Understanding Contribution Claims
The recent High Court judgment of Percy v White & Anor [2021] EWHC 22 (Ch) serves as a valuable reminder of the difficulties that may be faced in opposing contribution claims.
By way of background, London-based law firm Merriman White instructed David Mayall, a barrister in private practice, to advise on the legal and tactical merits of a claim involving their clients, Langley Ward Ltd and its sole director and shareholder, Mr Percy. The commercial dispute concerned a joint venture company owned jointly by Langley Ward and another shareholder company owned by Mr Trevor.
Following legal advice, Mr Percy initiated a derivative claim against Mr Trevor and required permission of the court in order to do so. Prior to the permission hearing, a mediation took place between Mr Percy and Mr Trevor, during which an offer of £500,000 inclusive of costs was rejected by Mr Percy. Mr Mayall was told of the events of the mediation, consulted with Mr Percy and advised him to continue with the action.
At the hearing in June 2011, the Judge refused permission and instead encouraged a just and equitable winding up of the joint venture company. Mr Percy therefore settled with Mr Trevor on a significantly reduced basis and sought damages from both Merriman White and Mr Mayall.
The professional negligence action continued against both defendants for some time until Mr Percy agreed the dismissal of his claim against Mr Mayall in 2017 on the basis that each side pay their own costs. Merriman White subsequently settled with Mr Percy in January 2019 and filed a notice of contribution against Mr Mayall pursuant to the Civil Liability (Contribution) Act 1978. The recent judgment delivered on 12 January 2021 related exclusively to the contribution claim between the solicitor firm and barrister.
Although it was held that Merriman White was liable for failing to settle the claim, the court concluded that Mr Mayall was partly responsible in his failure to warn of the risks of litigation and to advise that the offer made during mediation should be reconsidered and also for the advice regarding the nature of proceedings to be pursued. The court therefore apportioned liability against Mr Mayall at 40%.
The court ruled that the party against whom a contribution is sought, Mr Mayall in this case, may seek to challenge whether the claimant had a reasonable cause of action against the first defendant. However, Merriman White, as the first defendant, was only required to demonstrate that the assumed factual basis disclosed a “reasonable cause of action”. The extent of the inquiry is therefore limited and a first defendant is not obliged to prove that they were in fact liable to the claimant.
It remains worthwhile to consider whether any issues regarding contribution have arisen in a professional negligence claim. Professionals and their insurers will no doubt be aware that escaping being a party to the original claim or reaching settlement with a claimant will not prevent liability to a co-defendant by means of contribution.
If you require advice concerning professional negligence claims, a member of the Professional Indemnity team at Carson McDowell would be happy to help.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.
