April 4th, 2013
Courtesy of Thames Valley Business Magazine March 2013
Legislative changes to the way the costs of litigation can be recovered from unsuccessful opponents are expected to come into effect in April 2013. Any claims which your business currently has in prospect should be reviewed without delay, to ensure that there is the opportunity to resolve those claims before the benefits of the existing arrangements are lost.
What is changing?
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 introduces a wide range of reforms to the justice system. One of those reforms will be to bring an end to the recovery of certain types of litigation costs, presently referred to as ‘additional liabilities’, from the unsuccessful party to a claim.
When advising clients on their options for funding a prospective claim, we will explore with them whether the matter is suitable for a Conditional Fee Agreement (CFA), sometimes referred to as a ‘no win no fee’ agreement. An integral part of a CFA is known as the ‘success fee’, triggered if our client succeeds in the claim. Subject to some Court assessment, this success fee is (presently) recoverable from the opponent along with the client’s other costs.
In cases where we act under a CFA, and in some other cases, it is also appropriate to consider whether an After The Event insurance policy should be taken out, to cover the risk of having to pay the opponent’s costs (and sometimes own disbursements) in the event that the litigation is not successful. A premium is payable for that ATE insurance – usually deferred until the end of the case and only payable on success – when again, at present, it can be recovered from the unsuccessful opponent.
CFA success fee and ATE insurance premiums will not be recoverable from the unsuccessful party for any arrangements entered into after 01 April 2013.
Why do these changes affect you and your business?
The reforms are a significant departure from the present rule – which is that the loser can expect to pay some or all of the winner’s costs, including additional liabilities – and will mean that even successful litigants will need to dip in to their own pockets to meet these additional liabilities in future.
The changes will mean that many claims become significantly less commercially attractive to pursue, are only pursuable at significant additional adverse cost risk, or even become altogether uneconomic.
Consider these issues now
By taking advice in good time before the reforms come in to effect, you can ensure that all possible funding options are open to you, including those that will be lost altogether or become significantly less attractive on 01 April 2013.
Whilst not all cases are suitable for a CFA or for ATE insurance, it is certainly worthwhile investigating all of the funding options that might be available before some of them are lost. The reforms also introduce a new kind of funding arrangement called a Damages Based Agreement (DBA), which will become available from 01 April 2013. We can discuss with you how DBAs will work and whether your case might be suitable for a DBA once they become available.
It is anticipated that as the deadline approaches there will be a significant surge in applications for ATE insurance that risks overwhelming brokers and underwriters. It is therefore important not to wait until the last minute and to take advice on any current issues sooner rather than later.
How Pitmans can help
As an existing client of Pitmans, you may well already be aware of our top-ranked Dispute Resolution team. We are able to assist with a wide range of commercial and personal claims including contract, trade and finance, IT disputes company and shareholder issues, fraud, professional liability, land and property disputes, inheritance and trusts.
We are always happy have an initial telephone discussion on any contentious matters without charge and without obligation. If there are any issues with which we can assist you and your business, particularly in light of the above matter, then please do not hesitate to contact:
December 1st, 2012
Forty six percent of adults of UK adults online who use cloud storage are concerned about the security of their information, according to a recent YouGov survey.
Whether or not the public’s perception of cloud computing solutions is correct it highlights a concern that has led the Information Commissioner’s Office to publish a new guidance note entitled “Guidance on the use of Cloud Computing” (see guide here).
In addition to the well known risks of cloud computing, such as ineffective or even non-existent disaster recovery provision, the Guidance reminds businesses of their responsibilities under the Data Protection Act 1988 (“DPA”) and confirms that the DPA applies to any processing of personal data which takes place in the cloud.
Data breaches can lead to expensive fines and a recent example of the Information Commissioner’s appetite to penalise breaches of the DPA is provided by the £250,000 fine handed out to the Scottish Borders Council in September 2012 for a data breach after the council’s former employees’ pension records were found in an overfilled paper recycling bank in a supermarket car park.
The council had employed an outside company to digitise the pension records of its former employees but failed to put a written contract in place with the third party processor and failed to seek appropriate guarantees as to how the personal data would be kept secure whilst being processed and destroyed shortly thereafter.
To avoid similar fines the basic obligation for businesses to bear in mind is that as a business you are responsible for keeping your data safe. The processing of that data can be outsourced but how the data is used and protected remains your responsibility.
The main points detailed in the Guidance to consider are:
- If processing is outsourced a written contract must be in place to comply with the provisions of the DPA.
- The customer must take steps to ensure that the cloud provider adequately addresses the risks discussed in the Guidance. It cannot assume that the cloud provider’s standard terms and conditions will allow the customer to retain sufficient control over the data in order to fulfil their data protection obligations.
- Consider whether all the data that you are putting into the cloud really needs to be there. A customer should actively review its data and determine whether there is any data that should not be put into the cloud, and keep a clear record about the types of data that intends to move to the cloud.
- If the cloud provider is to act as a data processor (which it will in most circumstances) the provider must give sufficient guarantees about the technical and organisational security measures governing the processing to be carried out and the customer must take reasonable steps to ensure compliance with those measures.
- Data which is deleted is rarely entirely removed from the underlying storage media unless additional steps are taken. The customer should therefore ensure that the provider is able to delete all copies of personal data within the timescale that is in line with the customer’s own data retention schedule.
- If data is to be transferred to any country outside the European Economic Area it may only be transferred to a country or territory that ensures an adequate level of protection for the rights and freedom of data subjects in relation to the processing of their personal data. The customer must ensure that the cloud provider’s solution guarantees compliance.
- Once a cloud provider has been chosen the customer should continually monitor, review and assess whether the cloud service is being run as expected.
The Guidance provides a valuable checklist of matters for businesses to consider before signing up for cloud computing and you would be well advised familiarise yourself with them urgently or risk facing a potentially costly conflict with the Information Commissioner.
November 1st, 2012
How can businesses learn from the mistakes of others when commissioning custom software systems? asks Pitmans LLP Director and Technology Litigator Phil Smith
HM Courts and Tribunal Service announced earlier this month that its attempt to upgrade the IT system in the High Court had resulted in failure and was being decommissioned, costing the public purse almost £10 million. Even if not of the same scale, commissioning a bespoke software system can present businesses with a number of challenges. While the potential benefits of such projects can be substantial, there is also ample scope for misunderstanding, cost overrun and outright failure where a system does not deliver as hoped (or hyped) and does meet the
functional requirements of the user. The history of bespoke software projects is littered with failures, from which some common themes emerge and lessons can be learned. Here are our top tips for a successful project:
Choose your software developer carefully
This sounds obvious, but too often businesses allow the decision to be driven too heavily by bottom-line price. A system that does not work is worthless to the business, regardless of how much it might have cost if successful. Ask potential partners for references, and get to the bottom of whether they have they done any similar projects for similar businesses involving the software in question. Take time to follow up on references – frank feedback from the developer’s other clients is infinitely more useful than a glossy brochure and a slick pitch.
Be clear on the methodology
You should expect potential partners to set out clearly and fully the methodologies that will be adopted to take the project right though to completion. Although they may seem rigid and overly-formal, the recognised methodologies exist for one simple reason: to increase the probability of the project’s succeeding. Make it your business to understand the difference between waterfall and agile models, and the specifics of what any particular methodology like PRINCE2 will involve in practice and how much resource and time investment it will require from your own project management perspective.
Get the right people on the job
One of the most common areas for disputes arising between software developers and their clients following a project’s running into trouble is that the developer is not receiving sufficient resource, instruction or feedback from the client’s key personnel. Address this issue from the outset by nominating project managers with sufficient time, expertise and authority to dedicate to the project internally. If the methodology requires a project committee to be appointed, make sure that it meets regularly and, more importantly, that minutes and appropriate actions are agreed shortly after each meeting – a series of short meetings noting everything is on track will be far less-time consuming in the long run than only meeting when a problem needs to be addressed or the project is failing. Likewise, make sure the user-acceptance testing phase involves the ultimate users of the system, adopting a clear testing and reporting process.
Don’t be held hostage on costs
Inevitably, the developer will want staged payments to be front-loaded, while the client business will want to as much of the price as possible to be paid once it is confident that the project will ultimately succeed. Paying the whole of the price before user acceptance testing will leave the client with little leverage in the event of persistent snagging items, and should be avoided if possible. Just as with any construction project, seek to backweight a significant portion of payment (as far as is reasonable) to provide a fair allocation of risk.
Don’t ignore the dispute resolution mechanism
Problems and issues are almost inevitable; get over it. Prepare for them in advance and ensure that there is an effective and clear procedure and mechanism for seeking to resolve challenges and unforeseen issues, as well as an appropriate escalation procedure for ensuring senior representatives have an opportunity to agree any thorny issues should they arise. Make sure, however, that you are not contractually bound to conduct endless rounds of dispute resolution meetings before having the opportunity to get tough. Always retain the right to issue proceedings or invoke arbitration (where appropriate), depending on the scale of risk involved and the potential harm that may be done.
November 1st, 2012
Courtesy of Thames Valley Business Magazine October 2012
The level of service is ‘exceptional’ at Pitmans, where the lawyers have ‘a very good understanding of the market and the specific needs of the client’. Work highlights included advising Maple Leaf Bakery UK on the partial sale of its bakery business, and assisting with various matters relating to Tesco’s acquisition of shares in Blinkbox Entertainment. Andrew Peddie is an ‘excellent corporate specialist with great expertise and experience’. Philip Weaver recently advised the shareholders of Thames Travel on its sale to Go-Ahead.
With a team including a number of former City litigators, Pitmans has seen an increase in shareholder matters, guarantee claims and misrepresentation disputes. Practice chair Sue O’Brien handles complex commercial litigation, often with an international element, and is also and ADR-accredited mediator. Tim Clark is recommended for his experience in IT-related matters and company and shareholder disputes.
Pitmans is highlighted for its ‘excellent success rate’ in sectors including technology, construction and retail. Team head Suzanne Brooker is ‘readily available, sharp and commercial’.
The ‘excellent’ Pitmans has a ‘longstanding, loyal team of trusted advisers’. Highly rated practice head Patrick Long concentrates on corporate banking transactions and advises banks and corporate borrowers on refinancing and restructuring issues. The team is on the panels of 10 major banks.
‘Fast-moving and forward-thinking’ firm Pitmans houses an ‘excellent’ team which is ‘quick to grasp important issues’. Department head Suzanne Brooker has an ‘outstanding level of knowledge, and is one of the best in the business’. The team experienced a rise in both personal and corporate insolvency instructions in 2011.
Recognised for its strong technology-sector expertise, Pitmans recently assisted Toshiba TEC Europe Retail Information Systems in relation to an application for union recognition by Unite. Mark Symons leads the team, which includes the recommended Richard Devall. The firm also stands out for its niche practice in business immigration.
The ‘responsive and helpful’ Pitmans advises defined benefit schemes on issues such as scheme appointments and the switch from RPI to CPI. Recent work includes advising the trustees of CitiFinancial Europe on the merger of its occupational schemes into a larger parent scheme. ‘Clear, analytical’ department head David Hosford leads a team that includes two solicitors dedicated solely to pensions-related litigation.
Ferhat Choudri’s team at Pitmans gained several new clients in 2011, and acted in a multimillion-pound indemnity case.
Pitmans is highly regarded for its work advising housebuilders on acquiring development land, and recently handled two multi-million-pound site purchases for Bewley Homes in Reading and east Challow. Other clients include Banner Homes, Coutts & Co, Urban Outfitters, and Porsche. Team head Andrew Davies and Paul Murray are recommended.
Pitmans recently acted in three cases relating to property contamination.
Pitmans’ client base is largely made up of housebuilders, but the firm also acts for international banks and retail clients. It advised Banner Homes on over 20 sites in the South East.
Pitmans’ lawyers have a ‘very good understanding of the market’, and provide an ‘exceptional’ service. The IT team is now four partners strong following Philip James’ recent arrival from Lewis Silkin LLP. The lawyers divide their time between London and Reading.
Pitmans is noted for its ‘rapid response times and creative commercial solutions’, and recently acted for Live Nation in a European Court of Justice trademark appeal. Practice head Jeremy Summers is recommended, as is Sally Britton; both divide their time between London and Reading.
June 29th, 2012
Re-published from the Pitmans Times 2012
The more difficult trading conditions of the last few years have resulted in an upsurge of shareholder disputes. Although Pitmans would always advise shareholders to enter into a shareholders’ agreement to reduce the potentially significant costs that can result from dealing with these disputes, sometimes it is too late and disputed claims arise.
Claims often involve one or more of the following: unfair prejudice is usually alleged, directors’ conduct needs to be investigated, employment rights considered and shareholders’ and directors’ meetings held. Operation of the bank account requires immediate attention to stop potential financial abuse. One recent case saw a director whose conduct was being questioned present a cheque for an £80,000 ‘bonus’ just three hours after being informed he was being suspended.
The Pitmans team try as hard as they can to avoid litigation unless they believe it will be in the client’s best interests. A combination of careful tactical planning, knowledge of all the legal aspects and creative, practical solutions can work to ensure litigation is avoided and the company can carry on and leave the disputes behind.
T: 0118 957 0264
June 15th, 2012
Re-published from the Pitmans Times 2012
Pitmans’ Head of Dispute resolution, Sue O’Brien, outlines what grounds exist for challenging a will.
The idea of challenging a Will can be an agonising decision for family members at a very difficult time. But if a Will turns out not to be as expected, then it may be possible to challenge it.
Does the will reflect the true intentions of the deceased? If family members believe it doesn’t, then the following grounds could be considered as cause to challenge it.
1. Technical Validity
Does the Will stand up as technically (ie, legally) correct? Has it been revoked or superseded by another version, for example? Do other Wills exist?
2. Mental capacity
Was the testator capable of making the will at the time he or she did so? He or she must be of sound mind, memory and understanding when the will is made and have known of and approved of the contents of the will.
The court has the power to rectify a mistake in a Will in order to make the Will read as intended.
4. Undue influence
A Will can be set aside if undue influence can be proved.
Fraud or forgery would affect the validity of a Will but the standard of proof required is high.
Beneficiaries need to recognise the consequences of revocation of a Will. If a Will is revoked, the previous valid Will takes effect, or if there is none then the rules of intestacy will come into play.
In cases where there is suspicion or doubt about the circumstances in which a Will was made then evidence needs to be gathered quickly. Medical records may be sought, for example.
Working with a dedicated expert team like the one at Pitmans will help assess whether a will is open to challenge.
June 11th, 2012
Re-published from the Pitmans Times 2012
“As first class engineers, The Premier Group (TPG) are manufacturers of the Olympic and Paralympic torches for London 2012. Bus ask us about the legal side and we call in the experts. Suzanne Brooker has provided ‘top drawer’ legal services to TPG and has proved to be a valued member of team.
As manufacturers of such a prestigious and inconic symbol of the Games, we welcomed the legal knowledge, dedication and acommercial approach Suzanne afforded our team throughout both the contract negotiations and the production process.” – Denis Meagher, Managing Director, The Premier Group.
April 1st, 2012
Courtesy of Thames Valley Business Magazine March 2012
Personal guarantees given in the past to support corporate borrowing may well have been put in a drawer with no real expectation that they would ever again see the light of day. In these challenging economic times, however, more and more of them are being dusted down and used by lenders to recover unpaid debts. At this point the guarantee may be subject to a great deal more scrutiny than when it was given, with the guarantor (often a company owner/director) looking to avoid or reduce any liability and the lender conversely wanting to ensure that it maximises its recovery under the guarantee.
Guarantees are known to be technical documents, and this often leads guarantors who unexpectedly find themselves “on the hook” to seek ever more inventive ways of avoiding or reducing liability. Conversely, over recent years lenders have been careful to plug at least the more obvious gaps through which a guarantor might otherwise try to wriggle.
So in what circumstances might a guarantee not be enforceable?
Is the guarantee valid?
First, the nature of the document should be examined. Is it in fact a guarantee, or is it an indemnity? A guarantee is a secondary obligation guaranteeing the obligations of another party (usually a borrower) and depends on that other having defaulted. An indemnity on the other hand is a free standing obligation not dependent on the borrower’s default but enforceable in its own right. Many documents nowadays will have been drafted to be a combined guarantee and indemnity.
The distinction can be very important because only guarantees and not indemnities are subject to the technical requirements of the Statute of Frauds 1677, non-compliance with which renders a guarantee unenforceable.
The main technical requirement for a guarantee to be valid is that it must be in writing and signed by the guarantor or a person authorised on the guarantor’s behalf. Reliance cannot therefore be placed on a verbal assurance that one party will “see another right” or some such.
A guarantee is a contract and therefore must comply with the basic requirements of a contract including the need that there be “consideration” for the promise – an issue frequently overcome by executing the guarantee as a deed.
Execution as a deed in itself gave rise to problems for the lender in the case of Bibby Financial Services Ltd v Magson and others (reported November 2011) as the guarantee fell foul of Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989. This provides:
“(3) An instrument is validly executed as a deed by an individual if, and only if -
(a) it is signed -
(i) by him in the presence of a witness who attests the signature; or
(ii) at his direction and in his presence and the presence of two witnesses who each attest the signature; and
(b) it is delivered as a deed.”
It was this latter provision – delivery “as a deed” – which caused the problem. The critical thing is that the person delivering the deed must show an intention to be bound by it – and something more than signing may be required. In this case, documents were produced for discussion in a pub. At a meeting in a pub on 27 August 2008, the guarantors had signed both a guarantee and a warranty, and their signatures had been witnessed. They contended that, although each had signed an unbound guarantee and an unbound warranty as a gesture of good faith, their expectation, in the light of discussions at the time of signature, was that clean versions of each guarantee and each warranty, incorporating as part of the typed text amendments to take account of their manuscript notations, would be produced and that revised forms would be signed afresh. Consequently the signed versions of the guarantees and the warranties had not been dated or delivered. The versions of the guarantees and the warranties relied upon by the lender were bound and did not have manuscript alterations. The court found on the facts that they had not been “delivered” as required by law, and consequently were not enforceable.
A guarantee in standard form will be subject to a test of reasonableness under the Unfair Contract Terms Act 1977, thought he courts have made clear (for example in the 2008 case of Barclays Bank plc v Alfons Kufner) that many standard form clauses in contracts of guarantee will not be regarded as unreasonable as against experienced business people.
As with any contract, it is important to examine closely what has been agreed. As a matter of construction, does the guarantee actually cover the circumstances and claims which have arisen? If not, then the guarantor’s liability will not arise or will be reduced, even though the guarantee itself is valid.
Can the guarantee be discharged or avoided?
In certain circumstances, a guarantor’s obligations will be discharged; for example, if changes are made to the underlying agreement without the guarantor’s consent. (Note, however, that a term allowing such variation without having the effect of discharging the guarantee will be found in many standard forms.)
If the contract is induced by duress or undue influence, it may be set aside. This is one of the main reasons why lenders will insist that a guarantor obtains separate legal advice or at least attends a private meeting with the lender prior to giving a guarantee.
As in the case of any contract, a guarantee can be avoided in circumstances where a misrepresentation has been made to the guarantor. Further, whilst a lender is not under any general positive duty to disclose information to the guarantor, (including information it has about the debtor’s creditworthiness) circumstances can arise where the lender has a duty to disclose unusual facts not known to the guarantor.
In summary, very many considerations can affect a lender’s ability to make a recovery under a guarantee and it is worth both parties to the agreement having a very close look as soon as the guarantee looks likely to be invoked.
This is a very brief and general overview of some aspects of the law of guarantees and should not be relied on for advice in any particular situation.
Partner, Head of Dispute Resolution
T: 0118 957 0513
December 1st, 2011
Coutesy of Thames Valley Business Magazine November 2011
The Court of Appeal has given judgment in two cases involving challenges to s. 58 of the 2008 Finance Act. This section closed a tax loophole involving Isle of Man trust partnership arrangements and the particular feature which was challenged in each case was its retrospective effect. This meant that both applicants were suddenly liable to relatively significant sums in back tax and penalties, for the years in which they had (lawfully, at the time) taken advantage of tax mitigation schemes based around the relevant arrangements.
Mr Huitson was an IT contractor living in the UK and providing services here, as employee of an Isle of Man partnership. In the second case (Shiner) the applicants had been partners in a business acquiring and developing properties, but again as sub-contractors to a Manx partnership. The partnerships in question were between trust entities of which the applicants were beneficiaries. The partnership would contract with customers, and then employ the UK based individuals to undertake the work, but all profits were created and retained by the Isle of Man structures.
Under the existing (pre-Finance Act 2008) Double Taxation arrangements between the Isle of Man and the UK, the profits were therefore treated as arising in the Isle of Man, such that no liability to UK tax arose, while as the profits were retained in trust no tax was payable in the Isle of Man either. This arrangement was not something that the taxpayers had come up with on their own – it was a legitimate scheme marketed by PriceWaterhouseCoopers and Montpelier respectively and HMRC had been aware of it for at least seven years prior to taking any action. Equally though, it was an “aggressive” scheme, in the sense that it took advantage of what was obviously an oversight in the original drafting, rather than a tax break which the government had deliberately intended to confer.
The challenge in Huitson was to the compatibility of the retrospective legislation with the Human Rights Act, and in particular the right to quiet enjoyment of property. Shiner’s challenge adopted these challenges, but also complained that the effect of the legislation was to impede the free movement of capital between Member States of the European Union and other countries.
In each case, the Court of Appeal gave these arguments short shrift. Since (despite being aware of it for some time) HMRC had never suggested that it would consent to schemes which took advantage of it, the Court found that the taxpayers should have been well aware both that the loopholes might be closed, and that the effect of the closure might be retrospective. The Court was required to balance the rights of the individuals to certainty in their dealings with the rights of the wider community and, taking particular account of the aggressive nature of the scheme, the Court held that the balance had to favour the community interest and that as such the retrospective legislation was not susceptible to challenge.
Because of the particular features of the case, the results were perhaps not very surprising, but insofar as it marks an endorsement of the Revenue’s ability to revisit existing loopholes and close them retrospectively where the community’s interest in increased tax revenue outweighs the interests of the individual, these decisions have potential implications for anyone who has engaged in any type of tax mitigation strategy.
Director, specialising in Contentious Trust and Probate matters
T: 0118 957 0369
September 1st, 2011
Coutesy of Thames Valley Business Magazine July/August 2011
In our business and private lives alike, we all rely on professional advice and expertise from many quarters. We know that the right professionals add value to our businesses or protect them from risk. We use professionals we can trust, and often have a relationship built up over many years. Sometimes, however, we have a suspicion that we may have been let down. Our business may have lost money and we think an adviser may be to blame. If not examined, that suspicion will taint an important relationship and undermine its value to us.
People can be reluctant to look into such issues. This may be because of loyalty to the professional concerned, a sense of embarrassment at having let the situation develop or uncertainty as to whether the advice given, or action taken or not taken, really was inadequate. It is nonetheless important to assess the position. If there is nothing in your suspicion, you can rebuild your trust in the adviser. If it proves that there is a problem, you can objectively assess how to deal with it.
You are paying for a service. You are entitled to be happy that you are getting what you are paying for and should not be afraid of challenging advice or other professional input. Such challenges do not have to be adversarial. With the benefit of a careful prior assessment, very positive results can emerge from informal or formal complaints procedures or even mediation, which can lead to an outcome which is satisfactory to all parties without irreparably damaging the relationship. Professional indemnity insurers are increasingly open to early resolution of complaints and claims by mediation.
So what factors will be taken into account in assessing whether you are entitled to redress from a professional for failings in the service provided?
The basic requirements for a claim against a professional are:
1. a duty owed;
2. a breach of that duty;
3. loss caused by that breach.
Proving that the professional’s act or omission caused the loss suffered is a frequent stumbling block.
A professional adviser may incur liability for breach of contract and/or beach of a duty of care owed in the tort of negligence. Less commonly, liability can arise from breach of fiduciary duty or breach of statutory duty.
The first question to consider is what was the professional engaged to do? The starting point will be the contract – what has been agreed. The agreement need not be in writing. In some cases only part of it may have been written down. But the contract is likely to contain relevant terms (express or implied) and it is important to establish what these are. The precise ambit of the contractual obligations will depend on a number of factors including the experience of the client.
One then looks at whether the professional has carried out their engagement properly or at all. Under section 13 of the Supply of Goods and Services Act (1982), in a contract for services, a professional acting in the course of business will be obliged to carry out the service “with reasonable care and skill”. The client is entitled to rely on the professional to exercise the highest degree of care and skill which a competent professional would exercise in work of that kind. This duty may be limited by contract, subject to the Unfair Contract Terms Act (1977) and any applicable professional rules. Level of experience is not relevant to the standard of care which is imposed although a special skill can raise the standard of care to be expected.
A concurrent duty in the tort of negligence may (but will not always) exist.
Establishing whether there is a cause of action in contract or tort can be important in that different limitation periods may apply to any claim. The limitation period (after which claims may not be brought) is often longer in tort than in contract. (As the effects of professional errors do not always reveal themselves immediately, checking the applicable limitation should be done as soon as possible.)
There are also differences in the measure of damages which can be recovered. In contract, damages seek to put the injured party in the position he would have been in if the contract had been properly performed. So for example the innocent party can seek to recover expected profits. In tort, however, the injured party is to be put in the position he was in before the tort was committed, which will not include expected profits.
The defence of contributory negligence is more widely available in tort claims than in contract claims.
Assessing the quantum of a claim can also pose interesting questions. Many claims against professional involve a claim for a loss of a chance.
That the professional’s error caused the loss must be established in fact and in law. In law, this is often called “remoteness of loss”. In contract a claimant can recover losses arising naturally from the breach or loss which was in the contemplation of the parties at the time the contract was made. In tort, the type of damage suffered must have been reasonably foreseeable at the time of the breach of duty.
A claimant cannot recover damages for any loss which could have been avoided by taking reasonable steps in mitigation. And in some cases the level of damages recoverable will effectively be capped by a restricted definition of the scope of a professional’s duty and the loss which can fall within it.
So if your analysis of duty, breach, causation and loss indicates that you may have real cause for concern, how should you proceed? In general, if a professional has fallen below the standard of work expected, he or she will welcome the opportunity of explaining or making amends for any failings. You may wish to secure financial redress. The professional will normally be keen to continue to work for you and you may find you can use the opportunity to refresh and restate your relationship. Having conducted an objective assessment of your position, and having invited your professional to address the issues, you will be able to take an informed decision as to whether this is appropriate or whether it really is time to move on.
Pitmans has extensive experience in resolving professional liability issues by negotiation and mediation, as well as by proceedings where necessary. For examples of professional liability or further information, please visit our Dispute Resolution service page, or contact:
This is a complicated area of law and reliance should not be placed on this article to make decisions about particular issues. The article by its nature is brief and is not a comprehensive statement of the law.