Professional negligence in financial remedy proceedings: Holt v Holley & Steer Solicitors (A Firm) [2020] EWCA Civ 851

These proceedings were brought in respect of a claim brought by Julia Holt (“W”) for alleged professional negligence against Holley & Steer Solicitors (“the Firm”). The Firm had acted for her in the financial remedy proceedings that had ensued when she and her husband, Timothy Rawlings (“H”), had divorced. She complained that, in the course of those proceedings, the Firm negligently failed to obtain expert evidence as to the value of certain properties and jewellery, and to secure permission to admit such evidence at the financial remedy hearing.

Background

The first directions appointment (“FDA”) in the financial remedy proceedings was held on 1 July 2011, and the financial dispute resolution hearing (“FDR”) took place on 11 October 2011. At the FDA, the court ordered valuations of the family home and of some adjoining land by a joint expert, and that report was available at the FDR. However, no directions were given for the valuation of nine buy-to-let properties (“the properties”) held by the parties in separate names. At the FDR, further orders were made for H to provide evidence as to the existence and value of items of jewellery he claimed W owned, but no further orders for valuation of the properties or the jewellery were sought on W’s behalf by the Firm. W claimed that the Firm negligently failed to obtain expert evidence of the value of the properties and the jewellery.

The final hearing in the financial remedy proceedings was listed for a date in mid-February 2012. In January 2012, a solicitor at the Firm wrote to a firm of estate agents and asked them to provide up-to-date valuations of the properties in W’s name on a “drive-by” basis. A copy of the agents’ valuations, setting the value of W’s investment properties at £84,500, was sent to H’s solicitors on 10 February 2012. H’s solicitors replied that it was impermissible to seek to adduce new, unilateral valuations a matter of days before the hearing. The matter, it seemed, was not taken further by the Firm by way of an application to the court to admit the additional evidence.

After the final hearing before DJ Daniel, the judge circulated his draft judgment to the parties on 10 April 2012, and handed his judgment down formally on 30 May 2012, making his order on the same day. He found that the properties in the names of both parties had a combined net value of £435,000, with those in H’s name worth £217,000, and those in W’s name worth £218,000. The jewellery was taken to be worth £50,000. DJ Daniel awarded W 60% of the net non-pension assets, which gave her approximately £290,000. To implement this, he directed that the parties’ joint debts were to be left with H, and ordered H to pay a lump sum of £13,000 to W. W’s application for permission to appeal against the order was refused.

The present proceedings

In February 2016, W sent the Firm a formal letter of complaint, in which she claimed to have suffered losses, for which the Firm was responsible, in the sum of £268,000. This was made up under numerous heads of loss, including £100,000 for distress and £100,000 in respect of the property valuations. On 16 March 2018, W’s new solicitors sent the Firm a pre-action protocol letter claiming breaches of duty on the Firm’s part in failing to advise the obtaining of a formal valuation of the properties and the jewellery, which they said had adversely affected her position in the financial remedy proceedings. That letter concluded by asserting that limitation in respect of the claim might expire on 10 April 2012 (i.e. six years from the date of the circulation of DJ Daniel’s draft judgment), and proposed a standstill agreement. In response, the solicitors acting for the Firm asserted that the latest date for limitation purposes was 16 March 2012 (i.e. the last day of the final hearing). (The limitation periods in tort and contract cases, under s. 2 and s. 5 of the Limitation Act 1980 respectively, expire after six years from the date on which the cause of action accrues.)

W’s solicitors contended that the question in issue, for limitation purposes, was when W became financially worse off by reason of the breaches of duty alleged. They said that date was only reached when the final judgment was handed down and the order was made (i.e. 30 May 2012). They argued that until that time, any party could have applied to the court to adduce further evidence, including the valuation evidence in question.

On 5 April 2018, the claim form in the present proceedings was issued. It was the Firm’s case that the claim was therefore instituted after the expiry of the six year limitation period. However, W’s case was that proceedings were issued within that period. Particulars of Claim were served on 1 August 2018, claiming a total of £124,470.

Previous judgments

In May 2019, DJ Watkins granted summary judgment to the Firm in respect of W’s claim in contract, on the basis that it was time-barred under s. 5 of the Limitation Act 1980, but he found that the claim in tort was not time-barred. The parties’ arguments centred around the date upon which the alleged damage was sustained, since in tort, that date is when the cause of action accrues. He decided that W’s alleged loss was suffered, and the damage sustained, on 30 May 2012, when DJ Daniel’s judgment in the financial remedy proceedings was handed down and when his order was made.

The Firm appealed against DJ Watkins’ order. HHJ Ralton granted summary judgment in favour of the Firm and found that W’s claim as a whole was barred by both s. 2 and s. 5 of the Limitation Act 1980. He decided that the date of the damage was the date when the claimant was financially worse off, which he found to be 16 March 2012 (the last day of the final hearing). He said ‘the parties would know without doubt on that date that District Judge Daniel would make his mind up on the basis of the values presented. The loss to the Claimant at that date was measurable as the difference between the value of her properties and jewellery as presented and their true value…’ [18]. He therefore decided that W’s claim in tort was time-barred such that she had no real prospect of success (for that reason), and he gave summary judgment in the Firm’s favour and dismissed W’s claim in its entirety. W then appealed that decision.

The decision of the Court of Appeal

McCombe LJ, with whom King LJ and Keehan J agreed, concluded that W’s appeal should be dismissed.

It was submitted on W’s behalf that financial remedy proceedings in divorce are a very particular type of litigation which cannot be compared with other types of civil proceedings. The discretion of the court in seeking to achieve a fair distribution of assets was emphasised, and it was argued that decisions are ‘not clear-cut statements of entitlement to damages, but an exercise of discretion to produce a fair result: before the decision the divorcing spouse has no “right” which can be valued’ [22]. As a result of this, ‘whatever the nature of the evidence adduced, the court had a very wide discretion and could call for any evidence it wished’ [23]. The outcome of the case was contingent upon the judgment at the end of the day. In this case, therefore, the failure to adduce the expert evidence might have made no difference in the end, depending entirely on the solution adopted by the judge in the division of the assets. Whether damage had been sustained could only have been known when the District Judge delivered his final judgment. Three hypothetical routes were given by counsel for W to a decision which might have been adopted and upon which the absence of valuation evidence would have had no bearing. In those circumstances, it was submitted, ‘if a Claim Form in proceedings for the alleged professional negligence had been issued against the firm before the handing down of judgment, it would have been liable to be struck out as disclosing no cause of action’ [24].

McCombe LJ assessed the relevant authorities and considered that the loss suffered by W had to fall within the measure of damage applicable to the wrong in question, which meant the focus must be on the facts said to have given rise to the cause of action (i.e. those in the Particulars of Claim). The breach alleged in the Particulars of Claim was a failure to obtain expert valuations of W’s property portfolio and of her jewellery, and thereafter to secure permission to adduce that evidence in the proceedings. That was said to have caused H to have cogent objection to the later admission of the “drive-by” valuations, and in the end, therefore, to the lack of consideration of any such evidence by the District Judge in deciding the case. It was pleaded that if the additional evidence had been before the District Judge, he would have directed a balancing payment of slightly more than £89,000 (instead of the £13,000 ordered) in W’s favour to make a 60/40 split between the spouses. The actual difference in result achieved was said to have been £76,038.

The submission made on behalf of the Firm that there was no difficulty in measuring a loss at a time when the chance of introducing further valuation evidence became, in reality, impossible was agreed with by McCombe LJ. At that stage, W had lost the opportunity to invite the judge to assess her case based on what she asserted were the proper values of the properties and the jewellery, and so had lost a chance of arguing her case for a better outcome on fuller evidence. Indeed, as a result of the fact that it ‘is always on the basis of the evidence leading to the computation that the final distribution decision is made’, in many cases ‘the potential consequences of a negligent approach to valuation can be seen and, to some extent, it can be assessed before any judgment is delivered’ [35]. In this case, the value of W’s position was said to have been somewhere in the region of £90,000 worse than it would have been if she had had a properly arguable case that her property values were as she asserted them to be. W argued that this was a case where the damage she had suffered was dependent upon a contingency that might never occur, i.e. the final judgment reached by DJ Daniel.

McCombe LJ said that the ‘core question is still to identify the point at which Ms Holt was “financially worse off”/had suffered “measurable” damage’ [43]. He took the view that W’s Particulars of Claim showed that her loss was sufficiently well measurable, if not precisely quantifiable, when she lost the ability to adduce the evidence that she averred she should have been able to produce before DJ Daniel. McCombe LJ said that date ‘could hardly have been later than the end of the hearing on 16 March 2012’ [44].

This case was not a true contingency case in the view of McCombe LJ. In this case, W’s ‘prospective result in the financial remedies hearing was diminished in quality because the base line for distribution of the matrimonial assets would be defined by what she contended were the inflated values of an important part of her assets. The sum that she would be likely to receive either on settlement or on judgment would be calculated on those inflated values’ [46]. The closest analogy lay in cases involving allegations of negligence against solicitors in the conduct of other types of litigation (chiefly Khan v Falvey [2003] EWCA Civ 400, Hatton v Chafes [2003] EWCA Civ 341, and Berney v Saul [2013] EWCA Civ 640), which concerned situations where the claimants had suffered losses because their choses in action had been diminished in value by their solicitors’ conduct.

The court had said in Khan that a claim in tort was a chose in action, and as such, was assignable, and its value was based upon its prospects of success. McCombe LJ thought that, while a claim to a division of assets upon divorce is not a chose in action of the same assignable character, it is nonetheless a valuable right sounding in money. If, as McCombe LJ thought was the case here, ‘that right is essentially quantifiable and is rendered either valueless or of diminished value in a manner sensibly calculable, as this right has been shown to be by the Particulars of Claim in the action, I see no reason in principle for saying that it is not damaged if it is rendered less valuable by the negligence of a solicitor charged with its enforcement’ [50]. To make a distinction between matrimonial finance proceedings and other forms of civil litigation on the technical basis that one claim is assignable and the other is not would be a triumph of technicality over reality. As such, the valuable rights of a spouse on divorce should be subject to the same rules as other such rights.

McCombe LJ concluded that ‘it is clear that after the FDR, or at the latest after the Husband’s solicitors made it clear in January 2012 that they would object to new valuation evidence, there was a real risk (indeed perhaps a near certainty on the present facts) that the base line value of Ms Holt’s assets would be taken at what she says was an inflated value for the purpose of the financial relief proceedings’ [58]. That ‘inevitably meant that the value of her rights vis-à-vis the Husband were diminished’, and it made no difference if one postponed that inevitability to the end of the hearing, on 16 March 2012, as the damage was still suffered more than six years before the action was commenced [58].

The theoretical possibility of a judge in divorce proceedings taking the view, of their own motion, that the evidence before the court is unsatisfactory and requires improvement or clarification was not ignored. However, ‘the reality is that the expert evidence of values upon which a party may rely, and upon which proceedings will be resolved, will be settled well prior to the date of the hearing’ [59]. If one party, owing to a solicitor’s negligence, loses the opportunity to adduce the expert evidence that puts their case in the best possible light, then the value of that party’s claim is inevitably diminished.

Overall, McCombe LJ concluded that although the value of W’s claim had been inevitably diminished by her solicitors’ conduct, the date at which she suffered measurable damage and was financially worse off was by the end of the final hearing on 16 March 2012 at the latest, and in all probability much earlier than that. As a result, her claim for damages in tort was time-barred before her claim form was issued on 5 April 2018, and the appeal was dismissed.

Henrietta Boyle, Pupil at 1 Hare Court