Professional negligence claims against law firms almost halves

The number of professional negligence cases brought against law firms remains at a high level despite almost halving (47 per cent) in the last year.

Law firm RPC said the drop - 418 to 221 - is largely due to a fall in the number of post-financial crisis cases with the legal time limit on bringing a claim passing in the majority of instances.

Joe Bryant, partner at RPC, commented that solicitors have not seen the back of recessionary claims despite the 'substantial drop' in the number of new cases.

'A large number of property and conveyancing cases are still sitting there dormant for now, whilst the claimants and their legal teams accumulate the evidence they need to bring their cases in front of a court,' Bryant said.

The cases Bryant refers to are disputes over subprime mortgages originating during the financial crisis which could, arguably, skew the statistics.

Solicitors who contributed to clients purchasing property assets at inflated valuations have found themselves subject to professional negligence claims, often running into the hundreds of thousands millions of pounds.

Many of these cases are now subject to 'standstill agreements', which freeze the case without settling or dismissing it, according to RPC. This means that many of the costs involved are yet to be incurred.

Bryant commented: 'The idea behind standstill agreements is that they give claimants some extra time over and above the official time limits within which to finalise their investigations, in circumstances where they would otherwise be forced to start litigation and incur expensive court fees and other legal costs.'

He continued: 'However, another effect is to keep the cloud of litigation hanging over the defendant's head, so they are only used sparingly.'

Bryant added that the volume of claims that institutional lenders have pursued against solicitors and valuers since the recession began has led to a significant number of requests for these agreements over the past year, as claimants have struggled to get all of their claims up and running within time.

Lawyers who specialise in suing other lawyers are behind many new cases.

While the number of negligence claims is down when compared to 2013/14, since 2012/13 there has been a 55 per cent increase - from 143 to 221 - on the number of cases brought against solicitors.

RPC attributed this to a multiplicity of new claims being brought by specialist law firms who sue their clients' former solicitors, mainly for an 'under-settlement' of claims.

The two major categories of claims involve ex-wives disappointed with their divorce settlements and 'no win, no fee,' agreements.

Bryant said cases were being brought on an industrial scale on the back of carefully-targeted advertising campaigns to bring the claimants through the door.

'Given that the court rules don't require the loser to pay the winner's legal costs until the matter reaches formal litigation, firms are launching into often spurious scatter-gun cases without starting court proceedings, purely in the hope of getting a low "nuisance" payment, free of any down-side if they fail.'

Bryant also suggested 'ever-improving legal software' was making it far easier for claims to be launched against solicitors on a large scale despite the majority lacking in quality.

'Whilst perhaps only one in fifty claims reaches litigation, the whole approach places a huge burden both on the firms being targeted and their professional indemnity insurers, and associated insurance premiums,' Bryant said.