In this appeal, which Lewison LJ noted was important to those who practise in the professional negligence field, the Court of Appeal considered the effect and scope of section 1(4) of the Civil Liability (Contribution) Act 1978 (the "1978 Act"). The Court held that s.1(4) was concerned only with the liability of the party claiming contribution, and not with the liability of the party against whom contribution is sought, clarifying what has to be proved by a contribution claimant to succeed on a contribution claim.
A firm of solicitors (Merriman White), which had settled a negligence claim brought against them by a client (Mr Percy), sought a contribution from the barrister (Mr Mayall) it had instructed on the client's matter.
The client had engaged the solicitors and the barrister in respect of the recovery of sums alleged to have been misappropriated from a joint venture company by the client's business partner. The barrister had advised the client to pursue a derivative claim rather than applying to wind up the joint venture company. At a mediation, the client refused an offer of £500,000 to settle the claim. The barrister advised in conference soon after the mediation but did not give clear advice to accept the offer. The court subsequently refused the client permission to bring the derivative claim, holding that the dispute ought to be resolved via a winding-up of the joint venture company.
The client instructed new solicitors and settled his misappropriation claim for £65,000, significantly less than the sum offered at the mediation. He sued the original solicitors and the barrister for negligence, and subsequently settled his negligence claim with the solicitors and discontinued his claim against the barrister.
The solicitors sought a contribution from the barrister, relying on s.1(4) of the 1978 Act which provides that a party who has settled is entitled to recover a contribution "without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established".
It is settled law that this provision means that a contribution claimant (here the solicitors) does not need to prove its own liability to the underlying claimant (here the client). However, in this case, the solicitors sought to rely on this provision to establish the contribution defendant's (i.e. here the barrister's) liability to the underlying claimant.
At first instance, the High Court accepted that analysis: it held that, based on the assumed facts, the client had a reasonable cause of action against the solicitors, and it therefore followed, without more, that the solicitors were entitled to a contribution (of 40%) from the barrister.
The barrister appealed.
The Court of Appeal allowed the barrister's appeal. It found that S.1(4) of the 1978 Act was concerned only with the question of whether the defendant / contribution claimant (here the solicitors) was liable to the underlying claimant (here the client). It effectively created a type of deemed liability of the defendant where that defendant had entered into a bona fide settlement with the claimant – the defendant did not have to prove that he was liable to the claimant provided that he would have been liable assuming that the factual basis of the claim against him could be established. S.1(4) did not have any bearing on whether the contribution defendant (i.e. the party from whom contribution is sought) was negligent or whether that negligence caused the underlying claimant's loss. Therefore, a contribution claimant still had to establish that the contribution defendant was liable in order to succeed on a contribution claim.
Neither the client nor the solicitors had pleaded out the barrister's alleged negligence. That meant that it was impossible to say what advice it was alleged the barrister should have given, or what would have happened if that advice had been given. The burden of establishing that fell upon the client (in the main proceedings) and the solicitors (in the contribution proceedings).
Having allowed the barrister's appeal, the Court had to decide whether to remit the case to the Business List for retrial, or simply to dismiss the claim. It decided to dismiss the claim, on the basis that it would be unfair and oppressive (i) to allow the solicitors a second bite of the cherry on the correct legal basis when they had chosen to pursue the contribution claim on the basis of their incorrect interpretation of S.1(4); and (ii) for a professional to have to face a second trial (which would probably not take place until some time next year) some 12 years after the events in question, particularly where the case on negligence and causation now being advanced against him had not been pleaded.
This case provides useful guidance on what elements have to be proven against a contribution defendant and how that will play out in a professional negligence context in terms of the evidence required to be adduced at trial.