ATE and professional negligence

Part of the work that I undertake in the field of costs involves professional negligence claims in respect of solicitors, whose disappointed former clients contend that they have incurred loss after receipt of negligent advice on costs issues.

I have noticed recently an upsurge in claims against solicitors where the principal allegation is that they failed to incept adequate, or indeed any ATE insurance in the run up to the implementation of LASPO 2012 on 1st April 2013.

The timing is patently cyclical: the costs consequences of claims that were commenced in 2013 are now coming home to roost. Clients realise that due to the absence of adequate ATE insurance, after their original claim has fallen into ruin, for one reason or another,  they have been left exposed to adverse costs consequences, or a claim for incurred but unrecovered disbursements.

It is surprising how often a solicitor will incept some ATE, but fail to review or advise a client upon whether the level of indemnity remains adequate as a case progresses.

I suspect that most solicitors regard such matters, as they do costs budgeting, as something which once undertaken does not need to be looked at again, as there are far more important issues, like getting on with the case to concentrate on.

Yet, the duty of a solicitor to review his client’s vulnerability to adverse costs is clear.In this respect the starting point is the Solicitors Regulatory Authority Code of Conduct (2011 edition) which applied at the material time and required as outcomes: O(1.2) that the solicitor provide services to the client in a manner which protects their interests and their matter, subject to the proper administration of justice, O(1.6) that the solicitor only enters into fee agreements of the client better legal and which the solicitor considers are suitable for the clients needs and takes account of the client’s best interests, that O(1.12) the client is put in a position to make an informed decision about the services they need how the matter will be handled and the options available to them, that pursuant to O(1.13) clients receive the best possible information both at the time of engagement and when appropriate as the matter progresses, about the likely overall cost of their matter. Indicative behaviours include at IB(1.15) warning about any other payments for which the client may be responsible.

A failure either to consider with the client at the outset how the issue of adverse costs might be addressed, or to review the level of cover for potential adverse costs as the case proceeds, would constitute a breach of the Code of Conduct, and common law negligence.

Of course, the intriguing issue that then arises, is whether notwithstanding any failing on the part of the solicitor, it can be proved that it actually made a difference to the final result, the requirement of causation. But a client is in a fairly strong position: he does not have to prove on the balance of probabilities that he would have been granted an ATE policy, or an increase in the level of indemnity to an existing policy. Instead because the issue is whether a third party would have made a contract with the client, the normal rule in causation is modified.

The rule is well set out in Allied Maples.v.Simmons and Simmons [1995] 1 WLR 1602 where the Court of Appeal explained the principle as follows in the judgment of Stuart-Smith LJ:

In these circumstances, where the plaintiffs’ loss depends upon the actions of an independent third party, it is necessary to consider as a matter of law what it is necessary to establish as a matter of causation, and where causation ends and quantification of damage begins.

(1) What has to be proved to establish a causal link between the negligence of the defendants and the loss sustained by the plaintiffs depends in the first instance on whether the negligence consists of some *1610 positive act or misfeasance, or an omission or non-feasance. In the former case, the question of causation is one of historical fact. The court has to determine on the balance of probability whether the defendant’s act, for example the careless driving, caused the plaintiff’s loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury.

Questions of quantification of the plaintiff’s loss, however, may depend upon future uncertain events. For example, whether and to what extent he will suffer osteoarthritis, whether he will continue to earn at the same rate until retirement, whether, but for the accident, he might have been promoted. It is trite law that these questions are not decided on a balance of probability, but rather on the court’s assessment, often expressed in percentage terms, of the risk eventuating or the prospect of promotion, which it should be noted depends in part at least on the hypothetical acts of a third party, namely the plaintiff’s employer.

(2) If the defendant’s negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given? This can only be a matter of inference to be determined from all the circumstances. The plaintiff’s own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it. But in many cases the risk is not obvious and the precaution may be tedious or uncomfortable, for example the need to use ear-defenders in noisy surroundings or breathing apparatus in dusty ones. It is unfortunately not unknown for workmen persistently not to wear them even if they are available and known to be so. A striking example of this is McWilliams v. Sir William Arrol & Co. Ltd. [1962] 1 W.L.R. 295 ; the employers failed in breach of their statutory duty to provide a safety belt for the deceased steel erector. But his widow failed in her claim under the Factories Act 1937 , because there was compelling evidence that, even if it had been provided, he would not have worn it.

Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour. In the present case the plaintiffs had to prove that if they had been given the right advice, they would have sought to negotiate with Gillow to obtain protection. The judge held that they would have done so. I accept Mr. Jackson’s submission that, since this is a matter of inference, this court will more readily interfere with a trial judge’s findings than if it was one of primary fact. But, even so, this finding depends to a considerable extent on the judge’s assessment of Mr. Harker and Mr. Moore, both of whom he saw and heard give evidence for a considerable time. Moreover, in my judgment there was ample evidence to support the judge’s conclusion. Mr. Jackson’s attack on this finding *1611 was, as I have explained, something of an afterthought and not, I think, undertaken with great enthusiasm. I am quite unable to accede to it.

(3) In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr. Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr. Jackson’s submission is wrong and the second alternative is correct.

In short, all a client has to prove to establish causation is that if advised of the need for ATE insurance, on the balance of probability he would have instructed their solicitor to try to obtain ATE cover and that there was a real and substantial chance the solicitor would have obtained ATE cover. The actual measure of damages that might be recovered, is then a matter of quantum.


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