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Legal Watch - Property - Issue 1 2016
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Legal Watch:Property Risks & CoverageFebruary 2016Issue 01
In this issue:
• Property Risks and Coverage Seminar Programme 2016
• Duty of Care in Tort for Gratuitous Services Performed for Friends
• Artificially Reduced Issue Fees and Abuse of Process
• Further Increases to Court Fees
• The Briggs Review
• Riot (Damages) Act 1886 – Supreme Court Hears Mitsui appeal
• Latest News on the Riot Compensation Bill 2015-2016
• Enterprise Bill 2015-2016 – Update
Contact usIf you would like any further information on the cases or articles featured in this issue, please contact:
Nathan Rehbock
T: 0344 245 5229E: [email protected]
Robert Kay
T: 020 7469 6256E: [email protected]
Victoria Jordan
T: 0344 245 5416E: [email protected]
Marise GellertT: 020 7469 6249E: [email protected]
IntroductionThis month Nathan Rehbock looks at Burgess & Anor v Lejonvarn, which provides a salutary reminder that a duty of care can arise in tort for gratuitous services performed for friends.
Robert Kay considers the case of Richard Lewis & Ors V Ward Hadaway, in which claims were intentionally undervalued to reduce court fees.
Still on the subject of court fees, we consider the Government’s latest announcement on the issue fee cap and other fees.
Keeping the theme of reform going, we look briefly at what is being referred to as the Briggs Review – Lord Justice Briggs’ interim report on the civil court structures and judicial processes.
Victoria Jordan provides a short update on Mitsui v Mayor’s Office which arose out of the 2011 Tottenham riots, the Riot Compensation Bill 2015-2016 and the Enterprise Bill 2015-2016
Finally, set out on pages 1 and 2 are details of our forthcoming seminars, including our National Conference on 12 May 2016. The seminars are free to attend and will be followed by drinks. Please circulate the programme to any of your colleagues who may be interested in attending.
Here are the hyperlinks you can use to book your place:
To book your place for our Leeds seminars email: [email protected]
To book your place for our London seminars email:
[email protected] To book your place for our Manchester seminars email: [email protected]
If there are any topics not currently on the Seminar Programme which you would find useful please let Alison Heard know so that we can add them to our next Seminar Programme.
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Property Risks and Coverage Seminar Programme 2016
Date Location Seminar To book your place
Thursday
4 Feb 2016
5.30pm
London
Plexus Law
Peninsular House
30-36 Monument Street
London
EC3R 8NB
Claims Handling:
Obtaining and preserving evidence
Differences in Property Claims North and South of the Border:
Key differences between Scottish and English property claims across the major perils of floods, fires and defective products; limitation and costs.
Followed by drinks
Email:
Wednesday
24 Feb 2016
5.30 pm
Manchester
Plexus Law
City Tower
Piccadilly Plaza
Manchester
M1 4BT
Insurance Act 2015:
The practical effect on claims handling
Insurance Contract Terms and Conditions
How to identify different terms in insurance contracts, their legal effect, warranties – pre and post Insurance Act 2015
Third Parties (Rights Against Insurers) Act 2010
Followed by drinks
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Thursday
16 March 2016
5.30pm
Leeds
Radisson Blu Hotel
1 The Light
The Headrow
Leeds
LS1 8TL
Fire Claims:
Ignis suus
S86 Fires Prevention Metropolis Act 1774 – accidental fires?
Rylands v Fletcher
Causation
Tactical considerations
Email:
Thursday
12 May 2016
1.30 pm
London Stock Exchange
10 Paternoster Square
London
EC4M 7LS
National Conference
Speakers
Andrew Moncrieff (Hawkins)
Graham Eklund QC (4 New Square)
Amanda Savage (4 New Square)
Catherine Rawlin (RGL)
Imogen Swain (RGL)
Robert Kay (Plexus Law)
Drinks and canapés reception
Email:
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Duty of Care in Tort for Gratuitous Services Performed for FriendsBurgess & Anor v Lejonvarn [2016] EWHC 40 (TCC)
Background In 2012, Mr and Mrs Burgess (C1 and C2 respectively) decided to landscape the garden at their £5million home. They obtained a quotation from a landscape gardener to carry out the work at a cost in excess of £150,000 plus VAT, plus a planting budget of circa £20,000 plus VAT. The landscape gardener said that if the quotation was in line with expectations, he would produce a more detailed specification.
“...the court described this case as a cautionary tale.”C1 and C2 had been friends with Mrs Lejonvarn (D) for many years. At a party hosted by C1 and C2, D (who had trained as an architect in the USA but was not registered in the UK, which C1 and C2 knew) told C1 and C2 that the quote was excessive and the project could be done at half the price. As a result, C1 wrote to the landscape gardener informing him that the quotation was too expensive and indicating that he intended to deploy the design using someone else.
Notwithstanding her comment, D was not positively putting herself forward to secure the project at this time. However, D had previously project managed some works for C1’s company, which involved the conversion of a former bank into a residential apartment. Eventually, C1 emailed D, asking whether her “guys” (meaning her contractors) could do C1 and C2’s garden. D responded saying that her guys “will be great”.
D met with C1 and C2 at their home, to discuss the scope
of work. D realised that the landscape gardener’s plan was lacking in detail and it would be difficult to obtain a price for any works beyond preparation and ground works. Over the next week, there were various email exchanges between C1 and D; C1 made it clear that he did not want work to commence until he had a feel for what the cost was going to be. D replied that she would get a firm price from her contractors and that she would do what was necessary for them to price it out accurately. D subsequently sent a costs estimate prepared by contractors for the ground works and the first phase of works to C1. This was a one page document, totalling £78,500 plus VAT. A series of emails followed, in which there was an attempt to make this quote and the landscape gardener’s quote more like for like. At a subsequent meeting between C1 and D only, D identified a budget of £130,000 excluding VAT (this was disputed by C1, but the court preferred D’s evidence in this regard).
Works commenced on 15 May 2013, comprising site set up and preliminaries. There was a brief meeting between C1 and C2, D and the contractors. There was another meeting in the kitchen at C1 and C2’s home two days later. The budget of £130,000 was again discussed (this was again disputed by C1 and C2, but the court again accepted that the budget was at least discussed with the C1, although possibly not with C2).
Thereafter, the project got underway. D visited site from time to time. C1 and C2 did not communicate with the contractors but discussed substantive matters with D. This was mostly dialogue between C1 and D. However, by the first week of July 2013, communications between C1 and C2 and D were breaking down over perceived cost overruns (with C1 asserting that a budget of £130,000 plus VAT was never agreed), delays and defects caused by the contractors. By 8 July 2013 this had descended into an email war; this culminated in an email from C1 to D terminating her involvement in the project crossing with D’s
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own email resigning from the project.
IssuesC1 and C2 issued proceedings in the Technology & Construction Court seeking damages in contract and tort for the increased costs of the project, including remedial costs. The maximum value of the claim was in the region of £265,000.
At the trial of preliminary issues, the court was asked to determine:
• Whether a contract had been concluded between C1 and C2 and D and if so, on what terms
• Whether D owed C1 and C2 any duty of care in tort and if so, the nature and extent
• Whether a budget of £130,000 had been discussed between C1 and/or C2 and D (as discussed above, the court found it had, as regards C1)
Decision In relation to the first issue, the court rejected C1 and C2’s assertions that a contract came into being as a result of the parties’ written email exchanges coupled with D’s attendances onsite, particularly her attendance at the pre-start meeting. The court held that it was impossible to draw out from the emails any clear form of offer or acceptance; the written discussions were simply too inchoate for that purpose. Although the court accepted that there did not necessarily have to be a precise offer of detailed terms that met with a precise acceptance of such terms if there was at least a general consensus about the broad basis on which D was being retained, there was no such consensus here: there had been no discussion about remuneration or the duration of the services, and the parties never discussed the notion that they were entering into a contract.
In relation to the second issue, the court held that a duty of care will arise where someone possessed of a special skill undertakes, quite irrespective of contract, to apply
that skill for the assistance of another person who relies on such skill. The court held that liability could arise in tort in respect of services, which were rendered for another, gratuitously or otherwise, but were negligently performed where the defendant had assumed responsibility on which the claimant had relied so that, in all the circumstances, it was appropriate that a remedy in law should be available for such negligence.
“...liability could arise in tort in respect of services, which were rendered for another, gratuitously or otherwise, but were negligently performed where the defendant had assumed responsibility on which the claimant had relied...”The court held that the duty of care extended to the protection against pure economic loss (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465 and Henderson v Merrett Syndicates Ltd (No.1) [1995] 2 A.C. 145 applied). The court held that D had provided a series of professional services for C1 and C2 in respect of the project. Although her provision of those services was gratuitous in the sense that she only intended to seek specific payment for the next phase of the project once the earthworks had been completed, this did not mean that they were informal or social in context. The services were all provided in a professional context and on a professional footing; D acted as a project manager (akin to her previous role for C1’s company) and had assembled an experienced team and offered up their services, which she then managed. Moreover, C1 and C2 had relied on her
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to properly perform the services that she provided, which reflected skills which they themselves did not possess. The court held that it followed that D owed a duty of care to C1 and C2 to exercise reasonable skill and care in the provision by her of professional services acting as an architect and project manager.
“...C1 and C2 had relied on her to properly perform the services that she provided, which reflected skills which they themselves did not possess..”CommentIn its introduction, the court described this case as a cautionary tale. Many people are interpreting this case as meaning that a professional should not even give informal, ad hoc advice but that is not what is said here. It needs to be borne in mind that this was a significant project, with on-going advice and services being proffered over a relatively long period. The court emphasised that “this was not a piece of brief ad hoc advice of the type occasionally proffered by professional people in a less formal context”.
On that basis, whilst professionals should always take care when giving advice, whether formally or informally (and whether for remuneration or not) this case does not really change the legal landscape and professionals should always bear in mind that they could find themselves in difficulties with their professional indemnity insurers if a claim arises out of what they consider to be impromptu gratuitous advice.
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Artificially Reduced Issue Fees and Abuse of ProcessThe case of Richard Lewis & Ors V Ward Hadaway (A Firm) [2015] EWHC 3503 (Ch) is likely to have significant ramifications for claimants, their solicitors and potentially, solicitors’ professional indemnity insurers.
The judge held that it was an abuse of process to avoid payment of the true court fee by issuing a claim form with a statement of value lower than the real value of the claim (even if only for a short period), and in the knowledge that it could (and would) be amended later (to increase the value).
“The judge condemned the behaviour of the claimants...”BackgroundIn this case the 31 claimants, with claims for alleged professional negligence, issued claim forms shortly before their limitation periods approached expiry. The claim forms’ statements of value, and court issue fees paid upon them, reflected low claims. The claim forms were subsequently amended after the issue of proceedings, but before service (at which point court permission is not required for the amendment), to claim the larger sums.
Ordinarily, a claimant has four months after the issue of a claim form to serve it on the putative defendant. As the claims were issued close to the expiry of the limitation period they appeared primarily to be protective, demonstrating a deliberate intent to save money in the event that the matter might not be pursued. Effectively, the claimants had “bought time” for a final decision as whether or not to pursue their claims. Had they chosen not to then only the lower fee had been incurred and forfeited. Although the balance of the
appropriate larger fees were paid at a time before service, the defendant contended – and the court agreed – that the claimants had deliberately understated their estimate of the value of their claims.
“...the claimaints had deliberately understated their estimate of the value of their claims...”This not only deprived the court of the initial fees paid at issue but also increased the court’s administrative burden in processing the amended forms.
The judge condemned the behaviour of the claimants – not least being troubled by the fact that in each case the statement of truth was flawed: the claimants said they expected to recover damages limited to £15,000 when – in fact – they knew at that time that if their claims were to be pursued, they would be amended to claim damages of more than £300,000. In short, the claimants’ actions were an abuse of process.
Comment In recent years, the financial pressure (and risk) of bringing cases to court has increased on intended claimants. This is the result of (a) the Jackson reforms post April 2013; and (b) the Ministry of Justice’s court fee increases last year.
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In this case, many of the claims predated the recent increase in court fees (the maximum fee payable in the cases was £1,670, compared to what would be £10,000 now). It follows that a clear message has been sent out that one should not intentionally underestimate claim values and/or seek to limit the court fees payable. As always, therefore, one should be cautious not to issue proceedings at the last minute and/or where there is a significant difference between what has been asserted previously, such as in pre–action communications, which cannot be understood or reconciled. Indeed, for a claimant if there is any doubt about the claim value it would be prudent to err on the high side with the corollary of a higher court fee, rather than adopting a cautious or parsimonious approach which could lead to judicial criticism. For defendants, it is recommended that the amount claimed should be scrutinised and compared with how the claim has been presented in pre–action communications.
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Further Increases to Court FeesIn mid-December 2015 the Ministry of Justice announced a fresh round of court fee increases, following the consultation in July 2015 and the substantial fee increases in March 2015. Once again, the aim is to make the justice system self funding. The announcement has not been well received.
Fees will rise by 10% over a range of civil proceedings, including applications to determine costs, for enforcement and fees payable in the Court of Appeal.
The proposal to increase, or even remove entirely, the issue fee cap for money claims over £200,000 (currently capped at £10,000) has been scrapped “for the time being”, suggesting that this may not be the last we have heard of it.
No date has yet been set for the increases, which first require the approval of the statutory instruments implementing the proposals, which it does appear the Government is keen to bring forward “as soon as Parliamentary time allows”.
The Government response to the consultation on the further fees proposal can be found at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/486536/further-fees-proposals-gov-response-consultation.pdf
“The proposal to increase, or even remove entirely, the issue fee cap for money claims over £200,000 (currently capped at £10,000) has been scrapped “for the time being”, suggesting that this may not be the last we have heard of it.”
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The Briggs ReviewThis interim review from Lord Justice Briggs, published on 12 January 2015, follows informal consultation commissioned by the Lord Chief Justice and the Master of the Rolls in July 2015 to coincide with a programme for reform of the courts by Her Majesty’s Courts and Tribunals Service and looking at civil court structures and judicial processes more generally.
There is to be a larger, more formal process of consultation and it is anticipated that will be completed by the end of May 2016. Comments in writing on the interim report are invited before the end of February and those should be submitted to: [email protected] . Lord Justice Briggs will then hold a series of meetings from March to May 2016, with a view to completing the review by the end of July 2016.
The interim review found a “clear and pressing need” to create an online court for claims up to £25,000 designed for the first time to give litigants effective access to justice without having to incur what is said to be the “disproportionate cost of using lawyers”. The question of whether there should be any, and if so what, provision for cost shifting in the online court is a suggested subject for the full consultation. On that basis, it is not clear whether a party who chooses to enlist the assistance of a solicitor would recover any of their costs of so doing.
It is envisaged that there will be three stages:
Stage 1 – a largely automated, inter-active online process for the identification of the issues and the provision of documentary evidence;
Stage 2 – conciliation and case management, by case officers;
Stage 3 – resolution by judges. The court will use documents on screen, telephone, video or face to face meetings to meet the needs of each case.
The full consultation will also consider, amongst other things, whether the online court should be separate from
or a branch of the county court, mainly governed by the Civil Procedure Rules and which types of claims should be included (or excluded) if the ceiling is to be £25,000.
Other urgent priorities raised in the report include:
• Training the civil judiciary to play their part in the management of the court reforms from April 2016, including Judicial College training and staff to support the leadership judges
• Designing the structure and software which will be needed for the re-organised courts, particularly the proposed online court.
• Easing the burden on the Court of Appeal. Further specific proposals in this regard are expected in April 2016
It is also suggested that;
• Some of the judges’ more routine and con-contentious work could be transferred to ‘case officers’ under the supervision of judges, who would have the power to re-consider a decision from a case officer
• There should be a stronger concentration of civil expertise among district and circuit judges (that might, of course, have the knock-on effect of easing the burden on the Court of Appeal)
• All civil work with a regional connection should be tried in the regions, regardless of value, subject to very limited specialist exceptions (patents being one example)
• Rights and routes of appeal be reviewed and consideration be given to whether the current right to an oral appeal where permission to appeal has been refused on paper should be retained
• The enforcement of judgments be reviewed and a ‘unified’ and possibly centralised service be provided for all of the civil courts
The full interim report can be found at:
https://www.judiciary.gov.uk/wp-content/uploads/2016/01/CCSR-interim-report-dec-15-final-31.pdf
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The appeal to the Supreme Court in the long-running case of Mitsui Sumitomo Insurance Co (Europe) Ltd & 5 Ors v Mayor’s Office for Policing & Crime [2014] EWCA Civ 682, arising from the 2011 riots, on the issue of whether consequential losses are recoverable under the Riot (Damages) Act 1886 was heard on 21 January 2016 and judgment is now awaited. We will comment further when the judgment is available in due course.
This case is, of course, being considered under the current law, on the basis that the Riot Compensation Bill 2015-2016 has not yet been passed. The Bill proposes the exclusion of consequential loss claims and it will be interesting to see whether the Supreme Court bears this in mind when deciding Mitsui.
Riot (Damages) Act 1886 – Supreme Court hears Mitsui appeal
Latest news on the Riot Compensation Bill 2015-2016In a Government commissioned review following the riots in 2011, it was found, perhaps unsurprisingly, that the 1886 Act lacked clarity and was in urgent need of updating. A draft Riot Compensation Bill was presented to Parliament through the ballot procedure on 24 June. We reported on progress of the Bill through its second reading in the House of Commons in our last edition of PRC Legalwatch. The Public Bill Committee has now completed its work on the Bill. No amendments were made to the Bill by the Committee. The Bill will next be considered at Report Stage which is scheduled for Friday 5 February 2016.
The Bill signifies a significant overhaul of the 1886 Act. While the right to claim compensation from the police remains intact, key proposals include a new compensation cap of £1m per claim and the exclusion of consequential
loss claims.
Again, we will report further significant developments as and when they happen.
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PublicationsIf you would like to receive any of the below, please email indicating which you would like to receive.
Weekly:
• Legal Watch: Personal Injury
Monthly:
• Legal Watch: Property Risks & Coverage
Quarterly:
• Legal Watch: Health & Safety
• Legal Watch: Professional Indemnity
• Legal Watch: Disease
Contact usFor information on articles and cases featured in other editions of Property Risks and Coverage Newsletters, please contact:
Marise GellertPartnerT: 020 7469 6249E: [email protected]
Enterprise Bill 2015-2016 – Update Historically, insurers under English law have not been held liable for losses resulting from their failure to pay a valid claim, or their failure to pay such a claim within a reasonable time.
Part 5 of the Enterprise Bill 2015-2016 seeks to introduce an amendment to the Insurance Act 2015 whereby insurers are required to pay valid claims within a reasonable time or face claims in respect of additional losses suffered as a result of late payment. This provision was dropped out of the earlier drafts of the Insurance Act 2015 to allow more time for the details of the proposal to be considered.
The debate on the Enterprise Bill is now proceeding apace and it has passed all stages in the House of Lords, with a significant amendment to Part 5 in the form of the introduction of a one year limitation period from the date on which payment under the policy is made by insurers. The amended Bill had its first reading in the House of Commons on 16 December 2015 and is expected to have its second reading on Tuesday 2 February 2016.
We will report further significant developments as and when they happen.
