The Solicitors Indemnity Fund has come in for a lot of flak but it came into its own in the profession's tussle with the Bristol & West Building Society, says David Robinson. David Robinson is the national head of professional indemnity at Pinsent Curtis. Anson Game and Mark Brookes also assisted with this article. The legal profession faced a stiff and expensive test when the Bristol & West Building Society brought 87 cases of professional negligence against solicitors for losses suffered in lending transactions.
By being pragmatic and organised, the profession minimised its costs by the early identification of the key issues.
The ability of the Solicitors' Indemnity Fund (SIF) to react quickly to the large volume of claims, as the sole recipient of notifications of all claims against solicitors, was key.
The single focus and tight management of the legal team fighting the cases kept costs under control and simplified matters for the court. Had not all claims been referred to SIF things could have been very different.
A detailed understanding of the lender, its internal organisation and lending practices, right down to the particular approach of individual lending officers, was scrutinised.
Pinsent Curtis was asked by SIF to act as co-ordinating solicitor in relation to the claims. We appointed a dedicated team of counsel to plead and appear on behalf of solicitors faced with claims by the lender.
The counsel team was led by Nicholas Davidson QC with Elizabeth Weaver and Patrick Lawrence. Individual panel firms and counsel were appointed on the individual cases and were left with the daily conduct of the defence of cases, the task of proofing witnesses, completing case-specific discovery and dealing with affidavit evidence in relation to Order 14 proceedings.
Overall leadership and guidance was provided by Nicholas Davidson and Jes Salt, the claims controller.
Regular progress reports and guidance for the handling of individual cases were issued by this firm to members of the defence panel. A culture of sharing information and exchanging views about cases rapidly developed. The fact that each panel firm was reporting to a common client – SIF – helped. Had the claims been brought against surveyors, not solicitors, this advantage would have been lost because of the number of potential insurer-clients to whom the information on individual cases would have been sent. A lesson there, perhaps.
The practical significance of the judgment in May, May & Merrimans was that the gravy train, made up not only of the Bristol & West's but also other lenders' Order 14 applications, ran into the buffers.
The reason for this is found in the answer to the question posed by Mr Justice Chadwick at 1996 2 All ER 806f: "Is it safe for the court to act on the uncontradicted (but untested) assertion in an affidavit that – to use counsel's description of the evidence adduced in these cases – the society 'would not have touched this transaction with a bargepole'?"
The answer, on page 828f, was as follows: "One of the advantages of hearing a number of applications together – with agreement that the evidence in each may be read in every other – is that the court has a much wider view of the picture than would be presented by the evidence in any individual case. I have no doubt that, generally, it would be unsafe to act on the basis of untested assertions in the society's affidavits that the society 'would not have touched this transaction with a bargepole'. I think it may well turn out at a trial that, in the relevant period (1988 to 1991), the society was a good deal less fastidious in choosing its borrowers than it would now wish to recall."
This was a significant warning to the Bristol & West and all other lenders contemplating these actions and was fully borne out in the decision in the eight cases on which Justice Chadwick had to adjudicate in Fancy & Jackson. After succeeding on liability in all eight, the building society was awarded nominal damages in five and has been ordered to pay the solicitors' costs.
The lenders and their advisers started the ball rolling. Will they now modify their expectations in the light of the court's exhaustive consideration of all the evidence and the conclusions reached not only about the conduct of our profession but also of a substantial residential mortgage lender's operations nearly a decade ago?
The future looks brighter for the profession and for SIF. It is unlikely these claims will simply disappear but the profession should feel its prospects for paying significantly lower damages to lenders in the right cases are now much brighter than when the actions first descended on us.