the immediate removal of all such heaters. After settling their policy claim with insurers, the claimants commenced a professional negligence claim against their broker.

The claimants firstly alleged that the broker had been negligent in failing to take reasonable steps to ensure that they had a policy which was suitable and which clearly and indisputably met their needs. The judge agreed. He noted that once the broker knew that the RIM had been imposed, given its knowledge of the presence and permitted use of portable heaters, it should have appreciated the policy was no longer suitable.

The claimants further alleged that the broker had been negligent in failing to advise them on the RIM. In concluding that the broker had been negligent on this basis too, the judge commented that:

‘…in my view the imposition of the RIM had a “material and potentially deleterious effect on the insurance cover”…and the brokers were under a duty to act in their clients’ best interest by drawing it to their attention and obtaining their instructions in relation to it. I accept the claimants’ contention that advice needed to be given explaining that the cover might be prejudiced if nothing was done by removing the PHAs [portable heating appliance]…’

Failing to notify a claim in accordance with policy terms and conditions

In Alexander Forbes Europe Ltd v SBJ Limited the claimant, who was itself an insurance broker, maintained a claim for professional negligence against its own professional indemnity broker. The claimant’s negligence claim arose after the claimant’s insurers declined to provide cover for various claims made against the claimant, resulting from pension mis-selling.

The claimant alleged that the defendant broker had been negligent in notifying the potential claims against it under the wrong insurance policy. Instead of notifying under its own policy, the potential claims had been notified under a separate, group policy.

In concluding that the broker had indeed been negligent, the judge commented that:

‘Brokers owe duties going beyond those of a post box. It was for the brokers to get a grip on the proposed notification, to appraise it and to ensure that the information was relayed to the right place in the correct form … it was the duty of [the brokers] to have a strategy in place … that ensured that when such information was received from clients, the broker was alive to making such notifications accurately and promptly.’

Further legal assistance

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

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.

In this article we examine the secondary limitation period that applies to some professional negligence claims, as well as the dangers that it presents for potential claimants.

We have produced a separate article on the primary limitation periods that apply to most professional negligence claims, which may be read in conjunction with this article. This can be accessed here.

For those approaching the issue of limitation for the first time, or seeking brief answers to some of the frequently asked questions in this area, we have also produced a short guide to the time limits that apply to professional negligence claims. This can be accessed here.

A primary issue

The importance of limitation periods in professional negligence claims should not be under-estimated. Once the limitation period for a claim expires, the claim can no longer be commenced. This is so regardless of whether the financial loss suffered is substantial or the claim has considerable merit.

For this reason, limitation is one of the first issues that should be considered as soon as there is reason to believe that a mistake has been made by a professional adviser and/or that financial loss has occurred.

Secondary limitation period

If the primary limitation period for a professional negligence claim has already expired, it may still be possible to pursue a claim if it falls within the secondary limitation period. This can be found within section 14A of the Limitation Act 1980. It applies only to claims in negligence, where the facts relevant to the claim are not known at the date of accrual. It does not apply to, and cannot therefore save, any claim in contract.

Section 14A of the Limitation Act 1980 is a lengthy provision and not always easy to follow. In abbreviated form, it provides that:

(3)        An action to which this section applies shall not be brought after the expiration of the period  applicable in accordance with subsection (4) below.

(4)        That period is either:

(a)        six years from the date on which the cause of action accrued; or

(b)        three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above.

(5)        …the starting date …under subsection (4)(b) above is the earliest date on which the plaintiff…first had both the knowledge required for bringing an action for damages…and a right to bring such an action.

(6)        In subsection (5) above…knowledge…means knowledge both:

(a)        of the material facts about the damage in respect of which damages are claimed; and

(b)        of the other facts mentioned in subsection (8) below.

(7)        …material facts about the damage are such facts…as would lead a reasonable person…to consider…instituting proceedings

(8)        The other facts…are:

(a)        that the damage was attributable…to the act or omission which is alleged to constitute            negligence; and

(b)        the identity of the defendant; and

(c)        …

(9)        Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant…

(10)      …a person’s knowledge includes knowledge which he might reasonably have been expected to acquire:

            (a)        from facts observable or ascertainable by him; or

            (b)        from facts ascertainable by him with the help of appropriate expert advice…

As will be seen from the case examples that follow, the results of applying the secondary limitation period in practice are not always predicable.

Hayward v Fawcett

Here, on the advice of his accountants, the claimant had purchased an agricultural machinery business in 1994 and had invested heavily in it over several years. Before 6 December 1998 the claimant knew that his investment was lost and that the company was insolvent. However, it was not until December 1999 that the claimant first questioned the advice that he had received from his accountants in relation to the original purchase. In December 2001 the claimant commenced legal proceedings against his accountants, claiming damages for professional negligence.

For the purposes of section 14A the claimant alleged that he first acquired knowledge in 1999, when it was first suggested to him that his accountants had been negligent. In contrast, his accountants alleged that he had acquired actual knowledge prior to December 1998 and more than three years before the proceedings had been commenced. By then, they alleged, the claimant had known that his losses were attributable to their alleged acts or omissions.

On appeal the court held that for the purposes of section 14A (and section 14A(8)(a) in particular) and to start time running, it was sufficient that the claimant knew the facts which constituted the essence of his complaint. Here that was simply that it was his accountants who had recommended investing in the business from which his losses arose. That he had known more than three years before he had commenced proceedings. Therefore, the claim was not saved by the secondary limitation period and was time-barred.

Finance For Mortgages Ltd & Others v Farley & Company (A firm)

Here, upon valuation advice from the defendant chartered surveyors, the claimants loaned £380,000 to borrowers to purchase a residential property. After June 1989 no further repayments were made by the borrowers and in June 1990, the claimants were approached by the police who suspected mortgage fraud. The claimants obtained possession of the property in July 1991 and sold it in December 1993 for £170,000. In April 1994 they then commenced legal proceedings against the surveyors, claiming damages for professional negligence.

For the purposes of section 14A the claimants alleged that they first acquired knowledge in August 1991, this allowing for a reasonable period of time to revalue the property after possession was obtained. By contrast, the surveyors alleged that they had acquired constructive knowledge prior to April 1991 and more than three years before the proceedings had been commenced.

The court held that on the facts observable and observed by the claimants any prudent mortgagee would have commenced possession proceedings by January 1990. It further held that any prudent mortgagee could reasonably have acquired knowledge of the defendant’s overvaluation of the property by the end of March 1991. This was more than three years prior to the date on which proceedings had been commenced. Therefore, the claim was not saved by the secondary limitation period and was time-barred.

Jacobs v Sesame Limited

Here, on the advice of her financial adviser, the claimant invested £65,000 in a Legal and General Investment Bond in 2005. She surrendered the Bond in February 2012, by which time its value was approximately £53,000. In November 2012 she commenced legal proceedings against her financial adviser, claiming damages for professional negligence.

For the purposes of section 14A the claimant alleged that it was not until February 2012 that she knew either that she had suffered a loss or that she might have received inappropriate advice. In contrast, her financial advisers alleged that she had sufficient knowledge to commence a claim in July 2009 and more than three years before the proceedings had been commenced. By then, they alleged, the claimant had received four annual statements showing a catastrophic fall in the value of the Bond.

On appeal, the court considered that the claimant had acquired constructive knowledge by July 2009. By that date she could reasonably have been expected to learn, either herself or by seeking appropriate expert advice, that she had suffered damage as a result of the investment product having been defective from her perspective. Again therefore, the claim was not saved by the secondary limitation period and was time-barred.

Conclusion

As should be apparent from the above case examples, ascertaining the secondary limitation period for a particular claim can be a complicated and uncertain process. While this article seeks to provide an insight into some of the issues that can arise, it is no substitute for obtaining legal advice.

If you consider that you may have grounds for pursuing a professional negligence claim, you should seek legal advice from a specialist solicitor without delay. By doing so you should avoid the danger of your claim becoming inadvertently time-barred. You may also afford yourself the opportunity to resolve your claim without the need to incur the cost of commencing court proceedings which can, depending on the value of your claim, be considerable.

Further legal assistance

As professional negligence solicitor 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.

In this article we examine the primary limitation periods that apply to most professional negligence claims, as well as the dangers that they present for potential claimants.

We have produced a separate article on the secondary limitation period that can also apply to professional negligence claims, which may be read in conjunction with this article. This can be accessed here.

For those approaching the issue of limitation for the first time, or seeking brief answers to some of the frequently asked questions in this area, we have also produced a short guide to the time limits that apply to professional negligence claims. This can be accessed here.

A primary issue

The importance of limitation periods in professional negligence claims should not be under-estimated. Once the limitation period for a claim expires, the claim can no longer be commenced. This is so regardless of whether the financial loss suffered is substantial or the claim has considerable merit.

For this reason, limitation is one of the first issues that should be considered as soon as there is reason to believe that a mistake has been made by a professional adviser and/or that financial loss has occurred.

Primary limitation period

The primary limitation periods are usually the starting point in determining the time limits for commencing a claim for professional negligence. They can be found in section 2 and section 5 of the Limitation Act 1980. Respectively, they apply to claims in negligence and simple contract, both of which are capable (collectively or independently) of forming the legal basis for a claim for professional negligence.

Claims in negligence

Negligence is the most common type of legal claim pursued against professionals. In part, this is because such claims can also be pursued against professionals by third parties, who may not have instructed the professional directly but who may nevertheless have suffered loss as a consequence of a mistake made. It is also because the limitation period for bringing such claims can expire later than those in simple contract.

Section 2 of the Limitation Act 1980 provides that:

‘An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.’

Once it is known that a claim in negligence is ‘an action founded on tort’, this statutory provision may appear both clear and innocuous. However, looks can be deceiving, as they are here, and in practice this provision can be complicated to apply.

In claims for professional negligence, it is necessary for financial loss to occur in order for a claim in negligence to accrue. However, such loss can occur both at different times and in a variety of different forms and degrees, so that it is not always readily apparent from what point time starts to run.

Evidence of this can be found amongst the ruins of a multitude of claims demolished by section 2. We set out some of the better-known examples below.

Forster v Outred & Co

Here the claimant instructed the defendant firm of solicitors to act for her in relation to the grant of a mortgage over her home, the purpose of which was to secure a business loan for her son. However, after the claimant’s son became bankrupt, the claimant herself was forced to discharge the mortgage to ensure that her own property was not sold to repay the debt. The claimant commenced a claim against her former solicitors for failing to advise her fully when she granted the mortgage.

The issue arose, on the assumption of negligence by the solicitors, whether the claimant suffered loss when she executed the mortgage, or only when demand was first made by the lender. She would have been time-barred on the first footing, but not on the second.

On appeal it was held that the claimant suffered actual damage upon entering into the mortgage, the effect of which was to encumber her interest in the property with a legal charge and to subject her to a potential financial liability. Therefore, the claim fell foul of the primary limitation period and was time-barred.

Shore v Sedgwick Financial Services Ltd  

Here the claimant was the managing director of a substantial company. In April 1997 and on the recommendation of the defendant financial advisers, he transferred the benefits of his occupational pension scheme into a pension fund withdrawal (PFW) scheme. The claimant then commenced draw down later the same year. However, by early 1999 annuity rates had fallen and by 2000 so too had Government Actuaries Department (GAD) rates, both causing the value of his pension to be considerably reduced. The claimant eventually consulted a solicitor and commenced legal proceedings for negligence against his financial advisers on 29 September 2005.

For primary limitation purposes, the claimant alleged loss was first suffered (i) in early 2005 when he first suffered a cumulative loss of income; or (ii) in 2000, on his 60^th birthday; or (iii) in 2000, when revised GAD rates reduced his income.

However, on appeal, it was held that damage occurred in April 1997 and upon the transfer of the pension fund. This was notwithstanding that the transfer price paid for the PFW investment represented market value or that, depending on the vagaries of the market, the claimant could at the point of transfer have been financially better off under the PFW scheme.  Therefore, the claim was time-barred.

Pegasus Management Holdings SCA & others v Ernst & Young

Here the claimant was the owner of an electronics manufacturing business, which he sold for a substantial sum in 1997. On 2 April 1998 and on the advice of the defendant firm of accountants, the claimant purchased $150m of shares in a newly incorporated off-shore holding company, Pegasus. This was for the purpose of securing roll-over relief and to mitigate the tax liabilities arising from the sale of his business. However, due to flawed advice from the defendant, unforeseen and otherwise avoidable tax liabilities arose in connection with the disposal of businesses subsequently acquired by Pegasus, the first of which occurred in 2003. The claimant eventually commenced legal proceedings for negligence against his accountants on 10 November 2005.

For primary limitation purposes, the claimant alleged that by 2 April 1998 there was no more than a possibility of damage, as Pegasus might not have acquired the businesses that it did nor disposed of them. He further alleged that actual damage only occurred in 2003, when a tax liability arose upon its first business disposal.

However, both at first instance and on appeal, the court concluded that damage had been suffered by 2 April 1998. This was not because the claimant’s shares in Pegasus were worth less than he had paid for them, but because those shares did not give him the control of a company with the characteristics to avoid the tax liabilities he subsequently encountered. Therefore, this part of the claim was time-barred.

Claims in simple contract

Where a professional has been instructed to act or advise in return for a fee, a service contract (also known as a retainer) will arise. If, in carrying out his or her instructions, the professional then makes an unreasonable mistake or error, a claim for breach of simple contract is likely to arise.

Section 5 of the Limitation Act 1980 provides that:

‘An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.’

Unlike claims in negligence, damage is not a constituent element of a claim in contract and is not, therefore, required for an action to accrue and for time to start running. However, a breach of contract is and while the severity of the breach is rarely an issue for limitation purposes, the duration of it can be.

Midland Bank Trust Co. Ltd v Hett, Stubbs & Kemp (A firm)

Here the claimant was granted an option to purchase a farm by his father. He instructed the defendant firm of solicitors to record the terms of the option in writing, which the claimant and his father then signed. However, the solicitors failed to register the option which, some seven years later, the claimant’s father was able to defeat by selling the farm to his wife.

For primary limitation purposes the claimant alleged that time started to run from the date upon which the option was defeated and that his claim in contract had been commenced in time.

The court agreed. It concluded that this was a case of omission, rather than error, and that the defendant’s obligation to register the option had continued to exist until such time as performance was rendered impossible. The claim in contract had therefore been commenced in time.

Bell v Peter Browne & Co

Here the claimant had instructed the defendant firm of solicitors following the breakdown of his marriage. He had advised them that he had agreed with his wife that the matrimonial home should be transferred into her sole name, but that he should receive one-sixth of the gross proceeds of sale, whenever that occurred. The transfer occurred but the solicitors failed to protect the claimant’s interest, either by arranging for a declaration of trust or mortgage to be prepared and executed, or by registering a caution. Eight years later the claimant discovered that his former wife had sold the house and spent the proceeds.

For primary limitation purposes the claimant alleged that time did not start to run until the date upon which the house had been sold and that his claim in contract had been commenced in time.

The court disagreed. On appeal, it concluded that the solicitors’ breach of duty (in failing to prepare or execute a formal declaration of trust or register a caution) occurred at the time of or shortly after the transfer. This was so even though the breach was capable of being remedied up until the claimant’s former wife had sold the house. The claim in contract was therefore time-barred.

Conclusion

As should be apparent from the above case examples, ascertaining the primary limitation period for a particular claim can be a complicated and uncertain process. While this article seeks to provide an insight into some of the issues that can arise, it is no substitute for obtaining legal advice.

If you consider that you may have grounds for pursuing a professional negligence claim, you should seek legal advice from a specialist solicitor without delay. By doing so you should avoid the danger of your claim becoming inadvertently time-barred. You may also afford yourself the opportunity to resolve your claim without the need to incur the cost of commencing court proceedings which can, depending on the value of your claim, be considerable.

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.

In this short guide, we answer a number of frequently asked questions about the time limits that apply to professional negligence claims.

Why are there time limits for professional negligence claims?

Time limits for pursuing civil claims have existed for many hundreds of years and are applied as a matter of public policy. In the context of professional negligence claims, they afford professionals and those that insure them a degree of certainty as to the duration of their financial exposure to claims. This in turn can have certain practical advantages, such as enabling the professional to determine how long to store client files or maintain professional indemnity insurance cover.

For those professionals required to respond to claims, and for the courts required to adjudicate on them, sensible time limits can also help to ensure the fair trial of claims. This is achieved by a reduction in the frequency of stale claims, where the quality of the available evidence has substantially diminished over time.

Do the time limits vary according to the type of professional?

No. It does not matter whether the claim is against a solicitor, an accountant or any other type of professional. Instead, the time limit will generally be governed by the type of claim (known as the cause of action) being pursued.

Where do these time limits come from?

Most time limits are prescribed by the Limitation Act 1980. However, it is possible to extend or reduce certain time limits by agreement. This is most common in commercial contracts, whose terms can also be worth considering when determining the time limits applicable to any claim.

What are the time limits for professional negligence claims?

The most commonly encountered provisions and time limits found in the Limitation Act 1980 are:

Section 2: This provides that a claim in tort (such as a claim for professional negligence) must be brought within 6 years of the date upon which damage occurs.

Section 5: This provides that a claim for breach of a simple contract (such as the contract/retainer commonly entered into by a professional and their client) must be brought within 6 years of the date of the breach.

Section 14A:   This provides that where a claimant does not have knowledge of a financial loss at the time it is suffered, a claim for negligence (which includes a claim for professional negligence) must be brought within 6 years of the date upon which the financial loss occurs or within 3 years of the earliest date upon which the claimant has both the knowledge required for bringing a claim and the right to bring a claim, whichever is later.

Section 14B: This provides that a claim for negligence (which, again, includes a claim for professional negligence) cannot be brought more than 15 years after the date on which the act or omission giving rise to it occurred, even if the time limit prescribed by section 14A has not expired.

Therefore, where you have grounds for pursuing a professional negligence claim you will generally have 6 years from the date of wrongdoing or loss, but you may have 3 years from the date of discovery, if later, in which to bring any claim, subject to a long stop of 15 years.

What do I need to do to comply with the time limits?

Before the time limit for your claim expires and to stop time running you (on someone acting on your behalf) must deliver a valid Claim Form to the appropriate court, together with the appropriate court issue fee.

What happens if I don’t comply with the time limits?

If you fail to comply with the prescribed time limit, you will not be able to recover damages in relation to that element of your claim to which the limit applies, regardless of the merits.

In some instances, limitation can provide a complete defence to a professional negligence claim.

Can these time limits be varied?

Yes. It is possible to vary or postpone time limits by agreement. Frequently, the latter is done in the form of a Standstill Agreement. However, because of the serious consequences of failing to comply with the time limits for bringing a claim, considerable care should be exercised when agreeing to do so.

The above time limits can also be affected by conduct. Under section 32 of the Limitation Act 1980 they may be postponed where the claim is based on the fraud of the professional or where any fact relevant to your right of action has been deliberately concealed from you by the professional.

Where can I find more detailed information?

A more detailed account of the primary limitation periods (sections 2 and 5 of the Limitation Act 1980) that apply to professional negligence claims and the dangers associated with them can be accessed here.

A more detailed account of the secondary limitation period (section 14A of the Limitation Act 1980) that applies to professional negligence claims and the dangers associated with it can be accessed here.

Finally, a copy of the Limitation Act 1980 itself can be accessed here.

What should I do if I think I have a claim?

If you consider that you may have grounds for pursuing a professional negligence claim, you should seek legal advice from a specialist solicitor without delay.

In practice, calculating the time limits for a claim can be a complicated process and it is very possible that the time limit for pursuing any claim that you have will expire much sooner than you realise. By delaying, you run the serious risk that your right to pursue any claim could be inadvertently lost.

Acting promptly can have other advantages too. In some cases, it can ensure the preservation of important evidence that might otherwise be routinely destroyed, or simply lost. In other cases, it might ensure that your own recollection of particular events, as well as those of other witnesses, can be captured in as much detail as possible, before memories inevitably fade.

Where it is possible to resolve your claim consensually, acting swiftly may also avoid the need to incur the cost of issuing court proceedings which can, depending on the value of your claim, be considerable.

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.

In this article we consider the increasing risk of miscommunication between professionals and their clients, the approach the courts have taken to this issue and the actions professionals can take to protect both themselves and their clients from it in the future.

The potential for miscommunication

As the services sector becomes ever more reliant on electronic communication, it seems that the potential for miscommunication between client and professional has never been greater. For while texts, emails and instant messaging all offer speed and convenience, they also present a hotbed for misunderstanding and confusion. This is not only because of the speed with which professionals are expected to respond to such communications, but also because of the increasing brevity of those communications and the informal and abbreviated language that is increasingly used within them.

Added to this is the risk posed by the accessibility of electronic communications. With many professionals now enjoying remote access to their work emails through mobile phones, laptops, tablets and even watches, there is much greater potential for instructions to be received and actioned out of office hours or on annual leave. At these times, professionals risk greater distraction from environmental events, making them potentially less able to identify ambiguity and potentially more prone to misinterpretation.

While mobile phones have existed for many years, reliance on them continues to increase as employees become more agile and more mobile. Making and receiving calls in the car, on the train or walking down the high street can be efficient, but it can also hamper concentration.

But it is not only electronic communication and new working patterns that present a heightened risk of miscommunication between professionals and their clients. Due to the increasing level of migration over the last ten years, there is a significant proportion of the UK population for whom English is not a primary language. Where technical issues are being addressed, this can make the risk of confusion even more acute.

Further still, and because people are living longer, an ever-widening generational gap is occurring. With new generations not only adapting and redefining existing words and phrases, but also replacing them with acronyms and emojis, there is added potential for misunderstanding to occur. As parents, some professionals may have first-hand experience of this.

Examples of miscommunication

Miscommunication between client and professional can occur in a variety of different ways. It may simply be that the instructions given by the client are themselves ambiguous, confused or incomplete. Alternatively, they may conflict with instructions given previously, either by the same client or by a jointly instructing client.

On other occasions it may be unclear what the scope of the client’s instructions are and whether they encompass or extend to certain incidental or ancillary tasks.

Finally, for example, misunderstandings may arise through interaction with other professional advisers, who may be relaying instructions or whose own actions or instructions might result in a client’s instructions being misconstrued or misinterpreted.

Regrettably, when misunderstandings do arise, they risk becoming fixed in the sufferer’s mind, causing later events and remarks to be all too easily interpreted in light of a mistaken belief.

The approach taken by the courts

While the risk of miscommunication between client and professional may have increased, it is not a new one. Over the years the courts have been required to consider a number of professional negligence claims in which it has been alleged that client instructions have been misinterpreted or misunderstood.

Although each case mentioned below involved solicitors, the principles articulated are capable of much wider application and all professionals should take note of them.

Griffiths v Evans

Here the claimant had instructed the defendant solicitors fearing that the statutory compensation payments he was receiving following an accident at work would be reduced. While the solicitors engaged in negotiations in relation to those payments, they failed to consider or advise the claimant of an alternative remedy available to him at common law.

In his dissenting judgment, Denning LJ commented that:

‘On this question of retainer, I would observe that where there is a difference between a solicitor and his client upon it… the word of the client is to be preferred…or, at any rate, more weight is to be given to it…If the solicitor does not take the precaution of getting a written retainer, he has only himself to thank for being at variance with his client over it and must take the consequences.’

Gray & Another v Buss Murton (A firm)

In this case the claimant was companion and housekeeper to a successful businessman, Mr Akehurst. After relations between Mr Akehurst and his son soured, he prepared a home-made will by which he intended to bequeath his home to the claimant absolutely. At Mr Akehurst’s request, the claimant then took the will to the defendant solicitors, to confirm that it was fit for purpose. After inspecting the will, the defendant’s representative confirmed that it was legally valid, which satisfied the claimant.

However, following Mr Akehurst’s death, it transpired that while the will was valid, it did not bequeath his home to the claimant absolutely, as was intended.

In a claim for professional negligence against the defendant, the court concluded that the defendant had been negligent in failing to clearly ascertain the claimant’s wishes and in turn, the scope of the defendant’s retainer. It observed that:

‘…it is the lawyer who is in a far better position to recognise the possibility of misapprehension where the question of the extent of the retainer is concerned…and so it is the solicitor’s business to ascertain the client’s wishes accurately, bearing in mind the possibility that the client, through ignorance of the correct terminology, may not have expressed it correctly.’

Wellesley Partners LLP v Withers LLP

Here the claimant was an executive search firm set up by Mr Channing and his colleague. In 2007 and with a view to expansion, Mr Channing agreed to sell a 25% share in the claimant to Addax, a Middle Eastern bank, for £2.5m. Mr Channing instructed Withers to prepare the necessary documents to facilitate the investment, which included a new LLP agreement.

Amongst other matters, the new agreement was to provide that after 42 months, Addax had the option of cancelling up to 50% of its investment, which would then be returned to it. However, following an undocumented telephone conversation between Mr Channing and Withers, the latter amended the draft agreement so that Addax could exercise its option at any time up to 41 months from commencement.

In 2009, and in response to the financial crisis, Addax exercised its option causing significant financial hardship to the claimant. After a settlement was eventually reached with Addax in 2011, Mr Channing commenced a professional negligence claim against Withers. His main allegation was that Withers had made the changes to the option without instructions to do so.

At first instance the judge found that it was likely that Mr Channing had given further instructions in relation to the option, but not in terms that accorded with the changes made by Withers. In doing so, he observed that:

‘…if Mr Channing’s instructions were not clear…[Withers’] duty was to obtain clarification. I do not think it is open to a solicitor who has not drafted something in accordance with his instructions to escape liability by saying that the instructions were unclear.’

Steps to minimise the risk

It should be clear from the above that the courts place considerable onus on the professional to apprehend and defray any misunderstanding. Therefore, having regard to the present-day risks identified above, professionals may consider it good policy to:

• Take calls on the go but, unless urgent, call back later for instructions and advice
• Qualify out of office advice required urgently, or refer the matter to a colleague
• Make attendance notes as a follow up to all out of office calls
• Avoid responding to client emails when impaired or distracted
• Set up a reliable email monitoring system before departing on annual leave
• Confirm material oral instructions in a short follow up email or letter
• Contrast instructions needed with those received, to ensure the latter are complete
• Allow time for reflection before acting on instructions
• Seek confirmation when needed, to put any misunderstanding beyond doubt
• Keep in mind the client’s commercial objectives

Conclusion

With modern technology making instant access and superfast communication the new norm, the pressure on professional advisers to act quickly and efficiently when receiving and responding to client instructions has never been greater. However, if miscommunication is to be averted and claims for professional negligence avoided, all professionals should take the time to consider and adopt the behaviours essential to managing this increasing risk.

In this article we examine some of the common conveyancing errors made by solicitors and licensed conveyancers when undertaking residential property transactions.

Historically, conveyancing errors have given rise to more claims against solicitors than any other area of legal practice. There are undoubtedly a variety of reasons for this. However, one significant reason is that while the residential conveyancing process is relatively formulaic, it nevertheless addresses a wide range of legal issues and attendant pitfalls.

Consequently, there are, unfortunately, a myriad of mistakes that can occur during the course of a residential conveyancing transaction. Here, however, we focus on those that we have seen arise with some frequency and for which we can offer reported examples.

Failing to make pre-exchange searches

A number of searches are undertaken by the purchaser before sale contracts are exchanged with the vendor. While some of these searches (such as a local land charges search and local authority search) should be undertaken as a matter of course, others (such as flood searches or coal mining searches for example) are discretionary and a matter of professional judgement.

In some transactions, the appropriate searches and enquiries are overlooked. This was the case in Peter & Julia Cottingham v Attey Bower & Jones. Here the claimants instructed the defendant firm of solicitors on the purchase of a house that had been extended and extensively renovated by the vendors. However, prior to the purchase, the claimants’ solicitors had failed to undertake independent searches to confirm that building regulation approval had been obtained for these from the local authority. This omission was later found to be negligent by the court and the claimants’ solicitors were ordered to pay damages to compensate them for the additional professional and building regulation fees they had to incur.

Failing to advise on ground rents for leasehold property

Over the last year considerable concern has been raised over the practice by some residential developers of selling new build properties as leaseholds, with onerous ground rent provisions. Many of the purchasers affected have complained that they were never advised of the ground rent provisions or their significance and that, in some cases, their properties are now unsaleable.

As a consequence, a large number of claims have already been made against solicitors, with many more expected to follow. For further information about this issue, please see our article: Leasehold Ground Rent Scandal – Your Key Questions Answers.

Failing to ascertain rights of access

While the ability to gain lawful access to any property or land is clearly essential, the right to do so is not always a given. This can be so even where access has occurred previously. With the significant rise in infill development, where a right of way over either a vendor’s retained land or a neighbour’s land is frequently required, issues over access have become increasingly common.

The issue of access arose in the case of Malcolm Tucker & others v MB Allen & Co. Here the claimants instructed the defendant firm of solicitors to act for them on the purchase of a cottage and nearby paddock, the latter for grazing horses. Although the previous owners had advised that they had gained access to the paddock via a public footpath, it later transpired that no public or private right of way existed. In subsequent proceedings for professional negligence against the solicitors, the court held that in failing to advise the claimants of the true access position, the solicitors had acted in breach of their retainer and negligently.

Failing to advise on restrictive covenants

Restrictive covenants over residential property are extremely common. They serve to restrict the use or enjoyment of the land to which they attach and may be enforceable by future property owners. The nature of the restrictions can vary enormously and a precise reading of them is imperative. Where such covenants restrain the very usage for which a property had been purchased, the results can be devastating.

In the relatively recent case of Helen Joyce v Darby & Darby, the claimant had instructed the defendant firm of solicitors to act for her on the purchase of a large residential property. This she intended to divide into two dwellings and improve through the addition of a pool, balcony extension and terracing. However, after works had commenced, the claimant was advised by solicitors acting for her neighbour that restrictive covenants prevented her from using the property other than as a single private dwelling, or altering its external appearance without written consent. An injunction was subsequently obtained against the claimant and the property was eventually repossessed.

In a claim against the defendant solicitors, the court held that they had indeed been negligent in failing to advise clearly on the alterations covenant, its enforceability and the vulnerability of the claimant’s position. It also awarded damages against the solicitors for both the wasted costs the claimant had expended on building works and any diminution in the value of the property when purchased.

Failing to avoid delay

Delay in conveyancing transactions is not uncommon and can give rise to considerable frustration and inconvenience for those involved. While it is not on every such occasion that the delay is caused by the actions or inactions of the solicitor, or that it gives rise to actionable loss, this certainly does happen.

In Stovold v Barlows (A Firm) the claimant was most anxious to sell his house, having already purchased another with a bridging loan. After agreeing a sale price with an intended purchaser, he instructed the defendant firm of solicitors to undertake the conveyance. However, in doing so, the defendant sent urgent conveyancing documents to the wrong address, causing their receipt to be delayed. In the meantime, the intended purchaser resolved to buy another property. While the claimant was eventually able to sell his house, the price he attained for it was substantially less than that which he had agreed with the original purchaser.

Both at first instance and on appeal, the court held that in a matter as important as this, where it was vital that the conveyancing documents were received as soon as possible, risks should not have been taken or assumptions made on such a fundamental issue as the proper address of the recipient. In turn, damages were awarded against the defendant solicitors for the claimant’s lost chance of securing a higher sale price.

How we can assist

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

If you think that you may have suffered a financial loss as a result of a conveyancing error, and if you would like to explore the possibility of pursuing a claim for compensation, please contact us on 0800 195 4983 or 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.

In this article we examine some of the common conveyancing errors made by solicitors and licensed conveyancers when acting on commercial property transactions.

There can be similarities in the nature of the conveyancing errors made in residential and commercial transactions. However, the context in which these errors occur can be different, as can the nature and amount of the loss arising from them. For this reason, we have addressed them separately.

Historically, conveyancing errors have given rise to more claims against solicitors than any other area of legal practice and here, we identify those that we have seen arise with some frequency and for which we can offer reported examples.

Failing to utilise an appropriate plan

In our experience, conveyancing plans are a notorious source of errors, particularly in relation to development land. In some instances, it is the lack of clarity in the plan that gives rise to problems. In other cases, for example, it can be confusion as to which of a number of similar plans is the correct one for the particular conveyance. Some plans are simply erroneous and fail to correspondence fully with the contracts or deeds to which they are intended to relate.

In the recent case of Mansion Estates Ltd v Hayre & Co the claimant instructed the defendant firm of solicitors on the purchase of development land in Bradford, part of which it intended to dispose of by way of a sub-sale. However, after completion of the sub-sale, issues arose over the extent of the land included in the sub-sale, which precluded vehicular access being gained to the claimant’s retained land. The claimant asserted that the plan attached to the transfer deed was not correct and was not the plan that he had given to the defendant solicitors. The defendant asserted that it was.

Proceedings were issued for professional negligence and at trial, the court preferred the claimant’s evidence. In addition, it found that in filing the wrong plan, the defendant solicitors had been negligent and it awarded damages against them of £211,500 on this basis.

Failing to advise on planning limitations

In the commercial market, the use to which land and property is put has a tendency to change much more frequently than in the residential market. While it is not in every case that a change of use will necessitate further planning permission, this should certainly be a consideration before land or property is purchased. This is particularly so where the land or property in question is located in an area where planning sensitivities exist, such as green belt land, national parks or areas of outstanding natural beauty and/or where the proposed change of use is significant.

In AW Group Ltd v Taylor Walton the claimant had instructed the defendant firm of solicitors to act for it on the purchased of industrial land and units near Luton. However, following completion, the council served an enforcement notice in relation to the construction and use of part of the land for the parking of HGVs.

On this occasion, the defendant was successful in persuading the court that it had not in fact caused the claimant’s consequential loss. However, in failing to ascertain and/or clarify the claimant’s intentions for the land and in failing to advise on planning permission issues, the defendant was nevertheless found to have acted in breach of its duty of care.

Failing to make pre-exchange searches

Pre-exchange searches are just as important in a commercial setting as they are in a residential one. While some searches should be undertaken as a matter of course, others will be discretionary. In many cases the scope of the searches undertaken will depend on all the circumstances and not just on whether the property is residential or commercial. However, searches in respect of enterprise zones and hazardous substance consents are, for example, generally more common in a commercial context.

In G + K Ladenbau (UK) Ltd v Crawley & De Reya the claimant had instructed the defendant firm of solicitors to act on its behalf in the purchase of industrial land, which it intended to swiftly resell to a third party for more than three times the original purchase price. However, following the purchase and during the course of the resale, rights of common were identified as a result of a search not previously undertaken by the claimant’s solicitors. In consequence, the resale was delayed, causing various financial losses to be suffered by the claimant.

While recognising that there was clearly room for some discretion, the court found on the facts of this case that the defendant solicitors had been negligent in not undertaking a search of the commons register prior to the original purchase.

Failing to advise fully on rental provisions within a lease

In the commercial market, the demand for leasehold property is generally much greater than for freehold property. For many businesses, leasehold property not only requires less of an upfront financial commitment, but also offers flexibility should the needs or circumstances of the business change. However, to better assess whether future rental commitments can be met, businesses will need to understand the basis upon which they will be calculated, which may not be straight forward.

In the case of County Personnel (Employment Agency) Ltd v Alan Pulver & Co. the claimant entered into a 15-year lease, with rent reviews every 5 years. The lease provided that upon review, the initial rent would increase by the same percentage as the landlord’s rent, under the terms of the head lease. However, while the landlord’s rent reflected true market value, the initial rent was already at least three time higher than its true market value. As a consequence, and upon first review, the claimant’s rent increased significantly and to a level that the claimant could not sustain. Therefore, the lease was surrendered.

Proceedings were then commenced against the defendant solicitors for professional negligence. On appeal, the court found that they had been negligent in failing to warn the claimant of the risks inherent in the rental provisions of the lease, which should have been apparent to them, but which were most unlikely to occur to the claimant.

Failing to comply with time limits

Time limits are prolific in conveyancing and for good reason: they encourage progress and provide certainty. While some are imposed by statute, others are arrived at by agreement between the parties and recorded in contracts and leases. Time limits for completing a sale, exercising an option to purchase or exercising a break clause, are just a few common examples. Unfortunately, deadlines can easily be missed and when they are, the financial consequences can be serious.

In Whelton Sinclair (a firm) v Raymond William Hyland the claimant was the lessee of retail premises in Kent. Shortly before the expiry of his lease and under section 25 of the Landlord and Tenant Act 1954, solicitors for his landlord served on both the claimant and his solicitors notice to terminate his tenancy. Any counter-notice for a new tenancy had to be served within 2 months. However, the claimant’s solicitors mislaid the instructions the claimant had provided by telephone and this deadline was missed.

Both at first instance and on appeal, the court found that the defendant solicitors had been negligent in failing to serve the required counter-notice. The court also awarded damages against them for the value of the premium that the claimant could have realised, had he obtained and assigned a new lease, as was his intention.

How we can assist

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

If you think that you may have suffered a financial loss as a result of a conveyancing error, and if you would like to explore the possibility of pursuing a claim for compensation, please contact us on 0800 195 4983 or 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.

Please also feel free to contact us if you are intending to buy or sell a property and would like the details of an experienced solicitor, who specialises in commercial conveyancing. We would be happy to provide these to you.