Legal Watch - Property - Issue 1 2016

Legal Watch: Property Risks & Coverage February 2016 Issue 01

Introduction This month Nathan Rehbock looks at Burgess & Anor v

In this issue:

Lejonvarn, which provides a salutary reminder that a duty of

• Property Risks and Coverage Seminar Programme

friends.

• Duty of Care in Tort for Gratuitous Services

care can arise in tort for gratuitous services performed for

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

2016 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 20152016 • Enterprise Bill 2015-2016 – Update

Office which arose out of the 2011 Tottenham riots, the Riot

Compensation Bill 2015-2016 and the Enterprise Bill 20152016

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: kirandeep.kaur@plexuslaw.co.uk

To book your place for our London seminars email: alison.heard@plexuslaw.co.uk

To book your place for our Manchester seminars email: chris.heitzman@plexuslaw.co.uk

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.

Contact us

If you would like any further information on the cases or articles featured in this issue, please contact: Nathan Rehbock T: 0344 245 5229 E: nathan.rehbock@plexuslaw.co.uk Robert Kay T: 020 7469 6256 E: robert.kay@plexuslaw.co.uk Victoria Jordan T: 0344 245 5416 E: victoria.jordan@plexuslaw.co.uk Marise Gellert T: 020 7469 6249 E: marise.gellert@plexuslaw.co.uk

Property Risks and Coverage Seminar Programme 2016 Date

Location

Seminar

To book your place

Thursday

London

Claims Handling:

Email:

4 Feb 2016

Plexus Law

Obtaining and preserving evidence

alison.heard@plexuslaw.co.uk

5.30pm

Peninsular House

Differences in Property Claims

30-36 Monument Street London EC3R 8NB

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 Wednesday

Manchester

Insurance Act 2015:

Email

24 Feb 2016

Plexus Law

The practical effect on claims

chris.heitzman@plexuslaw.co.uk

5.30 pm

City Tower Piccadilly Plaza Manchester M1 4BT

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

Insurers) Act 2010

Against

Followed by drinks

01

Thursday

Leeds

Fire Claims:

Email:

16 March 2016

Radisson Blu Hotel

Ignis suus

kirandeep.kaur@plexuslaw.co.uk

5.30pm

1 The Light

S86 Fires Prevention Metropolis Act

The Headrow Leeds LS1 8TL

1774 – accidental fires?

Rylands v Fletcher Causation Tactical considerations

Thursday

London Stock Exchange

National Conference

Email:

12 May 2016

10 Paternoster Square

Speakers

alison.heard@plexuslaw.co.uk

1.30 pm

London

Andrew Moncrieff (Hawkins)

EC4M 7LS

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

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Duty of Care in Tort for Gratuitous Services Performed for Friends Burgess & Anor v Lejonvarn [2016] EWHC 40 (TCC)

of work. D realised that the landscape gardener’s plan was

Background

for any works beyond preparation and ground works. Over

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

lacking in detail and it would be difficult to obtain a price 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 03

own email resigning from the project.

that skill for the assistance of another person who relies on

such skill. The court held that liability could arise in tort

Issues C1 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

•

Whether D owed C1 and C2 any duty of care in tort and

•

Whether a budget of £130,000 had been discussed

and C2 and D and if so, on what terms if so, the nature and extent

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 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

In relation to the second issue, the court held that a duty

to her previous role for C1’s company) and had assembled

skill undertakes, quite irrespective of contract, to apply

she then managed. Moreover, C1 and C2 had relied on her

of care will arise where someone possessed of a special

an experienced team and offered up their services, which

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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..”

Comment In 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 Process The case of Richard Lewis & Ors V Ward Hadaway (A

appropriate larger fees were paid at a time before service,

ramifications for claimants, their solicitors and potentially,

claimants had deliberately understated their estimate of the

Firm) [2015] EWHC 3503 (Ch) is likely to have significant solicitors’ professional indemnity insurers.

the defendant contended – and the court agreed – that the value of their claims.

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...”

Background

“...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 –

In this case the 31 claimants, with claims for alleged

not least being troubled by the fact that in each case the

their limitation periods approached expiry. The claim forms’

expected to recover damages limited to £15,000 when –

reflected low claims. The claim forms were subsequently

be pursued, they would be amended to claim damages of

(at which point court permission is not required for the

an abuse of process.

Ordinarily, a claimant has four months after the issue of

Comment

professional negligence, issued claim forms shortly before

statement of truth was flawed: the claimants said they

statements of value, and court issue fees paid upon them,

in fact – they knew at that time that if their claims were to

amended after the issue of proceedings, but before service

more than £300,000. In short, the claimants’ actions were

amendment), to claim the larger sums.

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

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.

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

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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.

07

Further Increases to Court Fees In 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 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.”

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-govresponse-consultation.pdf

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The Briggs Review

or a branch of the county court, mainly governed by the

This interim review from Lord Justice Briggs, published on 12

Other urgent priorities raised in the report include:

January 2015, follows informal consultation commissioned by the Lord Chief Justice and the Master of the Rolls in

Civil Procedure Rules and which types of claims should be included (or excluded) if the ceiling is to be £25,000.

•

July 2015 to coincide with a programme for reform of the

generally.

the leadership judges •

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

•

The interim review found a “clear and pressing need” to create

•

•

•

•

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

tried in the regions, regardless of value, subject to

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

Stage 2 – conciliation and case management, by case Stage 3 – resolution by judges. The court will use documents

All civil work with a regional connection should be

example)

documentary evidence; officers;

expertise among district and circuit judges (that might,

very limited specialist exceptions (patents being one

It is envisaged that there will be three stages: for the identification of the issues and the provision of

There should be a stronger concentration of civil

burden on the Court of Appeal)

of so doing.

Stage 1 – a largely automated, inter-active online process

work could be transferred to ‘case officers’ under the

of course, have the knock-on effect of easing the

court is a suggested subject for the full consultation. On that the assistance of a solicitor would recover any of their costs

Some of the judges’ more routine and con-contentious

re-consider a decision from a case officer

any, and if so what, provision for cost shifting in the online basis, it is not clear whether a party who chooses to enlist

specific proposals in this regard are expected in April

supervision of judges, who would have the power to

first time to give litigants effective access to justice without

of using lawyers”. The question of whether there should be

Easing the burden on the Court of Appeal. Further

It is also suggested that;

an online court for claims up to £25,000 designed for the

having to incur what is said to be the “disproportionate cost

needed for the re-organised courts, particularly the

2016

to: ccsr@ejudiciary.net . Lord Justice Briggs will then hold a completing the review by the end of July 2016.

Designing the structure and software which will be proposed online court.

before the end of February and those should be submitted series of meetings from March to May 2016, with a view to

management of the court reforms from April 2016, including Judicial College training and staff to support

courts by Her Majesty’s Courts and Tribunals Service and

looking at civil court structures and judicial processes more

Training the civil judiciary to play their part in the

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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Riot (Damages) Act 1886 – Supreme Court hears Mitsui appeal 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.

Latest news on the Riot Compensation Bill 2015-2016 In 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.

loss claims.

Again, we will report further significant developments as and when they happen.

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

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Enterprise Bill 20152016 – Update Historically, insurers under English law have not been held

Publications If you would like to receive any of the below, please email indicating which you would like to receive.

liable for losses resulting from their failure to pay a valid

Weekly:

time.

Monthly:

Part 5 of the Enterprise Bill 2015-2016 seeks to introduce an

• Legal Watch: Property Risks & Coverage

claim, or their failure to pay such a claim within a reasonable

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

• Legal Watch: Personal Injury

Quarterly: • Legal Watch: Health & Safety • Legal Watch: Professional Indemnity • Legal Watch: Disease

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.

Contact us For information on articles and cases featured in

other editions of Property Risks and Coverage Newsletters, please contact: Marise Gellert Partner T: 020 7469 6249 E: marise.gellert@plexuslaw.co.uk

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