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By Nick Weston

Feb 1st, 2018

Pre-action Admission may be withdrawn where quantum dramatically increases

The Court of Appeal has recently held that substantial change in a claim’s value is a relevant criterion to be considered when the court is asked to allow the withdrawal of an earlier admission of liability.  The decision in Wood v Days Healthcare UK Limited and Others [2017] is likely to be of assistance to insurers. 

Background

The claimant, a paraplegic, was reliant on a motorised wheelchair.  The defendant had initially manufactured the wheelchair, although there were subsequent modifications (see below).

An accident occurred on 26 October 2009 when the wheelchair’s riser unit (manufactured by a Danish company) failed, and the claimant was catapulted into her desk.


The Claim

The claimant’s solicitors sent a letter of claim to the defendant.  At the outset, it was alleged that the claimant had sustained a rotator cuff injury to her right shoulder, and soft tissue injuries.

The defendant’s insurers instructed loss adjusters, who sought to clarify the value of the claim.  The claimant’s solicitors advised that they expected the claim to be of fast-track value, i.e. up to £25,000. 

In circumstances which are rather unclear, it subsequently turned out that there was an investigation report, obtained by the claimant’s solicitors, dated 13 November 1989 (“the investigation report”).  This concluded that while the wheelchair had been manufactured by the defendant, there had been significant modifications, arranged by the co-defendants, in summer 2008.  In other words, the riser that had failed had not been initially installed by the defendant.

It was unclear whether the investigation report was seen by the defendant’s loss adjusters, who fully admitted liability on 14 June 2010. 

Subsequently, the claim evolved.  In 2012, the claimant’s solicitors served medical evidence which outlined significant changes to their client’s symptoms, namely a post-surgery loss of movement in her right hand. This was especially devastating to a paraplegic claimant.
 
Proceedings were issued in October 2012.  The claim was pursued in negligence and breach of contract.  The statement of value was “in excess of £300,000”. 

The defendant sought permission to withdraw the admission of liability. 

The CPR

By way of background, CPR 14 PD lists the factors which the court will take into account when considering an application to withdraw an admission. The court has regard to all the circumstances of the case, including whether any new evidence has come to light, the conduct of the parties and the degree of prejudice that will be suffered by either side whether or the application is granted. 

The degree of discretion is wide. The court will consider each listed point prior to striking an appropriate balance, with a view to achieving the overriding objective.

The Decision at First Instance

In the District Registry, the defendant was refused permission to withdraw its admission.

The judge clearly had little sympathy with the loss adjusters.  She found that a reasonable investigation would have revealed the existence of the investigation report.  Had they considered this report, the judge found that the loss adjusters would not have admitted liability.

The defendant had admitted liability upon their advice. The loss adjusters had had the opportunity of investigating.  In the interests of finality, in the circumstances the defendant should be held to the admission. 

The risk of the potential value of the claimant’s claim increasing was inherent in any personal injury claim.  The judge did not find that this increase in value was a sufficient reason for allowing the defendant to withdraw the admission. 

On Appeal

In a unanimous judgment, the Court of Appeal found that the judge had been mistaken and the admission could indeed be withdrawn. The leading judgment was formed by Lord Justice Davis.  The key points are:

• New evidence had emerged about the value of the claim.  “An increase of a few thousand pounds perhaps may be an unacceptable and foreseeable inherent risk.  But a ten–fold increase, to over £300,000, is surely another thing altogether”.

• Based upon the evidence at the time, the loss adjusters had had no reason to realistically expect such a dramatic increase in the value of the claim. 

• Due to an oversight, they had not seen the investigation report.  Accordingly, they had not taken a fully informed calculated risk when liability was admitted. 

• “The judge’s stark approach – that a risk of increasing quantum is inherent in any such claim – would in my view tend to discourage speedy admission of liability in (then) small claims … it would tend to discourage them for fear of a subsequent withdrawal of admission of liability being refused”. 


Points for Insurers

1. As before, each case turns on its facts. However, insurers should be heartened that the court will be sympathetic where there has been a significant increase in value of the claim. 

2. A note of caution is that the Court of Appeal was rather forgiving of the oversight by the loss adjusters.  It cannot be assumed that there will always be such tolerance. The importance of thorough investigation by loss adjusters has been emphasised.

3. Here there was a very significant increase in the claim’s value.  The position may be less clear in circumstances where there has not been such a dramatic increase.

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