What happens when a property professional is on the receiving end of a professional negligence claim? How should the claim be dealt with?

01/06/2011

By Nick Horton, Partner and Head of Dispute Resolution. First published in Construction News in June 2011.

Professional negligence allegations are not only unwelcome and invariably arrive when other time consuming projects are on the go, but they have the capacity to be unsettling and immensely time consuming. If brought by a significant client, wider issues about the ongoing business relationship will inevitably arise. So how should the property professional deal with such claims?

Of course there are certain immediate steps to be taken, particularly reporting the matter to your professional indemnity insurers. Care should be taken not to make any actual admissions of liability or to give assurances, for example to important clients, which could be taken as such admissions. Also insurers' agreement must be obtained before any steps are taken or expenses are incurred, otherwise there is a risk of insurers avoiding cover or not covering such expenses.

Professionals have differing degrees of freedom to deal with claims made against them if they fall within their excess. If you do have such freedom, it is well worth obtaining a specialist solicitor's input right at this early stage. Claims which are not set out robustly on solicitors' headed notepaper and in sufficient detail to comply fully with the Professional Negligence Pre-Action Protocol should be rebuffed strongly and this may be enough to stop them in their tracks. Care should also be taken to respond fully and in compliance with the Protocol where the claim has been properly set out in a Protocol complaint letter of claim, since this will often lead to a quicker and cheaper resolution of the matter without court proceedings being necessary.

How, though, do you minimise the risk of claims being brought in the first place? One practical tip is to take care when setting up your retainer with the client to define the scope of your duty clearly. What are you taking on an obligation to do and what are you excluding? Another tip is to ensure that you keep full, accurate, contemporaneous notes of telephone conversations and meetings. Without such notes, professionals often find themselves having to say that it would have been their "usual practice" to provide advice on a particular issue or to have explained a particular risk - which is not very persuasive to a Judge who is being told by the claimant that this project was uppermost on the claimant's mind and that there is no way this advice or this explanation was given in this case.