Solicitors: a look back at 2019 and a look forward to 2020

In 2019, developments in relation to solicitors' negligence cases have largely focussed on the area of loss of chance. We review the 2019 loss of chance cases, developments in legal advice privilege, solicitors' duty to warn as well as regulatory developments. We also look at what lies ahead in 2020.

Loss of chance

Where a claimant sues a solicitor for the lost chance to secure a better result that would have been obtained but for the professional's negligence, the courts have the challenge of assessing the value of that lost chance.

The case of Perry v Raleys Solicitors [2019] UKSC 5 provided the Supreme Court with its first opportunity to consider the correct approach to determining loss of chance claims arising out of lost litigation since the Court of Appeal's decision in Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] UKSC 5.

Following Perry v Raleys, we have seen the Supreme Court continue to grapple with loss of chance cases. Notably, in Edwards v Hugh James Ford Simey (a firm) [2019] UKSC 54 the Court considered what evidence should be admissible when assessing the loss suffered. Both of these cases involve claims by former miners against their solicitors for a lost chance to claim compensation for vibration white finger (VWF). However, the judgments have implications for professionals and their insurers across a range of loss of chance claims.

Perry v Raleys

The key issues arising from the Supreme Court judgment are:

• There is no change to the requirement that a claim in negligence for loss of chance requires proof that the loss has been caused by the breach of duty and that the claimant has lost something of value.
• There is also no change to the causation requirements established in Allied Maples that a claimant must prove his/her actions on the balance of probabilities before then determining how a third party would have acted on a lost chance basis.
• It remains generally inappropriate to conduct a "trial within a trial".
• In addition to claims for nuisance value, dishonest claims will not be recoverable against negligent professionals.
• There is no distinction for these purposes between "lost litigation" claims and claims for loss of a chance under other commercial transactions.

Allied Maples principle

The judgment considers the causation principle established in Allied Maples that a claimant must first prove, on the balance of probabilities, what he/she would have done had the professional not been negligent. Secondly, to the extent that their loss depends on the hypothetical actions of third parties, the lost chance is calculated on a percentage basis by reference to the prospects that the better result would have been secured.

First instance decision

The case concerned a claim by an ex-miner against his solicitors for loss of a chance to claim special damages for VWF. Interestingly, the trial judge found that the claim for compensation could not have been brought honestly; during a two-day trial in which the claimant and his family members gave evidence, the judge found that the claimant was lying about the impact his condition had on his ability to carry out certain activities. Acting honestly, the claimant would not have qualified for the compensation in the first place. The trial judge accordingly concluded that the claimant had failed to prove that the solicitors' negligent advice caused him any loss.

Court of Appeal decision

The Court of Appeal stated that the examination of the claimant and his family members in the professional negligence claim amounted to a "trial within a trial", which was not allowed under the established principle. The Court of Appeal reversed the trial judge's findings in law and (unusually) awarded damages to the claimant.

Supreme Court decision

The Supreme Court overturned the Court of Appeal's decision, reinstating the trial judge's decision. It held that it had been proper for the trial judge to have conducted a trial on the question of whether the claimant would or could have brought an honest claim for compensation had his solicitors given him competent advice. Following Allied Maples, the claimant had to prove this issue on the balance of probabilities and it was capable of being fairly tried as the evidential matters were within the claimant's own knowledge. Having sought to clarify the evidential test, the Supreme Court did not seek to question the trial judge's findings that, on the balance of probabilities, the claimant would not have pursued a claim in circumstances where the claimant was found to have been dishonest about how his VWF condition affected his ability to carry out certain activities. For more on this case see here.

Loss of chance: developments since Perry v Raleys

Third party's evidence

Following Perry v Raleys, the High Court considered the question of standard of proof in loss of chance cases in Moda International Brands Limited v Gately LLP [2019] EWHC 1326 (QB). The court found that Gately had negligently advised Moda's agent on a property transaction agreement, but the key question was whether Gately's negligence had caused Moda to suffer a loss. The judgment confirmed the test laid down in Allied Maples, and reinforced in Perry v Raleys. It was held that in a professional negligence claim for loss of chance which depends upon the hypothetical actions of a third party, the court should evaluate the loss on a loss of chance basis, even where the third party has given evidence in court.

Admissibility of expert evidence

In Edwards v Hugh James the Supreme Court considered whether evidence that would not have been available at the underlying trial should be permitted when determining the value of a loss of chance claim. Similarly to Perry v Raleys, the case concerned a miner's claim for a lost chance to claim compensation for VWF under a government compensation scheme. The key question was whether the prospects of success of such a claim should be determined at the date when the claim was lost or the date when damages are awarded. The Supreme Court agreed with the Court of Appeal that it was inappropriate to allow an expert medical report on the claimant's condition obtained subsequently with the benefit of hindsight. Allowing this medical evidence would have been fatal to the claimant's case as it concluded that the claimant did not have the requisite VWF condition to be able to claim compensation.

The original claim was a claim within a defined compensation scheme and the claimant had lost the value of his claim under that scheme. The original scheme did not provide for a claim to be assessed by matters covered in the subsequently obtained medical report, and therefore this evidence was not relevant to the assessment of loss. Accordingly, the court held that the claimant had lost a claim under the scheme, and the judge should have proceeded to assess its value on a loss of chance basis.

Loss of chance: commentary

The Supreme Court judgment in Perry v Raleys provides helpful guidance on the correct approach to dealing with causation in claims for loss of a chance. As re-affirmed in Moda v Gately, it remains the case that the issue of factual causation in a loss of chance claim will be determined by reference to the Allied Maples principles. Insurers and professionals may therefore take comfort from the fact that Perry v Raleys reinforces that claimants, rather than third parties, are still required to prove their actions on the balance of probabilities and that dishonest claims can expect to be dismissed.

A more interesting question arising from Edwards v Hugh James that remains unanswered is whether it is always the case that expert evidence secured after the underlying trial, which undermines the basis of a lost chance claim, is inadmissible. We know from Edwards that no such evidence will be permissible in a defined compensation scheme that would not have entertained such evidence at the material time. However, the law is far from clear on whether retrospective expert evidence is inadmissible in lost chance cases that extend beyond the VWF compensation scheme. Perhaps 2020 will provide an answer to that broader question.

Legal advice privilege

In terms of developments away from the loss of chance arena, 2019 has been a relatively quiet year as far as solicitors' negligence cases are concerned. The case of Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600 dealing with the issue of legal advice privilege is worth a mention.

The case was brought by investors in a scheme marketed by a Cypriot company, Anabus Holdings Limited (Anabus). Anabus was advised by Salans LLP, now Dentons Europe LLP (Dentons). In 2016, Anabus was dissolved in Cyprus. Rights relating to documents on Dentons' file, created during the course of its retainer by Anabus, passed to the Crown as bona vacantia and the Crown disclaimed all interest in them "without either asserting or waiving any legal professional privilege". The investors claimed that the scheme was fraudulent and issued proceedings against Dentons. In the course of those proceedings, the investors sought disclosure of the documents between Anabus and Dentons.

The question for the Court of Appeal was whether legal advice privilege remained attached to a communication unless and until that privilege was waived or whether the privilege would be lost if there was no person entitled to assert it at the time a request for disclosure was made.

Privilege remains absolute unless waived

The Court held that a communication qualifies for legal advice privilege as a result of the purpose for which, and the circumstances in which, the communication was made. Privilege thus established remains absolute unless waived. The iniquity exception (which holds that no privilege attaches to documents or communications between the client and lawyer where the purpose of the client was the furtherance of crime, fraud or other iniquity) does not conflict with the principle that once privilege attaches, it remains unless waived. This is because communications created between a client and lawyer, where the purpose of the client is the furtherance of crime, fraud or other iniquity, will never attract legal advice privilege in the first instance. Accordingly, the boundaries of legal advice privilege are that the communication must be between lawyer and client made in connection with the giving or receiving of legal advice other than for an iniquitous purpose.

Immunity from production belongs to the client

The Court held further that immunity from production belongs to the person who was the client at the time the communication was made. Once created, the immune status attaches to the communication and once the client ceases to exist, the only remaining question is whether there is anyone who has the right to waive that privilege. In considering the policy choices to be made by the novel question of whether the Court should refuse to extend privilege to a dissolved company, the Court found that it was not a question of extending the scope of privilege but of extending the circumstances in which privilege, once attached to a communication, ceases to apply. The firm position in law was that privilege would only cease when waived by the client or someone else entitled to waive it or when overridden by statute. The recognition of exceptions would undermine the policy of certainty that underpins legal advice privilege. Further, given that legal advice privilege remains in existence unless and until it is waived, the fact that there may be no one who could waive that privilege or whether, as in this case, the Crown could have waived privilege but had not done so was irrelevant. The appeal was therefore dismissed.

Duty to warn of defective service

In Woodward & another v Phoenix Healthcare Distribution Limited [2019] EWCA Civ985, the Court of Appeal considered whether or not the overriding objective at CPR r1.1 (enabling the court to deal with cases justly and at proportionate cost) required a defendant's solicitor to alert a claimant to defective service before limitation expired.

The appeal arose following the issue of proceedings by Ms Woodward and Mr Addison (the Claimants) against Phoenix Healthcare (Phoenix) for breach of contract and misrepresentation. The cause of action arose on 20 June 2011 and was therefore potentially time barred from 20 June 2017. The Claim Form was issued on 19 June 2017 and in accordance with the Civil Procedure Rules (CPR) should have been served no later than midnight on 19 October 2017.

The Claim Form and supporting documents were sent by first class post on 17 October 2017 to Phoenix's solicitors, Mills & Reeve (MR) and were received by MR on 18 October 2017. They were also sent by email to a partner at MR on 17 October 2017. MR considered the purported service to be ineffective on the grounds that MR were not authorised or instructed to accept service and took the view that they were not obliged to notify the Claimants' solicitors of the mistake. MR notified the Claimants on 20 October 2017, the day after the Claim Form expired, to confirm their view that service had been defective.

At first instance, the Master held that Phoenix's entitlement to take advantage of the windfall opened up by the Claimants' mistake was qualified by MR's obligation to the Court to give effect to the overriding objective rather than employ "technical game playing". The decision was reversed by the Judge on appeal. The Claimants appealed to the Court of Appeal.

No duty to warn

The Court of Appeal found that the case was indistinguishable from the Supreme Court decision in Barton v Wright Hassall LLP [2018] UKSC 12, which held that the defendant was under no duty to warn the claimant that service was invalid where the claim form was served very near to the end of the limitation period. Lord Sumption in Barton emphasised the prejudice that would be suffered by the defendant from the loss of a limitation defence were service to be validated. He stressed the distinction between CPR r3.9 (which conferred a power on the Court to relieve a litigant from sanctions imposed for failure to comply with a Rule, Practice Direction or Court order) and CPR r6.15 which was directed specifically to the rules governing service of a claim form. There was a disciplinary factor in the decision as to whether to impose or relieve from sanctions in CPR r3.9 which was less important in CPR r6.15.

The Court of Appeal in Woodward found that the Master had ignored the majority decision in Barton. While the Supreme Court in Barton had not specifically considered the overriding objective, the emphasis on the prejudice arising from the loss of a limitation defence and the lack of any duty to warn in that situation was inconsistent with a positive duty to warn pursuant to the overriding objective.

Impact of when the limitation period expires

The Court of Appeal therefore agreed with the Judge's decision that the Master had been wrong to find that there had been technical game playing by MR and dismissed the appeal. Solicitors should note however that Lady Justice Asplin found that the decision might be different with regard to the duty to warn if there was a substantial period before the expiry of the limitation period.

Regulatory changes

Solicitors will be all too aware of the new regulatory regime that came into force on 25 November 2019 and which replaced the old SRA Handbook. The new Standards and Regulations (or STaRs) apply to solicitors working in private practice, in-house and outside a law firm and focus on high professional standards and the need to protect the public.

Clearly all solicitors need to familiarise themselves with the new regime carefully but key issues are:

• The single Code of Conduct has been replaced with two new Codes of Conduct, one for solicitors, Registered European Lawyers (RELs) and Registered Foreign Lawyers (RFLs) (which applies regardless of whether the solicitor is in private practice or in-house) and one for regulated firms.
• The key theme is the need to act with honesty and integrity.
• The existing ten principles of the old Code have been cut down to seven and require solicitors to act in a way that upholds the constitutional principles of the rule of law and the proper administration of justice and in a way that upholds public trust and confidence in the profession. Solicitors must also act with independence, honesty, integrity and in a way that encourages equality, diversity and inclusion and in the best interests of each client. It is important for solicitors to note that a failure to follow these principles, not only in their professional life but also in their private life, could lead to an investigation or prosecution by the SRA.
• The old outcomes and indicative behaviours have been replaced by Requirements.
• The ways in which solicitors can practise and the public can access legal services has been widened so that solicitors can now work on a freelance basis or as part of a non-regulated business.

The aim of the changes is to produce ethics based principles of practise and the focus is firmly on the behaviour of the individual with solicitors being held personally accountable for breaches. More details in relation to the changes can be found here.

What is on the horizon for 2020?

Last year we featured the Court of Appeal decision in Stoffel v Grondona [2018] EWCA Civ2031 in which the Court considered whether a client should be able to claim damages for professional negligence where the claim arose from mortgage fraud. The decision is being appealed to the Supreme Court and is due to be heard at some point next year. Watch this space!

There also appears to be a continuing trend of claims against conveyancing firms relating to the alleged failure to apply for multi-dwelling relief when client purchasers pay Stamp Duty Land Tax on their purchases. Further guidance from the court and/or HMRC on what amounts to a separate dwelling is likely to be welcome to assist in the defence of such claims.

We continue to anticipate that claims in relation to fraud and cyber-attacks will remain risk areas and we also forecast a rise in the number of claims arising out of failed PPI claims. See more details here.