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Comply or apply - Jackson and Mitchell: impact on claims against solicitors

No civil litigator can have failed to hear about Mitchell and its subsequent cases saying, in short, that following the Jackson reforms of April 2013, no mercy will be shown to solicitors acting for litigants who fail to comply with court orders.  Part of the Jackson reforms were implemented by CPR 1.1(2)(f) which states that the overriding objective of dealing with cases justly and at proportionate cost includes “enforcing compliance with rules, practice directions and orders”.  This means that even where the parties agree otherwise, the court may nevertheless impose sanctions against defaulting parties.

The ‘good old days’?

For those of us who defend claims against solicitors, it is interesting to contemplate how this will give rise to professional negligence claims, as they increasingly arrive on our desks. The rising potential for claims is obvious.  In the good (or bad) old days, although civil litigation solicitors might sensibly notify their insurers following a failure to comply with a court order, the likelihood would be that default would have to be somewhat egregious for the opposing party to secure a serious sanction.  Therefore, most of the time, matters could be put right and the insurer’s file would be marked “closed no pay”, with any adverse costs order being within the solicitor’s excess.

Trivial matters?

No longer.  Any breach that is not “trivial” will result in some kind of sanction on the litigant and therefore, more often than not, repercussions for the solicitors and their insurers.  Of course, it is the court that determines what “trivial” means, meaning that even tiny defaults may have serious consequences for practitioners.  At the time of writing, judgement of the Court of Appeal is awaited on three cases in which the Law Society and Bar Council have been given permission to intervene (Decadent Vapours v Bevan (unreported); Denton and others v TH White [2013]WL 8467421; and Utilise TDS v Davies and others [2014] EWHC 834 (Ch)).  In these cases, the court must decide whether breaches are trivial or not and in Utilise TDS, whether multiple trivial breaches mean that they are no longer regarded as trivial.

The result of a subsequent claim against the lawyer who has breached an order is not necessarily obvious. Practitioners in the field are well used to dealing with claims for loss of opportunity to pursue (or defend) an underlying claim, such as Berney v. Saul [2013] EWCA Civ640 (which went to the Court of Appeal on limitation issues).  However, that relatively simple scenario would only apply where the sanction applied is a strike out of the claim or defence.  Many of the sanctions in Mitchell type cases are less dramatic, and cause the client more subtle detriment.

Conflict situations

For example, where (as in Mitchell itself) solicitors fail to file their costs schedule H in time, the sanction is that their costs budget is set at court fees only.  Thus, if successful, the client can claim virtually no costs from the opponent.  This is likely to put the solicitors in a conflict situation with their client, as their desire to avoid working with no hope of costs recovery might colour their advice to their client regarding settlement.  If so, the client will incur costs instructing a new firm who cannot use a CFA (as costs recovery is now impossible) and the former client may seek those costs from the firm originally instructed.  The default could also arguably have an impact on the level of settlement.  Where the breach is by a claimant, it means that the defendant’s worst case scenario is now 100% liability of the claim (but no costs) instead of 100% of the liability plus costs.  The difference can be very significant where the costs figure represents a high proportion of the claim.  It follows that the defendant’s calculations are suddenly different from what they were, leaving them less disposed to be generous in their settlement proposals to the claimant.  At least, that would be the claimant’s argument against his former solicitors.  The solicitor might argue back that, given that the original defendant must still factor in his own costs, and that the value of the claim is unchanged, the only real impact on the claim’s value is removal of the claimant’s costs.  The same applies in post-April 2013 cases where the CFA uplift is no longer recoverable from the defendant, albeit costs will be less of a factor.

Other sanctions

Other sanctions can damage a litigant’s case in different ways.  For example, if witness statements are debarred (as in Durrant v. Chief Constable of Avon & Somerset [2013] EWCA Civ1624), what impact would that have?  That question cannot be answered in the abstract as it depends on the case and whether all or just some witnesses are debarred.  Although some cases will not heavily depend on witnesses, in others the answer may be ‘substantial’ meaning that the defaulting party will be held over a barrel by the opponent in negotiations.  In that case, professional indemnity lawyers will need to compare the result achieved with what would have been achieved absent default.

Satellite litigation

These sanctions therefore give rise to the possibility of costly satellite litigation, all of it fact sensitive, making precedent building difficult.  Obviously, the lesson from Mitchell is ‘comply or apply’ but absent that, resulting claims against the lawyer are likely to raise difficult points for both parties.  The claims are likely to have a knock-on impact on insurance premiums particularly for those practices that do a lot of civil litigation as underwriters may react to the increased risk by weighting litigation more heavily in their risk profiles than previously.

This article was first published in New Law Journal on 24.06.2014 (http://www.newlawjournal.co.uk)

Contact

For further information please contact Steven O’Sullivan, Senior Associate, DWF Fishburns on 020 7280 8868.

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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