PROVING THINGS 33: CAUSATION AND THE BURDEN OF PROOF IN CLAIMS AGAINST SOLICITORS

We have looked before at the decision in The Connaught Income Fund, Series 1 -v- Hewetts Solicitors  [2016] EWHC 2286 (Ch). The previous post was in connection with witness evidence.  However the judgment on the burden of proof is significant in terms of the need to prove causation and damages in the context of a professional negligence case.

KEY POINT

  • The evidential burden was on a claimant to show that they would have acted differently if they have been given different advice.
  • The cases where a reversal of burden applied are those cases where a lawyer has advised a client that they have a good cause of action (which then failed due to the lawyer’s negligence).  There was then a heavy evidential  burden on the negligent lawyer to show to the contrary.
  • However in other cases the burden remained on the claimant.

THE CASE

The claimant company sought damages for professional negligence against the defendant solicitors alleging negligence in relation to the purchase of a property. An issue arose as to,  in breach of duty was established, who bore the burden of proof in relation to causation and damages.

THE JUDGMENT
  1. It is necessary to consider reliance and causation together in the light of the Fund’s contention that in a certificate of title case such as the present, the causation enquiry stops at the reliance stage if the Fund can show that it would not have acted as it did if the COT had been as the Fund says that it ought to have been, namely completed, amended, or qualified as alleged.
  2. As to reliance, the following propositions are not, as I understand it, disputed:
215.1. In order to found a claim for damages, a claimant must establish that he relied on the solicitor’s information or advice such that if he had been correctly informed or advised, he would have acted differently: Sykes v Midland Bank Ltd [1971] 1 QB 113, per Harman LJ at 124F;
215.2. The incorrect advice or information need not be the sole motivating factor for the lender to enter into the transaction, but must play a “real and substantial part” in inducing participation: JEB Fasteners Ltd v Marks Bloom & Co (a firm) [1983] 1 All ER 583, per Stephenson LJ at 589a;
215.3. The claimant must show that he relied on the information or advice and believed it to be correct: Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1995] 2 All ER 769, per Phillips J at 796c;
215.4. The standard processes of the lender may serve as evidence of reliance: Cavendish Funding Ltd v Henry Spencer [1998] PNLR 122, at 127A to B per Aldous LJ.
  1. However, the Fund relies upon what was said by Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1 at 11D to E (in purporting to follow what Hobhouse LJ had said in Downs v Chappell [1997] 1 WLR 426), as authority for the proposition that in cases where the solicitor has negligently given incorrect advice or information, the claimant need only show that he would not have acted as he did if he had not been given the relevant advice or information, and, importantly, that he need not show that he would not have acted as he did if he was given correct advice or information. This is in contrast to the case where the solicitor fails to give proper advice where he does need to show that he would not have acted as he did had proper advice been given.
  2. Mr Smith, in response, draws my attention to the recent case of Thomas v Allbutt [2015] PNLR where Morgan J, at [430]-[435] considered the correctness of what Millett LJ had said in Mothew at 11 D-E, and rejected the submission in the claim before him, involving alleged barrister’s negligence, that all that was needed was reliance, and that causation did not require to be examined. Morgan J declined to apply what Millett LJ has said in Mothew on the basis that Millett LJ was the only judge in Mothew who had supported this proposition, and that what Millett LJ had said had to be read in the light of the fact that in the subsequent case of Swindle v Harrison [1997] 4 All ER 705, Hobhouse LJ had suggested that Millett LJ in Mothew had misunderstood the judgments in Downs v Chappell. Further, Morgan J placed reliance upon what had been said by the Court of Appeal in Levicom International Holdings v Linklaters [2010] PNLR 29 at [254] per Stanley Burton LJ, and also at [284] per Jacob LJ, where Jacob LJ had said:
“When a solicitor gives advice that his client has a strong case to start litigation rather than settle and the client then does just that, the normal inference is that the advice is causative. Of course the inference is rebuttable—it may be possible to show that the client would have gone ahead willy-nilly. But that was certainly not shown on the evidence here. The judge should have approached the case on the basis that the evidential burden had shifted to Linklaters to prove that its advice was not causative. Such an approach would surely have led him to a different result.”
  1. Whilst Ms Smith reserves the position of the Fund should the matter go further, I consider that, as a matter of judicial comity, I should follow Morgan J, and find that causation should not necessarily stop at the reliance stage. Thus the Court is, in my judgment, bound to consider whether, even if Mr Butcher had acted as it is alleged that he ought to have acted but failed to act, the transaction would have gone ahead in any event. I am bound to say that, on the facts of the present case, an unjust outcome would be capable of resulting if this were not the correct approach to take.
  2. A further legal issue arose at trial as to the burden of proof in respect of causation. Ms Smith, for this purpose, relies on the passage cited from the judgment of Jacob LJ in Levicom referred to in paragraph 217 above. She argues that this shows that the burden of proof is on Hewetts to prove that the Fund would have gone ahead in any event, and not on the Fund to show that it would not, given the reference in this passage to what Linklaterswas required to prove. This particular passage led Morgan J to say in Thomas v Albutt at [436]:
“I will proceed on the basis that the burden of proof is on Mr Albutt [the defendant barrister] to show that any negligent advice did not make any difference to the position of Mr and Mrs Thomas”.
  1. Mr Smith, in response, submitted that in Levicom and Albutt one was concerned with the discrete principle established in Mount v Barker Austin[1998] PNLR 493 to the effect that although the burden of proof remains on a claimant to prove that in losing the opportunity to pursue a claim, he had a real and substantial rather than merely a negligible prospect of success, where the legal adviser defendant has advised positively as to the merits of the litigation, there is a heavy evidential burden on the defendant to show to the contrary. Mr Smith submitted that this is the evidential burden that Jacob LJ was referring to in Levicom, and that this was the burden that Morgan J was referring to in Albutt, albeit referring to it as the burden of “proof”. Mr Smith therefore submitted that, as the present claim does not involve the conduct of litigation, this is not a proper case to apply the Mount v Baker Austin principle, and so the evidential burden remains on the Fund.
  2. Following the conclusion of the trial, Ms Smith provided further written submissions to which Mr Smith has since responded. Ms Smith submits that in the event that I decide to follow Morgan J in Thomas v Albutt, and therefore do not apply the approach of Millett LJ in Mothew as to causation, then if I accept, on the balance of probabilities, that the COT would have been sent back to TIL if Mr Butcher had done that which the Fund contends that he should have done, then what would then have taken place was outside the control of the Fund, and in the hands of Hewetts and TIL. She submitted that when the actions of a third party are involved in this way, then the Court must determine whether there is a substantial chance that (by reason of that third party’s actions) the Fund would not have drawn down the Loan, and that if there is such a substantial chance, then the evaluation of that substantial chance is a matter for the quantification of damages. Ms Smith relies upon Allied Maples Group Ltd v Simmonds & Simmonds [1995] 1 WLR 1602, per Stuart Smith LJ at 1611:
“In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr. Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr. Jackson’s submission is wrong and the second alternative is correct.”

  1. Ms Smith then submitted that:
222.1. As to the actions of Hewetts, its evidence was that it would not complete a false certificate. Consequently, if any of the breaches were incapable of remedy such that an un-amended or unqualified COT could not properly be sent to the Fund, then the transaction would not have proceeded because any amended or qualified COT would have been rejected by CAM/the Fund.
222.2. So far as the actions of TIL/TPlc are concerned, as to Hewetts’ case that TIL would have resolved the issues regarding the COT so as to enable it to resubmit an unamended and unqualified COT, it was Ms Smith’s submission that there was no evidence to inform the Court one way or the other as to what steps TIL/TPlc would have taken, and that it was for Hewetts to call evidence to establish the relevant facts, whether on the authority of Mount v Barker Austin or, as she put it, “on the basis of fundamental principles as to the evidential burden of proving a positive case.”She pointed out that there was no witness evidence from TIL/TPlc.
222.3. Ms Smith then submits that in the absence of that evidence, Hewetts cannot get over the fact that there was plainly a substantial chance that TIL/TPlc would not resolve the issue regarding the COT such that the drawdown would never have happened.
  1. As to the status of Mount v Barker Austin, Ms Smith relied upon the recent case of Harding Homes (East Street) Ltd v Bircham Dyson Bell [2015] EWHC 3329, in which Proudman J at [34]-[38] held that the Mount v Baker Austin principle was capable of broader application, Proudman J seemingly being prepared to apply it to a case involving loss of chance in a commercial negotiation.
  2. As to Harding Homes, I consider that the relevant passages in the judgment of Proudman J therein are no more than a recognition that, as appears from Simon Brown LJ’s formulation of the principle in Mount v Barker Austin summarised by Proudman J at [34], where the “loss of chance”jurisdiction does apply, then:
224.1. whilst the claimant bears the legal burden of proving that in losing his opportunity, he lost something of value (i.e., something having a real and substantial prospect of success);
224.2. the evidential burden lies on the defendant to show that the opportunity was of no value.
  1. Consequently, I consider it necessary to consider whether the loss of chance jurisdiction does apply in the circumstances of the present case and, if it does apply, what the significance thereof is.
  2. It is, to my mind, important to bear in mind why loss of chance principles are applied when they are to resolve loss and damage issues, namely to deal with the forensic difficulty of dealing with the hypothetical actions of third parties when the issue is whether that third party, who generally had no interest or involvement in the relevant litigation, would have conferred a benefit on the claimant, or acted so as to avoid loss to the claimant, in the relevant circumstances. Thus, as the case of Veitch v Avery [2008] PNLR 7 cited by Mr Smith demonstrates, if the third party’s actions can be closely associated with those of the claimant (in that case it was the relationship of father and son), then the Court may be more able to deal with the particular evidence said to have causative effect on the basis of the balance of probability. In that case, the issue was whether the claimant’s father would have advanced funds that would have saved what was otherwise a doomed business in a case where it was necessary for the claimant to show that the business was not doomed.
  3. Hewetts maintain that this is not a loss of chance case. Mr Smith submits that whether or not the Court finds that TIL was the Fund’s agent (but a fortiori if it does), then there was plainly a very close association between those two parties for the purposes of the scheme promoted by the IM such that, as with the relationship between father and son in Veitch v Avery, this closeness of association justifies TIL’s hypothetical conduct being judged on the balance of probabilities.
  4. I agree with Mr Smith that even in the absence of positive evidence from TIL/TPlc, and irrespective of the fact that TIL was, at one stage, co-claimant with the Fund to the present action, the closeness of the relationship between TIL/TPlc and the Fund was such that it is appropriate to consider what TIL would have done on the basis of what, on the balance of probabilities, TIL would have done had Hewetts, in respect of each of the alleged breaches of duty, done what the Fund maintains it should have done. I reach this view in the light of my finding above as to the nature of the relationship between the Fund and TIL, it being of importance and significance, in my judgment, that the Fund had, through CAM, delegated to TIL the specific function of dealing with the legal work necessary in relation to the relevant transaction, and that TIL was acting as agent of the Fund to that extent at least.
  5. I further agree with Mr Smith that the Mount v Baker Austin principle is only of application in a loss of chance case where the court first requires the claimant to bear the legal burden of proving that in losing his opportunity, he has lost something of value, in which event the evidential burden lies on the defendant to show that the opportunity was of no value. On this basis, I see no reason to depart from the general rule that it is incumbent on the Fund, as claimant, to prove causative effect – see Boateng v Hughmans [2002] PNLR 40 at [30] per Sir Christopher Slade.
  6. Thus, on the basis of my finding that I ought to follow the approach of Morgan J in Thomas v Albutt with regard to Millett LJ’s approach in Mothew, I consider that the onus is on the Fund, having established that Hewetts acted in breach of duty in any of the ways alleged, to then demonstrate, in respect of each breach of duty, why and in what way different advice would have led the Fund to decline to advance the Loan. I therefore proceed on that basis.

 

The judge went on to find that causation was not established.

RELATED POSTS

THE “PROVING THINGS”: SERIES

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