Professional Negligence Lecture
(by Patrick Mullins, Solicitor)

The Tort of professional negligence comprises a subset of the general rules of negligence. The general situation covered by professional negligence is a situation in which the Defendant has represented himself or herself as having more than average skills and abilities. By virtue of the services, which they offer and supply, professional people hold themselves out as having more than average abilities.

Generally speaking the occupations regarded as professions have four particular characteristics:

a) The work or service is skilled and specialised;
b) The practitioner is expected to provide a high standard of service and is expected to be particularly concerned about the duty of confidentiality;
c) Practitioners usually belong to a professional association which regulates admission and seeks to uphold the standards of the profession;
d) The practitioner holds a high status in the community.

The definition of “profession” was stated in one case to be as follows:-

“a “profession” in the present use of language involves the idea of an occupation requiring either purely intellectual skill, or of manual skill controlled, as in painting and sculpture, or surgery, by the intellect of the operator as distinguished from an occupation which is substantially the production or sale or arrangements for the production or sale of commodities. The line of demarcation may vary from time to time. The word “profession” used to be confined to the three learned professions, the church, medicine and law. It has now, I think, a wider meaning”.

There is no doubt but that since that time the law of professional negligence has developed to include as part of the meaning of the term “profession” many more than simply doctors, lawyers and religious. The law relating to professional negligence has been developed to include the likes of architects, engineers, quantity surveyors, insurance brokers and accountants, amongst other professions.

 

Relationship between Contract and Tort

In principle, liability in Tort runs in parallel to liability in contract. Subject to the normal rules of privity of contract, a person who has entered into a contract can sue, or, be sued on the contract, which, will set out the terms of the service to be provided by the professional person, and, in the absence of any expressed term, it is implied that the service will be performed with reasonable skill and care.

In contract law, there is a contract between the professional and his client, whereby the professional agrees to deliver service and the client agrees to pay a specified, or, alternatively, a reasonable fee. There is generally implied by law a term that the professional person will exercise reasonable skill and care. In addition there may be other fundamental terms which form part of the contract between a professional, and, his client. For example, if a consulting engineer is instructed to produce a report on property, there is an express, or, implied obligation to inspect the property. This is in addition to the implied obligation to exercise reasonable skill, and, care.

It is indeed uncommon that a professional will provide a service subject to a strict set of terms, and, conditions, which create contractual obligations on his, or, her part. The professional is normally engaged to achieve a particular result, or, to render a certain service. However, in any event in the absence of any express terms to the contrary, there is implied by law a term that the professional will carry these activities with reasonable skill and care.

It is common, in a, case that a plaintiff may have a cause of action in contract, and, in tort against a professional. However, the quantum of damages is limited to the actual loss suffered, and, does not increase merely by virtue of the fact that there is a liability in contract, and, in tort to the plaintiff.

Some incidents of legal liability vary according to whether the Plaintiffs claim is based on a breach of Contract, or, based upon a Tort. There is a distinction to be drawn between the Damages recoverable in Contract, and, in Tort. In cases for Damages in Contract, the primary objective is to place the innocent, and, injured party in the position in which he, or, she would have been, had the Contract been performed in full. However, the function of compensation in Tort is to place the injured party in the position in which the party would have been if the Tort had not been committed at all.

It is quite often the case that there is a concurrence of actions in Contract and in Tort. It is no doubt the case, that the existence of a Contract is important for the purposes of deciding whether to impose a Duty of Care in Negligence.

A very good assessment of how the Courts will deal with the issue of damages, where there is in concurrence of causes of action, was made by Mr Justice Clarke in the case of Edmund Kelleher and Joan Kelleher –v- Don O’Connor practising under the style and title of Don O’Connor & Company.

Judge Clarke stated that when assessing damages that it was “important to start with a fundamental proposition that, in almost all cases, the principal function of the award of damages is to seek to put the party concerned back into the position in which they would have been had the relevant wrongdoing not occurred”. In that decision Mr Justice Clarke indicated that in the case of a tort, the Court had to attempt to put the plaintiff back into the position in which the plaintiff would have been had the tort not occurred at all. In those circumstances it is the pre-incident position that the Court must look at as a starting point. However, where a claim is for breach of contract, it is the failure of a party to comply with contractual obligations that is assessed. Mr Justice Clarke went on to say that it was necessary to analyse the contractual obligations, which have been breached, before going on to ascertain the proper approach to the calculation of damages

Mr Justice Clarke went on to say:-“while it is true to say that a solicitor can be sued in breach of contract or in negligence, it does not seem to me that it is likely, at least in the majority of cases, that there will be any practical difference between the approach to damages in either case. If the proper conduct of the conveyancing transaction by the solicitor concerned ought to have lead the relevant client not to go ahead with the transaction at all, then the proper approach of the Court to the assessment of damages in such a case is to look what would have happened had there been no completed transaction”.

Liability in Tort

In simple terms, the Tort of Negligence is achieved when three conditions are satisfied;-

a) A Duty of Care is established between the Defendant and the Plaintiff

b) The Defendant has acted, or, omitted to act, or , spoken in such a way as to contravene that Duty of Care, and;

c) The Plaintiff has suffered Damage as a consequence of the Breach.

The law of Negligence has developed at pace since the Decision of the House of Lords, in Donoghue ~ V ~ Stevenson .

The formulation of the Duty of Care in Tort which is now generally accepted is as that stated in Anns ~ V ~ Merton London Borough Council as follows;-

“.... the question has to be approached in two stages. First one has to ask whether, as between the alleged wrongdoer, and, the person who has suffered damage, there is a sufficient relationship of proximity, or, neighbourhood, such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter – in which case a prima facie Duty of Care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative or to reduce or limit the scope of the duty or the class of person to whom it is owed, or, the damages to which a breach of it may give rise.”

Professionals are human beings and make mistakes. Even the most experienced professionals make mistakes. The consequences can be disastrous for the client. Professionals providing services will be judged by the standard of those claiming to have that same set of skills and abilities.

A client places “reasonable reliance” on the skills of the professional.

In the case of Hedley Byrne & Co. Ltd ~ V ~ Heller & Partners Ltd , the Court held as follows;-

“Where a person is so placed that others could reasonably rely upon his judgement, or, his skill, or, upon his ability to make careful enquiry, and, a person takes it upon himself to give information or advice to, or, allows this information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a Duty of Care will arise.”

There is no doubt, but, the law in relation to Professional Negligence has been substantially extended, to include cases where the professional has been held to owe a Duty of Care to an increasingly wide range of persons, who are not his or her clients.

One such case is the decision of the Supreme Court in Doran –v- Delaney . In these proceedings the Plaintiffs purchased a piece of land which they believed at all times had planning permission and also was accessible from the road. The intention was to construct a property on the land.

After completion, they discovered that planning permission had been granted due to the submission of an incorrect map with the application by the Vendors. They also discovered that the land providing access was not owned by the Vendors and had not been included in the purchase. They had no right of access to their property and as such their land was left land locked.

The Purchasers being the Plaintiffs were not told that the adjoining owner claimed to be owner of part of the land or neither that there was a dispute with the adjoining owner. Requisitions on title were raised in the ordinary course by the Plaintiffs solicitors who were the Purchasers. When asked whether there was any dispute with an adjoining owner, the reply was “Vendor says no”. When asked whether there was any litigation pending or threatened the answer was “Vendor says none”.

It transpires that the Vendors solicitors knew that there was dispute with the adjoining owner. A Partner in the firm had informed the solicitor dealing with the sale that the dispute had been resolved. However neither solicitor ascertained from the Vendors the terms upon which the dispute had allegedly being settled. As it turned out the matter had not been settled. In that case the Purchasers issued proceedings against their own solicitor claiming damages for negligence, breach of duty and breach of contract and also issued proceedings against the Vendors and the Vendors solicitors claiming damages for negligence, misrepresentation and breach of warranty.

In the High Court damages were awarded to the Plaintiffs against their own solicitors and the Vendors but their claim against the Solicitors for the Vendors was dismissed on the basis that the Vendors solicitors had merely passed on their clients instructions and had not assumed responsibility for the information.

The Plaintiffs appealed. The Supreme Court allowed the appeal and found that the Solicitors for the Vendors were liable to the Plaintiff for negligence. The Supreme Court held that whilst there was no contractual relationship between the Plaintiffs and the Solicitors for the Vendors, that would not in and of itself negate the existence of a duty of care.

The Supreme Court held that the Vendors Solicitor owed a duty of care to the Purchasers and that by failing to ascertain the terms upon which the dispute had been resolved and by indicating that there was no dispute, they were in breach of that duty.

The decision in Doran –v- Delaney is peculiar in its own facts.

The decision sent some shockwaves through the profession given the fact that up to then Solicitors had reasonably understood that they had a contractual relationship with their own clients and were not envisaging a possibility of having a liability in negligence to a third party, not being a client of their firm. The case establishes the obligation upon a solicitor to ensure the veracity of statements made in a conveyancing transaction and clearly establishes a duty of care on the part of a Vendors Solicitor in furnishing replies to requisitions on title and also clearly establishes a liability in negligence should the statements transpire to be untrue, and the Purchaser suffer a loss as a result.

It is clearly that Doran –v- Delaney has extended the scope of a solicitor’s duty of care following the Hedley Byrne principles.

The duty of care is that of avoiding making negligent misstatements which could give rise to a cause of action.

In the case of Dutton –v- Bognor Regis UDC , Lord Denning stated that since the decision in Hedley Byrne:-
“It is clear that a professional man who gives guidance to others owes a duty of care, not only to the client who employs him, but also to another who he knows is relying on his skill to save him from harm. It is certain that a banker or accountant is under such a duty, and I can see no reason why a solicitor is not likewise.”

A distinction of course must be drawn between the solicitor’s ability to rely on the instructions of a client completing Replies to Requisitions on title and the Doran –v- Delaney case. In the Doran –v- Delaney case, the solicitors were fixed with knowledge of the dispute with the adjoining land owner in relation to ownership of the access road. The negligence arose by reason of the failure on the part of that firm to satisfy themselves that the dispute indeed was at an end and had satisfactorily been settled. In reality, the Purchaser was misled by reason of the replies given, and, it is clear that the Supreme Court held that the Solicitors were negligent in that they could have investigated the matter further, they negligently misstated the position.

STANDARD OF SKILL AND CARE

In the decision in Roche –v- Peilow Judge Griffin defined the standard of care required by a solicitor undertaking a transaction entrusted to him by his client as being:- “The ordinary level and degree of skill and competence generally exercised by reasonably careful colleagues in his profession.”

A solicitor must exercise professional skill and judgment in his client’s interests. It is insufficient for a solicitor to simply carry out instructions furnished. A solicitor must consider the legal implications or the facts presented to a solicitor by his or her client.

In the decision of Carroll –v- Carroll , Mr Justice Baron stated that “A Solicitor or professional person does not fulfil his obligation to his client or patient by simply doing what he is asked or instructed to do. He owes such a person a duty to exercise his professional skill and judgment and he does not fulfil that duty by blindly following instructions without stopping to consider whether to do so is appropriate. Having done so, he must then give advice as to whether or not what is required of him is proper.”

It is also the case that relying on standard conveyancing practice has proven not to be a Defence in the case of solicitors. This was the case in Roche –v- Peilow where the Supreme Court held that the conveyancing practice applying at the time had defects which ought to have been obvious to any person giving the matter due consideration. In that case the firm of solicitors were held to be negligent in failing to carry out a companies offices search against a builder of a new house which was being purchased by their client. In that case the Plaintiff was successful in pursuing a claim for damages, for negligence and breach of contract against the defendant firm of solicitors who had failed to investigate, pre contract, the existence of an equitable mortgage. Their defence was that it was not customary to do so.

The question that arises is as to the formulation of the required standard of skill and care in the given profession. It is clear that the standard of skill and care must be determined by reference to the members of the profession concerned. However there is a difference between assessing the standard on the basis of either that which members of the profession do in fact ordinarily achieve, or, that which in the opinion of the courts, a profession ought to achieve. In all such cases it is a matter for the Court to decide what a reasonably competent member of a profession would do in a given set of circumstances. However, it is clear that the “extent of the legal duty in any given situation must…, be a question of law for the Court” It is clear from the decision in Roche –v- Peilow that the Court will not accept what it deems to be a lax standard, even if, that standard is accepted collectively as being an appropriate standard by the profession. In that regard, the Court does not restrict itself to evidence given by an expert in the field as to what other experts do or do not do. The Court reserves the right to assess whether in all the circumstances the professions own standard is sufficient to meet the test of reasonable skill and care. There is no doubt but that the decision in Roche –v- Peilow caused a bit of turmoil given the fact that the solicitor in that case was merely following standard conveyancing practice. It was the very practice itself that was found to be negligent by the Supreme Court.

It was held by Mr Justice Clarke in the case of ACC –V- Johnston that whilst “the duty of care of a professional person is often described by reference to the standards that would normally be applied by a professional of equivalent experience, it is clear from Roche –v- Peilow that the mere fact that a practice that is universal does not, of itself, immunise a professional concerned from potential liability, if it is a practice, which on reasonable consideration, the professional concerned ought to have identified as giving rise to a significant risk”. In that particular case Mr Justice Clarke was considering a practice of closing sales by way of receiving undertakings to deal with the proceeds of sale. In this particular case, a loan cheque was being released to the Borrowers solicitor in a commercial loan. Mr Justice Clarke indicated that the duty of care owed by a solicitor in accepting such an undertaking extended to considering whether such a common practice may so obviously involve unnecessary risks, which can be eliminated, that such a practices should not be engaged in.

In that particular case, a solicitor was held being negligent in circumstances where he was acting on behalf of a Bank in relation to a substantial commercial loan. He accepted an undertaking from the purchaser’s solicitors to acquire title to the property and to register the Charge instead of attending to a three-way closing, where he would have taken the documentation on closing and arranged registration of title himself. In the particular case, unfortunately the monies were not applied towards the purchase of the property and ACC never received a first legal Charge, as the Borrower never in fact acquired title to the property. In that particular case, the solicitor was found to be negligent in accepting an undertaking from the purchaser’s solicitors. Mr Justice Clarke held that the solicitor was employed by the financial institution for the purposes of reducing the risk that might otherwise lie to the financial institution. In the particular case, Mr Justice Clarke held that, if the transaction was to proceed in any other manner, other than by way of three-way closing, the Defendant solicitor who was retained by ACC Bank, should have obtained express authorisation from ACC Bank to close the loan by way of undertaking, rather than taking the title in hand, and, closing the sale by way of three-way closing.

A further distinction is drawn between the standard of skill and care appropriate to a practitioner with his or her particular qualifications, or, experience, and, the standard of skill, and, care appropriate to the profession generally. It has been suggested that the appropriate standard of skill and care for a professional, should be defined as follows:- “That degree of skill and care which is ordinarily exercised by reasonably competent members of the profession, who have the same rank and profess the same specialisation (if any) as the Defendant.”

It has been the case that the Courts have taken some offence at expert testimony being furnished which goes to matters of law which in effect then usurps the jurisdiction of the Court in relation to matters of law. A very interesting commentary in this regard was made by Mr Justice Hardiman in the case of O’Carroll –v- Diamond

The proceedings involved a claim for damages for negligence against a solicitor who the Plaintiff claimed did not insist that she obtain independent legal advice in relation to the charging by her husband of certain property prior to her executing a charge in conjunction with him.

Mr Justice Hardiman quotes with approval the comments of Oliver J. in the case of Midland Bank –v- Hett, Stubbs & Kemp in relation to the evidence of solicitors as to what they would have done in a particular situation :- “I must say that I doubt the value, or even the admissibility, of this sort of evidence, which seems to be becoming customary in cases of this type. The extent of the legal duty in any particular situation must, I think, be a question of law
for the Court. Clearly if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received. But evidence that really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the Defendants, is of little assistance to the Court; whilst evidence of the witness’s view of what, as a matter of law, the solicitor’s duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the Court’s function to decide”.

Mr Justice Hardiman noted that the High Court Judge in the case was uneasy about portions of the evidence given by the expert witness, because he was being requested to comment on matters of law. Mr Justice Hardiman went on to say that “the input of the parties on matters of law is to be by submission, and not by evidence”. He went on to say that there appears to him to be “a great deal to be said for the comments of Oliver J. cited above”.

In the particular case of O’Carroll –v- Diamond, the Supreme Court held that the solicitor in that case was not negligent in insisting that the Plaintiff obtain independent legal advice. The Court indicated that the circumstances were peculiar in that there was an extreme urgency with the transaction, and, that the Defendant had clearly advised the Plaintiff that she should obtain independent legal advice. She declined to do so, and, the Court held that he was not under a duty of care in the particular circumstances of that case, to insist that she obtain that legal advice, prior to proceeding. Mr Justice Hardiman went on to say that “the facts here are unusual and presented an acute dilemma which I believe that Mr Diamond handled as well as any solicitor could in the circumstances”.

The view of Mr. Justice Hardiman is quite critical of some aspects of expert evidence. However, the Courts have set down a prerequisite to the institution of Proceedings in Professional Negligence, that, an expert opinion be available, expressing a view that Negligence occurred.

In fact, it is the settled practice of the Bar, not to settle proceedings of Professional Negligence, unless, and, until an Opinion has been expressed by members of the same profession, that the impugned professional person in question has been Negligent.
Mr. Justice Barr stated in the case of Reidy ~V~ The National Maternity Hospital that:-

“It is irresponsible and an abuse of the process of the Court to launch a Professional Negligence Action against institutions such as Hospitals, and professional personnel, without first ascertaining that there are reasonable grounds for so doing. Initiation and prosecution of an action in Negligence on behalf of the Plaintiff against the Hospital necessarily required expert advice to support it.”

The view of Mr. Justice Barr was supported by the Supreme Court, in the decision for Cook ~V~ Cronin. In that case Ms. Justice Denham, was cognisant of the fact that a Siege mentality may be encountered in certain professions, and, commented that this in itself was inappropriate professional behaviour. However, she indicated the need for such evidence by appropriate professionals, who are willing to give evidence of Standards of Care, whether, those witnesses be from this jurisdiction or otherwise. Mr. Justice Keane was much more hard hitting, in his criticism of the manner in which the case had been prosecuted, and, indicated that there was a serious responsibility on both branches of the Legal Profession, in the institution of Proceedings for Negligence against Professional Persons. He felt in that case that those Standards were not met.

Mr. Justice Lynch, who delivered the principal Judgement in that case, indicated that in all cases of alleged Negligence on the part of a qualified professional person, in carrying out his professional duties, there should be some credible evidence to support the Plaintiffs case before such an action is commenced.

In the decision of Sugg ~V~ O’Keeffe Mr. Justice Geoghegan, put it as follows;-

“ A Court will never hold a professional person guilty of Negligence without professional evidence from another professional, supporting the assertion of the claim of Negligence.”

Mr. Justice Geoghegan indicated that the proceedings instituted by Mr. Sugg, constituted an abuse of process, given that he had no expert medical backup.

It is clear, therefore, that the expressed view of the Supreme Court, which has now been adopted as a code of practice by the Bar is that proceedings ought not to be instituted for Professional Negligence, without an expert Opinion by a professional of the same professional background, supporting an allegation of Negligence. Therefore, clearly a distinction is drawn between evidence of a particular Standard of Conduct, and, expressions of Opinion, of what one would have done hypothetically.

The Supreme Court decisions clearly indicate that expert evidence of a Standard of Conduct is required in order for proceedings to be instituted in the first place. Peculiarly, the Courts have also used expected Standards of Practice to make findings of negligence against solicitors.

In the case of Kelleher & Kelleher –v- Don O’Connor , Mr Justice Clarke heard evidence from Aine Hynes, a co-author of the Law Society’s “Complex Conveyancing Manual”. In that decision, Mr Justice Clarke accepted evidence from Ms Hynes that it was standard proper conveyancing practice for a solicitor to raise food hygiene matters as a pre-Contract Requisition, where a restaurant premises was being purchased. Mr Justice Clarke, as part of his reasonings in relation to the finding of negligence in fact quoted from the manual directly in relation to the solicitor’s obligation to advice a client acquiring a food business of the implications of owning a food business, and, of the consequences of failing to operate the business in compliance with legislation. In that particular case, the High Court found the solicitor negligent in not insisting that a client make enquiries with the Health Board in relation to food hygiene in circumstances where Requisitions were raised and the responses received were inadequate. The High Court made a finding of fact in that case that the solicitor had been specifically instructed to check out the position regarding food hygiene. The solicitor was also fixed with knowledge that the clients had no experience in the restaurant business, and, were not restaurateurs prior to the transaction and that they were intending to purchase the property for the purposes of investment only, and, intended to let it out to a tenant. Mr Justice Clarke held that there was “ a failure to either enquire of the Health Authority or, perhaps more realistically, to advise the Kellehers themselves to enquire of the Health Authority, concerning the food hygiene status of the premises”.

REMEDIES

The principal objective of an award of Damages or Compensation is to place the Plaintiff in the position he would have occupied if the Breach of Duty had not occurred. This is subject to a Limitation as to how far money can do this, and, also subject to the normal rules of Tort, in relation to Remoteness of Damage, and, Mitigation of Damage.

Whilst, there are special rules which govern the Liability for Professional Negligence, there are no special rules applying as regards Damages.

The victim of Professional Negligence who suffers Damage can recover Damages to include Personal Injury, Damage to Property, and Economic Loss.

It is clear for example, that if a Solicitor is Negligent, in failing to issue proceedings within the time period set out in the Statute of Limitations, and, that the case would have been successful if the proceedings were issued on time, then the Solicitor would be liable in such circumstances to the Plaintiff, for the amount of the Compensation which the Plaintiff would have achieved, had the proceedings been instituted. However, the Court will have regard to the Merits of the Plaintiffs case, had it been issued, and, if it transpires that the Court concludes that the Plaintiffs case did not have Merit, then, whilst there might have been Professional Negligence, no loss would have occurred, and, the case would be dismissed. In the case of Purcell ~V~ Cleland and Others, this very issue came before Mr. Justice Irvine.

The Court held that;- “The onus of proof on the Plaintiff in this action, is twofold. The Plaintiff must establish firstly, that Mr. Cleland was in breach of his professional obligations to him. In this case the obligation concerned, was his obligation to issue proceedings within the period permitted by Statute, seeking the bringing of a claim seeking damages for Personal Injuries. The second onus upon the Plaintiff is to establish that by reason of breach of his professional obligations, Mr. Cleland brought about a consequential loss to the Plaintiff.”

The Court held that there is a Professional Obligation on any solicitor, whilst investigating a potential claim for Personal Injuries on behalf of any client, to preserve his client’s rights by issuing a Writ, within the statutory time frame, allowed for the bringing of such proceedings. This applies even where the Solicitor may be experiencing difficulties in getting instructions, or, obtaining medical evidence, or, records to support such a claim.

The Court then assessed the proposed evidence that would have been adduced, had the proceedings been issued, and, concluded that the Plaintiff would have been unsuccessful in convincing the Court that he had a bona fide claim for Compensation, for Negligence arising out of the road traffic accident.

In that case, the Court held, that the solicitor, was by his own admission, Negligent in failing to issue a Writ, on time. However, the proceedings had they been issued would have been unsuccessful. An added factor in the case, was the fact that the Plaintiff issued proceedings against the Solicitor, outside the time set out in the Statute of Limitations, and, the Court concluded that the proceedings against the Solicitor were Statute Barred. In the case of Kelleher & Kelleher –v- O’Connor Mr Justice Clarke deemed the case to be firmly in the “no transaction camp”. The claim was in relation to the negligence of a solicitor in relation to the conducting of enquiries in relation to the food hygiene regulation difficulties encountered with a restaurant premises. Mr Justice Clarke held in that case that it was clear on the balance of probabilities that had the Plaintiffs been put on notice of the various difficulties which were coming down the track in relation to food hygiene, that they would not have purchased the property at all.

Mr Justice Clarke went on to assess what the diminution in value of the property was at the time of purchase with the food hygiene regulation difficulties.

In that case Mr Justice Clarke made a finding that the property based on valuers evidence was IR£15,000 less than the price paid for it. He then calculated that it would have cost something like IR£ 5,000 inclusive of VAT for legal and auctioneering fees, if the property had been put on the market immediately and sold there and then.

In that case, Mr Justice Clarke assessed damages at IR£ 20,000 being IR£15,000 for the diminution of value by reason of the difficulties with the property, and, the sum of IR£5,000 being the cost of auctioneering and legal costs in relation to a sale.

In this particular case, the Plaintiffs had expended more than that amount of money complying with the requirements of the Health Authority in relation to food hygiene.

Mr Justice Clarke took the view that had “the Kellehers simply sold the property, then they would have been IR£ 20,000 worse off at that time”.

Mr Justice Clarke held on the facts that there was no evidential basis put forward for there being any good reason for persevering with the impaired asset rather than selling it. In that case, the Plaintiffs merely obtained an award for the diminution of value at the time of the purchase, and the anticipated costs of a sale at that time on the basis that the property would immediately had been re-sold. The fact that the Plaintiffs held on to the property and incurred costs in the order of IR£26,000 in remedying defects within the property to satisfy the Health Board, were viewed in hind sight as being an incorrect approach to have taken. Those losses were not recoverable.

EXCLUSION OR RESTRICTION OF LIABILITY.

It is not possible in a paper such as this to enter into a full discussion in relation to the manner in which one can limit liability by Contract in relation to negligence. Suffice it to say, that if a professional seeks to exclude or restrict liability for negligence, that professional must ensure that:-

a. If a contractual term is to be relied upon, it is expressly incorporated into the Contract of engagement.
b. If a specific notice is to be relied upon, it is specifically drawn to the clients attention before the Contract is made and;
c. In either case the wording used is sufficiently clear to apply to negligence.

In the case of a solicitor it is not clear as to whether an exclusion or limitation of liability, if contained in the contract for legal services would be enforceable. Section 7 of the Attorneys and Solicitors Act, 1870 provided as follows:-
“A provision in any such agreement that the Attorney or Solicitor shall not be liable for negligence, or that he should be relived from any responsibility to which he would otherwise be subject as such Attorney or Solicitor, shall be wholly void”.

Section 7 of the Attorneys and Solicitors Act, 1870, was repealed by virtue of Section 44 (4) of the Civil Law (Miscellaneous Provisions) Act, 2008.

Section 44 of the Civil Law (Miscellaneous Provisions) Act, 2008, inserts a new Section 26 (a) into the Solicitors (Amendment) Act, 1994.

This new Section allows a firm of solicitors to limit the amount of civil liability incurred in a contract between a solicitor and client to the minimum level of cover required from time to time as specified by the Law Society in Regulations. The current minimum level of cover is €1.5 million. It is therefore open to a solicitor to insert a condition into its terms and conditions of business, or, terms of a retainer, providing that the solicitors liability in negligence in relation to any mistake made by the solicitor in the performance of the contract entered into between him and the client, shall be subject to a maximum exposure of €1.5 million.

It is important to know that this new provision has not been tested by the courts. There is no doubt but that notice will have to be brought to the attention of the client at the very start, and, the three matters mentioned at a-c above will be relevant.

There are other protections there for consumers in the Sale of Goods and Supply of Services Act, 1980 as amended and the European Communities (Unfair Terms In Consumer Contracts) Regulations, 1995 to 2000. These pieces of legislation provide consumers with comprehensive protection in respect of unreasonable contractual conditions. What is unreasonable is a matter for interpretation by the Courts.

Section 44 (2) of the Civil Law (Miscellaneous Provisions) Act, 2008, specifically draws attention to the Sale of Goods and Supply of Services Act, 1980, and the European Communities (Unfair Terms in Consumer Contracts) Regulations, 1995, as well as a Restrictive Practices (Amendment) Act, 1987. The provisions of these pieces of legislation shall take precedence over this contracting out Section in the event of a conflict.

There is no doubt but that the Courts will view any limitation clause in the context of the relative contracting positions of the parties and also in the context of the significant precedent at common law in relation to the interpretation of such exclusion clauses or limitation clauses.

LIMITATION OF ACTIONS

The Law of Limitations in this jurisdiction is governed by the Statute of Limitations, 1957 as amended by the Statute of Limitations (Amendment) Act, 1991 and the Statute of Limitations (Amendment) Act, 2000.

In essence, the limitation legislation provides that, if proceedings are commenced after the expiration of the specified statutory period of limitation, for the claim in question, the Defendant may raise the Defence, if proceedings are statute barred, thereby precluding any discussion to the merits of the claim.

Under existing law, claims for damages in Contract and Tort, (other than personal injury), will be statute barred after a period of six years from the date the cause of action accrues. It is irrelevant whether the claimant was aware or could have been aware of the right of action until after that period. The Law Reform Commission has questioned whether the law sets the correct balance in relation to discoverability of a cause of action. The Commission stated that it was “Of the Opinion that the current law does not adequately protect a Plaintiff in cases where the damage is so latent as not to be discoverable until after (or perhaps shortly before) the expiration of the current limitation period. This conclusion leaves the Commission to propose the introduction of a special provision to extend the limitation period in such cases”

A discoverability test exists in the area of personal injury litigation and was introduced by Section 3 of the Statute of Limitations (Amendment) Act, 1991.

A similar provision is contained in the Liability for Defective Products Act, 1991 which provides in section 7 a limitation period of “three years from the date in which the cause of action accrued or the date (if later) in which the Plaintiff became aware, or should reasonably have become aware of the damage, the defect and the identity of the producer”.

The Statute of Limitations in relation to personal injury has a significant impact in the area of medical negligence in relation to discoverability.

However, for example, in the case of a solicitor who commits a negligent act which causes a loss, and that loss is discovered over six years after the negligent act was committed or in the case of an omission, omitted, then the claim will be statute barred.

In the case of Tuohy –v Courtney the Plaintiff purchased a house in 1998 in the belief that he was acquiring a leasehold interest which carried a statutory right to buy in the freehold estate. He subsequently discovered that the house was held under a 99 year Lease, with less than 30 years left to run.

The Defendant solicitor, who was acting for the Purchaser pleaded the Statute of Limitations in Defence to the negligence action.

Mr Justice Blayney held that the cause of action accrued in 1978, when the transaction was entered into and therefore the claim was statute barred.

In essence, the High Court held that the loss was suffered at the time of reliance even though it had not manifested itself until it was discovered some significant time later.

There are limited exceptions to the Statute of Limitations running against a potential Plaintiff on the grounds of fraud and mistake which ought to be considered in appropriate circumstances.

The fact that a Plaintiff is not aware of a Defendants alleged breach of contract or negligence until after the statutory period of limitation expired does not prevent the claim from being statute barred.

Section 2 of the Statute of Limitations (Amendment) Act, 1991, contains a very detailed set of rules in relation to when time begins to run in cases of actions for damages for personal injury. In essence it provides that it runs from the date in which the cause of action accrued or the date of knowledge (if later) of the person injured.

The matter was considered at length in the Supreme Court decision of Cunningham –v Neary and Others . In particular the Court considered subsection 2 of section 2 which states as follows:-

“For the purposes of this section, a person’s knowledge, includes knowledge which he might reasonably have being expected to acquire –

(a) From facts observable or ascertainable by him, or
(b) From facts ascertainable by him with the help of medical or other appropriate expert evidence which it is reasonable for him to seek”.

In the particular proceedings, the Plaintiff issued proceedings seeking damages for personal injuries against Mr Michael Neary and Others with respect to a hysterectomy that was performed in 1991. The proceedings were instituted by way of Plenary Summons on the 22nd of March 2002. The Defence was solely on the basis of the Statute of Limitations.

The Supreme Court went to great lengths to deal with the Plaintiffs knowledge as defined in the legislation.

The Supreme Court noted that the Plaintiff had written to the medical council on the 19th of December 1998. The Supreme Court felt that at that time she had knowledge of the fact that the Defendant had removed her ovary in 1991. She had twice asked him why he had done so and had received no explanation at all. The Supreme Court held that this knowledge was such that it was then reasonable for her to seek medical or other expert advice. She went to see her solicitor in May 2000 and it took a further 11 months to obtain a report from a Consultant Obstetrician.

The Supreme Court went on to say that “If the Plaintiff had gone to a Solicitor in December 1998, she would have obtained the sort of advice that would have made out a case of negligence against the Defendant. Therefore, the key fact that the removal of the ovary had been unnecessary was “ascertainable” and, for the purposes of the section, the Plaintiff was deemed to have had knowledge of it as of that date.”

The Supreme Court held that the three year period commenced to run against the Plaintiffs claim not later than the 19th of December 1998 and that her claim was out of time. The 19th of December 1998 was the date upon which she made a substantial claim against Mr Neary to the Medical Council.

It is clear that there is a discoverability test in the area of damages for negligence for personal injury. However, this does not apply to situations of pure economic loss.

The Law Reform Commission have strongly argued for a discoverability test to be introduced in relation to economic loss where the negligence is discovered more than six years after the error was made.

A typical example would be a purchase of a property which is completed and a solicitor makes an error in relation to the title or identity or otherwise. A sale is agreed with respect of the property some ten years later and the Purchaser refuses to complete the Contract due to an error on title. The question for the legislature is to decide whether or not it is appropriate to allow the negligent solicitor off the hook on the basis that the mistake was made more than six years earlier. There is of course an argument that the innocent Plaintiff who has paid for the service albeit ten years earlier should not stand the loss completely.


Dated the 23rd day of September 2010


Pat Mullins
Solicitor
Mullins Lynch Byrne
Solicitors
Melbourne House
Model Farm Road
Cork