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Rayner my parade! The importance of specialist advice.
Jemma Brimblecombe
According to a provisional report prepared by Lord Justice Briggs, Chancery Division Masters are spending 14% of their time on professional negligence claims involving solicitors compared to 13% on business fraud cases.
Claims against other professionals account for only 6% of the Masters' workload. This is made up of 3% on claims against surveyors and estate agents, 1% on claims against accountants and 2% on all other negligence claims against professionals. Clearly, claims against negligent solicitors remain popular.
Now that we are into the last quarter of 2013, it is interesting to review whether the above statistics reflect the practice of professional negligence lawyers. In my opinion, property related professional negligence claims and claims against solicitors will always feature most prominently, especially after a recession. However, the other trends that I have noticed this year in our professional negligence practice are:
- Claims against professionals in tax related negligence are particularly buoyant. This largely stems from the fact that the HMRC is adopting a more robust stance against tax avoidance schemes. In my experience, individuals working in the media, sport and entertainment sector have been particularly vulnerable in respect of participating in aggressive tax avoidance schemes based almost entirely on the advice of professional advisors. Quite often, these individuals have barely understood the scheme that they have participated in. There is thankfully now greater scrutiny in the role of the professional advisor in such cases.
- Claims against IFA’s seem to be popular in 2013. Such claims generally arise from alleged negligent advice to purchase a financial product that has not performed as expected, with the loss becoming visible due to the economic crisis. It is not uncommon for professional negligence claims against IFA’s to be combined with claims for misrepresentation and for breaches of Section 150 of the Financial Services and Markets Act (FSMA). One potential pitfall that prospective Claimants in professional negligence claims against IFA’s need to be aware of is that quite often the Defendant is a small business with either no indemnity insurance or with low or aggregate limits which do not provide sufficient cover for the substantial losses that can be suffered. The lack of adequate insurance cover could be an insurmountable obstacle if the negligent professional operated as a limited company with no sizeable assets.
- Claims against professionals acting as trustees have been on the rise in 2013. These are often high value and complex claims. However, as these claims often relate to offshore trusts, I believe that increasingly we will see a decline in such cases being heard by the Chancery Division in England. Over the next 12 months, many feel that Jersey may be the most active jurisdiction for trust related cases, even those with a professional negligence element. The 2013 Supreme Court decisions in Pitt v Holt and Futter v Futter are also likely to have an impact moving forward in trust related professional negligence claims.
The biggest challenges in professional negligence claims, particularly tax and related claims and those claims that arise from the economic crisis, are causation and limitation. In respect of causation, Claimants often struggle to demonstrate how they would have acted if the correct advice had been given. Even then, Claimants can be heavily reliant on expensive expert evidence, especially in finance and property related claims. As for limitation, many Claimants (particularly in finance and property related claims) are leaving it too late to issue court proceedings in respect of breaches that occurred before the financial collapse in 2008.
It is unlikely that professional negligence claims will slow down in 2014. My view is that a review of the time being spent by Chancery Masters and Judges next year will probably highlight that these claims remain popular for Claimants, although for the reasons explained above it would not surprise me if there is a small increase in tax related and finance related claims.
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