Legal Business Blogs

Rushing to launch: High Court cases for law firm professional negligence claims jump 192% in a year

The number of High Court cases against law firms for professional negligence has almost tripled in the last year, increasing by 192% from 143 the year before to 418.

City litigators say the sharp increase is primarily a result of the time limit looming for pursuing negligence claims arising from losses sustained during the 2008 financial crisis, as well as the increased prominence and availability of third-party litigation funding.

Generally regarded by the market as a highly emotive form of litigation, parties have six years from the date of the alleged negligence in which to bring a claim to court. As is traditional with liability cases, many claims filed in the last year involved property and conveyancing disputes, and subprime mortgage lenders make up a substantial percentage of claimants.

Stephenson Harwood senior partner and commercial litigator Roland Foord says: ‘We’re slightly more than six years in from Lehman – which is engraved on everybody’s heart. People who want to pursue potential claims and haven’t done so for whatever reason have had to get off the fence and put their money where their mouth is. Whether all those claims will go anywhere is open to doubt. Some may not even get served.’

Foord adds, ‘The principal factor is credit crunch claims expiring. The other factor may be the availability of funding. People have been waiting, because they haven’t wanted to jump into litigation, and funding has become much more readily available in the last few years. So people are encouraged to jump off the fence and make a decision – I can’t imagine the increase is because solicitors have become three times more negligent!’

Conducted by City firm RPC, the research further noted examples of claims taken against law firms could include failure to carry out adequate money laundering checks on property transactions, from individual house purchases to major high-value developments; failure to conduct sufficient checks to identify mortgage fraud; and failure to identify mis-selling of inappropriate mortgage products or failing to recommend buyers obtain independent financial advice.

CMS Cameron McKenna insurance and reinsurance head Ed Foss adds: ‘For all professionals, in a funny sort of way, the economic crisis is continuing and the market is seeing claims against professionals that in more buoyant times might not ultimately be pursued. The peak of the economic crisis was 2008 and the six year primary limitation period is approaching or has passed.

‘Normally you will find potential claimants wait for the loss to crystallise. But the time limitation is ticking by and if they were not 100% sure of whether to take the case, they now need to make a final decision.’

Though not specific to property or conveyancing claims, the most recent high profile negligence news to hit headlines was last Thursday (4 December) when Legal Business revealed that Magic Circle firm Clifford Chance is to face a suit over the high-profile Excalibur litigation by the case’s third party funders and Greek shipping tycoons, the Lemos family.