Supreme Court “may change approach” to ‘lost litigation’ claims

Supreme Court: Hearing later this year

The Supreme Court may look to change the courts’ approach to dealing with claims over negligently conducted litigation later this year in a case involving miners’ compensation, a barrister has suggested.

Helen Evans said there were arguments that the court should look at the prospects of the lost litigation in far more detail than the “fairly broad brush” approach currently taken.

Writing on the 4 New Square website, she said that when a claim for ‘lost litigation’ is made – such as a divorcing spouse who has lost the chance to pursue a claim for a fair share of the matrimonial assets or a company whose lawyers have failed to advise about all the types of claim that could be brought against a delinquent director – the court has to grapple with what the likely outcome would have been if the original litigation had been properly pursued.

The court usually asks whether there was a real and substantial chance of the claimant achieving the outcome that he or she says he would have achieved if his case had been properly pursued by his lawyers.

“The courts have repeatedly emphasised that it is not appropriate to fight out ‘a trial within a trial’, and that it is ‘the prospects and not the hypothetical decision in the lost trial that have to be investigated’.”

Ms Evans explained that, despite the broad ground covered by lost litigation claims, the authorities governing them were drawn from “a surprisingly narrow field”, mainly where claims had been struck out for want of prosecution.

This was significant “because in order for a claim to be struck out in the first place, a judge must have concluded that a fair trial was no longer possible. The starting point, therefore, for this type of lost litigation claim is that the case before the court was not capable of being adequately tried by anyone.

“Against this backdrop, it is not surprising that the courts have repeatedly emphasised that it is not the function of the court trying the professional negligence case to have a ‘trial within a trial’.”

However, the upcoming Supreme Court hearing in Perry v Raleys – a miner’s compensation claim – saw the claimant able to give evidence himself and also to call expert evidence of the ‘lost litigation’ claim. “Is it right that such a claim should be treated in the same way?” Ms Evans asked.

The Court of Appeal thought so, observing that there were “sound public policy reasons for such an approach”, namely that it was “far too easy for negligent solicitors, or, perhaps more pertinently, their insurers, to raise huge obstacles to claimants such as Mr Perry from pursuing their claims, if the latter are required, effectively, to prove in the litigation against solicitors that they would have succeeded in making such a claim against the [original defendant]”.

Ms Evans said: “It may be the case that professionals sued by their client are apt to raise every issue that the original defendant would have dredged up in the underlying trial, but the Court of Appeal’s observation only looks at the issue from the claimant’s perspective.

“Defendant professionals sued in lost litigation cases often express surprise that a former client, who had less than 50% prospects of winning his or her original claim, now appears to have a stronger claim against his lawyers than he had against the original defendant (albeit that the negligence claim is worth less). Is that fair?”

Another problem with the traditional approach was the situation of a claimant exaggerating the value of the original litigation that he has lost the chance of pursuing, she said.

“Should the court proceed on the basis of a low prospect of the claimant recovering his or her exaggerated outcome? Or should it try to get to grips with the range of likely orders that the court would have made in the ancillary relief proceedings between the spouses?

“The first approach is arguably artificial; the latter approach arguably veers towards the ‘trial within a trial’ territory.”

This all meant that the current approach was “ripe for reconsideration”, Ms Evans said. Perry v Raleys is proceeding to the Supreme Court in late 2018 and it may be followed (if permission to appeal is granted) by Edwards v Hugh James Ford Simey, another case arising from a mishandled industrial injury claim.

“Although the main focus of the Edwards case was on whether evidence that would not have been available at the original trial date in the lost litigation could be adduced at the trial of a professional negligence claim, there are strong conceptual overlaps with Perry.”

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