Establishing loss in professional negligence claims

News | Wed 15th Mar, 2017

In this short article, I review three decisions of the Court of Appeal from the last five months or so where claims against professionals failed notwithstanding it being held that breach of primary duty was established. Whilst, these cases do not seek to restate the law in this area, they serve as a timely reminder that claimants will not succeed unless they can establish that there is some causally-relevant link between the breach and loss they suffered.

In Timothy Wright v Lewis Silkin LLP [2016] EWCA Civ 1308, the court below held that the claimant had lost a 20 per cent opportunity to recover an awarded severance payment of £10.3 million under the said contract by virtue of the defendant’s omission of an exclusive jurisdiction clause in an employment contract, which was assessed at and ordered by way of a judgment sum of £2.04 million.

The defendant appealed on the basis that (amongst others), the trial judge erred in finding that even with an exclusive jurisdiction clause, there was no realistic chance of the claimant recovering; and the held loss of a 20 per cent chance was too remote to sound in damages and/or was outside the scope of the solicitor’s duty in relation to the jurisdiction issue.

The Court of Appeal dismissed the first ground of appeal particularised above, and held that the assessment of the value of a lost chance in such cases was pre-eminently a matter for the trial judge and the Court of Appeal should interfere with this if the judge had made an error of principle or reached a perverse conclusion. It was held that judge had made no such error.

The Appellant solicitors however succeeded on this second ground recited above. The Court of Appeal held that the duty breached by the solicitors was the duty to advise as to the prospect of including an exclusive jurisdiction clause in the contract. The loss of the 20 per cent chance to secure payment of a judgment debt was too remote to fall within the scope of the specific duty. Thus the £2 million judgment sum was set aside; the claimant being left solely with a judgment for £40,000 representing the litigation costs, the claimant would not have had to expend absent the breach of duty.

In Rodney Channon (t/a Channon & Co) v John Ward (t/a Ward Associates) [2017] EWCA Civ 13, the defendant (and respondent to the appeal) was an insurance broker who over a long period of time had arranged the chartered accountant claimant (and appellant’s) professional indemnity cover. The claimant was also a director of a property development company who had persuaded a number of people, including some of his accountancy clients, to invest in this. The property development company became insolvent and the claimant was sued by the various investors for negligent advice. It was hoped that the claimant’s professional indemnity provider would meet any such claims, however he had negligently failed to arrange this insurance.

Judgment was entered against defendant for damages to be assessed. It was naturally hoped that the defendant’s insurers would meet the judgement, however he had also neglected to arrange his own p.i. insurance! In the expectation that Financial Services Compensation Scheme would be available to the investors, the claimant agreed to settle the investors’ claims at £1.8 million. However at trial, damages due from the defendant to the claimant were assessed at nil. It was held that even if insurance cover had been in place, the claimant’s insurers would not have met the investors’ claims because the Claimant had not provided investment advice or been acting in his capacity as an accountant.

The Court of Appeal upheld the court below. By analysis, it held that but for the defendant’s negligence, the claimant would have had in place a policy of insurance on the same terms as he had previously. This was professional indemnity cover for an accountant. In the circumstances (having taken independent legal advice or otherwise), the insurer would not have accepted any claim in respect of the claimant’s liability in respect of his property development company.

In Balogun v Boyes Sutton & Perry (a firm) [2017] EWCA Civ 75, the claimant former client of the defendant law firm had his case dismissed at trial. The defendant was retained pursuant to the claimant’s acquisition of an underlease of commercial premises which had planning permission for restaurant use.

It was held that the defendant had breached his duty in failing to advise the claimant of a non-correspondence between the terms of a headlease and an under lease concerning the existence of a right to access and use a ventilation shaft. However, the dispute concerned the extent, not the existence of that right. Therefore the breach of duty was inconsequential and no loss flowed from it.

This was upheld on appeal on its own fact and the claimant’s appeal dismissed.