Professional Liability and Coverage Update: 2023 in review and a look ahead to 2024

Articles & Publications
8 January 2024


Many of the significant professional liability cases in 2023 dealt with the issue of just how far duties extend – and to whom they are owed. The principles lying behind duties to third parties were brought to a head and helpfully codified by the Court of Appeal in Ashraf v Lester Dominic [2023] EWCA Civ 4. McClean v Thornhill [2023] EWCA Civ 466 and two first instance decisions involving solicitors and accountants – including Lewis v Cunningtons [2023] EWHC 822 (KB) – rekindled a related debate over the effectiveness of professionals seeking to protect themselves through disclaimers, whether in relation to third parties or their own clients. Meanwhile, Cutlers Holdings’ litigation against its former solicitors prompted a close review of what solicitors need to do when they have made an error, and how much they need to realise about what has gone wrong before a claim founded on breach of fiduciary duty can be made.

Other eye catching cases have involved working out the implications of multiple aspects of the Supreme Court’s reasoning in Manchester Building Society v Grant Thornton [2022] AC 783 and Khan v Meadows [2022] AC 852. In 2022, the focus was almost entirely on how – if at all – these cases changed the law on the duty/nexus issue. In 2023, the enquiry about the impact of MBS and Khan in 2023 ranged much more broadly, particularly into the area of expressing scepticism about contrived counterfactuals.

Elsewhere, there has also been a wider reinvigoration of interest into causation and loss, with a timely consideration of the principles applicable to a break in the chain of causation in Jenkinson v Hertfordshire County Council [2023] EWHC 872 and the Judicial Committee of the Privy Council grappling with contributory negligence in Primeo Fund v Bank of Bermuda [2023] 3 WLR 1007. The latter case also considered deliberate concealment for limitation purposes – a topic also tackled and clarified by the Supreme Court in Canada Square Operations Ltd v Potter [2023] UKSC 41.

Finally, on the coverage front, there have been interesting developments at first instance on condonation and aggregation in Discovery Land v AXIS [2023] EWHC 779, and on appeal on the question of whether insurers have to indemnify professional fees in RSA v Tughans [2023] EWCA Civ 999.

In this review of the year, Helen Evans KCBen Smiley, Pippa ManbyAnthony Jones and Marie-Claire O’Kane of 4 New Square Chambers explain in more detail what issues have emerged from the 2023 authorities, and look ahead to the next twelve months.

Three ways to get at third parties

The professional liability case law began in 2023 with the Court of Appeal handing down its judgment in January in the case of Ashraf v Lester Dominic [2023] EWCA Civ 4. The claim had its origins in a property fraud, which had culminated in a bank’s solicitors incorrectly representing to the Land Registry that a party to a purported property transfer – a Mr Ul Haq – was represented by a conveyancer and that no ID documentation was therefore required. In fact Mr Ul Haq was not represented and had not consented to the transfer. Since the Land Registry was not prompted to see his ID, the transaction wrongly went ahead. Mr Ul Haq not only lost his property but remained exposed on the mortgage. After he died, his executrix sued the bank’s solicitors. Since they had not been acting for him, they denied that they owed him a duty of care.

The Court of Appeal disagreed, and held that it was arguable that the bank did owe Mr Ul Haq a duty because the solicitor in question “was arguably not acting just for the benefit of the bank but for the benefit of all parties, and thereby stepping outside his role as solicitor for his client”. In reaching this conclusion, it conducted an invaluable review of the case law on duties to third parties, and characterised the cases as falling into three core categories:

  • The first category is where the very purpose of retaining a professional is to confer a benefit on a third party. The textbook example of this is the case of a disappointed beneficiary under a will,  e.g. the classic case of White v Jones [1995] 2 AC 207. This is referred to below as a “category 1 case”, and as will be seen, is probably quite “niche”;
  • The second category is where a professional person (i) makes representations on which another party reasonably relies and (ii) where the professional could reasonably foresee that reliance. This is referred to below as a “category 2 case” and is probably the most commonly encountered type; and
  • The third category is the so-called “Al Kandari” principle, where a professional steps out of their role acting for one party and takes on duties to another. This category is comparatively rare, and takes its name from a family law dispute, where solicitors for a husband agreed to hold their client’s passport. In contravention of this agreement, they released it to an embassy. When the husband persuaded the embassy to give him the passport and absconded with the children, the solicitors were held to use a duty to the wife. This is referred to below as a “category 3 case”, and although infrequently encountered, it is clear that the Court of Appeal saw the facts of Ashraf as falling within this category.

Although Ashraf does not appear to have been cited to the Court of Appeal in McClean v Thornhill [2023] EWCA Civ 466 in March 2023, much of the argument in that case was in effect about whether the facts fell within category 2 (or failing that, within category 3).

In McClean, the Defendant was a tax barrister who advised the promoters of film finance tax schemes. He had agreed to being identified as the tax advisor to the promoters in the Memoranda provided to investors, and also that his opinions could be made available to the investors if they requested them.  Some investors did request them, and others did not. The opinions did not contain disclaimers of liability to third parties.

The investors alleged that the barrister owed them a duty of care in relation to the advice which he had given to the promoters, and that they had relied on that advice in entering into the schemes. Both at first instance and on appeal, the Court disagreed. The crucial facts militating against the investors were that the Memoranda had told them to consult their own tax advisors, and had also contained provisions whereby they could only participate in the schemes once they had warranted that they had done so. The investors’ attempt to show that they had reasonably relied on the barrister, and that he could reasonably foresee such reliance therefore failed – notwithstanding his failure to include a disclaimer in his advice.

The investors also attempted to rely on what Ashraf has identified as category 3 – namely the “Al-Kandari principle”. They alleged that the barrister had been acting outside the traditional role of a barrister and undertaking a role more like that of a joint expert. This argument also failed. The barrister had merely been acting as the promoters’ adviser.

The one category that did not arise in McClean was Ashraf’s category 1 – the disappointed beneficiary type case. However, the boundaries of that principle were considered in the Guernsey case of Dorey v Ashton [2023] PNLR 19. In that case, the adult children of a testator sued solicitors not because of a failure to make a will but because they said he had lacked capacity to execute the will he had made (and as a result of which he had left property to his second wife). The case therefore involved the opposite of the usual White v Jones facts, with thwarted children arguing that that they were owed a duty because the testator should have been prevented from taking away a benefit they would otherwise have had. The Guernsey Court decided that this type of case did not fall within the “disappointed beneficiary” pattern. The core reasons were that the children could pursue a remedy of setting aside the will – and accordingly there was no “black hole” that could only be filled by fashioning a claim against solicitors. The judgment is an interesting reminder that an important question for Courts when considering duties to third parties is whether Claimants are inappropriately left without a remedy.

On this latter point, wording commonly adopted by auditors intends to make crystal clear that third parties should not have claims against them – and that it is correct that they should be left without a remedy. The wording used is often referred to as a “Bannerman clause” and it tends to state that the audit report is “made solely to the company’s members, as a body, in accordance the Companies Act” before specifying that “to the fullest extent permitted by law”, the auditors “do not accept or assume responsibility for our audit work to anyone other than the company and the company’s members as a body”.

Courts are often willing to uphold this sort of wording and indeed tend to take a stringent approach to recognising duties owed by auditors to anyone other than the company’s members as a body – perhaps for fear of opening the floodgates due to the public nature of audited accounts. But in Amathus Drinks v EAGK  [2023] EWHC 2312 (Ch), Master Brightwell declined to strike out a case against auditors which they contended was prevented by their disclaimer.

The claim was brought by buyers of the entire share capital of a company who said that the auditors had failed to spot a fraud. The buyers contended that the auditors’ role had gone beyond merely preparing the statutory accounts and that the auditors had known that the buyers would rely on their work on the completion accounts to calculate the final price payable.  The Master held that there was “realistic as opposed to a fanciful prospect of the Claimants succeeding at trial in showing that there was an assumption of responsibility by EAGK towards the buyersin relation to the completion accounts, and that the case therefore had to proceed to full trial. The Master’s approach suggests that he perceived the claim to be a potential category 2 case within the approach adopted by Ashraf.  Just as in McClean, where the absence of a disclaimer had not won the day for the Claimants, in Amathus the presence of a disclaimer did not spell defeat for them either. We suggest that the value of disclaimers is not wholly settled, and is a question ripe for re-examination in 2024 and beyond.

Before moving on, we also note that the cases on duties to third parties are related to a further area where we have recently seen professionals fall into much difficulty – namely conflicts of interest between related parties. Problems often occur where professionals are instructed by the same or closely related people in a number of capacities e.g. as a shareholder, director, employee and/or on behalf of a company. We have seen a number of disputes arising from the failure to consider properly who the client is (and is not), how any retainer should be structured, whether a firm’s conflicts policy is satisfied and, importantly, whether any individual needs to be advised to seek independent advice in relation to one of their individual capacities.    Again this topic seems likely to trouble the Courts further in the year ahead.

Disclaimers and limiting the scope of the retainer

In Lewis v Cunningtons Solicitors [2023] EWHC 822 (KB) the issue of limiting the scope of the retainer, including through disclaimers, was considered. The Claimant alleged that as a result of her solicitor’s negligence in the conduct of her divorce proceedings, she had entered into an unfair settlement agreement with her former husband. In particular, she argued that she did not obtain a pension sharing order and suffered loss in the region of £500,000 as a result.

At the outset of the matter, the retainer letter had presented the Claimant with a range of options in terms of legal services – from merely assisting her in drafting a settlement to much broader advice. At the start, the Defendant gave the Claimant some generic advice. After some months, the Claimant informed the Defendant that she and her former husband had agreed a settlement whereby he would pay her £62,000 on a clean break basis, with the Claimant agreeing to sign over a modest endowment policy to her husband. The Defendant responded explaining that it could not comment on whether or not such agreement was fair or reasonable in the absence of financial disclosure. It informed the Claimant that she would need to sign and return a disclaimer confirming that she understood that she had not been given any advice in relation to financial matters, and that because there had been no financial disclosure the Defendant could not advise whether or not the settlement was fair and reasonable. Prior to a consent order being drawn up to reflect the Claimant’s agreement with her former husband, there was then an exchange of statements of financial information. These revealed that the cash equivalent transfer value of the husband’s pension was £540,712.60 and he had a total capital of £590,712.60.

The scope of the Defendant’s retainer was one of the key issues in dispute. It was the Claimant’s case that the settlement she reached with the husband was so obviously unfair that she should have been advised to apply for a pension sharing order at the later stages of the matter. For the Defendant’s part, it argued that by entering into an agreement with her husband, the Claimant had by her conduct chosen one of the narrow options set out in the retainer letter, and/or it relied on the fact that she had signed a disclaimer. The Defendant argued that as in Minkin v Landsberg [2015] EWCA Civ 1152, once the Claimant had reached a deal, its duty was limited to implementing the settlement agreement which she had reached with her former husband.

The Court upheld the Claimant’s claim. It distinguished Minkin on the basis that in that case, the solicitor had been instructed from the outset solely and exclusively to draft a consent order on terms which the client had already agreed. In the present case, the retainer was a general retainer at the outset. Further, the Court took the view that the attempt to limit the Defendant’s responsibilities with a “one-size fits all” disclaimer was not appropriate. This was because it felt that the Defendant did have enough information to advise, even if in general terms as to the reasonableness or otherwise of the proposed settlement.

The decision in Lewis is of interest because it shows a Court taking a doubtful view about Minkin style arguments over the scope of the retainer arising after the start of a matter. However, there is a dearth of reported cases on this point – and we doubt that Lewis will be the last word on this issue, or on the effectiveness of disclaimers.

Duty to advise on everything?

Lewis was a case about whether solicitors were not in a position to give any advice. The Scottish case of Ronnie O’Neill Freight Solutions Ltd v MacRoberts LLP [2023] CSOH 75 was something of its opposite and concerned whether solicitors have to advise about every conceivable point.

In Ronnie O’Neill, a freight company entered into an agreement with a haulier (“UPL”) by which the freight company’s customers would place orders directly with UPL for various services.  UPL agreed to pay commission to the freight company for business passed to it. The agreement did not contain any express provision for termination. During the course of the agreement, UPL contacted the freight company purporting to terminate the agreement with immediate effect and stating its intention to continue trading with customers. The freight company sought legal advice from the Defendant solicitors, who advised that (i) the agreement was terminable subject to reasonable notice being given; and (ii) rather than litigate immediately, the company should pursue a commercial settlement, while at the same time trying to persuade its customers to switch to another contractor in place of UPL. Settlement was ultimately reached in the sum of £40,000 (of which £10,000 represented unpaid invoices and the balance damages).

The freight company then brought a claim against its solicitors, alleging that it should have been advised of the argument that the agreement was not terminable, even on notice, and to seek interim remedies from the outset. Had advice as to non-terminability been given, the freight company said it would have been successful in retaining all or most of its business; and/or that it would have pursued an action for damages against UPL for payment of three and a half years’ of commission, worth £350,000 which would have had a substantial chance of success. The Defendant denied that its advice was negligent and said in any event the action would have settled on the same basis as was in fact achieved.

Expert evidence on breach was given by two solicitors, each expressing a different opinion[1]. The Court considered that the short answer to the claim of negligence was that there was no rational basis to reject the Defendant’s expert evidence to the effect that not all ordinarily competent solicitors would advise a client about all arguments which were merely stateable, and that the non-terminability argument was sufficiently weak that advice need not have been given about it. Further, not all ordinarily competent solicitors would have advised the freight company to seek an interim remedy. Consequently, the freight company had failed to establish that the defendant had breached its duty of care in any respect.

The decision in Ronnie O’Neill accordingly provides helpful guidance to those advising on contentious matters, in that it suggests that not every line of argument, however weak, needs to be pursued or identified.

What does a professional need to do when they have been negligent?

We turn now to another conflict of interest problem – namely what a professional needs to do if they have been negligent. We considered conflict of interests between clients above, but here we turn to conflicts between solicitors and their clients.

In the solicitors’ case of Cutlers Holdings Limited v Shepherd & Wedderburn LLP [2023] EWHC 720 (Ch) involving Sheffield United, Bacon J dealt with this issue of “own interest” conflict. Specifically, she considered whether a solicitor should tell a client to seek independent advice where there was a significant risk that the solicitor’s prior actions and advice had been negligent. Unsurprisingly, she held that such a situation was a paradigm case in which an own interest conflict would arise. Referring to the version of the SRA Code of Conduct (“the Code”) in force at the relevant time – which required solicitors to inform clients if they discovered an act or omission which could give rise to a claim against them, to consider whether a conflict of interest had arisen and to advise the client to obtain independent advice – she held that the Code was a good measure of the conduct to be expected of the reasonably competent solicitor.  She also made clear that the duty to give advice of this nature would arise regardless of the sophistication of the client and/or whether the client was aware of the facts which might establish prior negligence of the solicitor.

It is not therefore difficult to show that a failure on the part of a solicitor to provide advice of the type required by the Code is negligent. However, it is clear from Cutlers Holdings that it is much more difficult to show that it would be a  breach of fiduciary duty. This is because the latter cause of action entails the need to show conscious disloyalty to the client.

In Cutlers Holdings, the Judge held that the solicitors had not acted in breach of fiduciary duty because, despite the serious findings made against them in relation to failing to advise the client of the conflict or to seek independent advice, they had not appreciated that there was a conflict of interest and had therefore not taken a deliberate decision not to inform the client.  Effectively, the Judge allowed the solicitors’ “wholly misconceived” view that there was no conflict and their “extraordinar[ily] … superficial” consideration of their duties in relation to that to serve as a defence to the breach of fiduciary duty claim. As we consider below, this was not the only area where the case law of 2023 has emphasised a need to show conscious wrongdoing on the part of a professional – the other core area being deliberate concealment.

Deliberate concealment and deliberate commission of a breach of duty

Solicitors who have acted in breach of duty and failed to advise their clients of the same frequently face allegations that they have deliberately concealed their wrongdoing, with the effect that the running of time does not begin for limitation purposes under section 32 of the Limitation Act 1980 (‘the 1980 Act’). But the long-awaited decision of the Supreme Court in Canada Square Operations Ltd v Potter [2023] 3 WLR 963 has delivered clarity to this particularly knotty area, and we consider that it is likely to dampen claimant enthusiasm for section 32 as a broad basis for avoiding limitation.

The underlying case related to excessive commissions earned on payment protection insurance (‘PPI’). A consumer, Mrs Potter, entered into a loan, not knowing that more than 95% of the £4,000 sum charged for a PPI policy was taken as commission by her lender, with only £182.50 actually paid as premium to the insurer. Non-disclosure of a very high commission gives rise to a statutory cause of action in respect of an ‘unfair relationship’ contrary to section 140A of the Consumer Credit Act 1974, for which there is a six-year time limit starting once the credit relationship has ended (which occurred in 2010 when Mrs Potter paid off her loan). Mrs Potter brought civil proceedings in 2018, relying on section 32 of the 1980 Act.

Section 32(1) of the 1980 Act provides, inter alia, that:

‘where in the case of any action for which a period of limitation is prescribed by this Act, either –

  • the action is based upon the fraud of the defendant; or
  • any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or
  • the action is for relief from the consequences of a mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.’

Section 32(2) provides that ‘deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.’

In an earlier judgment in Potter, the Court of Appeal had held, significantly, three things.

  • First, that the creation of an ‘unfair relationship’ contrary to the Consumer Credit Act 1974 qualified as the sort of ‘breach of duty’ which could come within the scope of section 32(2).
  • Second, that the lender’s non-disclosure of its commission could be ‘deliberate concealment’ of the unfair relationship for the purposes of section 32(1)(b), since the lender had failed to discharge a duty of disclosure (which did not need to be a formal tortious or fiduciary duty) arising from the underlying duty to act fairly implied by the Consumer Credit Act 1974.
  • Third that ‘deliberate’ meant that the defendant realised there was a risk it had a duty to tell Mrs Potter about the commission, but recklessly failed to do so.

On appeal to the Supreme Court, the issues were:

  • The meaning of deliberate concealment under section 32(1)(b), including whether it required a duty of disclosure and
  • Whether reckless failure to disclose was enough; and (b) whether recklessness was also enough to satisfy the deliberate commission of a relevant breach of duty under section 32(2).

On section 32(1)(b) – deliberate concealment – the Supreme Court swept away the Court of Appeal’s gloss on the wording of the statutory provision, removing the precondition of the existence of a duty of disclosure. It made clear that concealment simply means the hiding of information, regardless of whether or not that information is due to the Claimant, and irrespective of motive. In addition, the Supreme Court concluded that ‘deliberately’ means intentionally – and recklessness is therefore insufficient.

As to the term ‘deliberate commission’ in section 32(2), the Supreme Court again returned to the natural meaning of the words, concluding that a deliberate breach of duty does not embrace a reckless breach. In doing so, the Court affirmed the approach taken two decades ago by the House of Lords in the solicitors’ case Cave v Robinson, Jarvis & Rolf [2003] 1 AC 384 that a deliberate breach of duty requires knowledge that what was done was in breach of duty, and aligned the Supreme Court’s jurisprudence with the Privy Council’s decision (released the same day) in Primeo Fund v Bank of Bermuda [2023] 3 WLR 1007.

The decision will be welcomed by professionals and their insurers. As recognised in Cutlers Holdings, there are some causes of action or statutory tests – particularly ones that unlock more generous damages or provide lengthier limitation periods – which call for a Claimant to show that a Defendant professional has acted consciously rather than merely negligently.

Manchester Building Society applied

We turn now to the twin decisions of Manchester Building Society v Grant Thornton [2022] AC 783 and Khan v Meadows [2022] AC 852. There was much debate when the decisions were released as to how ground-breaking they would prove to be. In 2023 there has been a degree of flux as practitioners and Courts have sought to work out how the principles in these cases should be applied.  Indeed, 2023 saw four decisions handed down which touched on the correct application of various aspects of MBS and Khan. We discuss three of these below.

Just a sanity check?

First, the Court of Appeal in URS Corp Ltd v BDW Trading Ltd [2023] PNLR 28 considered a dispute between the Claimant developers (BDW) of residential apartment blocks and the Defendant company (URS) which had performed design work on those projects.  Following the Grenfell disaster, BDW evacuated the residents from the developments and remedied alleged design defects, even in the absence of actual damage and despite BDW no longer having an interest in the properties.

A preliminary issue (on the assumed fact that there had been defective designs) was whether BDW’s losses fell within the scope of URS’s duty. The Court of Appeal upheld the decision at first instance that the scope of URS’s duty encompassed all physical and economic losses suffered by BDW flowing from defective design. These were not limited to physical damage to property in which BDW had an interest and legal liability incurred by BDW to third parties; nor did they exclude the cost of remediating defects.

Notably, in reaching that decision, Coulson LJ (at [35]) depicted the six-stage checklist in MBS as a “useful way of analysing whether an alleged duty of care properly correlated to the harm claimed”. However he said that it was “primarily designed to analyse duties of care alleged to arise in novel situations which had not previously been considered by the courts, or where the type of loss claimed was unusual or stretched the usual boundaries imposed by the law.” Although he took the view that the checklist “was not primarily intended to be applied by rote to the well-known and much-reported standard duties of care”, at [36] he suggested that the judgment of the majority in MBS could nonetheless act as a form of “’sanity check’” even in more conventional scenarios.[2]

No appetite for contrived counterfactuals

Second, in Primeo Fund v Bank of Bermuda [2023] 3 WLR 1007 the Judicial Committee of the Privy Council addressed issues arising from Bernard Madoff’s Ponzi scheme which collapsed in 2008. The Claimant investment fund (Primeo) had invested in the scheme and sought to claim damages from its former administrator (the Bank) and custodian (HSBC). Primeo alleged that the Bank had failed to act with reasonable care and skill in maintaining Primeo’s books and records and/or determining its value from time to time. Primeo also contended that HSBC had breached strict contractual duties by appointing Bernard L Madoff Investment Securities LLC (Madoff Investments) as sub-custodian, and so was liable for the sub-custodian’s wilful breaches.

While no specific reference was made to MBS, there were echoes in the Privy Council’s judgment in Primeo of a key point which had been forcefully made by Lords Hodge and Sales in MBS, namely: “the danger of manipulation, in argument, of the parameters of the counterfactual world” and the tendency of counterfactuals to generate “abstruse and highly debatable arguments” (see MBS at [26]). In Primeo, the Privy Council was similarly sceptical about the counterfactuals put forward by the Defendant Bank. One was that even if Madoff Investments had held Primeo’s cash safely, it would have perpetrated the Ponzi fraud with other investors’ money, and Primeo therefore would only have been left with an unsecured right of recovery. The Privy Council concluded that such an argument “could not be sustained” [63]. In its view the relevant counterfactual analysis was to assume that Madoff Investments had not carried on a Ponzi Scheme at all, not that it had carried out a Ponzi Scheme excluding the Primeo money.

A mortgage broker is not a commercial guarantor

Finally, the High Court in Taylor v Legal and General Partnership Services Ltd [2023] PNLR 4 gave brief consideration to the scope of duty test in MBS in the context of a claim against allegedly negligent mortgage brokers. The Claimants had engaged a broker attached to the Defendant to remortgage their home. They used the borrowed sums towards paying an off-plan purchase of a Caribbean property development. It transpired that the Caribbean project was a fraudulent scheme and the Claimants lost all their investment.

Somewhat ambitiously, the Claimants then sought to recover all of their losses from the mortgage broker. They asserted that the broker had been negligent in failing to advise them to take independent advice on the investment (i.e. the Caribbean project), and had they been properly advised they would not have lost their money.

Every element of the claim failed. There was no breach, because the broker had adequately advised the Claimants.  The Court rejected the broad scope of the duties which the Claimants alleged had been owed by the broker. There would in any event have been difficulties in causation, given the Claimants’ enthusiasm for the proposed investment, quite apart from limitation issues.

As a further nail in the coffin, the Court held that even if the Claimants could have made out a case on liability, “it is difficult to see on what basis the capital loss in respect of the [Caribbean] investment could properly be said to fall within the scope of the duty of care” in accordance with MBS.  That must surely be right.  The risk which it is the purpose of a mortgage broker to guard against is plainly not the loss of the mortgage advance on what transpires to have been an unwise investment by the borrower.

What’s required to break the chain of causation?

An issue that commonly arises in professional negligence cases is that one Defendant seeks to argue that another’s error was so stark as to break the chain of causation, thereby exonerating the first Defendant from liability. What the first Defendant needs to prove is a topic that has received surprisingly little attention in the professional liability sphere.

However, it has recently been considered in the personal injury context.

Jenkinson v Hertfordshire County Council [2023] EWHC 872 (KB) was a claim against a local council following an injury sustained by the Claimant from an uncovered manhole cover. Despite not being a professional negligence claim, the decision of Baker J is of interest to professional negligence practitioners in relation to what was said about breaks in the chain of causation. In Jenkinson the Defendant’s position was whilst the Claimant’s ankle injury been suitable for surgery, the surgery had been performed so negligently that, instead of the Claimant making almost a full recovery within a short timeframe, he required six further surgeries and had a generally poor outcome.

The Defendant council applied to amend its Defence to add a new paragraph denying liability for loss and damage arising from the negligently performed surgery and alleging that the chain of causation from the original accident had been broken by the negligent medical treatment. That application was initially refused on the basis that there was a rule of law requiring proof that the medical treatment was grossly negligent as to be an inappropriate response to the injury inflicted by the first Defendant (“the Specific Rule”). The first Defendant appealed. Baker J considered the authorities said to support the existence of the Specific Rule.[3] He then determined that the Specific Rule did not exist as a principle of law. Whilst the case focussed on the position regarding medical interventions, it it is likely to reignite debates regarding causation and novus actus interveniens more widely, including in the professional negligence sphere. In particular it undermines the notion that the first professional has to show that the second professional involved was grossly negligent.

The case is likely to be enthusiastically adopted by professional advisers involved early on, in transactions or litigation that has subsequently gone wrong.

Contributory negligence

Finally so far as professional liability is concerned, there have been a number of cases this year in which the Courts have grappled with principles of contributory negligence.  While these cases all turn on their particular facts, three decisions from 2023 warrant particular mention.

First, in Primeo (discussed above in the context of MBS), the Privy Council confirmed[4] that contributory negligence is available when the Defendant’s liability in contract is the same as his liability in negligence (independent of the existence of a contract). That position had been established at first instance in Vesta v Butcher [1986] 2 All ER 488, and the Court of Appeal in Vesta had approved that decision, but obiter. The Privy Council concluded that Vesta had been correctly decided.

Ultimately, on the facts in Primeo, the Privy Council held the defence was not available in respect of the claim against HSBC (which as above was based on a strict contractual liability rather than an obligation to act with reasonable care and skill). However, the defence was available in the alternative claim against the Bank, as that was based on an allegation of failure to take reasonable skill and care. The Privy Council reduced the discount from the 75% awarded at first instance to 50% (which had also been indicated by the Court of Appeal of the Cayman Islands). That better reflected a case where Primeo’s directors were industry professionals and the high risks of Madoff Investments were clear; but the Bank also owed duties as a professional service provider.

Second, in Infinity Reliance Ltd (t/a My 1st Years) v Heath Crawford Ltd [2023] EWHC 3022, the High Court applied a contributory negligence deduction to an award of damages against an insurance broker. The case provides a useful example of the application of the two key matters when determining an appropriate discount: causative potency and relative fault. It also demonstrates how difficult it can be for a court to assess contributory negligence on the basis of complex and interwoven errors.

The Claimant, a personalised children’s gift retailer (Infinity), had obtained business interruption insurance with the assistance of the Defendant broker (HC). HC had provided guidance as to the calculation of sums insured. This explained that there were two elements to the calculation: the calculation of gross profit (which HC had wrongly described), and then the increase of that gross profit in to reflect Infinity’s forecast growth (which HC had accurately described). The sums insured calculated by Infinity was £24.9m. Following a fire at Infinity’s warehouse, the insurers reduced the sum paid to Infinity by 24% due to average.

Infinity alleged that HC had been negligent both (a) in providing misleading guidance as to the calculation of sums insured (due to the misdescription of the gross profit); and (b) in failing to recommend a “declaration linked” policy. HC admitted breach of duty in the first respect, and the Court upheld breach of duty in the second respect. However, HC’s main argument was that Infinity was the author of its own misfortune, since Infinity had failed to follow the part of the guidance on the calculation of sums insured which was accurate. While Infinity had started with a gross profit which was too low (as a result of HC’s misleading guidance), it had then failed to increase that figure appropriately in accordance with Infinity’s actual forecast growth.

The Court accepted that defence, to an extent, holding that Infinity was guilty of a careless failure to apply a reasonable methodology to inflating the gross profit figure, and that was a cause of its loss. HC’s own negligence (in the misdescription of gross profit) and that of Infinity (in the inadequate inflation of the gross profit figure) were each a sufficient cause of the loss: avoiding either would have mitigated or eliminated the effect of the other. While HC’s fault in this regard was serious, the Court would have awarded a 40% discount had the claim been based purely on the misleading guidance as to the calculation of sums insured. However, the contributory negligence discount was reduced to 20%, to take account of the other breach of duty: the failure to recommend “declaration linked” cover. Such cover would have avoided the application of average altogether (indeed, that was one of the reasons why it should have been recommended). As such, the balance of causative potency and relative fault lay more in Infinity’s favour in that regard.

Although contributory negligence is often pleaded in professional liability claims, decisions providing guidance as to the correct percentage deductions are surprisingly thin on the ground. These 2023 decisions therefore provide some welcome signposts for those advising on this issue.


Just as 2023 saw a number of noteworthy developments in substantive professional liability law, so too it saw some interesting cases relating to how professional indemnity insurance responds to such liability.

Sometimes the dispute is whether something counts as a covered type of civil liability at all. In Royal & Sun Alliance v Tughans (a firm) [2023] EWCA Civ 999, a central issue was whether solicitors’ liability to repay a success fee would be covered for the firm’s insurance which, like all SRA Minimum Terms insurance, responded to ‘civil liability.’

In summary the Northern Irish firm Tughans was involved in a transaction with a US law firm (Brown Rudnick) relating to the purchase by a private equity fund of a book of loans. Brown Rudnick and Tughans were to be paid success fees, and Tughans was required to provide various representations and warranties regarding compliance with anti-corruption conditions. The deal completed and the success fees were paid. But then it was revealed that a partner at Tughans had breached the anti-corruption conditions by diverting most of the success fee to his own benefit. Tughans was sued for recovery of the success fees. Tughans sought indemnity from its insurers. Insurers refused cover. Insurers accepted that a solicitor who accrued a contractual entitlement to a fee and then was ordered to repay that fee as damages would have incurred a civil liability to which insurance cover would respond. But insurers argued that Tughans had suffered no loss in this instance because the firm was never actually entitled to the success fee since the warranty precondition regarding anti-corruption compliance had never been complied with, and so the obligation to repay was a restitutionary obligation falling outside the scope of conventional professional indemnity cover. At first instance, Mr Justice Foxton rejected insurers’ position, concluding that the terms on which the success fee was payable required only that the Tughans representations and warranties be given, not that they be true. The firm’s breaches gave rise to simple contractual liabilities, something within the conventional scope of the cover which insurers were obliged to provide.

Insurers appealed, and the Court of Appeal in late 2023 handed down judgment. The Court of Appeal upheld Mr Justice Foxton’s decision, noting that the insuring clause was very wide, covering any civil liability without limitation. There was therefore no available distinction to be drawn between liability for damages in respect of fees or any other form of liability. That was said to be consistent with the function of compulsory professional indemnity insurance for solicitors, and the important policy objective of protection of the public.

In addition to cover simpliciter, 2023 has seen further case law on how different covers may or may not overlap – the question of aggregation.

A noteworthy case was that of Discovery Land v Axis Specialty [2023] EWHC 779 (Comm). That case arose from the fraudulent conduct committed by a Mr Stephen Jones who was a partner in the failed solicitors firm Jirehouse and its associated entities, and two judgments which had been granted against them. The first judgment concerned Mr Jones dishonestly removing a sum of US$14 million which a client had paid for the purchase of a property known as Taymouth Castle. The second judgment concerned Mr Jones dishonestly arranging a loan secured against the same property, and drawing down approximately £5 million from that loan.

Jirehouse’s insurance cover conformed with the SRA Minimum Terms, which allows for the aggregation of all claims arising from:

  • One act or omission;
  • One series of related acts or omissions;
  • The same act or omission, in a series of related matters or transactions;
  • Similar acts or omissions, in a series of related matters or transactions.

The question was whether the claims under the two judgments were subject to aggregation as claims arising ‘similar acts or omissions in a series of related matters or transactions.’ At first instance, Knowles J concluded that close attention was required to the actual acts carried out. In the first claim, the wrongful act was release of the money from the client account. In the second claim, the wrongful act was, some months later, the arrangement of the loan and drawing it down. He held that those were separate acts which were not sufficiently similar and did not aggregate. He also held that there were two transactions – the purchase of the castle and the loan – which were not sufficiently connected either.

An appeal against the judgment of Knowles J was heard in late November 2023 and judgment is expected in 2024.[5]


2023 was a busy year for professional liability and coverage case law. It is not surprising – given the direction of travel in 2022 – that so much of 2023’s case law grappled with who owed duties to whom, and what those duties comprised. The position in relation to duties to third parties is now more settled than before, and we anticipate that more attention will turn in the year ahead to questions such as the effect of disclaimers in a variety of different factual circumstances.

Unusually, some of the interesting 2023 developments with big impacts on professional liability had their origin in different areas- particularly consumer credit and personal injury. Thanks to Canada Square in particular, 2023 brought overdue clarity to the case law on deliberate concealment and is likely to spell difficulty for some antiquated claims.

Looking to the year ahead, we anticipate a revival of interest in arguments on breaking the chain of causation as well as contributory negligence, and we expect that coverage will continue to be a fertile area of dispute.

© Helen Evans KC, Ben Smiley, Pippa Manby, Anthony Jones and Marie-Claire O’Kane of 4 New Square Chambers, 8 January 2024

This article is not intended as a substitute for legal advice. Advice about a given set of facts should always be taken.

Helen Evans KC was called in 2001 and appointed silk in March 2022. Helen specialises in professional liability, regulatory fraud and insurance work, with a large part of her practice focusing on lawyers’ and accountants’ liability and disciplinary matters. Helen is a co-editor of the solicitors and barristers chapters in Jackson & Powell on Professional Liability. She is highly recommended in the directories. Prior to taking silk, in November 2021 Helen was named “Professional Negligence Junior of the Year” and in April 2022 was named “Times Lawyer of the Week.”

Ben Smiley was called in 2009. He has a broad commercial practice, which includes professional liability and insurance, among other specialisms. He is recommended as a leading junior in the directories in his core areas of work. He was shortlisted for Chancery Junior of the Year in the Legal 500 Bar Awards 2022 and for Chambers & Partners Professional Negligence Junior of the Year 2021. He edits the chapter on accountants and auditors in Jackson & Powell on Professional Liability.

Pippa Manby was called in 2010 and has a broad commercial practice. She is ranked by both Chambers and Partners and the Legal 500 as a Leading Junior in three categories: Professional Liability, Sport and Costs and by Who’s Who Legal in Sport. Her professional negligence practice includes high-value, complex disputes against the full range of professionals.

Anthony Jones was called in 2011 and is ranked by Chambers & Partners and the Legal 500 as an outstanding junior in four practice areas: (a) insurance and reinsurance; (b) professional negligence; (c) international human rights law; and (d) admin law and human rights. Anthony is the author of the defences chapter in Jackson & Powell on Professional Liability.

Marie-Claire O’Kane was called in 2013. She specialises in commercial litigation, including claims against financial and other professionals, insurance and civil fraud. She is an Editor of Jackson & Powell on Professional Liability and is ranked as a Leading Junior in Commercial Litigation by the Legal 500, 2024.


[1] Expert evidence of this nature is rarely permissible in England and Wales.

[2] Note that the six-stage checklist had similarly been used by Dingemans LJ as a cross-check in Armstead v RSA [2022] RTR 23 at [58]-[59].  That decision is subject to appeal to the Supreme Court.  Arguments were heard in late 2023 and judgment is expected in 2024.

[3] Including Webb v Barclays Bank and Portsmouth Hospitals NHS Trust [2001] EWCA Civ 1141; Rahman v Arearose Ltd [2001] QB 351; Hogan v Bentinck West Hartley Collieries (Owners) Ltd [1949] 1 All ER 588 and the commentary in Clerk & Lindsell.

[4] For the first time as part of the Court’s ratio at appellate level.

[5] The appeal concerned condonation as well as aggregation.

Related areas

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Helen Evans KC

Call: 2001 Silk: 2022

Ben Smiley

Call: 2009

Pippa Manby

Call: 2010

Anthony Jones

Call: 2011



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