Professional Negligence

Probate fees increase – don’t miss the deadline!
20 March, 2017

Despite overwhelming objections received during the consultation, the MOJ recently announced proposed increases in probate fees:

Value of estate                           Proposed fee

Up to £50,000                              £0

Between £50k-£300k                 £300

Between £300k-£500k               £1,000

Between £500k-£1m                  £4,000

Between £1m-£1.6m                   £8,000

Between £1.6m-£2m                   £12,000

More than £2m                            £20,000

https://www.lawgazette.co.uk/law/moj-confirms-hike-in-probate-fees/5060010.article

Current fees are £215 or £155 for those applying through a solicitor.

The changes are currently expected to come into force in May, once parliamentary approval has been obtained.  However, no implementation date has yet been announced and some further guidance released by the MOJ, in response to questions raised about the announcement, does not confirm a specific date.  

The guidance does, however, include the following:

The new fees will apply to all applications received by the probate service on or after the implementation date of the new fees irrespective of the date of death. Any application received within working hours of the Probate Registry before the implementation date will be charged the current fee. Subject to approval of the necessary legislation by Parliament, we expect the new fees to take effect from May 2017, but the exact date will be confirmed nearer the time.

There is likely to be an inevitable scramble as solicitors and individual executors submit applications before this date.

However, for solicitors there is the added concern that a delay on their part may lead to allegations of negligence if additional (higher) fees are incurred as a result. 


Solicitors held liable after conveyancing fraud
8 February, 2017
by: Cripps

The recent case of  Dreamvar (UK) Limited v (1) Mishcon de Reya (a firm) and (2) Mary Monson Solicitors Limited [2016] EWHC 3316 (Ch) will doubtless be of concern to firms of solicitors and their insurers alike.

The case was brought by a company (Dreamvar) which had attempted to purchase a property, but fell victim to a fraudster posing as the owner/seller, who subsequently disappeared with the sale proceeds of over £1m, leaving the purchaser to later discover that there had in fact been no genuine sale and ultimately without a property.

Dreamvar pursued various claims against it’s own solicitors, Mishcon de Reya (Mishcon), and the solicitors acting for the fraudulent seller, Mary Monson Solicitors. 

The solicitors acting for the seller were held not to be liable.  As for Mishcon, the court held that they had not acted dishonestly and had not been negligent.  However, the claimant succeeded on the basis that there was a breach of trust (the purchase money having ultimately been paid away to fraudsters).  Despite Mishcon being found to have acted reasonably and honestly, relief under s61 Trustee Act 1925 (which would excuse them of the loss caused by the breach in certain circumstances) was not granted. 

The main consideration in the exercise of the court’s discretion was that the impact of the loss would be disastrous for the uninsured claimant to suffer, but it was far easier for the (insured) firm of solicitors to absorb.  Importantly there did not appear to be any other potential avenue open to Dreamvar to recover the funds.

It is understood that Mishcon are appealing the decision.  This is undoubtedly a difficult and developing area of law, which is all the more important in light of increasingly sophisticated frauds being perpetrated.  Courts are in the unenviable position of deciding between firms which have done little wrong (at least in the context of generally accepted practice) and clients who fall victim to fraud, where the consequences are devastating if there is no potential remedy for them.

 


Professional negligence: overturning a Financial Ombudsman decision
17 January, 2017

In a recent professional negligence case the High Court has – unusually – overturned a decision by the Financial Ombudsman (FO).

The claim in Lenderkink-Woods v Zurich Assurance Ltd and Others [2016] EWHC 3287 (Ch) arises from tax advice given by a financial planning consultant representing Allied Dunbar (Allied Dunbar was later acquired by Zurich).

In 2001 the claimant, who had a complex domicile situation (she was born in the UK, acquired a domicile of dependency in the Netherlands and later moved to Costa Rica, where she still lives), was introduced to a financial advisor by one of her daughters. She wanted someone to “watch over” her investment portfolio, as she lived abroad, and was concerned about the potential inheritance tax liability (around £130,300) the portfolio (then worth £567,700) would incur.

Two key points arise regarding the financial advice given:

  1. Tax planning is affected by an individual’s domicile status and, accordingly, it is crucial that any financial advisor take into account their client’s domicile; and
  2. As a “tied” advisor, he could only recommend Allied Dunbar schemes. If nothing was suitable he was bound by his regulator to make no recommendation and introduce his client to an independent financial advisor.

On his recommendation, the portfolio was invested in three Allied Dunbar investments.

The claimant suffered a mild stroke in 2009. Her daughters became more involved with her finances and concerns grew about the investment portfolio.  In 2012 a complaint was made to Zurich, who agreed to £459,567 in compensation.  However, the offer was later withdrawn on the basis that the investments were suitable. 

A complaint to the FO followed. In 2014 the FO agreed with Zurich, stating that there was no proof any financial loss or other detriment had actually been incurred.

The claimant commenced proceedings in 2014. Importantly, she was able to overcome assertions by the defendants that her claim had been brought out of time.

The High Court ruled in favour of the claimant. It held that the advisor had been negligent and that “every tax-based reason that [the advisor] gave for his advice was wrong”.  The investment products were not suitable for someone not domiciled in the UK.  The advisor failed to reach the standard of a reasonably competent advisor who would know that domicile is a critical issue in tax planning and should either know, or seek advice as to, the rules.  In addition, the charging structure was unnecessarily burdensome. 

The claimant was awarded £223,000 in damages based on the unnecessary charges levied, which had cancelled out all investment growth.

The case is a helpful reminder that – although decisions reached by the FO are often regarded as final – courts are able to review and, where appropriate, overturn the FO’s decision in a matter.

Zurich said that it had not offered financial advice for more than a decade but accepted the ruling. Unsurprisingly, the FO has said that it will review the decision carefully.


Professional negligence: financial advice claims
15 November, 2016

The recent case of O’Hare and another v Coutts & Co [2016] EWHC 2224 (QB) considered whether the defendant bank breached its duty of care towards the claimant to exercise reasonable care and skill when advising on making certain investments.

To be liable in professional negligence the defendant must fail to reach the standard of a reasonably competent professional in that field. The usual approach is to follow the Bolam test, deriving from a case of the same name, and which applies to all professional liability cases.

Bolam held that the defendant doctor would not be guilty of negligence if (1) he acted in accordance with a practice accepted at the time as proper by a responsible body of medical opinion skilled in the particular form of treatment and (2) he would not be negligent merely because there was a body of competent professional opinion which might adopt a different technique.

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In O’Hare, the claimants opened accounts with the defendant bank in 2001.  Their claim was for losses suffered as a result of investments made in 2007/2008 and 2010.  

The defendant alleged that the advice given by its private bankers was sound and the investments were suitable (although they performed poorly).

Importantly, Kerr J did not apply the Bolam test.  Instead they followed the approach of the Supreme Court in Montgomery v Lanarkshire Health Board which, in summary, considered the duty as one to take reasonable care to ensure that the patient was aware of material risks involved in recommended treatment.

Following Montgomery, O’Hare focused not on whether the defendant had advised in accordance with a practice accepted as proper by a reasonable body of persons skilled in the giving of financial advice but on what the claimant would expect to be told by the defendant.

The claim was dismissed in its entirety. It was held that the defendant had not breached its duty, in either contract or tort, to ascertain the claimants’ requirements and objectives and to advise, explain and inform the claimants about suitable investments.

The judge decided that the bank had provided sufficient advice and identification of risks to the O’Hares, who were adequately informed to decide whether or not to proceed. The bank had complied with its duty of care.

The decision was influenced by expert evidence which indicated little consensus in the industry about how to manage the risk appetite of clients.

Kerr’s judgment suggests that that the giving of investment advice is not simply an exercise of professional skill. It is the right of an informed investor to decide the risk that he is willing to take which, by extension, means that he will also have to take responsibility for his own mistakes.


Offers to settle: Part 36 and Calderbank Offers
1 November, 2016

The recent case of DB UK Bank Ltd (t/a DB Mortgages) v Jacobs Solicitors [2016] EWHC 1614 (Ch) highlights the importance in litigation of understanding the different rules relating to common law settlement offers and Part 36 offers made under the Civil Procedure Rules.

A ‘Calderbank’ offer is a settlement offer made on a ‘without prejudice save as to costs’ basis.  This means that, if the other side rejects the offer, it will not be made known to the judge during proceedings but can be revealed after the trial and taken into account by the judge when it comes to the matter of determining costs. 

A ‘Part 36’ offer is also an offer to settle.  It can be made at any stage in legal proceedings and must be made in a particular way in accordance with Part 36 of the Civil Procedure Rules.  If complied with, the offer will again be ‘without prejudice save as to costs’.  For more information about Part 36 offers read our previous blog on the subject.

shaking-hands-close-up

It is an established principle in law that when an offer has been made, a counter-offer has the implied effect of rejecting the original offer.  This means that the original offer can no longer be accepted. 

In contrast, when a Part 36 offer is made, it remains open until withdrawn regardless whether it has been rejected or a counter-offer made.

In the above case, one party made a Calderbank offer.  The other party responded with a Part 36 offer, believing that the original offer would remain open for acceptance at a later date because Part 36 is a separate code that sits outside usual contractual principles.

In fact, the judge held that the Part 36 offer was a counter-offer which was an implied rejection of the original offer, under normal contractual principles.  The original offer could not, therefore, be accepted later.

Contrast this with the situation if the first offer had been a Part 36 offer.  A subsequent offer, whether under Part 36 or not, would have no effect.  The Part 36 offer would stay on the table until withdrawn in writing.

The decision is being appealed but, in the meantime, it is a useful reminder of the different settlement strategies open to parties during litigation and the importance of distinguishing which one is being used.


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