Disputes Yearbook 2024: 
Professional Liability 

Claims by prospective clients of solicitors

The Court of Appeal recently considered the scope of duty owed by solicitors to prospective clients: Miller v Irwin Mitchell LLP [2024] EWCA Civ 53 (see Court of Appeal considers duties owed by solicitors operating advice helplines).  The case concerned an individual, Mrs Miller, who contacted a law firm's helpline, with a view to seeking compensation following an injury which she sustained while on holiday.  On the call, the adviser provided Mrs Miller with a summary of personal injury law and limitation.  When Mrs Miller belatedly advanced her claim against her tour operator, it was insolvent and its insurers declined cover as they had not been notified promptly of the accident. 

The issue was whether the firm owed Mrs Miller a duty to advise her to notify the tour operator promptly of the accident.

Applying the conventional assumption of responsibility test (NRAM v Steel [2018] UKSC 13), Lady Justice Andrews had "no difficulty" in accepting that the firm would expect callers to rely on the information provided by the helpline operative, and that it would be reasonable for callers to do so (i.e. that it owed a tortious duty to Mrs Miller).  However, she held that the firm's responsibility was narrow: to provide preliminary advice of a limited and high level nature.  That did not include advice on whether to notify the travel operator of the accident.

Mrs Miller also argued that the contractual obligation on a solicitor to advise on matters "reasonably incidental" to their retainer (see Minkin v Landsberg [2015] EWCA Civ 1152), also applies where solicitors owe purely tortious duties.  This point was considered by the now Lady Chief Justice in Spire Property Developments LLP v Withers LLP [2022] EWCA Civ 970, but on which she preferred not to express a view.  Lady Justice Andrews similarly did not express a view, and dismissed the argument on the basis that such advice [to notify the tour operator promptly of the accident] could not "by any stretch of the imagination" be reasonably incidental to the firm's assumption of responsibility.

Assessment of solicitors' fees

Under section 70 of the Solicitors Act 1974 and CPR 46.9, a client can apply to have their solicitors' bill of costs assessed on the indemnity basis, subject to time limits, including that the application must be made within 12 months of "payment" of the bill.

In Oakwood Solicitors Limited v Menzies [2024] UKSC 34 – a decision handed down in October – the Supreme Court considered when "payment" occurs.  In that case, Mr Menzies settled his personal injury claim for a lump sum.  His solicitors, who were instructed on a Conditional Fee Agreement, delivered their final bill, which set out their fees and said that "the total charge has been deducted from your damages, as agreed" (ie, the firm paid Mr Menzies the settlement amount less their fees). Almost two years later, Mr Menzies sought to have the bill assessed.  The issue was whether "payment" occurred for the purpose of section 70 when the firm deducted its fees.

The Supreme Court held that "payment" does not merely comprise the transfer of funds to the firm's office account.  It also "requires an agreement [by the client] to the sum taken", either expressly or inferentially by conduct.

As such, firms which do not seek express approval from their client to deduct fees from damages are unlikely to benefit from the 12 month long stop.  Instead, they would need to rely upon discretionary time limits (eg, that the court will only permit an assessment more than 12 months from delivery of the bill in "exceptional circumstances").

Insurance broker negligence claims

Earlier this year, the High Court handed down judgment in a broker negligence case: Hamsard v AE Insurance Brokers [2024] EWHC 262 (Comm).  The case concerned a property insurance policy which had been avoided by insurers due to non-disclosure of material facts.  The insured alleged that the avoidance was the result of its broker failing to assist it in completing the proposal form.  The claim was unsuccessful, with Lionel Persey KC holding that evidence of the insured's witness "bears little resemblance to reality."  He made two points of broader application:

• He had "doubts" about adducing expert evidence "in a case of this nature."  He referred to the often cited decision of Mr Justice Leggatt (as he then was) in Involnert v Aprilgrange [2015] (see A "blot on English insurance law") which expressed doubt as to "the value of much of the evidence from broking experts" because the general duties of brokers "to a substantial extent, have become a matter of law."
• Obiter, he commented that "… consequential losses arising from non-payment of an indemnity are not usually recoverable in broker's negligence cases." They will only be recoverable if a broker has assumed a duty that goes beyond placing insurance cover of the type sought. The judge remarked that Colinvaux's Law of Insurance (13th Ed) was correct when it observed that "it follows from [Aneco Reinsurance Underwriting Ltd v Johnson & Higgins Ltd [2001] 2 All ER (Comm) 929] that there is no general rule that the broker cannot be liable for a sum greater than the amount of the lost cover, and that the sole question is whether the broker's duty extends solely to placing insurance cover of the type sought or whether the broker has also assumed duties akin to those of an investment adviser, the position found in Aneco".

SRA fining consultation

The Solicitors Regulation Authority (SRA) recently concluded a consultation on broadening its approach to fines for professional misconduct.  The consultation is the result of the Economic Crime and Corporate Transparency Act 2023 granting the SRA unlimited fining power in relation to misconduct concerning economic crime occurring after 4 March 2024.

The main proposals as regards traditional firms and individual solicitors are to:

• Permit unlimited fines for economic crime matters (an increase from £25,000);
• Increase the maximum indicative fine in relation to firms from 5% of gross domestic turnover to more than 25% (by introducing two new fining bands – E and F);
• Increase the maximum indicative fine in relation to individuals from 97% of annual gross income to more than 145% (again, by introducing two new fining bands);
• Introduce minimum fining levels for each penalty band, ranging between £5,000 and £500,000 for firms, and £2,500 and £100,000 for individuals; and
• Calculate fines otherwise than by reference to gross domestic turnover and annual gross income in "appropriate" case (e.g. where "a firm might have a large global presence but a small turnover in England and Wales").

The proposals have resulted in largely negative coverage by industry groups.  They have been described by the City of London Law Society as "arbitrary" and "not fit for purpose", by the Law Society of England and Wales as "potential unlawful" and "confusing", and by the Solicitors Disciplinary Tribunal as an encroachment on their jurisdiction to resolve the most serious cases. 

The SRA are considering the outcome of the consultation, which we expect to be published shortly.

You can find more detail on the consultation here and comments from the Law Society of England and Wales here.

Multiple claims on the same claim form

It seems increasingly common for claimants pursuing similar claims against multiple defendants to issue their claims on a single claim form.  Niprose v Vincents Solicitors [2024] EWHC 801 (Ch) was such a claim. It involved 94 claimants who entered into contracts for the off-plan purchase of property.  The developer went into liquidation prior to completion and each claimant pursued a claim against their conveyancer for a failure to advise on the risks of the purchase.

His Honour Judge Hodge KC made his views on this approach abundantly clear:

"… it is my experience that the court is increasingly being confronted with extreme attempts to bring claims on behalf of multiple claimants, or to sue multiple defendants, in one action. In such cases, in my judgment the court should not hesitate to use its general powers of case management (under CPR 3.1) to direct that specific parts of the proceedings should be dealt with as separate proceedings. Whilst it may be convenient to join in one claim all the purchasers of units in a single development who wish to sue a single firm of solicitors or licensed conveyancers, who used the same, standard-form documentation in connection with their respective purchases, in my judgment it is stretching the limits of the 'convenient disposal' test to join claims against different conveyancers - some solicitors and other licensed conveyancers - who used very different forms of documentation in a single set of proceedings. I am also concerned that it may constitute an abuse of the rules governing the payment of court fees on starting court proceedings."

The decision is a particularly welcome development for professionals who handle volume work (e.g. residential conveyancing transaction), who it seems are at a greater risk of being drawn into thematic and costly litigation of this nature.  For claimants, it may be possible to avoid the risk of criticism by issuing separate claims against each defendant, and asking the court to case manage and/or try them together.  There are recent high-profile examples of this, including the Ingenious Litigation and the NOx-Emissions Litigation.

However, it seems Niprose should not be taken as discouraging similar claims against the same defendant in the same claim form: note the approach taken in a decision handed down the day after Niprose in Morris v Williams & Co Solicitors [2024] EWCA Civ 376 (see "Court of Appeal clarifies when multiple claimants can bring claims using a single claim form").  That case involved 134 claimants who made claims against the same firm of solicitors in one claim form.  The firm had advised those claimants in relation to development projects.  In that case, the Master of the Rolls held that it was convenient for the claims to be advanced in the same claim form.  There were substantial common questions of law and fact (eg, each Claimant's allegation was broadly the same, and the firm had been instructed by each Claimant on essentially the same terms), and the claims arose out of the same developments.

Claims against pensions advisers

The Court of Appeal recently handed down judgment in Virgin Media v NTL Pension Trustees II Ltd [2024] EWCA Civ 843, dismissing the appeal and confirming that actuarial confirmation was required for certain historic amendments to pension deeds.  If no such confirmation was obtained, then the amendment would be void. 

While there remains a great deal of uncertainty about the practical implications of this decision, the concern is that amendments that made detrimental changes to benefits provided by defined benefit pension schemes could be found to be void in the absence of evidence of the required actuarial confirmation having been given, with the result that affected members would be entitled to higher benefits.  In turn, this would increase the liabilities of the pension schemes and may require sponsoring employers to make additional contributions to improve the funding position of those pension schemes.    

It is hoped that the Department for Work and Pensions will intervene to provide clarity and remedies for trustees and advisers alike. Absent that, there is a risk that claims against advisers start to emerge in the market in the event of trustees and sponsoring employers looking to pass on potentially substantial liabilities as a result of the Virgin Media decision. 

The technical aspects of the decision are discussed in more detail in our Pensions Dispute Quarterly.

Contribution claims by insurers in relation to insolvent insureds

Master Brightwell very recently handed down a short judgment concerning the interaction between the Third Party (Rights Against Insurers) Act 2010 and the Civil Liability (Contribution) Act 1978: Reidweg v HCC International Insurance plc [2024] EWHC 2805 (Ch).

The case concerned an individual who pursued a claim against a professional indemnity insurer under the 2010 Act because the primary defendant – who she said negligently overvalued a property which she had purchased – had gone into insolvency.  In those proceedings, the insurer sought to pursue a contribution claim in its own capacity against another professional: a law firm which the claimant had instructed in the purchase transaction.

The 1978 Act only permits a contribution where the contribution claimant and the contribution defendant are both "liable" to the underlying claimant "in respect of the same damage."  It was clear that both the insurer and the law firm could be liable to the claimant (the former under the 2010 Act, and the latter for breach of contract or negligence).  The issue was whether the liability would be for the "same damage."

Master Brightwell held that it would not:

"I consider that the purpose of the 2010 Act is to provide a mechanism for a claimant to pursue an insurer directly in respect of the liability of its insured, and for the claimant to stand in the insured's place for that purpose. The insurer's liability is still that which flows from its obligations to the insured, which can only be to indemnify the insured against its liability to a third party. The insurer does not become liable to the third party for the damage caused or allegedly caused by its insured, which it did not inflict."

While Master Brightwell was bound by the terms of the Acts, this strikes us as an inconvenient outcome.  It appears that an insurer would need to have its liability determined under the 2010 Act (eg, at trial) and then pursue a subsequent and standalone contribution claim against the third party tortfeasor (where permitted) as subrogated assignee of the insured and incur the associated costs.  There does not seem to be a clear policy rationale for prohibiting insurers from seeking contribution in proceedings under the 2010 Act, but this may remain impermissible without statutory intervention.