The recent decision of Avison v Harold Bell Infields and Co reiterates that making an application for strike out on the basis of collateral attack should be approached with caution.
Background
Mr and Mrs Avison brought a negligence claim against their solicitors, Harold Bell Infields and Co (HBI).
The Avisons had entered into a loan agreement with Mr White and Ms Emmanuel. The Avisons instructed HBI to prepare the loan agreement and security documentation, stressing the need for both borrowers to be bound and for fraud risks to be mitigated.
When the loan was defaulted upon, litigation followed and the majority of the principal sum was recovered from Ms Emmanuel by way of settlement. The claim against Mr White for the remainder of the principal sum and interest was successful, albeit a lessor interest rate was allowed. However, when Mr and Mrs Avison came to enforce their judgment, it transpired that Mr White had no assets.
Mr and Mrs Avison's claim against HBI was that it should have taken steps to verify the identity of the parties to the loan agreement (Ms Emmanuel argued that her signature on the loan agreement and the corresponding charge against her flat had been forged) and should have included more onerous terms in relation to interest. But for HBI's negligence, they would have been able to enforce the loan against Ms Emmanuel's property, recover their money earlier, and avoid the cost of litigation.
HBI made an application for strike out/summary judgment. It argued that it was an abuse of process for Mr and Mrs Avison to bring an action when they had failed in previous litigation upon the same issues (namely the claim against Mr White and Ms Emmanuel). In particular, it alleged that to the extent that Mr and Mrs Avison's claim concerned whether Ms Emmanuel was a party to the loan agreement and charge, this issue had already been determined by the Court. There was no new evidence and their claim against HBI would require the judge to "go behind" the trial judge's findings.
HBI also argued that the scope of their duty did not include advice upon the creditworthiness of Mr Whyte and case law established that a solicitor does not have a duty to advise upon the "financial wisdom" of a transaction. The losses claimed by Mr and Mrs Avison were not reasonably foreseeable and fell outside the scope of HBI's duty. Consequently, they had no real prospect of being recovered.
Decision
HBI's application was dismissed.
The Court held that the relevant question for the Court was what would have happened at the trial against Mr Whyte and Ms Emmanuel, had HBI not been negligent? That was not an issue which had already been addressed and the professional negligence claim raised distinct issues from the forgery litigation. The Court was not persuaded that the professional negligence claim would be abusive, unfair or bring the administration of justice into disrepute. There were reasonable grounds for the Claimants' negligence claim, and a real prospect of it succeeding.
On a separate issue, Master McQuail did not agree that all mitigation losses must be foreseeable or within the scope of duty in order to be recoverable. Mr Whyte's financial situation may have been something that should have been considered and which would inform the question of the reasonableness of Mr and Mrs Avison taking the steps they did in mitigation of their loss (which was a matter for the trial judge). Whether the losses Mr and Mrs Avison incurred were within the scope of HBI's duty and foreseeable were not matters that were suitable for summary judgment. HBI could not show that Mr and Mrs Avison did not have a real prospect of success and therefore the matter was to proceed to trial.
Takeaways
Solicitors' negligence claims often give rise to challenges to previous judgments and a professional negligence claim following prior litigation is not inherently abusive. If the claim attempts to appeal or change the underlying decision, it may be found to be abusive. However, the scope to argue strike out on the basis of collateral attack is limited and presents a high bar (and summary judgment and strike out are exceptional remedies). On the facts of this case, the Court concluded Mr and Mrs Avison's negligence claim against HBI did not amount to relitigation or a disguised appeal so did not cross the line into the realms of collateral attack.
