Kenneth Elliot & Rowe (a firm) v Gallagher

We have before us an appeal from the decision of HHJ Latham given on 17 May 2007 whereby he entered judgment for fees in favour of a firm of solicitors, Kenneth Elliot and Rowe, whom I shall call ‘the solicitors’. He also dismissed a counterclaim brought by Mr Gallagher against that firm alleging negligence.

The background to the action is as follows. Mr Gallagher made a claim under an insurance policy which he had with Financial Insurance Company Limited, and he claimed in making that claim under the policy that he had an accident falling over a carpet on 19 December 1996 which had rendered him permanently disabled. In August 2000 the insurers paid out half of the sum insured, that was some £57,500, not accepting that Mr Gallagher had been permanently disabled. Mr Gallagher decided to pursue the insurers for the other half of the sum insured. It seems that he instructed the solicitors in January 2001. It further seems that on 24^th May 2002 the advice of counsel was obtained as to the chances of success in making the claim against the insurers, and the advice was that the prospects of success were “too poor to make it worth going on with the claim”.

No proceedings were issued against the insurers prior to December 2002. As will be apparent, on 19 December 2002 six years would have passed since the alleged accident. One issue in Mr Gallagher’s counterclaim and decided at trial was whether Mr Gallagher was ever advised about the fact that the Limitation Act would expire on 19December 2002.

No action having been commenced against the Insurers the solicitors claimed that part of their fees which had not been paid. Those further fees were not paid, and the solicitors commenced an action on 21July 2003. They indeed obtained judgment in default on 16 October 2003. It was only thereafter on 10 March 2005 that Mr Gallagher commenced an action against the insurers. He indeed obtained judgment in default against them. That judgment was set aside, and ultimately on 6 July 2006 that action was struck out on a variety of different bases relating to the merits of the claim, but also on the basis that the action had been commenced more than six years after the Limitation Act had expired and on the basis that there were no provisions under the Limitation Act applying which might have extended that period.

It seemed that the solicitors only took steps to enforce their judgment relating to the fees in March 2006. That led to Mr Gallagher seeking to have the judgment that the solicitors had obtained set aside. The judgment was set aside; and in the result Mr Gallagher put in a defence denying that he owed the fees and put in a counterclaim alleging that the solicitors had not advised him about limitation. His assertion was that in the result he had been deprived of the loss of a chance in relation to obtaining the other half of the sum insured which the insurers had not paid. So he counterclaimed for that other half sum plus interest on that sum. It was that action which was tried by HHJ Latham.

The judge, to say the least, was unimpressed by Mr Gallagher as a witness or those witnesses called on his behalf. He found ultimately that, through a Mr Williams acting on behalf of the solicitors, Mr Gallagher had in fact been advised that limitation would expire in December 2002; that is paragraph 91 of the judgment. In addition the judge found that Mr Gallagher’s claim against the insurers was a dishonest claim. The judge found that it would simply have been incredible if that accident had not been mentioned to the doctors whom Mr Gallagher consulted in December 1996 and indeed later in January 1997, and the judge found:

“I simply do not believe that if there had been an accident or trauma component in the complaint that he took to hospital on the 21^st December 1996, that either he or the people who went with him would not have told the doctor that and that it would have been recorded; similarly in relation to Dr Sharma and similarly in relation to Dr Chakravarty.”

He also found that Mr Gallagher exaggerated his claim that he had become disabled, and that appears from paragraph 90 of the judgment. So in the result the judge dismissed the counter claim. Furthermore having regard to the view that he had formed about Mr Gallagher and his witnesses, he also ordered Mr Gallagher to pay indemnity costs on the counter claim.

Mr Gallagher, assisted by Mr Veen, who had represented him at the trial, put in grounds of appeal and applied for permission to appeal. At the forefront of the grounds of appeal was an assertion that, with the aid of a further statement (for which permission was going to be sought to put in evidence in the Court of Appeal), there would be an arguable case that the findings of the judge in relation to the dishonesty of Mr Gallagher and his witnesses would be overturned in the Court of Appeal.

Permission to appeal was granted by the single Lord Justice. The single Lord Justice was of the view that, because it was his view that the finding of negligence was in effect a borderline decision, that there should be permission to appeal on that ground. He then this in relation to the chances of success of the “lost claim”:

“The judge said in relation to the lost claim that all his findings of fact had to be on the balance of probabilities (at paras 42ff) and that was how he proceeded (eg at para 104). Despite the judge’s strong findings on the credibility of Mr Gallagher himself and his other witnesses, it does not appear that the judge was prepared to say that his claim was hopeless or worthless, although he does say in effect that it was a dishonest claim dishonestly pursued (eg at paras 76, 101 and 119). With hesitation, I think there is a real prospect of success on the issue of the Kitchen loss of a chance test, complicated by the findings of dishonesty. I would therefore give permission to appeal on this issue…”

What is important is that t single Lord Justice refused permission to appeal on the judge’s rejection of the witnesses’ credibility, and he was of the view that the fresh evidence which was sought to be put in would not assist on the point it was seeking to make.

No application was made to renew for permission to appeal those aspects on which the single Lord Justice had refused (and that refusal, I should say, was on 2 July 2008). It was in those circumstances that the appeal came on today, that appeal being limited to the question of negligence and whether there was a loss of a chance as a result of not being able to pursue the claim against the insurers.

Mr Veen appeared again before us. It seems that he has been little involved since he put in the grounds of appeal, but he has very properly, having received the papers shortly before the weekend, felt it right to come and argue, insofar as he can, argue the points on this appeal. When he opened the appeal we pointed out to him that his client had serious problems in arguing the negligence issue, having regard to the attendance notes and the findings of the judge; but, even if he could get over that hurdle, his real problem lay in relation to establishing any quantifiable damage for a lost claim. The judge had found that that claim against the insurers was a dishonest claim, and it was a claim, in which Mr Gallagher had been paid out one half. What then were the chances of Mr Gallagher succeeding in a claim against the Insurers if that claim was dishonest? The answer could only be that there was no chance, even if one took no account of the fact that Mr Gallagher had received half. But the chances were worse still if you took into account that he had received half, because the likelihood is, that if an action had been fought out against the insurers, that he would actually have been ordered to repay that half.

We gave Mr Veen an opportunity to consider the position, and when we returned he appreciated that the only basis on which he could mount an appeal on behalf of Mr Gallagher was to seek to argue the dishonesty findings of the judge; and, although he did formally apply for an extension of time so to do, we treated him as having made an application for that extension. We refused that extension of time essentially for two reasons, one of which was we had no basis whatever for ruling that there was some good reason why there had not been a renewal of the application for permission to appeal of that ground, but secondly because any application for permission to appeal that ground was doomed to failure.

This court is very reluctant to interfere with findings by a judge who has listened and heard the witnesses. It takes some special feature to persuade this court that it should interfere with such a judgment, and here one had a case that had lasted some four days. The judge had heard all the witnesses and he had made detailed findings as to the credibility of all the witnesses, and there were no witnesses so far as Mr Gallagher’s side was concerned which the judge believed.

In those circumstances permission to appeal the dishonesty findings has still not been granted. It follows from what I have said previously that because that finding cannot be challenged, there is no prospect of Mr Gallagher establishing that he has lost any chance of succeeding in a claim against the insurers because that claim simply had simply has no prospect of success whatever. It is thus unnecessary to enter into the detail of the finding relating to negligence, and this appeal must be dismissed.

I agree.

I agree.