By Helen Evans KC, Ben Smiley, Pippa Manby, Marie-Claire O’Kane and Will Cook of 4 New Square Chambers
Overview
The two professions who occupied most court time in 2024 in terms of considering duty of care were solicitors and valuers. The solicitors’ cases – Miller v Irwin Mitchell LLP [2024] EWCA Civ 53 and Niprose Investments Ltd v Vincents Solicitors Ltd [2024] EWHC 801 (Ch) focused on when a client’s lack of sophistication makes a difference to what a solicitor has to do, both before and after a formal retainer. 2024’s main valuers’ negligence case, Bratt v Jones [2024] PNLR 20 by contrast, contains a helpful codification of the tests to be applied.
Outside the scope of debates over duty, the defence of illegality raised its head in multiple contexts. Both in claims against solicitors and in the broader commercial setting, the courts expressed concerns about it operating as a blunt implement: Afan Valley Ltd v Lupton Fawcett [2024] EWHC 909 (KB). Where the defence can be deployed in a more nuanced fashion, we explain how it has met with some recent success, despite the Defendant’s own alleged implication in the Claimant’s alleged wrongdoing: Melia v Tamlyn and Son Ltd [2024] EWHC 3002 (Ch).
In the brokers’ negligence arena, two cases explored the extent to which damages can be claimed on a loss of a chance basis, with particular emphasis on the topic in Norman Hay Plc v Marsh Ltd [2024] EWHC 1039 (Comm).
Also spanning multiple areas, issues of duties to consumers came to the fore both in the context of commissions in Johnson v FirstRand Bank Ltd [2024] EWCA Civ 1282, and costs Glaser v Atay [2025] PNLR 4. Both cases were preoccupied with fairness, which also forms the backdrop to debate about limiting liability. The Civil Liability (Contribution) Act 1978 (“the Contribution Act”) also gave rise to a spate of challenges, with particular problems emerging when professional indemnity insurers sought to deploy it outside the setting of a subrogated claim: Riedweg v HCC International Insurance plc & Ors [2024] EWHC 2805
In this review of the year, Helen Evans KC, Ben Smiley, Pippa Manby, Marie-Claire O’Kane and Will Cook of 4 New Square Chambers explain in more detail what issues have emerged from the 2024 authorities, and what is likely to be in store in the next twelve months.
Lawyers’ liability
A duty to do what- and why?
Two key authorities in 2024 debated the extent which a client’s lack of sophistication drives the duties owed by a solicitor- one in circumstances where no formal retainer had yet been entered into and another in circumstances where there was a retainer, but there was also controversy over whether it required the Defendant to stray into commercial matters.
In the first case, Miller v Irwin Mitchell LLP [2024] EWCA Civ 53, the Court of Appeal considered the duty of care assumed by a solicitor when providing free initial legal advice via a telephone helpline.
The claimant, Mrs Miller, had sustained an injury whilst on holiday. She called the Defendant solicitors’ helpline after seeing a television advertisement. The Defendant gave her some high-level information about a personal injury claim, including about limitation. Nearly two years later Mrs Miller was ready to proceed with the claim and formally retained the Defendant. The Defendant sent a letter of claim to the travel operator requesting that it notify its insurers immediately. However, the insurers declined cover because of late notification.
Mrs Miller sued the Defendant, arguing that it owed her a duty to advise her to notify the travel operator of the accident when she first called the helpline. Her claim was dismissed at first instance. On appeal, Mrs Miller argued that because the Defendant had chosen to inform her about the limitation period in the initial call, it was also under an obligation to advise her to notify the travel operator of the accident. She tried to present both issues as facets of being able to achieve a recovery. She relied on her lack of legal experience to bolster her case.
The Court of Appeal accepted that the Defendant solicitors assumed a duty to take reasonable care in the advice given- even though it had been provided gratuitously on the helpline. However, that did not mean that the duty extended as far as Mrs Miller contended it did. The Court of Appeal held that her lack of sophistication was not as significant as she sought to argue. It made clear (at [46]) that statements in Carradine Properties Ltd v DJ Freeman & Co [1999] Lloyd’s Rep. PN 483 to the effect that an inexperienced client is entitled to expect a solicitor to take a broader view of the scope of his duties were specifically addressed to a situation where there was a retainer.[1]
In Miller, the Court of Appeal considered that the Defendant had only taken it upon itself to offer high-level and preliminary information about the ingredients of a claim in negligence; and specific advice about the period within which the Claimant must issue any legal proceedings. This did not create a duty to give wider-ranging advice about any steps the Claimant might take to protect her position before she issued proceedings[2]. The appeal accordingly failed.
Miller seems to us to be a welcome contrast to other recent decisions such as Lewis v Cunningtons Solicitors [2023] EWHC 822 which indicated a less forgiving approach to solicitors seeking to limit the scope of their duty to specific tasks.[3] However, the outcome was pre-retainer, and arguably at odds with 2024’s second big case on scope of duty.
This second case was Niprose Investments Ltd v Vincents Solicitors Ltd [2024] EWHC 801 (Ch), where the court refused an application by a firm of solicitors to strike out a professional negligence claim in relation to the purchase of units in a failed property development scheme. The Claimants alleged that the Defendant had failed to advise them properly of the risks of investing in the development and that no effective security had been provided to ensure that advance payments were protected. The Defendant denied negligence on the basis that it had made it clear that it had not been retained to advise on the wisdom of investing or the risks of making advance payments. It also argued that the Claimants’ pleadings failed to explain how the Defendant had been negligent and failed to engage with the argument that the Defendant’s advice was limited in nature.
The court declined to strike out the claim without giving the Claimants an opportunity to amend the Particulars of Claim. Despite having doubted the relevance of the Claimant’s sophistication to the pre-retainer situation in Miller, in Niprose the court took the opposite view once a retainer was in place (at [70]). On the basis of Carradine Properties, it was prepared to accept that the precise scope of a solicitor’s duty to advise depends not just upon the terms of the retainer, but also upon the extent to which any individual client appears to need particular advice. Where a client is less sophisticated, the solicitor is under a greater duty. The court also held that the level of the client’s sophistication is a matter for trial, provided the issue has been properly raised on the pleadings.
The Niprose case seems to us to be more generous towards unsophisticated Claimants than Miller– albeit that it does make clear that they must plead their case about their (lack of) sophistication in full and cannot merely leave the matter for witness statements. But, viewing the two cases together, the direction of travel is somewhat unclear.
Instructions on behalf of groups
One issue that often causes solicitors practical difficulties is working out how to take instructions from groups of clients. Must a solicitor make sure that all clients agree with the instructions in all circumstances? Or is it sometimes appropriate to take instructions from an apparent leader?
Blower v GH Canfields LLP [2024] EWHC 2763 concerned solicitors who had multiple clients in one family but failed to take instructions from all of them. They liaised solely with a husband about the settlement of claims brought against him, his wife and their two adult children by the husband’s trustee in bankruptcy. The court found that the solicitors had been entitled to reach settlement based on the husband’s instructions alone. This was because the rest of the family had left the husband and the solicitors to negotiate a settlement at mediation and had not responded to the solicitors’ request to tell him if there were any “red lines” that they should not cross (at [82]). This decision seems to us to be highly fact-specific: it is easy to imagine a different outcome if there were a hint of disagreement among the cohort.
Attempts to outflank restrictions in s. 14A or s. 32 of the Limitation Act 1980
Claimants who have allowed more than 6 years to elapse since their solicitors’ initial errors often have to reach for either s. 14A or s. 32 of the Limitation Act 1980. The former allows a period of 3 years to bring a claim, with time starting to run from the Claimant’s actual or constructive knowledge[4]. The latter allows a more generous period of 6 years from actual or constructive knowledge, but relies on being able to prove serious wrongdoing by the Defendant in the professional liability context- such as fraud, or deliberate concealment.[5] Just how far these provisions stretch is an issue that regularly comes before the courts- often alongside fallback arguments that Defendants had owed continuing duties to correct their initial advice, so as to start time running again and again.
In Lonsdale v Wedlake Bell [2024] PNLR 21 the court considered how s. 14A of the Limitation Act works where a Claimant knows that his solicitors have made a mistake but believes that it can be rectified. Under s. 14A, a Claimant only has the requisite knowledge to start time running under the Act when he knows “the material facts about the damage” (being such damage that would cause a reasonable Claimant to sue).[6]
In Lonsdale, the court took the view that merely knowing about the mistake was not enough to start time running. This was because the Defendant’s correspondence had led Mr Lonsdale to believe that problems with a trust could be sorted out. Mr Lonsdale had therefore acted reasonably in not even seeking independent legal advice until the solicitors conceded that matters were beyond repair. As this was less than 3 years before proceedings were commenced, the claim had been started in time.
In addition to permitting reliance on s. 14A, the court was also prepared to accept that the solicitors had owed Mr Lonsdale a continuing rather than one-off duty to advise. This type of argument is usually difficult to get off the ground[7], but on the unusual facts of this case the solicitors had continued to liaise with Mr Lonsdale about what had gone wrong. The court was prepared to characterise these interactions as fresh breaches of duty, which would start time running again for limitation purposes.
Whether these types of argument will in fact succeed is very fact sensitive. Both arose again- albeit in a very different context- in Al Sadik v Clyde & Co & Ors [2024] EWHC 818 (Comm)[8]. This case involved litigation which had taken a wrong turn, with Mr Al Sadik’s intended amendments being refused before trial. He contended that time had not started to run for limitation purposes because he thought that the rest of his claim would come good. Alternatively, he asserted that his lawyers had been under a continuing duty to tell him that his amendments had been introduced too late.
By contrast to Lonsdale, both arguments failed. The court was not prepared to accept that the loss of the amendment application was merely a temporary setback that could be resolved by the rest of the claim succeeding. After all, part of Mr Al Sadik’s claim was for the costs consequences of losing his amendment application, and there was no prospect of that being unpicked even if the rest of his case was successful (which it was not).
Nor was the court prepared to find that the lawyers had owed Mr Al Sadik a duty to tell him that they had negligently left his amendment application too late. Lawyers do not constantly have to look in the rear-view mirror and courts tend to react with scepticism to attempts to extend limitation periods based on duties of introspection[9]. The lawyers in question had not in fact taken the view that they had fallen short, and the judge held (at [171]) that there was “an important distinction to be drawn between a scenario in which the professional actually knows that he has been negligent, but chooses to say nothing, and a scenario in which the professional is not aware of the negligence.”
To our minds, Al Sadik contains the more commonly encountered outcome to these types of limitation argument than Lonsdale. Furthermore, it reinforces a broader point that has emerged in the past few years: that allegations founded on conflict of interest or deliberate concealment tend to require conscious disloyalty. They are serious allegations of wrongdoing, rather than occasion to water down the operation of the Limitation Act more broadly. This direction of travel builds on cases we covered last year, such as Cutlers Holdings Limited v Shepherd & Wedderburn LLP [2023] EWHC 720 (Ch)[10] and Canada Square v Potter [2023] 3 WLR 963.[11]
Advocates’ immunity from suit when sued by the other side
Finally in terms of considering duties owed by lawyers, El Haddad v Al Rostamani [2024] EWHC 448 (Ch) was an unusual case where the Claimant sought to set aside a judgment against him in a partnership dispute on the grounds that it was procured by the fraud of all eighteen Defendants to the new claim. Some of those Defendants were lawyers who had acted for Defendants in the partnership dispute. The fraud allegations included allegations of dishonestly misleading the Court in the partnership disputes, in conspiracy allegedly involving all lawyer Defendants.
Fancourt J noted that lawyers owe overriding obligations to the Court not to mislead it by presenting a case which they know to be false, or which is manifestly false. However, he found that there was no duty to investigate the facts or ascertain the truth before presenting their client’s arguments. Lawyers remain independent of their clients: their duty was to seek by all proper professional means to advance their clients’ case even if it was a weak one.
Fancourt J determined that the serious nature of the allegations did not mean that the threshold immunity otherwise enjoyed by the witness or advocate to the other side in litigation was lost. This was the same view that had been expressed by Cockerill J in King v Stiefel [2021] EWHC 1045 (Comm). Accordingly, the claim against the lawyer Defendants was an abuse of process and was struck out.
The judgment is to be welcomed for confirming the immunity for advocates facing spurious claims from opponents. It also contains useful discussion of lawyers’ roles more generally which will assist those defending professional negligence and wasted costs applications.
Insurance brokers: when does loss of a chance suffice?
In 2024 there were two judgments in claims against brokers which touched on whether it is necessary to prove on the balance of probabilities that the cover arranged by brokers was indeed ineffective, or what alternative cover should have been in place. The core question is whether “loss of a chance” is a concept that applies to brokers’ negligence claims.[12]
Hamsard: the client’s claim is defeated at trial
At the beginning of the year, a Claimant had its claims against its brokers dismissed in Hamsard One Thousand and Forty-Three Ltd v AE Insurance Brokers Ltd [2024] EWHC 262. The Defendant (AE) had assisted Hamsard in obtaining a policy underwritten by Fusion. Fusion had avoided the policy on non-disclosure grounds, and Hamsard blamed AE. However, the judge held that there had been no breach of duty by AE in this regard.[13]
An issue that often arises in respect of non-disclosure is the failure to inform insurers about previous insolvencies of connected businesses. There is frequently debate over what (if anything) the insured was in fact required to say. Here, the Judge held that Fusion had waived disclosure under s.18(3)(c) of the Marine Insurance Act 1906 due to the wording of the statement of facts[14]. As to a separate alleged failure to disclose the fact that the insured property was occupied by administrators, the Judge held that Hamsard had not shown that AE had failed to pass that information to Fusion.
Both of those findings meant that AE was not negligent. But they also raised questions as to why Fusion’s own avoidance had not been (successfully) challenged by Hamsard itself. The judgment was critical of the FOS’s rejection of Hamsard’s complaint against the insurers. Had negligence been established, the claim may have run into further issues on these . As it was, the judge held obiter that the claim would have failed on causation grounds, because (among other reasons) cover from Fusion would not have been available had the disclosure been given; and such cover as other insurers might have been prepared to offer would not have covered the claimed property damage.
Norman Hay: the broker’s attempt to summarily defeat the claim fails
Then in May 2024, Picken J decided against the Defendant insurance brokers who had brought a strike out and summary judgment application: Norman Hay Plc v Marsh Ltd [2024] EWHC 1039 (Comm).
In Norman Hay, the Claimant had retained the Defendant insurance brokers to provide global insurance for the claimant’s group of companies. An employee of one of the companies had sadly been involved in a car accident in the USA, in which he was killed whilst driving a hire car. The driver of the other car was seriously injured. That other driver brought a claim against the Claimant and others in the USA. The Claimant sued its insurance brokers on the basis that they ought to have arranged “non-owned” auto insurance cover, covering motor liability for employees driving hire cars.
The Defendant sought to have the claim struck out or summarily dismissed, including on the basis that the Claimant was required as a matter of law to establish on the balance of probabilities both that:
- The Claimant had been liable to the other driver in the settled US claim; and
- The hypothetical insurance cover would have been effective to cover that liability of the claimant.
Picken J rejected the Defendant’s application. As to whether the Claimant had to prove it was liable in the USA, the Judge accepted that, in an insurance claim against a liability insurer, an insured must establish its underlying liability to the third party in order to succeed[15]. However, he held that the position was different in respect of a client’s professional negligence claim against an insurance broker. In the latter context, Picken J held (at [64]) that “there is scope for a broader inquiry as to what, had the broker not been negligent, would have happened in the event that the claimant … had presented a claim to its putative insurer. That necessarily requires there to be an assessment of the chance that the claim under the putative policy would have been met.”
As regards the issue over whether the Claimant had to prove that cover would have been effective, the Defendant relied on Dalamd Ltd v Butterworth Spengler Commercial Ltd [2019] PNLR 6. In that case, Butcher J had held that where an insurance broker was sued for failing to obtain effective cover, the Claimant had to show on the balance of probabilities that the cover was indeed ineffective. It was not enough to show that the client’s chances of recovery against the insurer had in some way been impaired. Picken J analysed Dalamd at [66], to explain his view that it: “should not be treated as authority that the only way in which a claim against an insurance broker can succeed is if the Court is persuaded, on a balance of probabilities, that the claimant…. would have recovered under the putative policy of insurance which, but for the broker’s negligence, the claimant would have had.” He went on to say that if this could not be proved but the court felt that the Claimant had been deprived of a chance of success against insurers, then “there will be a recovery but it will not be in full and will instead be arrived at on a loss of chance (and so percentage) basis.”
Picken J observed the difference between the factual scenario considered by Butcher J in Dalamd, and that raised in Norman Hay. In Dalamd, the broker had arranged an insurance policy and there was an issue as to whether that policy was effective for the claim in question. The Claimant could have brought a claim against the insurer to determine that question in that matter but had chosen not to do so. By contrast, in Norman Hay, there was no way for the Claimant to do so. There was no relevant insurance policy in place, and no insurer “on the scene” to be sued at all. The question of what would have happened in the counterfactual therefore “necessarily involves looking at loss of chance-type aspects” (see [84]).
The decision of Picken J provides clarification of the limits of the decision in Dalamd. Permission to appeal was granted, to be heard in January 2025.
Surveyors and valuers
There were two main cases against surveyors or valuers in 2024.The first clarified the tests to be applied in considering whether a valuer has been negligent. The second demonstrated an illegality defence falling short of its target- a theme which we will show emerging repeatedly in multiple contexts.
Bratt v Jones [2024] PNLR 20 concerned a jointly instructed expert alleged to have undervalued some development land. Having examined the authorities, the Judge held that for a valuer to be negligent it was necessary to establish both that:
- They had acted otherwise than in accordance with practices regarded as acceptable by a respectable body of opinion in the profession; and
- The valuation reached was outside the acceptable bracket.
He made clear that those questions should generally be approached separately and that the court should follow the following steps, namely:[16]
- Determining the objectively correct valuation;
- Deciding on the appropriate percentage margin of error for the property in question;
- Dismissing the claim if the valuation was within the margin; and
- If the claim was outside the bracket, investigating whether the valuer had acted negligently in reaching their valuation i.e. applying the Bolam
The Judge explained the thinking behind the steps in the process. Although counsel for the valuers argued that the court should always tackle the question of whether the valuer had failed to take reasonable steps in the valuation, the Judge disagreed (at [167]) that this was always required. In cases where the Claimant failed to meet the first three components in the test set out above, it would often be unnecessary to consider the fourth.
The decision in Melia v Tamlyn and Son Ltd [2024] EWHC 3002 (Ch) concerned a surveyor alleged to have provided poor advice in relation to the claimants’ planning application to convert an outbuilding on their land. A variety of defences was run – including that the Claimants had conspired with an employee of the Defendant – a Mr Venton- to make a sham planning application that they had no intention of complying with.
Mr Venton was not called by the Defendants as a witness. The Defendant’s attempt to rely on the Gestmin line of authority[17] to suggest that the contemporaneous documents were the most reliable form of evidence therefore fell flat. The Claimants contended (at [86]) that Mr Venton had been prepared to “play the system” and had adopted a different tone in correspondence to how he conducted himself in meetings. The Judge broadly accepted the Claimants’ case. He made clear that although not required on the facts of the case, he would have drawn an adverse inference from the absence of Mr Venton as a witness if necessary.
Perhaps unsurprisingly against this backdrop, the Defendant’s argument that the Claimants’ involvement in attempts to mislead planning authorities should afford a complete defence failed. However, the Judge was prepared to make a 50% reduction to recoverable costs to reflect “moral turpitude” at the final stage of the MBS test – ie the “legal responsibility” stage (see [185])[18]. He also made clear that a similar reduction would have been made for contributory negligence if necessary.
Ex turpi causa- does the illegality defence ever take you far?
As is evident from the case of Melia v Tamlyn discussed above, Defendants to professional liability claims often seek to rely on the doctrine of ex turpi causa, arguing that because of some underlying fraud, dishonesty or other illegal conduct attributable to the Claimant, they are contrary to public policy and therefore cannot succeed. The uphill struggle which such arguments can face was underlined by two further decisions in 2024.
In Afan Valley Ltd v Lupton Fawcett [2024] EWHC 909 (KB), the Claimant SPVs (which were in administration) brought claims against two firms of solicitors who had previously acted for them. The Claimants alleged that various property investment schemes which they themselves had operated had been used by their founder and controlling mind as a Ponzi scheme to defraud investors, as well as constituted unauthorised and unlawful Collective Investment Schemes (“CISs”) under the Financial Services and Markets Act 2000 (“FSMA”). The Claimant SPVs argued that, had they been properly advised, they would not have promoted the investment schemes, accepted investment monies or taken out loans, and would have avoided losses as a result.
One of the Defendant firms (“LF”) applied to strike out the claim against it. LF had been instructed to advise the Claimants as to whether the investment schemes amounted to CISs. The strike-out application was brought on various grounds, and ultimately succeeded on the basis that the Claimants had suffered no loss, and in any event no loss which was attributable to the duty of care alleged to have been breached by LF (the Judge viewing these two issues as interconnected).[19]
However, an alternative ground of LF’s application, based on the defence of ex turpi causa, was rejected by the Judge. LF had argued that as it was the Claimants’ own case that there was a fraud at the heart of the various schemes, claims for losses arising from the director’s dishonest acts should be barred by ex turpi causa.
In the past ten years the law in this area has become more nuanced and less extreme than it used to be. The Judge cited the three-stage test set out by Lord Toulson in the case that changed the approach- namely Patel v Mirza [2016] UKSC 42. This test entails considering:
- The underlying purpose of the prohibition which has been transgressed;
- Any other relevant public policies which may be rendered ineffective or less effective by denial of the claim; and
- The possibility of overkill unless the law is applied with a due sense of proportionality.
The Judge considered that the first two limbs of the test in Patel would not be served if the claims were struck out because of ex turpi causa. The relevant prohibition transgressed was that the schemes were unlawful CISs. The purpose of the FSMA regime is to protect investors and ensure that those who unlawfully promote CISs do not gain. The offending entities in this case were insolvent, and the purpose of the litigation was not to enrich them but to assist investors and other creditors. If the claims were dismissed for ex turpi causa, that would deny the investors or creditors the benefit of the very protection which the FSMA scheme was designed to afford. Furthermore, denial of the claim would have the effect of undermining the policy that solicitors should perform their duties diligently and compensate clients when they fail.
The reluctance of the Court to accede to ex turpi causa defences was also evident in a further decision from outside the professional liability sphere but at appellate level, namely Ali v HSF Logistics [2024] EWCA Civ 1479. This was a road traffic case in which the Claimant’s car had been damaged by the (admitted) negligence of the Defendant’s lorry driver. While his car was being repaired, the Claimant hired a replacement vehicle and claimed the credit hire charges as damages. At the time of the accident, the Claimant’s car did not have a valid MOT certificate in place. This was a criminal offence.[20]
The Defendant sought to rely on the absence of a valid MOT certificate to deny the claim for credit hire charges, on the basis of ex turpi causa among other arguments. The Court of Appeal focused in particular on the third limb of the test in Patel, noting that there was a real risk that denying recovery would amount to a disproportionate penalty. The Defendant had succeeded below in seeking to recharacterize its defence as one based on causation rather than ex turpi causa – because the Claimant was not deprived of a vehicle which could lawfully be driven. However, the Court of Appeal unsurprisingly recognised that this was a false distinction, given that the so-called “causation” defence was premised on the illegality of the lack of MOT.
The Court of Appeal also held that the courts below had been wrong to treat the doctrine of ex turpi causa as one which deprives a claimant of all redress. On the contrary, the doctrine is a flexible one, which can operate for instance to bar a head of claim, or even only part of a head of claim, depending on the particular facts of the case and illegality relied upon. In this regard, the analysis of the Court of Appeal echoes the outcome in Melia v Tamlyn set out above.
The courts’ updated approach to ex turpi causa is likely to be of particular interest to Defendants to audit negligence claims. These are often brought by an insolvent company on the basis that the auditors negligently failed to detect and report on a fraud perpetrated by the company’s controlling mind prior to its insolvency. As such claims are ultimately brought on behalf of creditors of the company, many of whom will themselves have been defrauded, the parallels with the situation in Afan Valley are clear. A court is likely to be reluctant to find that it is in the public interest for the auditors to escape liability entirely on the basis of the very fraudulent conduct which it is alleged they negligently failed to uncover- but there may be room for a more subtle approach.
Secret commissions, fiduciary duties and consumers
“Secret commission” allegations are often made against accountants and other professionals who promote, for instance, tax planning schemes in return for remuneration from scheme providers. Such cases have been put firmly back in the spotlight by the decision of the Court of Appeal in late 2024 in Johnson v FirstRand Bank Ltd [2024] EWCA Civ 1282. The case sent shockwaves through the financial services industry, with some (including the FCA) likening its potential consequences to the next PPI scandal. Perhaps unsurprisingly, the Supreme Court has already granted permission to appeal, and the appeal will be heard in April 2025.
Johnson involved three linked appeals brought by financially unsophisticated consumers. They were all purchasers who had engaged car dealers as their credit broker to arrange hire-purchase agreements. The dealer/broker would then present an offer of finance from a lender, on the basis that it was competitive and suitable for the purchaser’s needs. As well as making a profit on the sale of the car, the dealer/broker would also receive a commission from the lender. The commission would be paid under a side agreement between the dealer/broker and the lender, to which the purchaser was not a party. While, in some cases, the lender’s standard terms and conditions referred to the payable commission, the full details (including the amount of commission and how it was calculated) were not revealed.
Each of the Claimant purchasers brought claims against the lenders seeking, among other things, the return of the commission they had paid. This was on the basis that the dealers owed them a “disinterested duty” to provide information, advice or recommendation on an impartial basis, sufficient to found a claim for the disgorging of secret commissions, and that they were acting as agents in the broad sense identified in Wood v Commercial First Business Ltd [2021] EWCA Civ 471 (i.e., “Someone with a role in the decision-making process in relation to the transaction in question, e.g. as agent, or otherwise someone who is in a position to influence or affect the decision taken by the principal”).
The Court of Appeal agreed that the dealers/brokers owed the Claimants the “disinterested duty” alleged and that the relationship between them was a fiduciary one. It held that these were relatively unsophisticated individuals who undoubtedly placed trust and confidence in the dealers/brokers to secure an agreement which was affordable and competitive. Further, it was “precisely because the brokers were in a position to take advantage of their vulnerable customers and there was a reasonable and understandable expectation that they would act in their best interests” that they owed the purchasers fiduciary duties.
Although the authority arises in the financial services context, it seems to us to have the potential for broader application to claims involving professional advisers paid in part on a commission basis. We note that secret commission allegations are often paired with s. 32 arguments to seek to extend the limitation period for cases that are more than 6 years old.
Furthermore, the Johnson case demonstrates a desire to protect consumers from unfair practices, which also manifested itself in the costs setting this year.
In October 2024, the Court of Appeal upheld the High Court’s deprivation of two barristers’ rights to recover their fees from a direct access client in Glaser v Atay [2025] PNLR 4. This was a costs dispute involving a consumer law challenge to fees charged by directly instructed counsel in a family law case. Counsel’s terms required the client to pay fees in advance, including a substantial brief fee for a 10-day hearing. All three courts that considered the matter held that this involved the consumer client paying disproportionately high sums for services that were not actually supplied when the hearing did not take place, and that this was unfair under s. 62(4) and (5) the Consumer Rights Act 2015 (“CRA 2015”).
The CRA 2015 contains a “grey list” of potentially problematic terms, one of which is: “a term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied.” The Court of Appeal rejected the barristers’ argument that the service supplied was booking time out of counsel’s diary. They characterised the core service as actually representing the client at the hearing- which had not in fact occurred.
While the first instance judge had been persuaded to allow counsel to recover 70% of their fees on a “quantum meruit” basis, neither the High Court nor the Court of Appeal upheld this approach. This was because of the absolutist nature of s. 62 of the CRA- where the effect of unfairness is to cut down a term in its entirety[21] and allow no space for half measures.
The Court of Appeal finished (at [148]) with the observation that its judgment was not intended to “prevent counsel from devising and agreeing with their clients contracts that fairly balance their own interests in not being left with gaps in their diaries with the interests of their clients in not paying for work that is not carried out”. The key question however is fairness: here the arrangements had fallen into the trap of representing significant imbalance in the parties’ rights and obligations, contrary to s. 62(4) of the CRA 2015.
How to limit liability effectively (or not)
Another topic which has seen repeated recent judicial consideration in 2024, and which also relates to fairness, is limitation of liability in different forms. It is no surprise that professionals seek to either remove or restrict the liabilities they owe- or that clients often challenge this.
Auditors are particularly assiduous about restricting liability when it comes to duties to third parties, no doubt because of the broad range of potential Claimants who could rely on accounts for various purposes. Last year, we commented on Amathus Drinks v EAGK LLP [2024] PNLR 6, where Master Brightwell refused to strike out a claim brought by the buyer of a company against the auditor of that company (EAGK), despite the auditors relying on a “Bannerman disclaimer”[22]. The judge held that the facts (as asserted by the Claimant) were potentially sufficient to distinguish previous authority and in particular Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320 (Comm); [2015] 1 CLC, where a claim against auditors by a third party lender (Barclays) was struck out due to the effect of the Bannerman clause. 2025 may see the trial of that claim.
Other professionals focus more on limiting duties to their own clients- although the authorities on such clauses are surprisingly sparse and courts can be squeamish about them in some contexts[23].
In November 2024, the Court of Appeal considered the interplay between a contractual liability cap and both a set-off defence and claims to interest, in Topalsson GmbH v Rolls-Royce Motor Cars Limited [2024] EWCA Civ 1330. Its analysis was favourable to the party seeking to rely on the limitation clause.
RRMC had engaged Topalsson in respect of digital visualisation software but had terminated the engagement. At first instance, O’Farrell J held that the termination was valid due to delays which were the responsibility of Topalsson; that RRMC was entitled to c.€8m in “termination damages”; but that Topalsson was also entitled to c.€800k by way of set-off.
The engagement contained a contractual liability cap at clause 20, which provided among other things: “… the total liability of either Party to the other under this Agreement shall be limited in aggregate for all claims no matter how arising to the amount of €5m…”
O’Farrell J had held that clause 20 provided for the cap to apply after the respective liabilities of RRMC and Topalsson to each other had been netted off. Thus, subject to interest (addressed below) Topalsson’s liability would be €5m (the cap having been applied to RRMC’s net c.€7.2m liability, after the c.€800k set off).
The Court of Appeal disagreed. It held that the wording of the clause, commercial common sense, and the only relevant authority[24] all indicated that Topalsson’s liability subject to the interest point was c.€4.2m (the set-off reducing Topalsson’s already capped liability). The Court was concerned that if the claim for set-off was taken into account before the cap was applied, then the result could be manipulated so that the party with the right to set-off could avoid the consequences of the cap altogether.
As regards interest, Topalsson sought to argue that contractual interest (provided for at clause 14) fell within the cap, and that statutory interest did not arise. This point had only been raised expressly for the first time at the consequentials hearing. The Court of Appeal’s primary finding was that this ought to have been pleaded, and that it was too late for Topalsson to amend. However, the Court also went on to consider the point on the merits. Coulson LJ held that the interest on late payment fell outside the cap, relying primarily on the wording of the engagement, which provided expressly for interest as the “sole and substantial remedy” for late payment, which would otherwise be denied if the cap applied. The statutory interest issue was dealt with briefly, as it was academic in the circumstances and the Court was unsure whether it had all the necessary material to make a fully reasoned decision.
Looking forward, there will be a further judgment in 2025 which may consider both disclaimers and contractual limitations of liability, in the context of a financial mis-selling claim that was tried before Jacobs J in late 2024: GI Globinvest Ltd and others v XY ERS UK Ltd and others. We therefore anticipate that this is a particular area to watch.
Coverage, condonation and aggregation
We turn now to professional indemnity coverage. In January 2024 in Axis Specialty Europe SE v Discovery Land Co LLC [2024] EWCA Civ 7, the Court of Appeal gave guidance on what constitutes the condonation of dishonesty in solicitors’ professional indemnity insurance, as well as looking again at aggregation.
The Claimants were various entities which sought to purchase Taymouth Castle in Scotland. They instructed Mr Stephen Jones, a solicitor in Jirehouse Partners LLP, and a director of two related legal practices referred to as the “Jirehouse Entities”. A second solicitor, Mr Vieoence Prentice, was also a member and director of the same entities. Mr Jones misappropriated some of the purchase monies for the Castle, and then secured a loan against it and misused the monies.
The Defendant was the provider of the primary layer of solicitors’ professional indemnity insurance- sued directly under the Third Parties (Rights against Insurers) Act 2010.
Pursuant to the policy, the insurer had no liability in respect of “Any claims directly or indirectly arising out of or in any way involving dishonest or fraudulent acts, errors or omissions committed or condoned by the insured” subject to proviso that “No dishonest or fraudulent act, error or omission shall be imputed to a body corporate unless it was committed or condoned by, in the case of a company, all directors of that company, or in the case of an Limited Liability Partnership, all members of that Limited Liability Partnership.” By reason of this proviso Mr Jones’ dishonest acts could not be imputed to the Jirehouse Entities unless Mr Prentice was party to them (which was not alleged) or condoned them.
At trial, Mr Prentice gave evidence over two and a half days and the judge concluded that had not condoned the dishonesty. The Defendant challenged that finding of fact on appeal. Its case was that the conclusion the judge reached could not reasonably be explained or justified, particularly in light of the numerous adverse findings that he had made about Mr Prentice.
In the Court of Appeal, Lady Justice Andrews accepted that the judge had been highly critical of Mr Prentice but ultimately concluded that he was entitled to reject the Defendant’s case on condonation for the reasons which he gave. Notably, the Court of Appeal made the following general observations about condonation of dishonesty (see [38-39] and [42-47]). In particular:
- It agreed with the judge that to “condone” conveys acceptance or approval, and it does not require an overt act;
- The condoner does not need to know of the dishonest act before or at the time it was committed and may condone dishonest behaviour after the event;
- There must be a causal nexus between the dishonest behaviour said to have been condoned and the claim against the insured;
- The relevant clause was wide enough to embrace a situation in which someone condones a pattern of dishonest behaviour which is of the same type as the dishonest behaviour that directly gives rise to the claim. For example, if one director condoned the regular use by the other director of client funds for their own purposes;
- The individual concerned could not escape the consequences of his condonation of an established practice, by arguing that he was unaware of the specific instances of such behaviour which gave rise to the claim – for example, because he was on holiday when the relevant event took place; and
- The question in each case would be whether or not knowledge and acceptance or approval of other acts in the same pattern amounted to condonation of the act or acts which gave rise to the claim.
So insurers failed on their condonation defence- and the Court of Appeal did not allow them to aggregate the two planks of the claim either.
The relevant aggregation wording was whether there had been “similar acts or omissions in a series of related matters or transactions”. This is much narrower than “originating cause” type wording and requires a more formulaic approach.
The Court of Appeal took the view that Mr Jones’ acts in misappropriating purchase monies were not sufficiently similar to securing a charge against the Castle and misapplying the loan (see [85-86]). It also concluded that the purchase and loan were not a series of “related” transactions, the connecting feature being Mr Jones’ fraud rather than the clients’ commercial aims (see [88-89]). The Court stated that: “the fact that the purchase of the castle provided the opportunity for Mr Jones to steal the money on both occasions does not answer the question whether the transactions fitted together”.
When two Acts collide: the Contribution Act and the Third Parties (Rights Against Insurers) Act 2010
Riedweg v HCC International Insurance plc & Ors [2024] EWHC 2805 grappled with whether and how Contribution Claims are supposed to work when the original claim by a client starting off the chain of litigation has been brought against a professional indemnity insurer directly under s. 1 of the Third Parties (Rights Against Insurers) Act 2010 rather than against the insured professional body itself.
The conundrum in this case emerged because in order to bring a Contribution Claim against a third party, a defendant must clear various hurdles set out in s. 1 and s. 6 of the Contribution Act. One is that the defendant bringing the Contribution Claim and the third party being brought into that claim both need to be liable to the same person, usually a client in professional liability cases. Second, the defendant and third party’s liability need to be in respect of the “same damage”.
These requirements can cause difficulties at the best of times but are particularly apt to malfunction when statutes providing shortcuts or new causes of action are interposed[25]. And so it proved in Riedweg, where the original client sued the insurers for a firm of valuers direct, but the insurers could not persuade the court that they could satisfy the tests to bring a Contribution Claim against third party solicitors who had also acted for the original client.
There would have been no problem with the valuers bringing the Contribution Claim themselves if they had been sued directly- but given their liquidation, they had been left out of the litigation.
Master Brightwell took the view that the valuers’ insurers did not find themselves in the same position as the valuers. The insurers had not themselves inflicted damage on the original client- and even if their refusal to pay out could be characterised as damage it was not the same damage as that caused by either the valuers or the solicitors.
Insurers not having yet paid out, the parties seem to have taken the view that the answer did not yet lie in insurers’ rights of subrogation either. The consequence was that insurers found themselves in limbo, unable to find a clear route towards recovery.
The outcome seems at odds both with the Contribution Act’s aim to provide a simple claims mechanism and the Court of Appeal’s clear message in cases such as Aldi Stores[26] that parties should not drip-feed Contribution Claims over time. It is understood that the Riedweg matter is due to be heard on appeal.
However, Riedweg is not the only current case grappling with the Contribution Act – or the need to deal with claims in an orderly fashion.
In December 2024 argument was heard in URS Corporation v BDW Trading, where one of the many issues before the Supreme Court is whether it is a necessary component of a Contribution Claim that the original client has in fact threatened to sue the party seeking contribution.
Although the issue may appear odd, the preferential limitation provisions in the Contribution Act sometimes mean that parties try to repackage direct claims as contribution claims to get round timing problems.
By contrast with the first instance judgment in Riedweg, the Court of Appeal in URS did not favour an overly formulaic approach to construing the Act- making clear that it was unappealing to require potential co-defendants to wait for claims to come in before they could resolve their legal differences.
What does 2025 have in store?
Standing back, it is apparent that the 2024 cases have left multiple loose threads to be picked up in 2025:
- The first is the issue of how the doctrine of loss of a chance applies in brokers’ cases;
- The second is the proper approach to “secret commissions”- which has the scope to affect multiple professions;
- The third is limitations of liability and disclaimers, which seem to us to be emerging as contentious issues in an increasing number of cases;
- Fourthly and finally, there are many areas where the Contribution Act is not operating as simply as intended, and where clarity is required.
Webinars
There will be two webinars on the topics explored in this article, at 1pm on 23 January 2025 and 5pm on 28 January 2025. Please note, both webinars will cover the same content but we offer attendees flexibility to choose from a lunchtime or evening session.
For information about how to book a place on one of the webinars, see Professional Negligence Update Webinars – 4 New Square Chambers.
© Helen Evans KC, Ben Smiley, Pippa Manby, Marie-Claire O’Kane and Will Cook of 4 New Square Chambers, January 2025
This article is not intended as a substitute for legal advice. Advice about a given set of facts should always be taken.
The Authors
Helen Evans KC was called in 2001 and appointed silk in 2022. Helen specialises in professional liability, regulatory, contempt of court, 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’ negligence chapters in Jackson & Powell on Professional Liability and is highly recommended in the legal directories. Alongside her practice, in 2024 she was appointed Chair of both the Appeal Committee of the Chartered Institute of Management Accountants and COMBAR’s Response to the Law Commission’s Consultation on Contempt of Court. Email: hm.evans@4newsquare.com
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 Professional Negligence Junior of the Year in the in the Legal 500 Bar Awards 2023, 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. Email: b.smiley@4newsquare.com
Pippa Manby was called in 2010 and has a broad commercial practice. She is ranked by Chambers and Partners and the Legal 500 as a Leading Junior in four categories: Commercial Litigation, Professional Liability, Sports Law and Costs. Her professional negligence practice includes high-value, complex disputes for and against the full range of professionals. She was shortlisted for Legal 500 Sports Law Junior of the Year 2023 and Legal 500 Commercial Litigation Junior of the Year 2024. Email p.manby@4newsquare.com
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, 2025. Email: m.okane@4newsquare.com
Will Cook was called in 2019. He has a broad commercial practice, including professional liability, insurance and disciplinary and regulatory work. He has a particular specialism in audit negligence and claims involving alleged fraud or dishonesty. Email: w.cook@4newsquare.com
[1] The Court of Appeal made clear that if a solicitor takes it upon himself or herself to give legal advice to someone who is not a client, the inexperience of that other person in legal matters will be a factor in determining whether (1) the advice is couched in appropriate terms and (2) it was reasonable to rely on it. However, beyond that, it will be of limited assistance in determining the ambit of the solicitor’s responsibility, which will depend on the facts.
[2] In general, a solicitor is not obliged to advise even a client with whom there is a formal retainer to take steps to safeguard against the risk of unenforceability of a judgment due to the insolvency or impecuniosity of the other side unless they were put on notice of financial difficulties.
[3] Lewis v Cunningtons Solicitors [2023] EWHC 822 (KB) (31 March 2023) concerned advice given to an unsophisticated wife in relation to financial remedies on divorce from her husband.
[4] I.e. the knowledge that a person might reasonably have been expected to acquire.
[5] It can also be relevant in cases of mistake- but these are rare. The constructive knowledge requirement under s. 32 is formulated slightly differently- it refers to when a person could with reasonable diligence have discovered the fraud, deliberate concealment or mistake.
[6] S. 14A(6)(a) and s. 14A(7) of the Limitation Act 1980.
[7] See for instance Sciortino v Beaumont [2021] EWCA Civ 786.
[8] For a more in-depth analysis of both cases, see “Where’s the Limit? A recent contrasting pair of cases on Duty and Limitation” by Amanda Savage KC and Helen Evans KC.
[9] See [161] of the judgment in Al Sadik v Clyde & Co & Ors [2024] EWHC 818 (Comm).
[10] Where a claim for breach of fiduciary duty failed because the solicitors had not appreciated that there was a conflict of interest and had therefore not taken a deliberate decision not to inform the client that they may have been negligent.
[11] Where the Supreme Court made clear that the 6-year extension of the limitation based on deliberate concealment under s. 32 of the Limitation Act 1980 requires intentional hiding of information.
[12] Since Dalamd Ltd v Butterworth Spengler Commercial Ltd [2019] PNLR 6.
[13] Further allegations regarding the alleged failure by AE to obtain adequate insurance were also rejected, with the judge holding that Hamsard had not sought cover for loss of rent; and that AE had adequately confirmed to Hamsard that the scope of insurance cover did not include accidental damage cover. In the latter regard, the judge held that similar reasoning applied as in O’Connor v B D B Kirby & Co [1971] 1 Lloyd’s Rep 454, where it was held that, if a broker negligently completes a proposal form, the client’s own negligence in checking that form will exonerate the broker from liability.
[14] Following cases such as R&R Developments Ltd v AXA Insurance UK plc [2009] EWHC 2429 (Ch) [2010] 2 All ER 527 (Comm) and Ristorante Ltd v Zurich Insurance UK plc [2021] EWHC 2538 (Ch).
[15] The Defendant relied on a run of authorities such as Astrazeneca v XL Insurance (Bermuda) [2013] EWCA Civ 1660.
[16] Previously set out by Dove J in Barclays Bank PLC v TBS & V Ltd [2016] EWHC 2948 (QB).
[17] Gestmin v Credit Suisse [2013] EWHC 3560 (Comm).
[18] MBS v Grant Thornton [2021] UKSC 20.
[19] The essence of the Claimants’ case was that, had they been properly advised by LF, they never would have promoted the investment schemes at all (and would therefore never have received any monies from investors). The Defendants argued that any monies owed to investors needed to be offset by the investment monies in fact received from those investors, with the result that there was no net loss to the Claimants. Further, any losses alleged to have been suffered were not attributable to LF’s alleged negligence, because a distinction needed to be drawn between the initial receipt of the investment monies and the use to which they were subsequently put. It was the latter which was the cause of any losses which the Claimants had sustained, but the scope of LF’s duty only extended to the former.
[20] Under s. 47(1) of the Road Traffic Act 1988, punishable summarily with a maximum fine of £1,000.
[21] S. 62(1) of the CRA provides that “An unfair term of a consumer contract is not binding on the consumer”.
[22] Typical Bannerman wording makes clear that the report is made solely to the company’s members as a body and that no responsibility is assumed to anyone other than the company and the company’s members as a body.
[23] See e.g. Lewis v Cunningtons Solicitors [2023] EWHC 822 (KC), referred to above.
[24] The Tojo Maru (No.1) [1969] 2 Lloyd’s Rep 193.
[25] For a more detailed explanation of this, see “When Can Contribution Claims run into Trouble?” by Helen Evans KC.
[26] Aldi Stores v WSP Group plc [2008] 1 WLR 748.
