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4 July 2013
During the World Cup, Terry Venables noted astutely that if anyone knows how to build a wall, it is the Chinese. Likewise, it can be said that if anyone knows how to ensure that solicitors' negligence does not go unpunished, it is the courts.
Professional negligence claims against the legal profession continue to keep the judiciary busy, and one area that has attracted the attention of the Appellate Court is the assessment of damages for claims for loss of chance.
While this legal principle can often assist the settlement of claims, it can also cause considerable concern to the law firm which is on the back end of a professional negligence action. This concern becomes more acute in a climate where professional indemnity (PI) premiums are set to rise.
The disposal of PI claims frequently involves a claim payment being made which will include payment of the claimant's costs, and this payment will affect the claims record of the law firm concerned. Inevitably, a negative claims record is likely to result in a premium increase, not forgetting the direct financial impact of a claim payment on the law firm given the excess that will need to be paid.
A concern for law firms is that they are being advised to settle claims where, while breach of duty has been admitted, there is a chance that the claim is speculative and that no loss has been suffered at all. The short answer to this concern may often be that a greater chance exists that the claim is better than just speculative.
However, this short answer may not be sufficient, particularly when substantial sums are at stake and the settlement of a claim can have serious implications in the future for the law firm concerned. While each case will warrant its own explanation, mention of some general principles may alleviate some of the concern that surrounds the settlement of loss of chance cases:
The assessment of the value of a lost chance often depends on the hypothetical actions of a third party, and a claimant need only establish that there is "a real and not a mere speculative chance" that a third party would have acted in such a way as to confer a benefit. If this hurdle is overcome, the court will then assess the value of that lost opportunity, not on the balance of probabilities, but on a percentage assessment of that benefit being conferred.
Claimants will sometimes allege that numerous different outcomes could have occurred; the Court of Appeal in Langford v Hebran (2001) dealt with this issue by applying a percentage reduction to each different scenario (carefully avoiding any double recovery to the claimant).
Where the burden of proof lies is crucial. The claimant must establish that something of real value has been lost (ie more than just speculative) and, should a claimant fail to do this, there can be no loss. Equally, it is for the defendant to establish that the lost chance has no value, and in many cases this can be an extremely difficult task.
The task is made all the more difficult by the fact that the sympathy of the courts will more often than not lie with the claimant. This sympathy will extend to the assessment of the percentage reduction to be applied; the court made this clear in Mount v Barker (1998), when it held that: "Generally speaking, one would expect the court to tend towards a generous assessment, given that it was the defendant's negligence which lost the plaintiff the opportunity " Worrying words indeed.
That said, claims can be - and regularly are - defended on the basis that a claimant (or a third party) simply would not have acted in the way alleged by the claimant had the solicitors' negligence not occurred. Such arguments will only succeed if the evidential burden has been overcome, and this burden can be high. In many instances, a court will only be swayed if independent and impartial evidence weighs heavily against a claimant, or in circumstances where the claimant's own evidence is simply not credible.
To summarise, true loss of chance claims do allow law firms and their insurers the 'opportunity' to arrive at a settlement figure based on established principles. In my view, this approach to assessment of loss is, on the whole, beneficial to the profession. This is because it provides a mechanism for both valuing professional negligence claims in an alternative way than doing so on a win all/lose all basis and for defending the speculative claims.
Angus Turner is an insurance partner in Mills & Reeve's Birmingham office