Risky business

While professional negligence claims can be a nightmare for accountants, brokers and solicitors, the legal roller coaster ride that ensues can offer rich pickings for chambers with nerves of steel. Fennella Quinn reports.

To practise at the professional negligence bar is, in a sense, to ride a roller coaster. With every new catastrophe, economic boom or bust, or human error on a grand scale, this type of work turns, dips and circles with a momentum all of its own.

In the last decade alone we have seen the massive Lloyd’s litigation, huge amounts of recession-driven actions related to the property market and the continuing actions arising out of the downfall of Barings Bank.

According to many practitioners, the main areas that chambers are all chasing are accountants, brokers and the usual stream of solicitors’ professional negligence. Despite the introduction of bar regulations allowing clients a limited ability to seek recompense against faulty barristers, the volume of work in this area is still minuscule, although a House of Lords judgment this week might change all that.

The Lord Chancellor has brought in a team of seven Law Lords to decide on Hall v Simons, a case which will clarify the extent to which advocates are liable to be sued for actions and advice given outside the courtroom, as opposed to being sued for poor advocacy within. Although the Lords have twice before ruled that advocates – in most cases, therefore, barristers – are not liable to suit in relation to work outside the court, many expect this panel to redraw the line.

Fountain Court and Brick Court, neither of which are seen as major professional negligence players, according to the more predominant indemnity sets, are both said to be chasing volume work around the country, although senior clerk at Brick Court, Ian Moyler, refutes this.

Moyler says: “Personally I don’t have a feel for what’s going on at the lower end, and I’m not necessarily going out and looking for it [high volume work],” he claims. “You really have to build up a relationship with solicitors over many many years, and we have had a pretty good relationship with accountants.”

According to Moyler, his team of professional negligence experts, most notably Jonathan Sumption QC, who is acting in Hall v Simons, Mark Hapgood QC and Mark Howard QC are all extremely busy on “big ticket” cases worth more than £1m.

“It’s one of those areas that’s continually booming and moving ahead, because the consequences of negligence are so much greater these days than they ever were,” says Moyler.

He says there is a boom in accountants negligence actions “despite extra vigilance on their part”, particularly in warranty actions. These arise out of company takeovers, where warranties as to future performance of businesses do not come up to expectations, and the accountant who made the warranty comes into the firing line.

Of course Barings is still not quite at a close, with more actions on the way, but the financial services field remains strong in terms of volume work, according to Anna Guggenheim of 2 Crown Office Row, shortly to be renamed Crown Office Chambers after its merger with 1 Paper Buildings.

“The surveyors and valuers market has almost dried up now that the property market is back on track again,” she says, adding that the dearth of litigation is thanks in part to the demise of negative equity. “If conditions were to change radically, that would alter – the same applies to anything sensitive to economic conditions.”

Claiming that her set has not felt any significant invasion from the top commercial sets, Guggenheim adds: “There’s intense competition for all general civil and commercial work and also to get onto the insurers’ panels. That is the principle reason for our merger with 1 Paper Buildings – insurers expect specialist and sizeable teams.”

In the wider construction field, Guggenheim claims there is steady growth, but adds: “There’s not so much litigation nowadays as more claimants opt for arbitration, mediation and adjudications.”

It would seem that in addition to the classic skills a professional negligence lawyer has always needed, they must now be able to add the strings of excellent negotiation and mediation to their bow.

“A practitioner now needs to be fairly comfortable dealing not only with common law subjects but also with many of the principles of equity,” claims Nicholas Davidson QC of Four New Square. With the increasing trend to seek equitable solutions to commercial actions, and therefore to employ more chancery-based barristers to come up with these solutions, professional negligence work experiences the same phenomenon.

“In the past it was supposed that a common law practitioner would apply his or her mind to common law principles, while a chancery barrister would apply the mind to equitable remedies,” says Davidson. “A professional indemnity lawyer needs to be able to deal with both.”

He adds that professional negligence cases often turn on highly technical points of law.

“There’s a great interest at the moment in adjectival law, that is areas which don’t go to the heart of whether someone’s acted correctly or not, but do determine whether or not they’re liable (such as Hall v Simons),” says Davidson.

“These are the daily diet of a professional negligence lawyer and sometimes they are very complex. You don’t learn about, say, limitation as a law student, you have to learn it in practice.”

The introduction of the new Civil Procedure Rules (CPR) last year has added to the technicalities which must be taken into account. One of the main objectives of the CPR is to speed up the process of litigation, yet paradoxically, according to Guggenheim, it has meant that fewer cases are struck out for delay these days.

“Actions struck out for delay were probably the largest source of solicitors’ negligence cases, but it’s happening less frequently thanks to better professional performance, CPR and more flexible courts,” she says. Furthermore, the Biguzzi case in the autumn last year presaged a change in the climate of striking out applications, so that now, if a case becomes stale, the judge cannot just strike it out.

While solicitors’ negligence is always a strong market, the feeling is that SIF, possibly in the run-up to losing its monopoly, is more imaginative about the way it handles claims, utilising mediation and settlements to a far greater degree. However, no one expects the amount of claims against solicitors to drop off, for whatever reason they may be brought.

Despite the apparently more flexible approach from the courts, excessive delay will still be penalised and arise as a reason for action. “People who ask for extra time because they have stumbled are less likely to get it than previously,” says one eminent QC, who is also concerned that with solicitors doing more and more preliminary work in these cases, more problems will arise.

“You see cases where counsel is brought in at a much later stage than was the case 10 years ago,” he says. Calling it a “very questionable practice” he adds: “There is the danger that with new case management arrangements it might be very difficult to retrieve an early failure.”

Despite this feeling of solicitors taking bread and butter work away from the bar, few sets admit to harbouring idle professional negligence juniors, even right at the bottom end. However, no one denies that life is getting harder. “Clients are much more vigorous about checking they have the expertise they need,” says Graham Eklund of 2 Temple Gardens. “From a practice point of view, the vibes we’re getting from our clients is that greater specialisation is important. They want to know that we’re competent to do the best work for them. It’s more difficult for the younger end to get their leg up on the ladder.”

Guggenheim says: “Some of the major firms have ceased or say they are planning to cease using the junior bar, and that’s had an enormous impact.” She points to some specialised sets in Sydney “where chambers are effectively all silks. They practise in a firm for 15 years to get the experience and only then cross over to the bar as a silk.”