- This is a professional negligence action by a company against its former lawyers concerning litigation settlement advice 9 years ago.
a. The Claimant was, and is, a successful car hire company in Merseyside run by Mr Kenny, its managing director and major shareholder.
b. The First Defendant was, and is, a firm of solicitors nearby in Birkenhead. At the material time, Mr Jones was employed by the firm, initially as a trainee, to conduct its civil litigation but is now running his own practice.
c. The Second Defendant was, and is, a chancery/commercial barrister practising in Liverpool.
- The claim form was issued on 8th August 2006. Despite the pleadings, it was agreed before final submissions that it claims:
a. breach of contract and/or negligence against the solicitors relating to 5 pieces of advice/non-advice on (1) 5th June 2000; (2) 12th July-14th August 2000 and (3) 15th January 2001; and
b. Negligence against the barrister concerning two pieces of advice/non-advice on (1) 2nd June 2000; and between (2) 12th-15th January 2001.
- The delay in bringing this "satellite" or "meta litigation" (i.e. litigation about litigation) itself raises difficult problems of limitation, relevant standards of current practice (the current civil procedure rules were in their infancy in 2000/2001), costs and judicial assessment of witnesses in their recollection of insignificant events in their business lives at the time but of minute trial scrutiny and apparent significance to its outcome.
- The claim is most unusual, if not unique. In essence, it claims that both solicitors and barrister:
a. failed to spot potential latent flaws in a residual claim for damages in 2000/1 and to recommend acceptance of overgenerous offers of settlement erroneously made by the representatives of the other party to the litigation; and
b. failed to recommend acceptance of such an outstanding final offer when the potential flaws became patent upon exchange of counsel's skeleton arguments on Friday 12th January 2001 before assessment of damages commencing on the following Monday 15th January.
- In summary what had occurred was this. Between February and April 1999 Caledonia had refused to honour its obligation to re-purchase over 70 cars at a total price of £870,683.12. A claim for this sum was conceded leaving a residual claim of £131,920.52 for sums payable to another company, Global, as a result of the failure of Caledonia to honour its obligation to re-purchase the cars (plus another for storage charges). Alternatively, statutory interest was claimed on the repurchase monies. This residual claim was pursued to trial before HH Judge Kershaw QC on 15th/16th January 2001 and failed in its entirety on both bases submitted.
- The reason it failed was that the learned Judge accepted submissions first raised by Caledonia in a skeleton argument by counsel exchanged on the Friday before the Monday 15th January hearing that, upon strict construction of a leasing contract between West Wallasey and a third party finance company (Global), West Wallasey had sustained no contractual loss nor themselves been kept out of principal monies entitling them thereby to any interest.
- Nearly 9 years on now, the claimant seeks to recover from its former lawyers the loss of an extant offer "at the doors of the court" of £100, 000 including costs less the sum awarded by the court of £9,714.29 (£90,285.18) plus own trial costs of £3,520.30 and adverse costs of £5,000 totalling £98,805.48 plus interest.
- It is thus unashamedly a claim for "overvaluing" the true worth of the original claim and for losing the opportunity of obtaining an unjust windfall settlement in the lottery of civil litigation, if respect is properly to be had for the justice of the findings by the trial judge.
- As a matter of public policy, advocates no longer have special immunity from liability and are in the same position as surgeons performing an operation. However, the courts are very wary of the dangers of effectively relitigating disputes and will not undermine judgments already made and accepted (the rule in Henderson v. Henderson). It is also very costly to revisit commercial disputes. By way of contrast, the combined total costs of the original claim were in the region of £40,000 -£50,000; the costs of this litigation are in the region of £306,000 with the Claimant spending £90,000 on a maximum claim of £98,805 plus interest.
- As discussed below, the court must be very wary of the dangers of hindsight and of imposing its own standards above, or below, those of "the Bolam test" (see below) in the litigation context where, uniquely, the court is its own expert. Furthermore, this particular area of litigation 'settlement' is a notoriously difficult area of anticipatory professional judgment: an "art" probably more difficult than that of a doctor advising on the chances of a successful operation where there is more "science" to guide the professional.
- It is important to remember that the "Bolam test" is just one stage in the fourfold stage test to determine negligence or breach of contractual duty of due care.
a. First, it must be established that there is a duty of care owed ["Duty"].
b. Second, it must be shown that the duty of care has been breached. This is where the Bolam test is relevant, because falling below the standard of a responsible body of professional men means that person will be considered negligent. ["Breach"].
c. Third it must be shown that there was a causal link between the breach of duty and harm ["Reliance" & "Causation"]; and
d. Fourth, it must be shown that the harm was not too remote ["Reliance & Remoteness"].
- This case raises issues under each of those stages.
- Under Stage 1 (duty), the general obligations of lawyers were elucidated in Canada by Riley J. in Tiffin Holding limited v. Millican 49 DLR (2nd) 216 (as approved by the Supreme Court of Canada (1967) 60 DLR (2nd) 469:
"The obligations of a lawyer are, I think, the following: (1) To be skilful and careful; (2) To advise his client on all matters relevant to his retainer, so far as may be reasonably necessary; (3) To protect the interest of his client; (4) To carry out his instructions by all proper means; (5) To consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him; (6) To keep his client informed to such extent as may be necessary, according to the same criteria." [emphasis added as being apposite in this case].
- The balance of duties shared between solicitors and counsel is helpfully summarised in Locke v. Camberwell Health Authority  Lloyds Rep. P.N 23 at page 29 it was stated:
"(1) In general, a solicitor is entitled to rely upon the advice of counsel properly instructed.
(2) For a solicitor without specialist experience in a particular field to rely on counsel's advice is to make normal and proper use of the Bar.
(3) However, he must not do so blindly but must exercise his own independent judgment. If he reasonably thinks counsel's advice is obviously or glaringly wrong, it is his duty to reject it."
- Under Stage 2 (breach of standards), the court needs to evaluate the evidence using the established 50 year old Bolam "jury direction" for professional negligence actions: i.e.
"he is not guilty of negligence if he has acted in accordance with a practice accepted as proper by a responsible body of
men skilled in that particular art."
- This test is open to two potentially different standards:
a. That which members of the particular profession do in fact achieve ordinarily ; or
b. That which, in the opinion of the court, members of the profession ought to achieve.
- As Jackson & Powell on Professional Liability observe in paragraph 2-119, this distinction is frequently blurred but the latter approach is correct as it is the duty of the court to decide what is meant by the appropriate standard of professional competence.
- In professional negligence cases, codes of practice or expert evidence of standard accepted practices are usually provided to aid the court in establishing what the requisite minimum standard is, or should be. It is then for the court, as a matter of law, to determine what that standard is: "The extent of the legal duty in any given situation must, I think, be a question of law for the court" per Oliver J. in Midland Bank Trust Co. Ltd v. Hett, Stubbs & Kemp  1 Ch. 384 at 402C.
- In professional negligence cases against barristers and solicitors, the general rule is that, apart from specialist areas such as tax, expert evidence is not allowed as it is not required:
"I must say that I doubt the value, or even the admissibility, of this sort of evidence, which seems to be becoming customary in cases of this type. The extent of the legal duty in any given situation must, I think, be a question of law for the court. Clearly, if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received. But evidence which really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the defendants, is of little assistance to the court; whilst evidence of the witness' view of what, as a matter of law, the solicitor's duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the court's function to decide."
per Oliver J. in Midland Bank Trust Co. Ltd v. Hett, Stubbs & Kemp  1 Ch. 384 at 402B-D.
- Twenty years on this jealously protective stance of the courts had softened somewhat with the Court of Appeal recognizing the difficulties it imposes on the court. In Belamoan v. Holden & Co  NLJ 898, Brooke LJ said:
"A further difficulty that confronts us on this appeal is that in the trial of a claim against a firm of solicitors for damages for professional negligence there is a tradition in this country that the courts do not need expert evidence because judges will be familiar with the standard of care which is reasonably required of lawyers and do not need evidence to help them (see Midland Bank Trust Company Ltd v. Hett Stubbs & Co Kemp  Ch 384, 402B-D, approved and applied by this court in Bown v. Gould and Swayne  PNLR 130). As the practice of the law becomes more and more specialised, the existence of this tradition may give rise on occasion to difficulties."
- The law on legal professional liability in litigation now fully recognises that blanket immunity is no longer justifiable and it is for the court to determine both as a matter of law and of fact what the appropriate standard was at the material time from its own experience and observation. These developments in professional liability law present two difficulties for the court. First, the court has to rely upon its own expertise that is largely unknown to the parties and cannot be tested in evidence. All the parties know herein is that a specialist judge with experience in the area is trying the case. Secondly, the court has to recall, in this instance, what standard competent practice was in 2000 shortly after the civil procedure rules had been radically changed in April 1999.
- Guidance has been given in quite a substantial body of case law.
- In Saif Ali v. Sydney Mitchell & Co (a firm)  AC 198, Lord Wilberforce observed at 214G:
"Much if not most of a barrister's work involves exercise of judgment - it is in the realm of art not science. Indeed the solicitor normally goes to counsel precisely at the point where, as between possible courses, a choice can only be made on the basis of a judgment, which is fallible and may turn out to be wrong. Thus in the nature of things, an action against a barrister who acts honestly and carefully is very unlikely to succeed."
In Lord Diplock's opinion from 220-221 he said:
"The fact that application of the rules that a barrister must observe may in particular cases call for the exercise of finely balanced judgments upon matters about which different members of the profession might take different views, does not in my view provide sufficient reason for granting absolute immunity from liability at common law. No matter what profession it may be, the common law does not impose on those who practise it any liability for damage resulting from what in the result turn out to have been errors of judgment, unless the error was such as no reasonably well-informed and competent member of that profession could have made. So too the common law makes allowance for the difficulties in the circumstances in which professional judgments have to be made and acted upon".
"If subsequently a barrister is sued by his own client for negligence on what he advised or did in the particular case, he has the protection that the judge before whom the action for negligence against him will be tried is well qualified, without any need of expert evidence, to make allowance for the circumstances in which the impugned decision fell to be made and to differentiate between an error that was so blatant as to amount to negligence and an exercise of judgment which, though in the event it turned out to have been mistaken, was not outside the range of possible courses of action that in the circumstances reasonably competent members of the profession might have chosen to take. [emphasis added]
Lord Salmon said this at 231D:
"The barrister is under no duty to be right; he is only under a duty to exercise reasonable care and competence. Lawyers are often faced with finely balanced problems. Diametrically opposite views may and not infrequently are taken by barristers and indeed by judges, each of whom has exercised reasonable, and sometimes far more than reasonable, care and competence. The fact that one of them turns out to be wrong certainly does not mean that he has been negligent."
- The introduction of the word "blatant" might appear to suggest that the standard of competence is lower in this particular area of professional judgment in litigation as it is the language of "gross negligence". However, the use of the word "blatant" must be viewed in the context of the whole paragraph where he is using the word as a label denoted something that was "outside the range of possible courses of action that in the circumstances reasonably competent members of the profession might have chosen to take". i.e. no competent member would have done that, itself quite a high threshold test to clear as used by Lord Hobhouse below.
- In Arthur J S Hall & Co (a firm) v. Simons  1 AC 615, Lord Hobhouse at 737H reminded of the standard of care owed by professionals and the safeguards given against unjustified liabilities:
"The standard of care to be applied in negligence actions against an advocate is the same as that applicable to any other skilled professional who has to work in an environment where decisions and exercises of judgment have to be made in often difficult and time constrained circumstances. It requires a plaintiff to show that the error was one which no reasonably competent member of the relevant profession would have made. This is an important element of protection against unjustified liabilities."
- In Moy v. Pettman Smith (a firm)  UKHL 7;  1 WLR 581, the House of Lords gave guidance on the approach to the particularly difficult area of the art of settlement. At 599E-G Lord Carswell, with whom the other members of the House of Lords agreed, cited with apparent approval this passage from the judgment of Anderson J in the Ontario High Court in Karpenko v. Paroian, Courey Cohen & Houston (1980) 117 D.L.R. (3rd) 383, 397-398:
"What is relevant and material to the public interest is that an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him that he should have done otherwise. To the decision to settle a lawyer brings all his talents and experience both recollected and existing somewhere below the level of the conscious mind, all his knowledge of the law and its processes. Not least he brings to it his hard-earned knowledge that the trial of a lawsuit is costly, time-consuming and taxing for everyone involved and attended by a host of contingencies, foreseen and unforeseen. Upon all of this he must decide whether he should take what is available by way of settlement, or press on. I can think of few areas where the difficult question of what constitutes negligence, which gives rise to liability, and what at worst constitutes an error of judgment, which does not, is harder to answer. In my view it would be only in the case of some egregious error that negligence would be found."
- The recent decision of the Court of Appeal in Pritchard Joyce & Hinds (a firm) v. Batcup  EWCA Civ 369 overturned the decision of the trial judge on the basis of too much hindsight and too exacting a standard being imposed. The essence of the complaint against the defendant barristers was that they failed to identify a potential claim and advise their client of the time limit for bringing it.
- Sullivan LJ, with whom Dyson and Sedley LJJ agreed, concluded at :
"Standing back from the mass of detail in this case it is useful to remind oneself that the question is not whether the Appellants' understanding of Mr Fox's complaints against Mr Leech turned out to have been mistaken, it is whether they fell into an "error that was so blatant as to amount to negligence": see Saif Ali at p.221A. If there were any errors on the part of Miss Nickson of Wellers, or Mr Batcup or Mr Susman, and for the reasons set out above I am not persuaded that there were, they could not reasonably be described as "blatant" errors, the kind of errors that no reasonably competent solicitor or barrister would have made. Even if it is too simplistic to expect that a blatant error should "leap out of the page", the need to carry out a minutely detailed reconstruction with the assistance of thousands of documents of events going back over many years before any finding could be made even as to what the error might have been, is perhaps a pointer to the conclusion that if error there was, it was certainly not so blatant as to amount to negligent professional conduct."
- In a short concurring judgment Sedley LJ said at :
in a system which populates its senior bench from the practising profession, an outside observer might discern equal and opposite risks of excessively sympathetic and excessively critical appraisals of the conduct of legal practitioners. In holding, as this court does, that Underhill J. has erred in the latter of these directions, we ought also to recognise his desire to maintain a high standard of professional trustworthiness. The law does not, however, demand either omniscience or infallibility in lawyers any more than it does in doctors or architects. The law's standard of reasonable competence means not only that there will be errors which are not compensable but that legal advisers are not expected to divine every claim that a client may theoretically have.."
- Again the word "blatant" has been used here in the context that Lord Diplock had done in Saif Ali. The dividing line of what is negligence here i.e. a "blatant error" or an "error of judgment" depends on the circumstances in which the error was made and the simplicity of the situation. The term "blatant error" can thus be used as a shorthand label for this and should not be seen to connote "gross negligence".
- In Fletcher & Son v. Jubb, Booth & Helliwell  1 K.B. 275 at page 280, Scrutton LJ approved an illuminating passage from a judgment of Tindal CJ in Godefroy v. Dalton (1830) 6 Bing. 460 on the principles about the art of judgment in this area:
"It would be extremely difficult to define the exact limit by which the skill and diligence which an attorney undertakes to furnish in the conduct of a cause is bounded or to trace precisely the dividing line between the reasonable skill and diligence which appears to satisfy his undertaking, and the crass negligentia or lata culpa mentioned in some of the cases, for which he is undoubtedly responsible. The cases, however, which have been cited and commented on at the bar, appear to establish, in general, that he is liable for the consequences of ignorance or non-observance of the rules of practice of this court; for the want of care in the preparation of the cause for trial; or of the attendance thereon with his witnesses and for the mismanagement of so much of the conduct of a cause as is usually and ordinarily allotted to his department of the profession. Whilst on the other hand, he is not answerable for error of judgment upon points of new occurrence, or of nice or doubtful construction, or of such as are usually entrusted to men in the higher branch of the profession of law"[emphasis added].
- This must be seen in the light of (1) case law since 1984 that moved away from the division of skills and labour between the two branches of the profession. In Davy-Chiesman v. Davy-Chiesman Fam. 48 and Ridehalgh v. Horsefield  Ch 205, where Sir Thomas Bingham MR said at page 237 that:
" a solicitor does not abdicate his professional liability when he seeks the advice of counsel. He must apply his mind to the advice received. But the more specialist the nature of the advice, the more reasonable is it likely to be for a solicitor to accept it and act upon it." ; and (2) the observations made above about "gross negligence" that is no longer a test in the tort of negligence since at least 1910 upon the case law.
- A useful illumination of where the dividing line was in 2001 (the apposite time in the instant case) between negligence and competence can be found in Griffin v. Kingsmill and Others  EWCA Civ 934. Counsel had been specifically instructed to advise on the merits of a claim for serious personal injuries suffered by a 12 year old girl in a straightforward accident claim where there was a conflict of evidence between two witnesses. An experienced legal executive had visited the site of the accident with the witness whose evidence favoured their mutual client and his attendance note supporting that witness's account was among counsel's papers. In a short Advice counsel, most surprisingly in my view, concluded that he could not hold out "any reasonable prospect of establishing any liability on the part of any driver for this accident". Sir Murray Stuart Smith, with whom Schiemann and Kay LJJ agreed, said at -
"The circumstances in which barristers and solicitors have to exercise their judgment vary enormously. On the one hand decisions have frequently to be made in court with little time for mature consideration or discussion. That is a situation familiar to any advocate. It is one in which it may be very difficult to categorise the advocate's decision as negligent even if later events proved it to have been wrong. Or in a very complex case it may be that in advising settlement too much weight is given to some factors and not enough to others. Here again a difficult judgment has to be made; and unless the advice was blatantly wrong, i.e. such as no competent and experienced practitioner would give it, [emphasis added as being the appropriate test] it cannot be impugned and the prospects of successfully doing so would seem very slight.
But that is not this case. This was essentially a simple case, though one of great importance for the claimant and her family. It was a case where the advice could be given after careful consideration. It was a case which was typical of many personal injury cases. Where if the claimant's evidence, or that on his or her behalf is accepted, the claim will succeed. If the defendants' account is accepted the claim will either fail or there will be a substantial contributory negligence. Where there is such a conflict it is very difficult, if not impossible at an earlier stage of the case, as this was, to be sure which evidence will be preferred. All that can be done is to point out what I have just said and then make some attempt to evaluate the strengths and weaknesses of the conflicting accounts. It would take very cogent reasons indeed to say that it was overwhelmingly likely that Mrs Grant's account would be preferred and Mr Bailey's rejected, and consequently the claim had no reasonable prospect of success.
On the face of it is surprising result that advice which turns out to be one hundred per cent wrong in such a case was not negligent. The interested layman, or our old friend the officious bystander, might well ask "if the lawyers can be so wrong and they are considered to have acted in a way that competent and experienced lawyers could be expected to advise why do we need lawyers?" I confess that I have listened with increasing amazement and some dismay to the submissions of counsel for the defence that the advice given here complied with the proper standard of care and competence. If that is so the profession should be ashamed that its standards are so low. I do not accept for one moment that this was the sort of advice that competent and experienced solicitors and counsel should have given. The judge thought that it was honestly and carefully given. There has never been any question about the honesty, but I am not at all clear how the judge arrived at the view that it was carefully given if he had correctly applied the law. It is not enough that counsel and solicitors have read the papers and given clear advice which could be understood. In a case such as this logical and sensible reasons have to be given for rejecting the favourable evidence of Mr Bailey. If the reasons do not bear examination they are not such as can be expected from a competent and experienced practitioner."
- In an "undervalue settlement claim" Davies J in Walker v. Chruszcz  EWHC 64 (QB) rehearsed the legal approach to dealing with erroneous valuation of claims and made two pertinent observations at the end that have relevance to the instant case:
.Before recording my findings, I would draw attention to two initial points.
.1 First, it is at the heart of Miss Rodway's case that reasonably competent specialist leading counsel and specialist firm of solicitors should have advised that there was no, or no serious, risk of Mr Walker losing on primary liability: and that was so even if the assessment was that Mr Walker would make a very bad witness. That submission would thus connote that not only were Mr Chruszcz and Irwin Mitchell negligent; but also that Mr Makey, Mr Witcomb and previous solicitors acting (and, for that matter, Mr Barker) had themselves also completely misassessed the position: as indeed, by implication, had District Judge Bellamy also.
.2 Second, it is a corollary of Miss Rodway's submissions that correct advice to Mr Walker would have been to the effect that he was in effect bound, or virtually bound, to succeed on primary liability. That gives cause to reflect, as Mr Stuart-Smith and Mr Elkington suggested, on what Mr Walker's reaction and complaints would have been had the case been fought (and I can and do take it that his case would have been properly conducted at trial if it had been fought) and lost before Judge Coles. Of course, Miss Rodway asserts that simply would not have happened. But her stance causes one to bear in mind the words of Judge LJ in Kelley v Corston  QB 686 at p 700 C-F:
"Settlements of litigation are to be encouraged, and as early as possible. Many settlements are advised before litigation is started, and many more cases are settled long before the date of the substantive hearing. Some cases settle a day or two before the hearing, some at the door of the court, and some indeed after the substantive hearing has begun. Yet others settle on appeal. The advice on which settlements are based will reflect many different considerations. For example in one case the advice to settle may arise from the non-availability of a witness in circumstances where the costs of an adjournment would be disproportionate to the value of a claim. In another the settlement of a claim for personal injuries may be woefully inadequate simply because inexperienced counsel has grossly underestimated the value of the claim. In another case, for reasons of his own the client may insist that the case should be settled on the best available terms because there are no circumstances in which he wishes the case to be heard in court. The circumstances are infinite. One specific feature relating to all settlements needs attention. Every lawyer in practice and every judge knows that there is no such thing as the case which is bound to succeed. Experience shows that cases with the brightest prospects of success somehow fail and it is difficult to underestimate the value of the certainty provided by a settlement as opposed to the continuing risks of litigation through to judgment. This factor alone should militate against successful proceedings based on criticism of advice leading to a settlement.'"
- The standard thus needs to account for the level of service being provided by the practitioner. In Locke v. Camberwell HA (1990) 140 NLJ 205 per Morland J was considering the position of a solicitor inexperienced in clinical negligence work. He stated that "he is not expected to have specialist expertise of a partner in a firm specialising in medical negligence work
He is expected to have the competence and skill to be expected of a solicitor engaged in litigation in general practice." .
- Despite the observations of Megarry J. in Duchess of Argyll v. Beuselinck  2 Lloyds Rep 172, the standards of competence do not vary with the size or reputation of the firm or practitioner but the scope and obligations of care under the retainer may well vary the duties of performance owed and expected. In Matrix Securities Ltd v. Theodore Goddard  PNLR 290 Lloyd J. held that the conduct of a leading city firm should be judged by the standard to be expected of a reasonably competent firm of solicitors with a specialist tax department. In Balamoan v. Holden & Co  NLJ 898 it was held that a one man firm could not expect a lower standard of care to be applied because it delegated the case to an unqualified member of staff if the conduct of that person fell below the appropriate standard for a solicitor. Where the solicitor was in a small country town instructed by a legally aided client in a small claim for nuisance, the Court of Appeal held that the courts should not apply too rigorous a standard in such circumstances of the scope of the retainer, as the solicitor had been anxious not to incur costs which could not be recovered from the other side. Great weight would therefore be placed on the judgment of the local circuit judge as to the standards reasonably to be required of local litigation solicitors on that retainer. In Hedrich v Standard Bank London  EWHC 1656, Lord Justice Ward said in paragraph 67:
"We have to judge negligence by the standards of a solicitor of ordinary competence, the competence, that is, of a typical, reasonably well-informed high street solicitor, just like Mr Zimmer, not the Rolls Royce standards which the big City firms like Jones Day must and do uphold."
- It is therefore important to look at (1) who the practitioners are, (2) what they held themselves out as providing and (3) what the terms of their retainer were.
- The standard of performance in litigation after the inception of the Civil Procedure Rules in April 1999 also needs to account for fulfilling the duties on practitioners to comply with the Overriding Objective of dealing with cases "justly", including "proportionality" under CPR 1. The competent practitioner is not expected to achieve "perfect justice" but "reasonable justice". In Nichia v Argos  EWCA Civ 741, Lord Justice Jacob observed in paragraphs 50 & 51:
"Perfect justice" in one sense involves a tribunal examining every conceivable aspect of a dispute. All relevant witness and all relevant documents need to be considered. And each party must be given a full opportunity of considering everything and challenging anything it wishes. No stone, however small, should remain unturned. Even the adversarial system at its most expensive in this country has not gone that far
But a system which sought such "perfect justice" in every case would actually defeat justice. The cost and time involved would make it impossible to decide all but the most vastly funded cases. The cost of nearly every case would be greater than what it is about. Life is too short to investigate everything in that way. So a compromise is made: one makes do with a lesser procedure even though it may result in the justice being rougher. Putting it another way, better justice is achieved by risking a little bit of injustice."
- In the instant case we are judging, as of late 2000 to early 2001, the performances of (1) a chancery barrister holding himself out as a specialist in commercial leasing on specific litigation instructions; and (2) a small local firm of solicitors (not specifically the individual handling the case) in general litigation practice instructed to pursue a claim for damages for breach of a commercial lease of vehicles.
- Accordingly, applying the above helpful guidance and using my own expertise and experience as a lawyer, I shall proceed to do so after briefly explaining the original claim and proceedings.
Original claim facts and proceedings
- The Claimant hired out cars which it rented from a finance company, Global Leasing Limited ("Global"). Global bought the cars which formed the subject matter of the underlying litigation from a Peugeot dealer called Caledonia Motor Group Ltd ("Caledonia").
- Under the terms of an agreement signed by Mr Kenny dated 16 January 1998 (with an addendum dated 18 January 1998) Caledonia agreed to re-purchase cars from the Claimant or its nominated finance company at a predetermined price. The addendum provided that Caledonia would re-purchase 400 vehicles at specified percentages of the original sale price.
- The vehicles were sold not to the Claimant, but to Global, which then leased them to the Claimant on the terms of a Master Vehicle Lease Agreement signed by Mr Kenny dated 1 August 1996 supplemented by a letter dated 20 January 1998 which fixed rental payments at 1.5% of the re-purchase price.
- Between February and April 1999 Caledonia refused to honour its obligation to re-purchase over 70 cars at a total price of £870,683.12.
- The Claimant, acting by its managing director, Mr Kenny, instructed solicitors, who in turn instructed Mr Pugh. The solicitors originally instructed were not able to conduct contested civil litigation and so Berksons were instructed in their place.
- A succinct 4 page Particulars of Claim was drafted by counsel and served on 28th May 1999. A short 4 page Defence was served on 13th July 1999. So far as quantum was concerned, as was the practice at the time, it consisted of uninformative bare denials and a lack of mitigation of loss assertion.
- On Mr Pugh's advice summary judgment was sought in respect of the main part of the claim against Caledonia, namely payment of the re-purchase price of £870,683.12. The papers show that considerable work was undertaken by Mr Pugh on the instructions of Mr Jones on that dealing comprehensively with all the points at issue or anticipated to be so with the result that Calendonia, per Mr Hill (Mr Kenny's opposite number) conceded that claim in full in January 2000. No criticism is made of the performance of the solicitors and barrister during that period and indeed they must be congratulated for the excellent, comprehensive, cost effective and efficient service they provided to the Claimant in what was really quite a complicated matter, particularly for summary judgment effectively to 100% success level.
- Relatively minor, but not insignificant claims, were left to be resolved. As eventually quantified they were:
(1) £131,920.52 for sums payable to Global as a result of the failure of Caledonia to honour its obligation to re-purchase the cars.
(2) £8,800 for storage charges.
As an alternative to (1) there was a claim for interest on the re-purchase monies under s.35A of the Supreme Court Act 1981. (1) and the claim for interest are "the relevant claims".
- At trial on 15th 16th January 2001, HH Judge Kershaw QC found for the Claimant in respect of the claim for storage charges plus interest on them, but rejected the claim for £131,920.52 and the claim for interest on the re-purchase monies.
- HH Judge Kershaw QC rejected the claim for £131,920.52 because, he held, under the terms of the Master Vehicle Lease Agreement, the Claimant was contractually obliged to lease the cars for 6 months. Any payments made to Global after that period were voluntary and so irrecoverable as damages.
- As for the claim for interest under s.35A, the principal sum had been payable to Global, not the Claimant, so that the Claimant had not been kept out of money.
- An appeal to the Court of Appeal against this decision was considered but not made.
- However, these proceedings were issued on 8th August 2006 contending that the findings of HH Judge Kershaw QC ought to have been anticipated by Mr Jones and Mr Pugh and the litigation risks of such findings ought to have been advised to Mr Kenny whilst an offer of settlement was still available.
Analysis of the satellite claim
- The claim form is somewhat ambiguous in its brief details claiming global professional negligence in the proceedings ending on 16th January 2001 plus a negligent failure to advise in relation to quantum and in relation to a part 36 offer on 21st July 2000. The long narrative form of Particulars of Claim appear to specify 8 breaches without particularising dates but paragraph 40 identifies a failure to advise properly on the offer of £100,000 inclusive of costs as the cause of the alleged loss: the loss of a good settlement and avoidance of trial costs. The verified pleading by trial counsel has a separate section on limitation. It appears to make it plain that no claim was being made for any acts or omissions before the negligence alleged on 21st July 2000 on Limitation Act grounds relying on a construction of the offer of 21st July that it was open for acceptance for at least 21 days and beyond the Limitation Act cut off date of 8th August 2006. The pleading somewhat curiously includes a final paragraph 46 under the general subheading of limitation that Mr Pugh was "under a continuing duty in tort to advise and to correct any previous erroneous advice, when briefed at trial, on or about 8th January 2001 and/or when skeleton arguments were exchanged prior to trial". It is significant that this was not pleaded as a separate breach but as opportunities to correct an error already made.
- There are some obvious logical and consequential difficulties in that presentation of the claim where the "error" alleged was that the solicitor and the barrister at various times, when they had random opportunities of doing so, failed to advise the client that the claim was, of course, flawed from the outset through their own alleged negligence in failing to consider the evidence and had no intrinsic merit at all and would be found out by the judge, as he did, in due course. The act of negligence there is the launching of a worthless but overvalued claim and the damage and loss so caused would be wasted costs; not the incidental failure to reconsider whether or not they had been negligent earlier. This sophistry of recurring breaches in failing to rectify a breach in order to defeat the Limitation Act was emphatically rejected by the Court of Appeal in Bell v. Peter Brown & Co  2 QB 495 per Nicholls LJ 500H; Beldam LJ 507; and Mustill LJ 512-3 and scorned by HH Judge Seymour QC in Tesco Stores Ltd v. Costain Construction Ltd & others  EWHC 1487, TCC where he held that such was a "transparent mechanism for delaying artificially the commencement of some period of limitation" [para. 270].
- Hence the court gave the Claimant the opportunity before submissions to specify the breaches by date and occasion so that the issues of limitation and the serious allegations of professional failings could fairly be addressed and dealt with. The court was very mindful that HH Judge Kershaw QC back in 2001 had observed that "with hindsight, it is unfortunate that the claimant's remaining case was not re-pleaded". Pleadings are vital: they form the case management and trial agenda. These set out the issues to be placed before the judge for him to determine. The Particulars of Claim should thus contain "a concise statement of the facts on which the claimant relies" and the Defence must state "which of the allegations in the particulars of claim he denies and his reasons for doing so" see CPR 16.
- This judgment will therefore analyse those breaches alleged and the submissions made on that basis.
Witness and factual analysis
- The analysis of the facts and the witness testimony needs to bear in mind the incredible difficulties imposed upon a fact finding judge seeking to determine the truth and accuracy of witness testimony relating to events 8 years ago. This is inevitably endemic in professional litigation negligence cases and lamentably so when a claimant chooses to issue its claim right upon the limitation period deadline of 6 years since the cause of action accrued. However guidance is given upon surmounting these difficulties in the extra-judicial writing of Lord Bingham of Cornhill in a paper headed "The Judge as Juror: The Judicial Determination of Factual Issues" published in "The Business of Judging", Oxford 2000, where it was reprinted from Current Legal Problems, vol 38, 1985 p 1-27:
". . . Faced with a conflict of evidence on an issue substantially effecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties' lives or fortunes, how can and should the judge set about his task of resolving it? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? . . .
The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not) such facts as are shown to be incontrovertible. In many cases, letters or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time. In other cases, evidence of tyre marks, debris or where vehicles ended up may be crucial. To attach importance to matters such as these, which are independent of human recollection, is so obvious and standard a practice, and in some cases so inevitable, that no prolonged discussion is called for. It is nonetheless worth bearing in mind, when vexatious conflicts of oral testimony arise, that these fall to be judged against the background not only of what the parties agree to have happened but also of what plainly did happen, even though the parties do not agree.
The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis  2 Lloyds Rep 403 at p 431. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full:
''Credibility' involves wider problems than mere 'demeanour' which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person telling something less than the truth on this issue, or though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by over much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.'
Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue . . . . more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely form case to case:
(1) the consistency of the witness's evidence with what is agreed, or clearly shown by other evidence, to have occurred;
(2) the internal consistency of the witness's evidence;
(3) consistency with what the witness has said or deposed on other occasions;
(4) the credit of the witness in relation to matters not germane to the litigation;
(5) the demeanour of the witness.
The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness's evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.
The fourth test is perhaps more arguable. . . ."
- In this case we are dealing with events in the year 2000 and January 2001 when contemporaneous logging of communications through electronic instant communication was a glint but in the eye of Apple and Microsoft. Communication (and miscommunication) was by phone, meeting, paper, attendance note and fax. Although there are 8 trial bundles of 1605 pages of documents, the relevant ones are in a core bundle of 260 documents. Of those about 50 contain the essential contemporaneous record of facts. These are the advices of Mr Pugh and the attendance notes of Mr Jones that can broadly be relied upon as accurate.
- My analysis of the witnesses is that I found Mr Kenny to be a tough, longstanding, confident and successful businessman used to getting his own way in his familiar world of motor vehicle leasing. Although he demurred on this, he struck me in the way he gave his evidence during cross examinations as being neither a natural compromiser nor a listener. His correspondence with Mr Hill, his opposite number at Caledonia, clearly demonstrates that and both Mr Pugh and Mr Jones knew that he was not coming to them for advice in the law in this area but to process his debt claim successfully. Although he initially denied that he knew Mr Jones was only a trainee when he instructed Berksons, he was forced to acknowledge that he did know when being taken to the letter of retainer buried in one of the files. In my judgment, he would have known full well the terms of the MVLA he himself had signed and operated with and I find it surprising that he did not raise it with his lawyers if it was so blatant a point that he now claims long after HHJ Kershaw QC found it so. No doubt he would listen to advice but I believe that Mr Pugh was right when he said this was a client who liked a fight and to win in court rather than settle, as of course, is the client's right.
- Mr Jones was a trainee solicitor in a small firm that did not specialise in commercial litigation. He now has experience in that area and consequently greater expertise. He obviously relied heavily upon counsel for legal input and saw his role as mainly to processing the claim for a debt and interest leaving counsel to deal with the leasing law. He struck me as trying to do his best to recall events but clearly had his own opinions on matters.
- Mr Pugh was a very impressive witness. He considered difficult questions thoughtfully and answered them with the precision and care to be expected from a chancery lawyer of Lincoln's Inn, never speculating on answers he would like to give. I found his written opinions a model and his handling of the successful claim for nearly £1m to have been masterly. Throughout the underlying litigation he did all that was specifically asked of him and did so comprehensively; hence his complaint that he would certainly have advised on the offers if he had been specifically asked to do so.
(1) 2nd June: Mr Pugh (Barrister)
- It is alleged that he was negligent when he called Mr Jones to discuss his skeleton argument, the merits of the claim and a part 36 offer (having been briefed for trial) because he had not analysed the prolongation claim and, in particular, the effect of clause 1 (c) of the MVLA and the Requisition Order which strictly meant that the lease of each vehicle expired after a minimum of 6 months so that thereafter there was no legal obligation within the MVLA to prolong the lease and that the vehicles could be returned to Global without penalty or further obligation. If he had, it is alleged then he ought to have advised of the real risk that the judge at trial would find as he eventually did 7 months later.
- It is important to analyse what Mr Pugh was instructed to do and what he actually did in the context of the state of the litigation at that time not before nor subsequently.
- There were no pleadings that defined the issues between the parties to be determined; this process evolved dialectically through the exchange of witness statements. Since the introduction of the Civil Procedure Rules which came into force on 26th April 1999 both pleadings and witness statements have to be verified by a statement of truth.
- Mr Kenny, as director of West Wallasey, made and verified his 3rd witness statement on 4th April 2000 with no involvement of Mr Pugh. In paragraph 5 of that statement he swore that under the agreement he had signed and agreed with Global that "West Wallasey were required to continue paying the leasing charges until the principal sum was discharged". Mr Hill, his counterpart and divisional managing director of Caledonia in his witness statement of 16th April 2000 for the putative hearing in June stated "The Claimant now alleges that as a result of the breach of contract by the Defendant the Claimant sustained a loss by way of liability to its nominated finance company of £131,920.52. The Defendant disputes the extent of that loss. The Defendant accepts that some loss will inevitably flow from the failure by the Defendant to re-purchase the vehicles within the time stipulated by the contract" [emphasis added].
- Both parties were apparently proceeding on that basis prior to the re-involvement of Mr Pugh that is criticised. The dispute between them was one of "remoteness & foreseeability" rather than "causation" of damage.
- In this context, on 18th April 2000, Mr Pugh was instructed to draft a witness statement in reply on behalf of Mr Kenny and received Supplemental Instructions dated 20 April 2000 with detailed comments made by his solicitors and Mr Kenny on Mr Hill's statement. Included was the instruction on paragraphs 8 and 9 of Mr Hill's statement that "WWCH were contractually obliged to make payment and the profit element belongs to Global" and that "Counsel will be aware that the capital in this transaction belonged to Global". Based upon these instructions, he duly drafted a statement in reply and sent it to Berksons under cover of a letter dated 28 April 2000 rendering a fee note of just £325 for doing so.
- In his letter Mr Pugh commented that the issue of "remoteness of damage", which was clearly raised in Mr Hill's statement, was "not as straightforward" as either he or Caledonia's solicitor suggested.
- On 30th May 2000, Mr Pugh received instructions for the hearing of the remaining issues then fixed for 9 June 2000. Mr Pugh was instructed that "on 18th May 2000, the Defendants paid the sum of £70,000 into Court. Despite Instructing Solicitors' caution, Michael Kennuy has rejected the offer out of hand. He is very confident that he will be awarded in excess of £130,000" and Mr Kenny's reasons for this belief. Mr Pugh was told that Berksons had warned Mr Kenny that the judge might not see things as Mr Kenny did but that Mr Kenny was prepared to take the risk in costs. His Instructions continued:
"If Counsel has any strong views either way, then perhaps he could advise."
- Mr Pugh had views as to this and telephoned Mr Jones of Berksons on Friday, 2 June 2000. Mr Jones' attendance notes of 2nd and 5th June are revealing. They record, and I have no doubt accurately, that Mr Pugh:
(1) said that Mr Kenny should "carefully consider putting in his own Part 36 offer";
(2) asked that the Skeleton Argument he had drafted be sent to Mr Kenny so he could see that "it is not as straight forward as he had imagined" and that he was "anxious to get over to him that the matter was far from straightforward and he was concerned that we would not recover the damages MK was seeking";
(3) offered to be available for a conference "at very short notice if required"; and
(4) when asked if he had a figure in mind for a Part 36 offer said "£100,000 would probably be reasonable".
- Mr Pugh had not been instructed to advise on the merits, nor did he render a fee note for doing so. He had merely been instructed that if he had strong views either way on the attitude to settlement, then "perhaps he could advise". He had done so and fulfilled those instructions.
- In my judgment, the parameters of Mr Pugh's "assumption of responsibility" in tort were (1) to draft a witness statement in reply by Mr Kenny to that of his counterpart Mr Hill; and (2) to advise, if he thought strongly about it (i.e. if something was glaringly obvious on the papers before him), on the 50% offer of £70,000 plus costs by Caledonia on the basis of the respective stances taken by the two protagonists in the witness statements he was dealing with.
- As to (1) Mr Pugh did directly and carefully deal with each paragraph in Mr Hill's witness statement. In my judgment there was no need for him to do anything beyond that which he did competently by joining issue with everything apparently in dispute between the parties. Indeed, he could have been validly criticised if he went beyond his brief.
- As to (2) it is alleged that Mr Pugh had crucially misconstrued paragraphs 7 and 8 of Mr Hill's statement as raising issues of 'remoteness' and 'foreseeability' of damage rather than 'causation' and that he ought to have reviewed the terms of the Leases as part of his retainer not just the rates therein.
- Paragraphs 7 and 8 of Mr Hill's statement state "It is therefore the Defendant's contention that the Claimant is entitled to such loss as necessarily and reasonably flows from the Defendant's breach of agreement". In my judgment, Caledonia was raising the issue of remoteness of damage/foreseeability, not causation. These no doubt carefully crafted words reflect the classic dicta of remoteness and foreseeability used Lord Reid in the Heron II  q A.C. 350 at 285 (as recited in the leading practitioner's textbook, Chitty on Contracts) where he said:
"The crucial question is whether, on the information available to the defendant when the contract was made, he should or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation."
- This objective legal analysis is confirmed by the subsequent letter of Caledonia's solicitors dated 19th July 2000 when it was stated that "the area between us will revolve around the Court interpreting the rule in Hadley v. Baxendale".
- As explained in an attendance note of Mr Jones dated 17th May 2000, recording a conversation with Mr Marriott about Caledonia's offer and his subsequent explanation to Mr Kenny, Caledonia were accepting that it would have to pay interest and hence the Part 36 Payment of £70,000 to accommodate that with a cushion of £5,000.
- It was suggested to Mr Pugh in cross-examination that the correct reading of paragraph 9 of Mr Hill's statement indicated that Caledonia's stance was based upon a mistaken belief that the capital was the Claimant's rather than Global's. This was based upon one sentence in paragraph 9:
"The true loss to the Claimant as the result of the Defendant's alleged breach of agreement and the loss which shod be visited upon the Defendant is simply the delay in replacing the Claimant's capital namely the sum of £870,683.12".
- However, Mr Pugh pointed out during his cross-examination that the paragraph does not end there. The balance of the paragraph contains the suggestion that the Claimants should have "re-honoured its agreement with Global Leasing using its own resources or borrowing" thereby raising an issue of "Failure to mitigate". Paragraph 9 taken as a whole and in its proper context therefore confirms that Caledonia fully understood the correct position.
- In summary, Caledonia was not proceeding under any misapprehension. It expected to be ordered to pay interest on sums which had been due under the Repurchase Agreement and which it had deliberately delayed in paying in breach of contract. The Claimant had already recovered on the principal sums.
- In my judgment the contemporaneous evidence at the time of Mr Pugh's involvement is reliable. Mr Jones' instructions to Mr Pugh, the witness statement of Mr Hill, the attendance notes of Mr Jones and the correspondence between the respective solicitors establish, in my judgment that : (1) Caledonia believed its best case was that it would only have to pay interest of £65,000 on the capital sum earlier awarded, hence the later payment into court of £70,000; (2) Mr Kenny was very confident of his own position and of his own mind independent of any advices that the Claimant would recover at least £130,000. (3) Mr Kenny did not rely or seek to rely upon any advice from Mr Pugh; he was offered a conference but declined the offer; (4) Mr Pugh told his instructing solicitor that their clients were overconfident, the matter was far from straightforward and he was concerned that the Claimant would not recover the amounts Mr Kenny was seeking.
- In my judgment Mr Pugh did not assume a duty of care in tort to advise the Claimant upon the merits of its claim on 2nd June: it was not a "reasonably necessary relevant part" (see the Tiffin Holding case referred to in paragraph 12 above) of his retainer and the Claimant had eschewed his offer to provide such advice. His suggestion that a Part 36 counter offer would "probably be reasonable" was not an advice; it was a tactical suggestion in the context of litigation where 'costs shifting' plays a significant role in the resolution of litigation.
- Furthermore, even assuming that he had, in my judgment such "advice" was not negligent. Some barristers may have gone back to research the genesis of the claim even though it had already substantially succeeded and revealed the flaw identified by HH Judge Kershaw QC. However, in my judgment most competent barristers would have given advice based upon a costs:benefit analysis based on inherent risks of the unexpected (litigation risk factor), the state of the litigation and the known stated positions of the parties to the litigation "a bird in the hand or two in the bush" advice as it is colloquially known.
- This is effectively what Mr Pugh did. He had assessed the respective cases being advanced whilst drafting Mr Kenny's witness statement in direct response to that of Mr Hill and whilst preparing his skeleton argument. He was under no duty to extend his instructions beyond the issues between the parties to be tried and to go looking for possible arguments which Caledonia might conceivably try to raise, but had not done so. To do so would impose too high a standard of care, almost perfection and beyond any sense of proportionality in Civil Justice as enshrined in the Overriding Objective of CPR 1. Although unfortunately not crystallised in pleadings as HH Judge Kershaw QC observed, the issues between the parties as everyone recognised through exchange of witness statements was as Caledonia put it on 19th July: "the area between us will revolve around the court interpreting the rule of Hadley v. Baxendale". Mr Pugh then, very shrewdly, in my judgment, suggested the Part 36 offer of £100,000 plus costs a midway figure between the respective valuations and bargaining positions of £70,000 on offer and the £130,000 sought by Mr Kenny.
- Again furthermore, even if Mr Pugh had by chance discovered the flaw in the Claimant's case and told Mr Kenny and Mr Jones about it informing him that the case may only be worth £8,800 for storage charges, in my judgment, Mr Kenny would have rejected that advice as being wrong and not have relied upon it. Mr Kenny was an experienced business man in this area, had formed his own view and was "very confident" in his case, as recorded by Mr Jones in his attendance note of 2nd June. He would not have cut and run taking the £70,000 then offered. In this context, one must also bear in mind that the ploy by Mr Pugh was actually successful: a Part 36 offer of £100,000 plus costs drew the response of £100,000 (inclusive of costs) shortly thereafter on 7th July leaving only the modest amount of the Claimant's costs between themselves in terms of settlement. Even then, Mr Kenny must have still have been unduly confident of extracting the £130,000 and certainly more than £100,000 another indication that he was not relying on any advice from Mr Pugh, being self reliant in his area of usual business relating to vehicle leasing contracts and their commercial realities.
- In my Judgment Mr Pugh was not in breach of his duties of care in carrying out his instructions on 2nd June 2000.
(2) 5th June 2000 Berksons (Solicitors)
- It is alleged that Berksons were negligent when Mr Jones spoke to Mr Kenny on 5th June to discuss what Mr Pugh had written in his skeleton argument and had said about the case.
- In the light of the above full analysis of the allegations against Mr Pugh, it would be otiose to dwell on these parallel allegations made against his instructing solicitors. They amount to much the same thing i.e. that the solicitor, like the barrister, did not take the opportunity to re-look at the claim and spot the underlying flaw that HH Judge Kershaw QC later found in his judgment. There is no allegation that Mr Jones gave any positive advice other than to pass on Mr Pugh's concerns that "we may not recover the damages that MK were seeking" and his (unaccepted) offer of a conference. In fact, all Mr Jones was doing was liaising between his client and the barrister instructed for an imminent hearing; he was not advising. At this stage, Mr Jones quite properly deferred substantially to the barrister briefed for the hearing. Unless there was some glaring error or misunderstanding on the part of Mr Pugh or his client or between them, then it was entirely reasonable to accept his client's 'bullish' instructions and pass on Mr Pugh's caution.
- In my Judgment, Mr Jones fulfilled this role admirably at this stage and there was no breach of any duty owed.
(3) 12th July 14th August Berksons (Solicitors)
- During this period there were part 36 offers exchanged between the solicitors acting on behalf of their respective clients. It is significant that no advice on the merits or upon quantum was sought by Mr Kenny from either Mr Jones or Mr Pugh. The fee note for a modest £3,580.76 (including Mr Pugh's fees of just £822.50 including VAT) rendered by Berksons for the period 14th April to 14th August 2000 is consistent with the supply of legal services in processing the claim: witness statements, disclosure and hearing preparation etc. The only references to the offers and settlement is "noting Defendants Offer of Settlement and taking instructions" and "Advising on submission of Part 36 Offer in the sum of £100,000".
- Essentially the factual situation was this.
a. On 28th June 2000, the claimant made a Part 36 offer to settle of £100,000 (exclusive of costs) open until 21st July.
b. On 7th July, Mr Marriott of Caledonia's solicitors phoned Mr Jones with an offer of £100,000 (inclusive of costs).
c. On 12th July, Mr Kenny spoke to Mr Jones about the case. The attendance note of Mr Jones (which I accept) states that Mr Kenny said "he was not inclined to reduce the offer by any more. He is confident he will succeed". Mr Jones records his response that he said that "unfortunately in this case there was no middle ground, so either the judge will see it Mike's way and award the full amount of £130,000+ or he will agree with Caledonia and award around £70,000". It goes on to say that "Mike is prepared to take the risk. I did warn him that both me and John Pugh were concerned at the likely outcome
the Defendants are confident they are going to win".
d. On 13th July, Mr Jones reiterated Mr Kenny's instructions to Caledonia's solicitors that he would not reduce his offer below £100,000 plus costs.
e. On 19th July, Mr Marriott wrote to Mr Jones reiterating his offer of £100,000 (inclusive of costs) noting that "the area between us will revolve around the court interpreting the rule in Hadley v. Baxendale". "
f. On 14th August, Mr Jones reminded his client, Mr Kenny, of this offer and stated that if Mr Kenny had changed his mind he would see if the offer was still open.
- In my judgment, the statements above attributable to Mr Jones need to be seen in their proper context. They were simply part of the solicitor's ongoing duty to communicate offers and advise on counter offers in the context of negotiations between two parties who had come to a co-incidental mid way point (apart solely on costs) between their firmly stated positions both premised upon how the rule in Hadley v. Baxendale would be interpreted. The solicitor was under no duty to revisit the whole basis of the Claimant's claim and to advise on merits.
- Apart from arguably the discussions on 12th July, none of the other statements attributable to Mr Jones were 'advices'. Mr Jones was perhaps incautious in his discussions with Mr Kenny on 12th July in stating that he agreed it was either £130,000+ or £70,000. However, here he was genuinely agreeing with what Mr Kenny already believed himself. This is also what all the parties to the settlement negotiations believed at that time. Mr Kenny was already convinced it was the latter despite what Mr Jones or anyone else would have said. In my judgment, Mr Kenny was not relying upon Mr Jones here for advice; he had already formed his own judgment.
- Mr Jones was also entitled to rely on considered advices of counsel unless it was blatantly wrong. Here it is contended that Mr Jones relied upon advice given in conference by Mr Pugh much earlier on 16th July 1999 that interest would recovered and hence the recovery of £65,000 was a certainty. Mr Pugh accepts that he did indeed discuss the principles of the recovery of interest in conference depending upon the documentary and factual scenarios i.e. what could be claimed but not in the context of giving advice in July 2000 on offers of settlement and what claims would succeed. I am satisfied upon his own frank evidence that Mr Jones genuinely believed that Mr Pugh was therefore confident that the Claimant would receive at least £65,000 and that he too had formed that view and so advised the Claimant of such. I accept what Mr Pugh says that he did not give actually give such specific advice and in my judgment Mr Jones was mistaken in assuming he had. In my judgment this was a simple misunderstanding that would be too harsh to be called a "blatant" error. Furthermore, I simply do not believe Mr Kenny that he relied upon Mr Jones' advice here he had attended the conference with Mr Pugh a year before - and he already had overwhelming confidence in his own case (that Mr Pugh cautioned against) and this prevailed over anything Mr Jones, a trainee solicitor, had advised him.
- Furthermore, in the context that each legally represented party believed in its fixed positions and the issue of remoteness was the only matter between them, it cannot be said to be a "blatant" error i.e. that no competent lawyer would make, not to recognise and advise that both such parties were wrong. In my judgment, Berksons were not negligent in failing to advise that there was any real risk that the Claim was only worth £8,800 storage charges. It was wrong but not negligently so; it was wrong only with the benefit of hindsight after a trial 6 months later.
- Furthermore, even if Mr Jones had advised that there was a real risk of such a limited recovery, then in my judgment it would have had no causative effect on Mr Kenny. He was an experienced businessman in this field and had formed his own very strong views on the outcome of his litigation. He was not risk averse but the contrary: he was willing to reject an offer of £70,000 on a supposed bedrock claim of £65,000 and then do the same when the offer reached £100,000 when the costs of the parties were £10,000 each whilst gambling on obtaining £130,000. He is still of the same nature and, as Mr Pugh observed "enjoys a fight rather than settlement": in this action he is willing to risk losing £300,000 costs in order to recover just £98,000 on a claim against his lawyers for a settlement that would have been an unjust windfall on his own case.
- He knew as he admitted, despite originally denying it in the witness box, that Mr Jones was only a trainee. He also said in court that he considered that Mr Pugh was overcautious about remoteness. In my judgment, Mr Kenny was not relying here on the advices of Mr Jones; he was merely relying on Berksons to achieve a settlement by tough uncompromising negotiations of at least £100,000 plus costs of £10,000 or by judgment in the sum of at least £130,000 plus in the firm self belief that his best position of £130,000 was a strong case.
- The Claim Form in these proceedings was issued on 8 August 2006. If therefore Claimants cause of action against the Defendants accrued before 8 August 2000, its claim is statute barred.
- In my judgment, any actionable negligence or breach of duty in reality being alleged herein is in failing to analyse the basis of claim against Caledonia and bringing a fundamentally flawed claim before the court. At the very latest this would be 28th May 1999 when the original Claim form was served and costs incurred. Hence all causes of action based upon the latently flawed claim against both Defendants are statute barred.
- The continuation of the claims against Caledonia for any head of loss save the storage charges was hopeless and doomed to failure; and thus that the incurring of legal costs on those claims was entirely wasted. In other words, the very fact that the Defendants did not advise the Claimant to drop most of its claims against Caledonia would have caused the Claimant loss, in the form of costs incurred for valueless legal services.
- Where a defendant's breach of duty has caused a claimant some loss outside the limitation period, the fact that further loss flows from the same breaches within the limitation period will not save the claim from being statute barred: Knapp v Ecclesiastical Insurance Group Plc  PNLR 172, CA, per Hobhouse LJ at 178D and Khan v Falvey  Lloyd's Rep PN 369, CA, per Chadwick LJ at para 56 on page 382. Thus, even if the Claimant is right that the Defendants should have advised it as to the "true" construction of the MVLA, then its cause of action was complete at some time in February 2000, after the Defendants perused the MVLA, and is therefore statute-barred.
- I have earlier found, whilst "analysing the satellite claim" that there is no continuing duty in law upon legal advisers to continually revisit their previous advices to check for latent mistakes.
- The courts are generally reluctant to impose a duty on professionals, either in contract or tort, to review work already undertaken and correct errors. Thus, in Bell v Peter Brown & Co  2 QB 495, the Court of Appeal rejected the analysis that it was implicitly a solicitor's duty to his client pursuant to his (continuing) retainer to identify and remedy earlier breaches of that retainer. See in particular the judgment of Mustill LJ at 512F to 513B.
- If lawyers acting in commercial litigation were to be brought under a continuing duty to review earlier advice, it would have at least two very unsatisfactory consequences:
a. First, it would impose on solicitors a duty to retread over old ground incurring irrecoverable unnecessary costs for their clients.
b. Second, it would on many occasions (including this case) provide claimants with an artificial way of evading the provisions of the Limitation Act 1980. In Tesco Stores Ltd v Costain Construction Ltd & Ors  EWHC 1487, TCC, where HHJ Seymour QC held that the cause of action against architects accused of negligent design accrued either on the date the design was completed or (at the latest) the date on which the work in question was inspected and observed that the idea of a continuing duty proposed by the claimant in that case was "a transparent mechanism for delaying artificially the commencement of some period of limitation" (para 270).
- The exceptions to this general rule arise where the professional may be said to have acquired knowledge at some later stage that he has committed an earlier breach of contract as here when the alleged potential flaws only became patent upon exchange of skeleton arguments on Friday 12th January 2001 before the assessment of damages commencing on the following Monday 15th January. Where there is a contract still continuing, then (per Dyson J in New Islington HA v Pollard Thomas  Lloyd's Rep PN 243, paras 16 to 18 at 246 col 2 to 247 col 1) arguably the professional should report his earlier breach to the client and advise accordingly.
- Even if one accepts the Claimant's premise that the breaches occurred between 2nd June and 14th August 2000, then only the one alleged on 14th August 2000 would not be statute barred. In tort they are actionable upon damage and such damage would be incurred upon the wrongful expenditure of unnecessary costs. The question is one of when the Claimant first suffered actionable damage, not whether the loss and damages (i.e. the unaccepted open offer) claimed was suffered with the limitation period. See Khan v. Falvey  Lloyd's reports P.N. 369, paragraph 23 on page 374 per Sir Murray Stuart Smith.
(4) 12th 15th January 2001: Mr Pugh (Barrister) and Berksons (Solicitors).
- The hearing was re-fixed for Monday, 15 January 2001. Mr Pugh received Caledonia's Skeleton on Friday, 12 January 2001. New unforeseen points were taken by Mr Terry, counsel for Caledonia. They found favour with HH Judge Kershaw QC.
- It is alleged that Mr Pugh and Mr Jones should have advised Mr Kenny that they had merit and significantly undermined their case, whereon Mr Kenny would have accepted the offer of £100,000 (inclusive of costs) still on offer according to Mr Hill of Caledonia who was called as a witness at both trials.
- There are some serious flaws in this rather facile allegation.
- First it is not a pleaded allegation. It is an allegation made only against Mr Pugh in the context of limitation. Although I have permitted it to be run, the lack of previous proper pleading of it does indicate that the Claimants do not have much confidence it, particularly against Berksons.
- Secondly, the fact that Mr Hill and Caledonia and their legal advisors were still prepared to offer £100,000 (inclusive of costs) at trial despite Mr Terry's skeleton argument strongly indicates that before the trial Caledonia and its lawyers continued to believe that the issue between the parties was either £65,000 on their case and £130,000+ on Mr Kenny's depending on the judges findings on remoteness of damage as per Hadley v. Baxendale. On that basis it cannot be said that any "blatant" mistake was made by either Mr Pugh or Mr Jones at the doors of the court in any assessment of whether the risk of litigation had changed by Mr Terry taking an unexpected point they all thought was a bad one.
- Thirdly, whilst Mr Pugh was not on his feet in court when he first learnt of the new points, it was the eve of the hearing. Mr Pugh had the weekend to consider the points and he used it to do so. His predicament was similar to that of the barrister in McFaddens (a firm) v. Platford  EWHC 126 (TCC) (see, in particular, paragraph 374 of the judgment of HH Judge Toulmin CMG QC) he was at the doors of the court under pressure of time dealing with points of advocacy good or bad, not with time for considered advices.
- Fourthly, Mr Pugh had a difficult judgment call to make in this situation. He, and everyone else at court, apart from the judge, considered the point a bad one and that he had arguments to defeat it. He believed that any lacunae in the strict terms of the agreement would be cured by implied terms as it was "necessary to give it business efficacy" according to the long established test in contract law. He believed it was a nonsense to expect a finance company in the Isle of Man to be expected physically to receive returned vehicles. He had always viewed his client as confident, indeed over confident, and took the view it would be wrong to panic at the doors of the court (or be seen to do so by such a client who may lose confidence in his fortitude) when faced with an unexpected early salvo in the battle of litigation. In my judgment, he did not err in his judgment. However, since the learned judge found the case otherwise, it is necessary to add that in my judgment, Mr Pugh is "not answerable for error of Judgment upon points of new occurrence or of nice or doubtful occurrence." And similarly Mr Jones is not liable here for "such [matters] as are usually entrusted to men in the higher branch of the profession" as Mr Pugh had been in being the trial advocate seized of immediate conduct of the case. See Godefroy v. Dalton [supra].
- Fifthly, the evidence as to what documents were seen by Mr Jones at what time is extremely thin, and is not at all clear if Mr Jones was even in a position to give advice about the effects of Mr Terry's skeleton. Not surprisingly, as this allegation was new to him and unpleaded against him, he simply could not remember when he saw the skeleton. Mr Kenny maintained in his evidence that Mr Jones refused to accept his instructions to try to settle the case but rather told him that they were in court "to fight". However, Mr Kenny accepted that he had not made that allegation known to Berksons at any time before the service of his second witness statement in these proceedings in December 2008. Furthermore, there was a contradiction between the evidence Mr Kenny gave in court and what he said in his first statement in these proceedings. In that first statement, at para 28, Mr Kenny's evidence was that he had not seen the skeleton argument at the time of the hearing; but the evidence he gave to the court was that it was handed to him as he walked into court by Mr Jones, who told him "here, you'd better read this". In my judgment Mr Kenny's memory on these points is unreliable and his versions given in court were untrue in order to bolster his new claim against his former solicitors after he had by then appreciated that he was not going to succeed against them unless he did so.
- In my judgment, Mr Pugh fulfilled his duty of care towards the Claimant at court in the context of making having to make fine judgments whilst under pressure of a court hearing. It is only hindsight that has proved him wrong but it is difficult to see what else he could have done at the very doors of the court when nobody present thought the case had materially changed by the new argument in the skeleton of his opponent.
- As for Mr Jones, in my judgment he probably was not in any position to give any worthwhile advice to Mr Kenny - he did not have any opportunity to consider the skeleton argument and he and his opposite number, had rightly devolved the handling of the issues in the arguments to those doing the arguing of the respective cases before the judge.
- Accordingly, the claim fails and there will be judgment for the Defendants.
His Honour Judge Simon Brown QC
11th December 2009