David Mayall v Merriman White & Ors

Under section 1(4) of the Civil Liability (Contribution) Act 1978, a bona fide settlement relieves the contribution claimant only from proving its own actual liability. It does not establish the contribution defendant’s liability. The claimant must still prove that the defendant breached duty and caused the same damage.

Where the alleged breach is a failure to advise, causation depends on the identified counterfactual. The party advancing that allegation must prove that the client would have acted differently if properly advised. If only the client can prove that issue, failure to call that evidence may leave a fatal lacuna. A professional is not negligent merely because advice proves wrong; the issue is whether it fell outside the range of reasonably competent advice.

Mr Percy alleged that his former solicitors, Merriman White, and the barrister they instructed, David Mayall, had negligently advised him to pursue a derivative claim concerning a deadlocked company. The permission application for that claim failed. Mr Percy discontinued his claim against Mr Mayall but settled his claim against Merriman White for £250,000.

Merriman White then sought a contribution from Mr Mayall under the Civil Liability (Contribution) Act 1978. The High Court held that the settlement and section 1(4) entitled it to contribution, and ordered Mr Mayall to pay 40 per cent: [2021] EWHC 22 (Ch). Mr Mayall appealed, challenging the construction of section 1(4), the treatment of the earlier permission judgment, negligence, causation and reflective loss.

1. Appeal allowed; contribution claim dismissed. Section 1(4) of the Civil Liability (Contribution) Act 1978 creates deemed liability only as between the settling defendant and the original claimant. It removes any inquiry into whether the settling defendant was actually liable, provided the proviso is met. It does not remove the need to establish that the contribution defendant was liable to the original claimant for the same damage. WH Newson did not decide otherwise. Its conclusion that the settling defendant would succeed against the contribution defendant reflected its exceptional cartel facts, in which both defendants were already bound by the Commission’s finding.

2. The judge was also wrong to treat a challenge to the derivative-claim permission judgment as necessarily abusive. Mr Mayall was neither a party nor a privy to that litigation and could not appeal it. A collateral challenge by a non-party is abusive only exceptionally, applying the principles in Bairstow. In any event, Mr Mayall did not need to prove that the earlier judge was wrong. The decisions in Hughes v Weiss and Saatchi v Gajjar showed that a reasonably competent barrister could advise that a derivative claim was appropriate notwithstanding possible alternative remedies.

3. The finding relied on below was an unpleaded failure to warn, at the January 2011 conference, of a risk that permission might be refused. The pleadings did not identify the advice alleged to have been required or the necessary counterfactual. The judge also wrongly treated Mr Mayall as having admitted causation.

4. Causation required Merriman White to prove that, if Mr Mayall had given the relevant warning, Mr Percy would have acted differently, such as by seeking an immediate settlement. That burden lay on Merriman White. Mr O’Sullivan’s evidence about Mr Percy’s attitude to the risks of a trial did not prove his response to a low risk of refusal at the permission stage. As Mr Percy alone could give the necessary evidence and was not called, there was a fatal lacuna. Unadopted pleadings were not evidence.

5. The reflective-loss issue did not affect the result. The alleged loss was personal: Mr Percy’s weakened settlement position flowed from his potential personal liability for costs. It was therefore outside the narrow reflective-loss rule. A retrial would be unfair and oppressive, particularly after twelve years and where the case advanced on negligence and causation had not been pleaded.

• Court of Appeal (Civil Division): Allowed Mr Mayall’s appeal and dismissed Merriman White’s contribution claim: [2022] EWCA Civ 493.
• High Court, Business and Property Courts: Held that Merriman White was entitled to contribution under the Civil Liability (Contribution) Act 1978 and assessed Mr Mayall’s contribution at 40 per cent: [2021] EWHC 22 (Ch).