Solicitors Liability: latest decisions August 2020
The last few months have seen a run of cases relevant to solicitors liability issues which we digest below.
Duty of Care
Valley Brook Investments v Huam [10.07.20]
The defendant in this case was an architect. It had prepared drawings for its client M concerning the conversion of a property to residential use. M intended to sell the relevant property to A and/or a SPV company controlled by A (“the Company”). At the time the drawings were sent to A, the Company had not been incorporated. The Company purchased the property and both A and the Company brought a claim alleging that the drawings had been prepared negligently. The architect sought to dismiss the Company’s claim, in part, on the basis that there was no assumption of responsibility to an entity which did not exist at the time the drawings were prepared.
The court found that the Company was within the relevant class of persons in respect of which a duty had been assumed. An awareness of the fact that a SPV was to be used was found and as at the date of reliance (purchase of the property), the SPV existed.
This is a difficult case for professionals generally as protections put in place in the retainer documentation such as limitations of liability or proportional liability clauses may not be effective when the claim is brought by a non-client.
Service of the Claim Form
Piepenbrock v Associated Newspapers [01.07.20]
Again, not a solicitors case, but one illustrating the perils of service of the Claim Form. It raises familiar issues, but ones that still generate significant “lost litigation” claims against practitioners.
Here, the claimant (acting in person) “served” a Claim Form on the solicitors acting for the defendants just before the expiry of its four month validity. However, the solicitors had not confirmed they were authorised to accept service and had not been “nominated” as such by their clients. Service was therefore ineffective. Further, an application to retrospectively extend the time for service under CPR 7.6 was refused as such applications tend only to be effective if significant attempts have been made to effect service during the validity of the Claim Form, which did not apply here.
Given the current working from home restrictions in place, we expect service issues to be paramount in the minds of litigators - both for court proceedings and also for contractual notices such as break clause notices in leases or options.
Holt v Holley & Steer [07.07.20]
This claim arose from family proceedings and, in particular, deals with when limitation from the allegedly negligent conduct of financial relief proceedings would run.
The claimant alleged that the defendant solicitors had failed to obtain expert valuation evidence and hence the valuation of certain of her assets within the matrimonial finance proceedings were inflated, leading to a lower award. The Claim Form in the claim against the solicitors was issued within six years of the date of the family judgment, but more than six years after the relevant hearing. The claimant alleged that matrimonial litigation was unlike other forms and hence the loss did not crystallise until judgment was handed down.
The Court of Appeal rejected this approach and applied lost litigation cases such as Khan v Falvey which looked at when the “chose in action” suffered damage, namely when the hearing proceeded without the benefit of expert evidence contended for by the claimant.
Family proceedings have many differences to general civil litigation, but the Court of Appeal was persuaded that different rules should not apply for the purposes of calculating the date of loss in claims against negligent solicitors. Such clarity is to be welcomed given the proliferation of cases on limitation over the last few years.
The Akhmedova Case [13.06.20]
Another matrimonial case - this time involving very big money.
The wife received an award of £453m and has been chasing the husband’s assets around the globe. So far, only £5m has been recovered. The wife sought assistance from third party litigation funders to continue the quest. The husband asserted that it was wrong in principle for third party funders to be allowed to fund matrimonial litigation on the basis that funders may exercise control over the conduct of litigation and that their consent to settlement may be required. This, it was suggested, would be in breach of public policy in the context of matrimonial proceedings, particularly as solicitors are not permitted to act on a conditional fee basis in such cases and the potential champertous nature of the relationship.
Mrs Justice Knowles rejected these arguments. She was satisfied that third party funding provided an appropriate route to justice in cases such as this, in particular where the funder was a member of the Association of Litigation Funders and bound by its code of practice.
Litigation funding is here to stay and this is the latest in a number of judgments which have endorsed its ability to achieve access to justice for impecunious claimants. We expect, if there is a COVID-19 caused economic recession, to see many more claims against professionals funded by third party funders, particularly claims brought by insolvency professionals.
Clitheroe v Bond [21.05.20]
Hot on the heels of the government introducing new legislation concerning the witnessing of “Zoom Wills”, our final case highlights the importance of the “golden rule” for probate practitioners.
The mother left her estate to her son, leaving her daughter nothing. The will contained adverse comments about the daughter and highlighted a breakdown in the relationship between her and her mother. The daughter challenged the will on the basis of a lack of testamentary capacity. Evidence was lead that the mother suffered from a “complex grief reaction” and that there had been a poisoning of her mind against the daughter. The daughter succeeded in having the will set aside and hence the intestacy rules applied.
Practitioners will be aware of the “golden rule” - when advice should be taken from a medical practitioner as to testamentary capacity. We expect that many wills have been prepared in the last six months in a rush, if not a panic, and that often for very practical reasons, the golden rule has not been complied with. Often in such circumstances, solicitors can find themselves drawn into bitter family disputes which can be expensive to defend. Larke v Nugus statements setting out the solicitor’s contemporaneous recollection of the will taking process are a vital tool in the solicitor’s risk management armoury.
To discuss these or any other aspect of solicitors’ liability or risk management please contact Paul Castellani, David Robinson or your usual Kennedys contact.