In order to commence a professional negligence claim before a Court in England & Wales you must issue a County Court or High Court claim form accompanied with Particulars of Claim setting out the details of the claim including the remedy sought from the errant professional. The issuance of the Claim Form must be done within strict time limits known as limitation periods and the relevant court fee must be paid (which is a percentage of the losses claimed up to a maximum of £10,000).
In all professional negligence disputes the Civil Procedural Rules state that before starting a claim, certain procedural steps must be followed (depending on which type of professional you intend to sue).
Pre-Action Protocol for Professional Negligence
Parties to litigation or contemplating litigation must adhere to the Civil Procedure Rules 1998 (the CPR). Therefore, the provisions of the CPR are applicable, in particular the Pre-Action Protocol for Professional Negligence (professional negligence PAP).
The updated PAP for professional negligence came into effect in May 2018, on which date claims to be issued from then must comply with.
All the parties are encouraged to attempt to settle the professional negligence claim without issuing formal proceedings in court. The PAP sets out the framework to be followed and encourages an exchange of information and a set timetable, which both parties must comply with to encourage early settlement without the need for a costly court process.
Pre-action conduct in Professional Negligence claims
The conduct of the parties in the pre-action stage of any litigation dispute is governed by the CPR and the court has the discretion to impose sanctions on any of the parties that fails to act in compliance with any of the relevant pre-action rules. The professional negligence PAP is an important guide that any legal representative suing a professional for negligence ought to adhere to when commencing a claim for professional negligence.
When does the professional negligence PAP apply?
It applies to negligence claims against legal professionals, accountants, financial advisers, auditors and certain other professionals. However, it doesn’t apply to claims against construction professionals, (e.g. architects, engineers and quantity surveyors) as the Pre-action Protocol for Construction and Engineering Disputes is applicable instead. Nor against healthcare professionals (see the PAP for the Resolution of Clinical Disputes) or in defamation cases (see the PAP for Defamation Claims).
What are the procedural steps under the professional negligence pre-action protocol (“PAP”)?
Step 1: Preliminary Notice
The claimant should notify the potential defendant(s) in writing as soon as it decides that there is a reasonable chance of a claim for negligence by submitting a preliminary notice which must:
- identify the claimant and any other parties;
- contain a brief outline of the prospective claim;
- provide a general quantification of the financial value of the claim;
- request that the professional inform their professional indemnity insurers (if any, NB law firms are most likely to have professional indemnity insurance).
The defendant professional ought to acknowledge receipt of the letter within 21 days of receiving it. Sending a preliminary notice is an important first step in a professional negligence claim particularly because the professional is required to notify their professional indemnity insurer. If a professional fails to do so once the preliminary notice (or Letter of Claim) is received then this may invalidate their insurance policy.
Step 2: Letter of Claim
As soon as the claimant has decided that there are potential grounds for a professional negligence claim, then it should send a Letter of Claim to the professional which amounts to a notice of intention to commence legal proceedings. It is recommended that the assistance of specialist professional negligence lawyers is sought for this correspondence as this is an important letter and if not handled correctly can lead to a reduced chance of obtaining a settlement or reduced prospects at trial especially if the subsequent Particulars of Claim (which is a statement of case) differs from the Letter of Claim in which case the court has the discretion to impose sanctions. The professional negligence pre-action protocol states that the Letter of Claim should include:
- the identities of any parties involved in the dispute, or any related dispute (it is important to identify any and all correct defendants including successor entities before the limitation period expires);
- a chronology containing key dates of the facts on which the claim is based, together with copies of all key documents;
- reasonable requests which the claimant needs to make for documents held by or in control of the professional;
- any details of the allegations made by the claimant against the professional;
- an estimate of the financial loss caused to the claimant by the alleged negligence, including details of how the loss is calculated (in any claim this figure will likely be the subject of expert evidence, for example, consequential losses or loss of chance are difficult to quantify at the outset of a claim without expert evidence therefore an estimate will suffice at this stage, for example “in excess of £2 million”);
- confirmation of whether or not an expert has been appointed (expert evidence is an important part of any claim in litigation and as experienced professional negligence lawyers we have forged many contacts with leading experts in different industries from forensic accounts to hedging derivatives experts);
- a request that a copy of the Letter of Claim be forwarded on receipt to the professional’s indemnity insurers (if they have any);
- an indication of whether you agree to refer the dispute to adjudication. If so, propose three adjudicators or seek a nomination. If you don’t wish to refer the dispute to adjudication, you should give reasons.
In addition, if the claimant has sent other Letters of Claim to any other party in relation to the same dispute or a related dispute, those letters should also be provided with the Letter of Claim.
Step 3: Letter of Acknowledgment
The Letter of Claim is to be acknowledged by the professional within 21 days. If the defendant does not do so, the court has the discretion to levy sanctions.
Step 4: Investigations by the professional
Within 90 days from the date of the Letter of Acknowledgment, the professional should investigate the claim and respond to the claimant by providing a Letter of Response and if it so wishes a Letter of Settlement. If the Letter of Claim sets out a cogent case against the professional (rather than simply alleging that something has gone wrong and baldly blaming the professional) then the professional, their solicitors and insurers will carry out a proper investigation of the claim. For example they may proof witnesses and obtain evidence at this stage.
Step 5: Respond to the Letter of Claim
As soon as the professional has completed the investigation (i.e. within 90 days of the Letter of Acknowledgment, unless an extension of time has been agreed), a Letter of Response, a Letter of Settlement, or both will be sent by the professional’s legal team.
Step 6a: Letter of Response
This is a letter sent in open communication (i.e. not sent on a without prejudice basis therefore the court will see it) responding to your allegations. Whilst it doesn’t have the formal status of a Defence (which is a statement of case), the court has the discretion to impose any sanctions if it is materially different from the Defence in any court proceedings. The Letter of Response is required to comply with the provisions of the professional negligence PAP and must:
- clearly state which parts of the claim in the Letter of Claim are either admitted or denied. Alternatively, the professional can request further information if it is unable to admit or deny on the evidence it currently has to hand;
- provide specific comments on each allegation in the Letter of Claim;
- provide the professional’s version of events (especially if the claimant’s version is different);
- provide a response to the claimant’s estimated quantification of loss (even if liability is made out, it does not necessarily follow that the defendant is liable for all losses claimed and quantification of losses is a precise endeavour which the court invests time into);
- identify and enclose copies of any key documents.
In a meritorious case which was well set out in a Letter of Claim, the Letter of Response or a separate Letter of Settlement may offer the possibility of alternative dispute resolution (ADR) such as mediation or a without prejudice meeting. This could lead to resolution of the dispute. If not then you will need to take advice as to whether to reply further or to issue a Claim Form at court (the latter of which can be an important tool in focusing the parties on the resolution of the claim especially in circumstances where the professional is not taking meritorious allegations against it seriously).
Step 6b: Letter of Settlement
According to the professional negligence pre-action protocol (PAP) (particularly at para 9.3.1), a Letter of Settlement can be sent in various forms, including:
- an letter sent in open communication;
- a without prejudice letter (which means the contents of which cannot be later admitted as evidence in the court case where the claim does not settle);
- a “without prejudice save as to costs “(WPSATC”)” letter; or
- an offer made pursuant to CPR Part 36, commonly referred to as a “Part 36 offer”.
Step 7: Alternative Dispute Resolution (“ADR”)
The pre-action protocol on professional negligence creates an obligation on the parties to consider whether a form of alternative dispute resolution procedure is more suitable than litigation. Often professional negligence cases are settled out of court with the parties agreeing to save further costs down the line and coming to a mutually beneficial settlement. Ultimately, many professionals and defendant companies and firms will not want a long court case with bad publicity and negative judicial public chastisement of poor conduct, therefore ADR is ordinarily considered at every stage of the claim/defence to the claim.
The court has a wide ambit to levy sanctions upon parties for costs if they are found to have behaved unreasonably by refusing to engage in ADR. The court is
There are several forms of ADR, which includes:
- early neutral evaluation;
- adjudication; and
- Ombudsman schemes.
The parties to the claim will mutually select a mediator and a venue for the mediation. Mediation often occurs in professional negligence claims and can result in a successful resolution of the dispute, either during the course of the mediation itself or in follow-up negotiations post- mediation. Sometimes if the parties are far apart on legal arguments they may ask the mediator to conduct an Evaluative Mediation, although this is rare.
Our specialist lawyers have attended many mediations (with one in particular lasting over 24 hours straight!) alongside our clients, industry leading experts and the UK’s top QCs to achieve fantastic settlement results.
If there is an arbitration clause in the professional’s terms and conditions then this may be mandatory otherwise the parties can agree to arbitrate. Whilst there are benefits to arbitration over litigation such as privacy (without publicity and judicial proceedings in open court), arbitration can be as costly and time-consuming as litigation. Arbitration is generally not deployed in professional negligence claims (and certainly does not occur as often as Mediation).
Early Neutral Evaluation
Early Neutral Evaluation is where a third party will give a non-legally binding view on the merits of the claim to the parties involved. It is a rare form of ADR in the majority of professional negligence claims and is usually only offered by defendants facing a weak claim from an inexperienced litigator or litigant in person.
Adjudication is the binding determination of the claim (unlike for Early Neutral Evaluation which is non-binding), or on particular issues (for example on whether a duty of care is owed in the first place or whether the claimant has failed to mitigate its’ loss(es)) by an independent third party (the Adjudicator). Adjudication offers flexibility in that the parties are able to agree the precise terms of the adjudicator’s reference and whether or not the adjudicators’ decision will be binding.
Adjudication is relatively rare (except for in construction related disputes where Adjudication is more common). However after the completion of the Adjudication Pilot for Professional Negligence Claims supported by the Ministry of Justice, the requirement to consider whether the dispute is suitable for adjudication has been added to the professional negligence PAP in May 2018.
In May 2019, the Professional Negligence Bar Association launched a voluntary adjudication scheme for professional negligence disputes. This allows for disputes to be determined by an Adjudicator who can be either nominated by the Chairman of the PNBA (Caroline Harrison QC) or by the parties. The Adjudication scheme rules can be downloaded here.
Adjudication is generally best suited to low value claims or claims where the facts and legal issues involved are relatively straightforward.
The Legal Ombudsman (“LeO”) and the Financial Ombudsman Service (“FOS”) have their own complaints mechanisms for individuals and small businesses. Both the LeO and the FOS have the ambit to make determinations which will be binding on the professional if accepted by the complainant (the claimant).
However, there are pitfalls in solely relying on Ombudsman schemes as for example, the Legal Ombudsman cannot award compensation of more £50,000 (but can order the refund of legal fees paid by the complainant which could be in excess of £50,000). Moreover, the Financial Ombudsman is not mandated to award compensation in excess of £150,000 plus interest. Further, the FOS for example have strict jurisdictional criteria before considering any complaint (for example turnover of the complainant company, number of employees and also the FOS has its own time limits in which a complaint can be brought).
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