In a recent judgment, HHJ Cooke found in favour of the defendant solicitors in a claim by the Trustees in Bankruptcy of Clifford Shore that Irwin Mitchell had failed properly to advise Mr Shore as to the risk of pursuing litigation that was subject to limitation arguments.

Kevin Hellard, Amanda Wade v Irwin Mitchell [2013] EWHC 3008 (Ch)

Background

In 1997 Mr Shore, upon the advice of Sedgwick Financial Services Ltd (SFS) transferred his substantial benefits from an occupational pension scheme to a private pension scheme, from which he then took a pension by way of draw down, rather than an annuity.  He suffered a substantial loss from 2 causes; (i) the annual draw down was limited by reference to a percentage set by the Government Actuary's Department (GAD) and (ii) the capital value fell as a result of investment losses.

In August 2004 Mr Shore instructed Irwin Mitchell in respect of a claim against SFS.  Irwin Mitchell instructed Counsel, Ben Elkington (now QC) to advise in writing.  Counsel advised that primary limitation had expired but that a claim under Section 14A of the Limitation Act 1980 could be pursued on the basis that while Mr Shore had raised a complaint with SFS in 2000 regarding the lack of advice as to the GAD rate, it was not until 2002 that he became aware of the dramatic fall in the value of his pension fund and could therefore be said to have obtained the "relevant knowledge" required by Section 14A.

Thereafter, proceedings were issued and served upon SFS.  SFS defended the claim on grounds that limitation had expired.  It alleged that Mr Shore had known from 1997 of the nature and inherent risks of the products he was buying.

During the course of the litigation Mr Shore attended a number of conferences with Irwin Mitchell and Counsel during which the issue of limitation was raised. Mr Shore was advised that in order to rely on Section 14A, it would be necessary to show a relevant date of knowledge no earlier than late 2002. In August 2006 Irwin Mitchell advised Mr Shore that his prospects of success were 60-65%.

The trial ran from 10 to 20 July 2007, prior to that Irwin Mitchell had also instructed Leading Counsel, Michael Joole QC, who also considered the limitation arguments.  Judgment was handed down by Beatson J on 8 November 2007.  The Judge held that Mr Shore had suffered loss when annuity rates fell in 1999, and could not rely on Section 14A as he had requisite knowledge before September 2002.  An appeal was dismissed by the Court of Appeal.

Following the appeal, Mr Shore was unable to pay his liability for adverse costs and was made bankrupt.  The Trustees in Bankruptcy brought a claim against Irwin Mitchell, which alleged that Irwin Mitchell ought to have advised Mr Shore that the claim was doomed to fail.  Had such advice been given, Mr Shore would not have pursued the claim, or would have accepted one of the low offers made by SFS.

Judgment

In his judgment, HHJ Cooke rejected Mr Shore's witness evidence that he had not been advised as to the significant risk on the limitation issue.  He also did not accept that Mr Shore's case against SFS had been hopeless, or was so weak that Irwin Mitchell ought to have advised Mr Shore to accept the very low offers in settlement from SFS.

The judge accepted that it was appropriate for Irwin Mitchell to rely on the advice of well-respected, competetent and specialist Counsel, whose advice Mr Shore had received in conference, and that Irwin Mitchell was not negligent for failing to advise that Counsel's views were wrong.  The Judge concluded that Mr Shore had known what the risks were, having been advised of them in conferences with Counsel and otherwise, and had decided to pursue the claim on his own assessment of the balance of risk and reward.

Comment

The judgment should provide some comfort to solicitors who obtain, and rely on, specialist Counsel's advice as to specific issues such as limitation, particularly where such advice is given to a client in conference.  However, it is also a reminder that solicitors are not entitled to abdicate responsibility to Counsel but must exercise their own judgement.

The general rule is that it is more likely to be reasonable for the solicitor to rely on Counsel the more specialist the advice given (Ridehalgh v Horsefield and another [1994] 3 All E.R. 848 CA decision) and that it is only if the advice is glaringly or obviously wrong that the solicitor will be negligent for not challenging it.  Limitation is something all litigators will have knowledge of but the issues were far from clear around date of knowledge in this Irwin Mitchell case, so it is no surprise that the judge decided that it was appropriate to rely on specialist Counsel's advice.