Making group actions work in professional negligence claims
In this month’s blog, we broaden our horizons and speak to two leading lawyers in the rather unique, professional negligence group action space. David Niven and David O'Brien are both partners at Pennington Manches Cooper. They’ve driven this growing area of law and are making their mark in the broader class action space.
Q. David, and David, thank you for taking the time to speak with us. Let’s start at the beginning - how did you get into group action space - particularly professional negligence?
DN: When we started - over 10 years ago - it was just David OB and I, and we weren’t really aware of any other firms doing group professional negligence claims.
We’d successfully acted for an individual who lost money in a property related Ponzi scheme. That gave us the idea of helping others who had been affected by the scheme. So from acting for one claimant, we ended up acting for 12.
That led to work on other failed schemes. The real leverage for us was the Giambrone case because it was the first one to receive publicity (where Penningtons Manches Cooper successfully acted in 2015 for a group of over 100 UK and Ireland based claimant purchasers who brought a professional negligence and breach of trust claim against their former lawyers, Giambrone & Law (Giambrone) In 2017 the Court of Appeal also ruled in favour of Pennington Manches Cooper’s clients, dismissing all five grounds of appeal brought by the defendants. The coverage of the case led to a lot more enquiries relating to similar schemes and really positioned us as the go-to firm in the market.
DOB: We really are one of the only firms with a particular specialism in professional negligence group actions. Despite it being novel when we started out about 10 years ago, it now makes up about 70% of our group actions work. The remainder is financial services with a group action element.
Since then, the work has continued to grow, and with it our team. There are now 10 - 12 fee earners doing only group actions work.
Q. Professional negligence class action claims are quite unique. What was the impetus for them?
DN: Most of these cases arise out of off-plan property schemes, such as hotels or student accommodation and were an unforeseen consequence of the financial crash. Following the crash, the banks weren’t lending, so many developers were looking for new ways to raise funds – including from individual buyers. However, this new system of lending didn’t have the built in protection that traditional lenders would have insisted upon and so many buyers were unaware of and weren’t properly advised on the risks involved and lost money as a result when the scheme failed.
Q. As you’ve been doing these for so many years, and before the collective action regime was in place how did you structure these claims - are they through Group Litigation Orders (GLOs).
DOB: We tend not to use the GLO process but we invariably model the procedure on CPR Part19 which governs GLOs. The downside to the GLO – for these types of claims - is that where there is a potential limit on recoverable insurance or assets creating a public register of claims is often not the best strategy.
Instead, we usually issue for all claimants under a single claim form and ask the court to case manage the claim by initially trying generic issues and a selection of a few lead claims.
Q: Sounds like you’ve created your own way of managing these actions.
DOB: Well , it's modelled on Part 19 which contains the GLO provisions within the CPR, so the Court and defendants know what to expect, but often the GLO process itself is not in the clients’ or defendants’ interests so being able to adapt and be innovative is important in these cases.
Q. What are the issues that you face?
DN: It's not an issue per se, but in our claims, we have to be very aware of the insurer's position on the aggregate cover - that is whether for a single limit of indemnity applies for each individual or for all the claimants together - and that is a difficult process.
Q: That sounds rather unfair - isn’t there legislation on that point?
DOB: There’s a form of legislation. The SRA publishes minimum terms and conditions which solicitors’ insurance has to comply with and prevents aggregation of claims other than on certain terms. But then there are disputes about how those terms apply to the facts of a case so it’s not always an answer. There is a Supreme Court case called AIG v Woodman 2017 which also assists, but the question of whether claims can aggregate is fact sensitive, so there is still lots of room for dispute.
DN: It’s difficult to prescribe for every circumstance that could come up!
Q: Is there a reasonable collective action regime at the moment?
DOB: For the types of cases we do, modelling the claims on the GLO procedure rather than some other model works. We act for small enough claimant cohorts that we are able to deal with questions of individual causation from the start - that is all claimants need to prove eventually that if they were given the right advice at that time, they would have avoided the loss - which is a very important part of the claim in a professional negligence case, but also try to limit costs initially by trying generic issues by reference to only a few claimants’ transactions. We find the GLO type model effective for actions of our size.
Q. Do you use funding in your claims?
DN: When we started doing this type of work we worked entirely on a conditional fee basis. Most of our cases are still conditional fee but some are also Damage Based Agreements (DBAs) and some private paying. Whilst we don’t currently have any of our cases on a third party funding model, we’re actively looking at it.
Q. And what is the future of your practice?
DOB: Financial mis-selling class actions is the biggest area of growth for us. We’ve been doing group actions outside of GLOs for a long time and are finding our experience easily transferable to other types of group actions.
Our failed property development group action is still growing but hopefully the collapse of these sorts of development schemes will start to become less common. The Solicitors Regulation Authority has started to look closely at conveyancing solicitors who become involved in these schemes and fail to give proper advice and has provided the profession with numerous warnings about the risks involved and what conveyancers should be doing to protect their clients. I suspect this will have a positive impact and reduce the number of investors losing money in these high risk schemes.
We are also always looking at new technology and better infrastructure to manage group claims. As we look to take on larger claims, it’s important to have the proper structure in place to take on a higher volume of claimants.
DN: I would also add that our team is great! We’ve got lots of excellent homegrown talent. We are looking to grow our current group actions and professional negligence team as well as develop new partners internally.