Avoiding Procedural Pitfalls in Professional Negligence Claims

Professional negligence claims are somewhat more susceptible to the many procedural pitfalls in civil litigation. Passage of time, lengthy negotiations before issue, insolvency.

This article reviews two recent cases which illustrate these procedural pitfalls, and discusses how to avoid them.

Playfair v Pannells LLP  [2024] EWHC 1933 (Ch)

This was a claim for professional negligence against accountants and solicitors in relation to the restructuring of family trusts. Proceedings were issued on 16 June 2023, shortly before the expiry of the 15-year longstop under section 14B of the Limitation Act 1980. Although proceedings were issued in-time, the claim form was not served.

Instead, the claimants made an application on 13 October 2023 under CPR r.7.6 for an extension to the four-month period for service of a claim form specified by CPR r 7.5. The claimants’ case was as follows. They did not realise that they had a claim until 16 May 2023. Due to the imminent expiry of the longstop, they did not have time to carry out the steps which a well-advised claimant would carry out before issuing and serving proceedings. And they were unable to serve the claim form earlier due to the imminent expiry of the longstop.

The application was rejected. Although the court acknowledged the difficulties faced by the claimants with respect to limitation, complexity and the identity of the defendants, it considered that none of these factors mean that they were unable to serve the claim form sooner. The claimants could have taken the more obvious steps of agreeing a standstill agreement with the defendants before issuing or, even after issue, by seeking agreement or applying for a stay of proceedings, or an extension of time for particulars of claim.

Comment

This case is a good illustration of the perils of delaying service of the claim form when there are limitation issues at play. It should be a last resort.

Although desirable, standstill agreements are not always a realistic option, and it is sometimes necessary to issue to prevent a claim from being time-barred. If that happens, however, and you need more time, try to reach agreement with the defendant on a stay or extension of time; if that is not possible, an application for a stay or for an extension of time for serving the particulars of claim is likely to be preferable than having to persuade the Court to extend the time for serving the claim form.

Tintometer Ltd v Pitmans (A Firm) [2024] EWHC 370 (Ch)

This case arose allegedly negligent advice given by solicitors in relation to a pension scheme. When that advice had been given in 2008/9, the solicitors instructed by the claimant carried on business as a traditional unincorporated partnership (the Partnership). Although a limited liability partnership had been incorporated in 2008 (the 1^st LLP), it was at that stage a dormant company and did not carry out business until 2011 and was subsequently acquired by another limited liability partnership in 2018 (the 2^nd LLP) In the circumstances, the Claimant had been advised by the Partnership. The Partnership was therefore the correct defendant.

The claimant issued proceedings in 22 April 2021, about six months before the expiry of the secondary limitation period under s.14A of the Limitation Act 1980. However, the claimant commenced proceedings against both LLPs (which was the wrong defendant), mistakenly believing that it had been advised by the 1^st LLP. It did not realise its mistake before the expiry of the limitation period. Nor did it serve the claim form within 4 months of issue as required by CPR r.7.5. Instead, the deadline for service was extended on five separate occasions (at first by agreement, then by court orders under CPR r.7.6), pushing back the deadline for service by over two years to 22 September 2023.

Shortly before service, having realised its mistake as to the identity of the defendant, the claimant amended its claim form under CPR r.17.1(1) to substitute the Partnership as the defendant. The Partnership sought to set aside the orders extending the time for service of the claim form, or alternatively to disallow the substitution. It failed on both counts.

On the extensions of time, the Court concluded that the Partnership was not entitled to apply for them to be set aside. It was not party to the proceedings when those orders were made,  and was not a person ‘affected’ by those orders within the meaning of CPR r.r3.3(5) or 40.9; a newly joined party rely on those provisions to unravel historic procedural orders. Even if the Partnership were entitled to make such an application, the Court would have dismissed it in any event. It rejected the argument that the Court does not have jurisdiction under CPR r.7.6 where the parties had previously agreed to extend the time for service, if such an agreement was compliant with CPR r.2.11. The Court also noted that the Partnership ought to have disputed jurisdiction in its acknowledgment of service, but that this was an error of procedure which could be corrected under CPR r.3.10.

On substitution, the Court declined to exercise its discretion under CPR r17.2 to set aside the amendments to the claim form. It was common ground that the claimant’s mistake was such that CPR r.19.6(3) would be applicable. The Court rejected the Partnership’s argument that the amendment should nonetheless be disallowed. Both LLPs and the Partnership were represented by the same solicitors and covered by the same insurers; the commercial reality was that the change of party had made no difference to the defence of the claim. Although there had been significant delay since the issue of proceedings, the claimant pursued with reasonable diligence, and the delays were largely not been of its making. The substitution caused no real prejudice to the LLP.

Comment

Whilst there are several procedural lessons to learn from this case, the most important is to take care in identifying the correct defendant, especially in cases where a professional has carried out business via different legal entities. This is important for defendants too; the Court seems to have taken into account the fact that the LLPs made the same mistake as the claimant, positively asserting (wrongly) that the 1^st LLP was the entity that had advised the claimant (when it had in fact been the partnership).

When such a mistake is made, however, the question of whether the claim can be salvaged by a substitution will turn on the facts. Of course, the mistake must relate to as which entity provided the advice (rather than as to which is liable): see Insight Group v Kingston Smith [2012] EWHC 3644 (QB), [2014] 1 WLR 1448 at [56] to [57]. Once a mistake has been discovered, the claimant will need to correct it, either by amendment under CPR r.17.1(1) or substitution under CPR r.19.2(2) or 19.6(3) (depending on whether the limitation period has expired). In these types of cases, the Court is likely to look at the commercial reality of the situation and sympathise with the claimant (provided they have acted reasonably; compare American Leisure v Olswang [2015] EWHC 629 (Ch)).

Article by Joshua Griffin