We are frequently instructed to act in cases where an individual’s solicitor settled a claim for less than the claimant believes that they were reasonably entitled to receive (an undervalue). The Court of Appeal recently considered this issue in detail in the case of Perry v Raleys Solicitors. In this case, the Court of Appeal concluded that a claimant’s compensation claim was settled at an undervalue by the defendant solicitors. The judgment also considered issues of causation and loss of chance.

Background

The Department for Trade and Industry (DTI) set up a scheme that provided tariff-based compensation to miners who had developed vibration white finger (VWF), a common industry injury. The scheme offered compensation in the form of general and special damages. The Scheme also provided for “service awards”. A “special service award” was made if, as a result of the VWF, a claimant could no longer independently carry out certain tasks, such as DIY.

Mr Perry was employed as a coal miner. As a result of using vibratory tools, he developed VWF and was entitled to claim under the scheme. He therefore instructed the defendant firm of solicitors, Raleys, to act in relation to his claim for compensation for his injury. Raleys obtained an expert medical report which concluded that Mr Perry was suffering from VWF and identified that Mr Perry’s injuries were such that he would be eligible for a service award, although this could be challenged by the DTI. The DTI made a settlement offer of £11,600, which was for general damages only with no element to compensate Mr Perry for any inability to carry out services. Mr Perry accepted this offer.

However, in February 2009, Mr Perry issued proceedings against Raleys on the basis that they had negligently failed to advise him of his potential services claim. He sought to recover damages in the sum of £17,300, plus interest.

Raleys’ defence

Just two days before the professional negligence claim was heard by the court, Raleys admitted that they had been negligent in failing to advise Mr Perry about the potential service claim.

Raleys argued that even if they had advised Mr Perry of his right to pursue a “service” award, he would not have pursued this element of the claim as it was bound to fail.

First instance decision

The judge commented that:

The onus is on the claimant to establish on the balance of probabilities…that he would have acted differently if properly advised and the lack of opportunity to do so has caused him loss…

The issue that then arises is, if the claimant had acted differently and had made a claim for services, what were the chances of his claim being successful?

When considering this test the judge found that had Mr Perry pursued a “service award” as part of his claim, that part of the claim would have failed. He found that Raleys succeeded in their defence.

The appeal

Mr Perry appealed on a number of grounds:

  1. The judge had misapplied the test of causation in considering whether he had lost a real chance of succeeding on a services claim.
  2. He failed to attach significant weight to the expert evidence on the severity of the claimant’s VWF.
  3. He failed to understand the principle that, to be entitled to a services award under the scheme, Mr Perry did not have to be disabled completely from carrying out every aspect of a category of task.
  4. The judge’s conclusion that Mr Perry had not honestly met the factual matrix was wrong.
  5. The judge failed to make proper allowance for Mr Perry’s “lack of sophistication”.
  6. Raleys omitted to put forward his allegations of dishonesty to Mr Perry.

The Court of Appeal decision

The Court of Appeal unanimously allowed Mr Perry’s appeal.

Gloster LJ giving the leading judgment found that this was a “very rare” case where an appellate court should interfere with the factual conclusions of the trial judge. Her reasons for this were:

  1. The judge made a material error of law in his approach to determining the issue of causation as to whether Mr Perry would have made a claim.
  2. He wrongly assumed that the burden of proof was on Mr Perry.
  3. He failed to consider or misunderstood, relevant evidence.
  4. He could not reasonably explain or justify his decision.

Gloster LJ concluded that the trial judge was “wholly wrong” to carry out a determination on the balance of probabilities as to whether Mr Perry would have succeeded in his services claim against the DTI.

Additionally, it was held that the trial judge based his conclusions entirely on ‘partial and unsatisfactory cross-examination of the claimant’, rather than expert medical evidence.

Gloster LJ expressed concerns that it is too easy for solicitors and their insurers to raise large obstacles to claimants. In her view, this is intellectually unsound and requires court intervention.

Damages were quantified in the agreed sum of £14,556.15, plus interest at the rate of 8% per annum for the period from the date by which any services claim would have been determined under the scheme.

This case highlights some of the difficulties facing claimants in relation to professional negligence claims where they are required to establish causation against solicitors on the basis of their negligent advice or omission, particularly where that negligent advice resulted in the underlying claim not being pursued.

The judgment in Perry v Raley Solicitors confirms that the way in which a court will decide such cases is by assessing the prospects of success of the underlying claim. The court will then make an award for damages applying a percentage discount to reflect the chance of the underlying claim failing. The judge confirmed that in these cases the court should not conduct a “trial within a trial”.

What is interesting to note is that the defendant’s insurers were criticised by the court for putting the claimant to proof on every aspect of the underlying claim. It was held that this approach is not appropriate where negligence has already been admitted or proven. This will be of some comfort for those acting for claimants.