A negligence house of cards

There may be no formalised professional negligence Bar, but our soundings of the sector have uncovered names to watch

The term 'professional negligence' might seem a contradiction in terms. But oxymoron or not, it has been an extremely lucrative area of practice for lawyers.

Unfortunately, there is also a down side. Solicitors (and occasionally barristers) have increasingly found themselves on the receiving end of a writ. And it is well-known that many firms are undertaking audits of lending institutions' records to find possible professional defendants who “failed to follow the standard instructions”.

One practitioner thinks this is merely part of the new ethos, where “plaintiffs are pursuing defendants who have professional indemnity insurance and are seen as having bottomless pockets to meet a claim, or make up a shortfall”.

One firm admits this area of practice has grown such that it has represented “99.9 per cent solicitors as defendants over the last four to five years”.

That expansion of the work has been experienced nationwide with practitioners in the regions as well as the City admitting they are surprised by the large number of claims still being pursued against the professions, in particular solicitors and valuers in property-related transactions, by building societies and the clearing banks.

Recent cases, including White v Jones, Henderson v the Merrett Syndicate, Mortgage Express v Bowerman Partners, Target Holdings v Redferns & ors and Hemmens v Wilson Browne involving solicitors and other professional advisers, as well as the awaited decision from the House of Lords in Banque Bruxelles Lambert SA v Eagle Star Insurance Co and others have ensured there is “heaps of work and across a vast area of disciplines”.

Another leading practitioner says professional negligence is very much a growth area and also a cyclical phenomenon. “In the early 1980s, no civil engineer could move without being on the receiving end of a writ. When the property market collapses, it is the turn of the chartered surveyors. Even when the construction market is less buoyant, claims will continue to come into the UK for overseas building projects.

“More recently, attention has been trained on the accountants such as with Binder Hamlyn, and with the insurers and solicitors acting for plaintiff banks, it is now the solicitors' turn.”

The consensus is that although it is a lucrative area of practice, the case law is in a state of flux with “sometimes bizarre decisions which expand the areas of liability for professionals, such as White v Jones, and are difficult to rationalise”.

But the Binder Hamlyn case and those involving Lloyd's may be an indication of the next market for the professional negligence specialists, namely financial services. Advertising agents, computer consultants and management consultants, many of which are not required to have professional indemnity insurance, may also come into the firing line. As one partner says: “With the number of claims in this sphere growing, it is only a matter of time.”

And time is another factor being considered by the courts. The case of First National Commercial Bank v Humberts is before the House of Lords and will, practitioners hope, provide a definitive decision on the limitation period for claims.

One partner comments that “a Labour government and its construction policy is the best combination” for their area of practice, as it will spawn another boom of claims against construction professionals. But a partner in the same firm adds: “It's very much a rollercoaster and no one seems to learn the less-ons. It is quite bizarre – there may come a time, as in the US, where every professional who gives positive advice also has to give 10 disclaimers.”