David Mayall v Merriman White & Ors

The Court of Appeal allowed the appeal by Mr Mayall against the High Court judgment awarding Merriman White contribution under section 1 of the Civil Liability (Contribution) Act 1978 following a settlement with the original claimant. The court held that section 1(4) creates a deemed liability only as between the settling defendant and the original claimant and does not relieve the settling defendant of the burden of proving that the defendant from whom contribution is sought was negligent and that that negligence caused the claimant's loss. The court further held that a contribution claimant who relies on a counter-factual about what the original claimant would have done must call the original claimant where that evidence is material; Merriman White’s failure to call Mr Percy was fatal to its causation case. The court also rejected the view that a non-party legal adviser is always precluded from defending a negligence claim by challenging an earlier merits decision of a judge in related proceedings; collateral-attack/abuse principles did not bar Mayall from showing that other judges might reasonably have reached a different view and therefore that his advice was within the range of reasonable professional judgment.

Background and procedural posture:

• This is an appeal from Chief Insolvency Judge Briggs (sitting as a Deputy High Court Judge) ([2021] EWHC 22 (Ch)) concerning a contribution claim under the Civil Liability (Contribution) Act 1978 made by Merriman White (MW) against the barrister David Mayall following MW's settlement of a negligence claim by its former client, Mr Percy, for £250,000.
• Mr Percy had issued a derivative claim (on behalf of Seven Holdings Ltd) alleging misappropriation by a co-shareholder; permission to continue the derivative claim was refused by a Deputy High Court Judge. MW settled with Mr Percy and sought contribution from Mayall under the 1978 Act.

Nature of the application / relief sought: MW sought contribution from Mayall towards the settlement paid to Mr Percy, relying on section 1(4) of the 1978 Act which entitles a settling defendant to contribution provided he would have been liable "assuming that the factual basis of the claim against him could be established."

Issues considered:

• Whether section 1(4) of the 1978 Act operates to relieve MW from proving that Mayall himself was liable to the claimant, or whether MW still had to prove that Mayall was negligent and that any such negligence caused the claimant's loss.
• Whether Mayall was precluded, on abuse of process/collateral attack grounds, from challenging the merits of the Deputy Judge's permission decision made in the derivative proceedings.
• Whether MW proved causation (i.e. that, had Mayall given the alleged advice, Mr Percy would have acted differently), and who bore the evidential burden on that counter-factual.
• Whether the rule against reflective loss barred the contribution claim.

Court’s reasoning and conclusions:

• The Court of Appeal held that section 1(4) operates only to relieve the settling defendant (D1) from having to prove his own liability to the claimant; it does not dispense with D1's obligation to show that the defendant from whom contribution is sought (D2) was liable in respect of the same damage. The decision in Newson was interpreted in that narrower context; Newson did not create a general rule that satisfaction of the section 1(4) proviso alone establishes D2's liability.
• The court rejected the view that Mayall was automatically barred from contesting aspects of the permission decision by way of abuse of process. Because Mayall had not been a party to the permission hearing, and because other judges might reasonably have reached a different view (authorities were cited where permission was granted in similar circumstances), it was permissible for him to show that his advice fell within the range of reasonable conduct.
• On causation the court emphasised that the critical counter-factual depended on what Mr Percy would have done if given the alleged warning; MW bore the burden of proving that counter-factual. MW elected not to call Mr Percy at the contribution trial and thereby left a material lacuna in its evidence. The evidence put before the trial judge did not suffice to establish that Mr Percy would have settled earlier if given the alleged advice. For that reason MW’s contribution claim failed.
• The Court of Appeal briefly considered the reflective loss point and concluded Mr Percy’s claim was a personal loss (exposure to adverse costs affecting his negotiating position) to which the narrow reflective-loss rule did not apply.

Disposition: The appeal was allowed and the contribution claim was dismissed. The Court considered it inappropriate and oppressive to remit for retrial given MW's chosen approach below and the passage of time.

Appeal allowed. The Court of Appeal held that section 1(4) of the Civil Liability (Contribution) Act 1978 creates a deemed liability only as to the settling defendant's liability to the claimant and does not remove the contribution claimant's obligation to establish that the defendant from whom contribution is sought was negligent and that that negligence caused the claimant's loss. The settling defendant failed to prove the necessary counter-factual causation because it did not call the original claimant to give the critical evidence; the contribution claim therefore failed. The Court also held that a non-party adviser is not necessarily precluded, by abuse of process principles, from defending a negligence claim by demonstrating that the earlier judicial decision was not inevitably correct, particularly where other judges might reasonably have reached a different view. For these reasons the High Court order for contribution was set aside and the contribution claim dismissed.

Appeal from Chief Insolvency and Companies Court (Chancery Division) Deputy High Court Judge Briggs: [2021] EWHC 22 (Ch). Appeal heard and allowed by the Court of Appeal (Civil Division): [2022] EWCA Civ 493.