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Insurers beware: No trial within a trial

An update on Frank Perry v Raleys Solicitors [2017] EWCA Civ 314

In this article Helen Smith and John Bennett review the recent decision of Frank Perry v Raleys Solicitors in which the Court of Appeal overturned the original Judge's decision, restated the principles relating to cases of lost opportunity and awarded Judgment Act rate interest at 8% on damages over a ten year period, seemingly as a result of how the claim had been defended.  

Facts

Mr Frank Perry (the "Claimant") was a miner who worked at the National Coal Board ("NCB") and then the British Coal Corporation ("BCC").  The Claimant developed Vibration White Finger ("VWF").  The Claimant took redundancy in 1994 and instructed Raleys Solicitors (the "Defendant") to pursue a claim for damages arising from the VWF against his former employers.

The Claimant's claim was made in accordance with the compensation scheme established by the Department for Trade and Industry ("DTI") which assumed responsibility for the liabilities of the NCB and BCC (the "Scheme").   The Defendant obtained a medical report on the Claimant's behalf; the report concluded that the Claimant was suffering from VWF "with stagings of 3V and 3Sn bilaterally".  The report's findings meant that it could have been open to the Claimant to pursue not just a claim for general damages, but damages also arising from the Claimant's inability to perform services (gardening, window cleaning, DIY and decorating, for example). 

On 5 November 1999 the DTI made an offer of settlement of £11,660; this was a sum for general damages only and not damages in respect of a possible services claim.  The Claimant accepted this offer.

In February 2009 the Claimant issued proceedings against the Defendant.  The Claimant claimed damages in the sum of £17,300.17 (plus interest) in respect of the lost opportunity to claim a services award from his former employers.  The Defendant put forward "a raft of defences to resist [the Claimant's] claim" to include running a limitation defence and also denying every aspect of the Claimant's claim.  Two days before the trial, the Defendant admitted that they had negligently failed to advise the Claimant about the potential for a services claim.  

The First Instance Decision

The Judge in the Leeds County Court decided that the claim was not statute-barred but otherwise found in favour of the Defendant.  Amongst other things, the Judge held that the Defendant's negligence had not caused the Claimant to settle his claim at an undervalue.  The Judge concluded that the Claimant had not established that he "honestly" met the "factual matrix" for making a claim for "services".

The Court of Appeal's Decision

The Claimant appealed the first instance judgment to the Court of Appeal.  The Claimant argued that the Judge failed: (i) in his approach to causation; (ii) to attach sufficient weight to the high grading of the Claimant's VWF by the experts; (iii) to apply the principle that the Claimant did not have to be entirely disabled; and that (iv) the first instance conclusion that the Claimant did not honestly meet the factual matrix was against the weight of the evidence and wrong.

The Defendant argued, amongst other things, that the Court of Appeal, as matters of principle and merit, should not overturn findings of fact; the first instance Judge's decision was based upon credible contemporaneous evidence and a "series of adequate explanations" and, in accordance with a statement from Lloyd LJ in Cook v Thomas[1], the Claimant should face a "seriously difficult task" in seeking to overturn such factual findings.

The Court of Appeal found in favour of the Claimant.  It overruled the first instance Court's findings in relation to causation, concluded (in line with the first instance Court's factual finding) that the Claimant had lost an 80% chance of making a services claim and awarded the Claimant £14,556.15 plus interest at an agreed rate (see point 4 below).  The Court of Appeal held, amongst other things, that:

1.this was a rare case where the Court of Appeal should interfere with the factual findings of a first instance Judge.  The original Judge made a material error of law in that he (wrongly) assumed that the burden of proof was on the Claimant; he failed to consider and/or misunderstood relevant evidence; and his decision that the Claimant could not have honestly made a claim for services could not be reasonably explained or justified.

2. the first instance Court (wrongly) conducted a trial within a trial as to whether the Claimant, on the balance of probabilities, was unable to carry out the relevant tasks without assistance.  The correct approach in a lost opportunity claim (based on authority such as Dixon v Clement Jones Solicitors (a firm) would be for the Court to ask: (i) whether, on the balance of probabilities as at the date of settlement of the underlying claim, if advised correctly , the Claimant would have acted differently, and made or pursued the claim ( in this case for services) ; and (ii) if so, what the Claimant's chances of success were; the evidential burden being on the Defendant.

3. there were sound public policy reasons for the approach set out in (2) above.  The Court of Appeal stated that:

 4. "it is far too easy for negligent solicitors, or, perhaps more pertinently, their insurers, to raise huge obstacles to claimants…from pursuing their claims, if the latter are required, effectively, to prove in the litigation against the solicitors that they would have succeeded in making such a claim against the third party.  [The Defendant's] defence in the present case is an unfortunate exemplar of insurers putting the claimant to proof of every issue in the underlying claim.  Such an approach is intellectually unsound…".

5. in respect of the rate of interest, the Court of Appeal held that the judgment rate of 8% per year for the entire period  of over a decade from when it was assessed that the DTI might have settled the services claim should be used.  The Court of Appeal pointed out that interest could be awarded by way of compensation or punishment and said that in this case 8% interest compensated the Claimant, not only for being out of pocket for so long, but also "because the conduct of [the Defendant] (or their insurers) in their long drawn-out defence of this claim deserves appropriate sanction".  The fact that the Defendant chose to admit breach of duty two days prior to the original trial was one factor which did not hold favour with the Court of Appeal.

Comment

This authority is a useful reminder as to the correct approach to the lost opportunity doctrine in causation in cases involving allegations of under settlement. The fundamental question is whether a Claimant has lost something of value. If properly advised would a different course of action have been taken and, if so, what were the chances of a successful outcome.  Moreover, it also highlights that a defence strategy of not admitting liability until trial (absent a good reason) and putting a Claimant to proof on every detailed aspect of his claim, above a perhaps more reasonable and/or pragmatic strategy, could result in sanctions at a later date.  

Contact

For further information please contact:

John Bennett, Partner on 020 7280 8807 or at john.bennett@dwf.law; or Helen Smith, Associate on 020 7220 5235 or helen.smith@dwf.law

By Helen Smith and John Bennett

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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