Family Law Hub

Hogg v Crutes LLP [2016] EW Misc B29 (CC)

Solicitors for the husband were found liable for not advising him that he need only transfer 58% of his pension to the wife, not 100%.

  • Case No: C80LS1

    IN THE COUNTY COURT

    Sitting at LEEDS

    The Court House

    Oxford Row

    Leeds LS1 3BG

    Date: 01/11/2016

    Before:

    His Honour Judge Behrens

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    Between:

    BRIAN HOGG (Claimant)

    - and - 

    CRUTES LLP (Defendant)

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    Anthony Hajimitsis (instructed by Lyons Davidson) for the Claimant

    Clare Dixon (instructed by Clyde & Co) for the Defendant

    Hearing dates: 28 and 29 September 2016

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    Judgment

    Judge Behrens:

    1. Introduction

    1. This is a claim by Mr Hogg against his former solicitors, Crutes LLP, arising out of the settlement of ancillary relief proceedings. It is Mr Hogg's case that these proceedings could and should have been concluded on terms which were more favourable to him.

    2. Mr Hogg has three complaints in relation to the settlement. The first complaint relates to the Hogg Trust. This was a pension fund of which Mr Hogg was the primary beneficiary. Under the terms of the settlement Mr Hogg agreed to transfer the whole of the benefits under the policy to his wife. The value of the Hogg Trust was £143,339.88. Actuarial advice had been obtained that in order to provide equality of income Mr Hogg needed to transfer 58% of the value of the trust. Mr Hogg denies that he authorised his lawyers to agree to transfer the whole of the Hogg Trust to his wife. He further contends that he was not given adequate or proper advice in relation to the transfer. He should have been advised that he did not need to transfer more than 58% of the Hogg Trust to his wife. He has therefore lost 42% of the Hogg Trust. In answer to this claim Crutes contends that Mr Hogg expressly authorised the transfer of the whole of the Hogg Trust and that he was properly and adequately advised in relation to it.

    3. The second complaint relates to 4 bonds which were part of the jointly owned assets and were valued in total at £181,620. As part of the settlement it was agreed that Mr Hogg would keep the two more valuable bonds and make an equalising payment to his wife to ensure that they would receive bonds of equal value. This could be achieved by an equalising payment of £12,056. However the settlement agreement provided for an equalising payment of £24,112. Crutes accept that there was negligence in computing the equalising payment and that Mr Hogg is in any event entitled to judgment in the sum of £12,056 plus appropriate interest.

    4. The third complaint relates to a Scottish Widows pension fund in respect of which Mrs Hogg was the principal beneficiary. The value of this was £34,822.50. Mr Hogg complains that he should have been advised to make a claim in respect of this policy. If he had he would have been advised that to achieve equality of income 42% of the policy should be transferred to him. Crutes make the point that at no stage was there any suggestion that any part of this policy should be transferred to Mr Hogg and that they were not negligent in failing to advise that it should.

    5. There are significant disputes of fact between Mr Hogg and Mrs Blount, the solicitor on behalf of Crutes with conduct of the matter on behalf of Mr Hogg. Although Mrs Blount made a witness statement in 2016 she did not give oral evidence as she is suffering from multiple sclerosis. She did however make detailed (but not always legible) contemporaneous file notes. There is also contemporaneous correspondence which is consistent with the file notes. Mr Hogg did give live evidence. Much of his evidence was inconsistent with Mrs Blount's file notes. Mr Hogg suffers from dyslexia and is unable to write. I take that into account in assessing his evidence. It is however right to record that where there were differences between Mr Hogg's version of events and the file notes Mr Hogg was prepared to accuse Mrs Blount of fabricating her file notes.

    2. The facts

    Brief chronology

    6. Mr Hogg was born in July 1940. Mrs Hogg was born in August 1955. They began cohabiting in November 1978, had two children and were married in April 1984. By the time he met Mrs Hogg, Mr Hogg had 6 children from previous relationships and had also started a steeplejack business. That business continued until 2002 when Mr Hogg retired and left it to one of his sons from a previous relationship.

    7. In August 2007, Mr Hogg and Mrs Hogg separated, and Mrs Hogg petitioned for divorce. Mrs Hogg instructed Dickinson Dees Solicitors ("DD") to act for her and Mr Hogg instructed Crutes. The solicitor with conduct at DD was Theresa Davison. The solicitor with conduct at Crutes was Christine Blount who was an experienced matrimonial solicitor and head of the family department at Crutes. During the dispute Mrs Blount instructed Counsel Brian Mather who practiced from Newcastle. There is no suggestion that this case was not within his competence and/or expertise.

    8. The case was not straightforward in that it included an application for a freezing order against Mr Hogg in relation to a sum of approximately £245,000 which was paid to him by his daughter in September 2008.

    9. In the light of the conflicts of evidence it will be necessary to consider (albeit not in detail) some of the events leading up to the ancillary relief hearing so as to consider the reliability of Mr Hogg's recollection and the quality of Mrs Blount's file notes.

    10. On 24 June 2008 acting on the joint instructions of the parties Mr Hart produced an actuarial report on the Hogg Trust. In it he advised that in order to equalise the income from the Hogg Trust as between Mr and Mrs Hogg Mr Hogg would need to transfer 58% of the Hogg Trust to Mrs Hogg. He estimated that it would then provide an income of approximately £5,000 p.a for each of them. Mr Hart was not instructed to produce an equivalent report in respect of the Scottish Widows fund.

    11. On 25 June 2008 DD served Mrs Hogg's open proposals. These comprised (a) equal division of capital, (b) a pension share order so as to equalise the pension income from the Hogg Trust and (c) periodical payments of £7,000 p.a until her 60th birthday or a £35,000 lump sum to provide for accelerated receipt.

    12. On 1 July 2008 Crutes served Mr Hogg's open proposals which comprised (a) an equal division of the 4 endowment policies with Mr Hogg making a balancing payment to make up the difference in value and (b) a pension share in favour of Mrs Hogg in respect of 50% of the Hogg Trust.

    13. The ancillary relief hearing was listed before DJ Hall in Middlesbrough on 3 July 2008. The parties reached agreement following negotiations on that day between 12 noon and 3 p.m. The DJ had indicated a provisional view that Mrs Hogg should be entitled to 58% of the Hogg Trust. It will be necessary to consider the assets of the parties and the terms of the settlement in more detail later judgment. Mrs Blount made a manuscript file note during the negotiations. Following a complaint by Mr Hogg made on 7 July 2008 substantially in relation to the balancing payment she made a further manuscript note at 1 p.m on 10 July 2008. Finally there is a typed file note dated 14 July 2008 from Mrs Blount which (though not identical) is in substantially the same terms as the file note of 10 July 2008.

    The assets of the parties prior to the settlement

    14. The assets of the parties as at the date of the divorce can be seen from the following tables:


    Capital
    Joint
    Mr Hogg
    Mrs Hogg
    Real Property
       
    6 Whinstone Drive
    225,000
      
    Spanish Property
    295,560
      
    17 Portman Street
     40,000
     
        
    Bank Accounts
       
    Northern Rock
    206,910
      
    Barclays Premier current
    16
    589
    (395)
    Barclays savings/cash reserve
    6,425
    30,743
    14,880
    Barclays rent
     2,412 
     
    Halifax
     260
     
    Spanish account
    3720
      
        
    Shares
       
    Bradford & Bingley
     161
    161
    HBOS
     2246
     
        
    Investment Bonds   
    Axa
    42,805
      
    Prudential
    51,111
      
    Norwich Union
    51,755 
      
    Phoenix
    35,949
      
        
    TOTAL:
    919,251
    76,411
    14,646 

    Pension

     Total
    Mr Hogg
    Mrs Hogg
    Hogg Trust
    143,339.88
    143,339.88
     
    Mr Hogg's state
    112,692.58
    112,692.58
     
    Scottish Widows
    34,822.50
     34,822.50
    Wife's state
    22,519.91
     22,519.91
         

     Income

    15. As at the date of the hearing Mr Hogg was in receipt of income from the Hogg Trust, his state pension and rent from 17 Portman Street. In the file note of 3 July 2008 Mrs Blount made a calculation which indicated that Mr Hogg's income was £458.42 per month. There was some suggestion in a file note made a few days earlier that the income from Portman Street was precarious because it was empty and on the market.

    16. Mrs Hogg's income was declared as nil. However, there was an issue at the trial as to whether Mrs Hogg had an earning capacity. She was 52 had some skills as a bookkeeper but had not worked for a number of years. A number of business ventures which Mr Hogg had set up for her had failed. At 52 she was not entitled to her state pension or her Scottish Widows pension. She would however be entitled to income from the Hogg Trust in so far as it was transferred to her. Furthermore, in so far as Mrs Hogg received a settlement some of the monies could be used to provide an income for her.

    Settlement

    17. The effect of the settlement can be seen from the following tables1:

    Capital

     Mr Hogg
    Mrs Hogg 
    Property 
      
    6 Winstone Drive
    225,000 
     
    17 Portman St
    40,000
     
    Spanish property
     295,560
       
    Bonds 
    102,866
    78,754
    Balancing
     24,112
       
    Bank accounts
    115,712 
    128,093
       
    Shares
    2,408
     161
    Total485,986
    526,680

    18. It is to be noted that this calculation includes the actual balancing payment agreed. It is important not to double count the effect of the mistake. If one takes the correct balancing figure of £12,112 the result would still be that Mrs Hogg would receive about £16,000 more capital than Mr Hogg.

    Pension

    19. The effect of the pension sharing order was that Mrs Hogg would have the benefit of pensions valued at £200,682 whereas Mr Hogg would have pensions valued at £112,692.

    20. The only pensions actually paying out were Mr Hogg's state pension and the Hogg Trust.

    Income

    21. Mrs Hogg would be entitled to income from the Hogg Trust – approximately £9,600 p.a. She would also be entitled to income from her investments and any income from working. In due course she would be entitled to her state pension and the income from the Scottish Widows fund.

    22. Mr Hogg would be entitled to his state pension and any income from his investments.

    The events leading to the freezing order.

    23. In early September 2007 Mr Hogg's daughter repaid £245,000 in respect of a joint loan made to her. There was considerable correspondence as to what happened to it as DD sought to ensure it was not dissipated.

    24. In any event in November 2007 Mrs Blount made a file note recording the fact that Mr Hogg had given £200,000 to his children. Later in December she made another file note saying that £200,000 had been set aside for the four children of his previous marriage. That note was contained in a letter sent to DD on 18 December 2007.

    25. In evidence Mr Hogg denied that he had given those instructions making the point that the £245,000 was at all times safe though he had transferred £200,000 to Northern Rock to gain an advantageous interest rate.

    The offers of the Hogg Trust

    26. It was suggested in cross-examination that Mr Hogg had made an offer of the whole of the Hogg Trust to Mrs Hogg in April 2008. He denied this. However, existence of the offer was supported by a file note made by a secretarial assistant at Crutes on 23 April 2008, a manuscript file note in Mrs Blount's handwriting, a letter dated 24 April 2008 from Mrs Blount to DD and a reply dated 15 May 2008 from DD to Mrs Blount.

    27. There is also a file note of a Conference with Counsel on 6 June 2008 which suggests that Mr Hogg said that he would rather give Mrs Hogg the Hogg Trust. Mr Hogg said in evidence that he had no recollection of this.

    30 June 2008

    28. In paragraph 28 of his witness statement Mr Hogg refers to the fact that there were a number of discussions between Counsel and Mrs Blount on 30 June and suggests that Mrs Blount did not inform him of Counsel's advice.

    29. The file reveals that Mrs Blount had 3 conversations with Counsel and 3 with Mr Hogg. Amongst other matters Mr Mather advised that the judge was unlikely to ring fence any assets and that in essence there would be a 50:50 split. He thought there would be a 50:50 split on the Hogg Trust, and the maintenance claimed in Mrs Hogg's open statement was too high. He thought the maximum was £200 per month.

    30. In one of the conversations between Mr Hogg and Mrs Blount the file note suggests that Mr Hogg put forward 3 proposals one of which involved an offer of the whole of the Hogg Trust. In the last conversation between Mr Hogg and Mrs Blount the file note records proposals which formed the open offer which was made by Mrs Blount on behalf of Mr Hogg the following day.

    The negotiations on 3 July 2008

    Mr Hogg's evidence

    31. In his witness statement Mr Hogg deals with the negotiations at paragraphs 34 to 37. In it he has no recollection of being told the judge's preliminary view on the Hogg Trust. He asserts that the significance was not explained. He has no recollection of Mrs Blount making enquiries about Mrs Hogg's entitlement to the Hogg Trust. It was never his intention that he would transfer the whole of the Hogg Trust. He did not authorise Mr Mather to agree to that percentage.

    32. In cross-examination he did not resile from this position.

    Mrs Blount's file notes

    33. I shall not lengthen this judgment by setting out the 3 file notes verbatim but it is necessary to summarise them

    The file note of 3 July 2008

    34. The file note starts with a discussion about the Hogg Trust. It refers to DJ Hall's preliminary view. It points out that Mrs Hogg can draw an income from the Hogg Trust as she is over 50.

    35. After referring to the Spanish property it contains a calculation in relation to the bonds. It then contains an analysis of Mr Hogg's income concluding that his income from the Hogg Trust, his pension and rent from Portman Street was £458.42 per month. The income of Mrs Hogg was said to £200 per week.

    36. After recording a discussion about what Mr Hogg thought Mrs Hogg could draw from the Hogg Trust it contains what appears to be a proposal which refers to "the Hogg Trust".

    37. At this stage there is reference to a conversation with Sarah Allsop (the Administrator of the Hogg Trust) who confirmed in a fax that Mrs Hogg could draw up to £9,600 p.a.

    38. There then appears to be a summary of the values of the assets in accordance with the proposal. The summary values Mr Hogg's assets at £476,321 and Mrs Hogg's assets at either £489,265 or £629,625. As the Hogg Trust is valued at £140,000 it is to be inferred that the two values are values with or without the Hogg Trust.

    39. There is then a note that Mrs Hogg had agreed.

    40. There is nothing in the file note to suggest that Mr Hogg was advised that payment of the whole of the Hogg Trust was more than was likely to be awarded.

    The file note of 10 July 2008

    41. This is a more coherent note no doubt prepared with the benefit of the 3 July file note. It refers to the indication from DJ Hall, and the bonds. It continues:

    [Mr Hogg] then suggested "give her the Hogg Trust". Counsel checked he was serious. [Mr Mather] worked out the figures. I was asked to ring the Hogg Trust to check that she could draw straight away and if so how much.

    42. It refers to the negotiations between Mr Mather and Counsel for Mrs Hogg and to Mrs Hogg's agreement. The order was drafted by Mrs Hogg's Counsel. Mr Mather went through the order more than once with Mr Hogg who agreed to it. Mr Hogg signed the order. The judge approved the order without Mr Hogg or Mrs Blount going into court.

    43. It is again to be noted that there is no reference in the file note to any advice given by Mrs Blount or Mr Mather about giving the whole of the Hogg Trust to Mrs Hogg. As Mr Hajimitsis pointed out the highest the matter is put is that he checked if Mr Hogg was serious.

    The typed file note

    44. As already noted there are no material differences between this and the file note of 10 July 2008 and I do not need to refer to it.

    Mrs Blount's witness statement.

    45. Mrs Blount's witness statement is dated 2nd August 2016 and was served together with a Notice pursuant to s2 Civil Evidence Act. The notice recorded that Mrs Blount was suffering from advanced multiple sclerosis. Importantly it noted that she suffers from cognitive impairment and can lose her train of thought easily.

    46. The only part of her statement that it is necessary to refer is in paragraph 9 where she says:

    I recall that both Counsel and I advised Mr Hogg that it was not necessary to offer 100% of the Hogg Trust and my note records that Counsel checked with Mr Hogg that he was serious.

    47. Mrs Blount was not, of course, cross-examined on her witness statement. However, Mr Hajimitsis invited me not to rely on it. He pointed out that it was made 8 years after the relevant event, at a time when Mrs Blount was suffering from cognitive impairment. If this advice had been given, he submitted that it would have appeared in one of the three file notes.

    Mr Hogg's complaints

    48. Mr Hogg first complained to Crutes on 7 July 2008. On that day there were a number of calls between Mrs Blount and Mr Hogg. In the first call his complaint was about the mistake in the balancing payment. However, in a call timed at 15.39 Mrs Blount's note records that he complained that he should not have given Mrs Hogg what he did and should have been told not to. Mrs Blount said he was happy with it at court. He said he was "unhappy now".

    49. On 28 July 2008 Mr Hogg was advised to seek independent advice.

    50. On 25 February 2009 Mr Hogg wrote a letter of complaint which made express reference to the Hogg Trust.

    51. On 25 August 2011 the original letter of claim did not mention the complaint about the Hogg Trust. However, in the light of the earlier references I do not think it can fairly be said that no complaint was made about the transfer of the Hogg Trust until 2013.

    3. Assessment of the witnesses.

    52. In the course of her submissions Miss Dixon drew to my attention a relatively well-known passage from the judgment of Leggatt J in Gestmin v Credit Suisse [2013] EWHC 3560 where he stresses the importance of contemporaneous documents, the fallibility of human memory and the dangers of accepting oral testimony which conflicts with contemporaneous documents.

    53. All of the relevant events in this case took place more than 8 years ago. Mr Hogg suffers from dyslexia, Mrs Blount suffers from multiple sclerosis which includes cognitive impairment. At the time of the relevant events Mrs Blount made detailed file notes.

    54. In all the circumstances I have come to the conclusion that the file notes and contemporaneous correspondence provide a more reliable route to the facts than either Mr Hogg or Mrs Blount's witness statement.

    55. I cannot accept that Mrs Blount fabricated her file notes and that they would be as inaccurate as they would need to be if I were to accept Mr Hogg's evidence. It follows that I reject Mr Hogg's evidence save and in so far as it is consistent with the documentary evidence.

    56. Equally, largely for the reasons given by Mr Hajimitsis I do not accept that either Mrs Blount or Mr Mather advised Mr Hogg that he did not need to offer to transfer the whole of the Hogg Trust. I am fortified in this conclusion by Mrs Blount's file note of the 7th July telephone conversation. When Mr Hogg complained that he should have been "told not to" I would have expected Mrs Blount to have said (and recorded in her note) that he was so told. Instead she merely told him that he was happy at the time.

    4. The law

    57. There was little, if any, difference between Counsel as to the law. In paragraphs 26 and 27 of her skeleton argument Miss Dixon put the matter in this way:

    26. … a finding of professional negligence requires a finding that the defendant concerned did, or did not do, something which no reasonably competent solicitor would have done.

    27. However, a solicitor also has a duty to follow his client's instructions. If a client, having been appropriately advised, gives a solicitor instructions, then the solicitor is obliged to follow them .

    5. Discussion and Conclusion

    the Hogg Trust

    Instruction

    58. As Miss Dixon pointed out the first question is whether Mr Hogg did in fact instruct Mrs Blount/Mr Mather to offer Mrs Hogg to transfer the whole of his interest in the Hogg Trust.

    59. For reasons that I have given I prefer the evidence in the file notes of Mrs Blount. I am satisfied on the balance of probabilities that Mr Hogg did instruct them to offer the whole of the Hogg Trust. The file notes make it clear that Mr Hogg did give the instructions, that Mr Mather went through the order with him on more than one occasion and that Mr Hogg signed the order.

    60. It follows that in so far as the claim is based on an allegation that the order went beyond Mr Hogg's express instructions it fails.

    Advice

    61. Mr Mather advised that this was an appropriate case for an equal split of the capital assets. No-one has suggested that that advice was wrong. Certainly it was within the range of advice that could be given in relation to this marriage.

    62. In order to give appropriate advice it was therefore necessary to consider precisely what the assets were and their value. If this had been done properly (and no mistake had been made about the balancing payment) it should have been appreciated that the value of the capital which Mrs Hogg would own was some £16,000 more than that owned by Mr Hogg. As Miss Dixon pointed out valuation is not an exact science but that is based on the figures known the parties as at 3 July 2008. There was thus no reason to give Mrs Hogg an enhanced pension contribution based on the disparity of capital.

    63. In argument Miss Dixon made much of Mrs Hogg's claim for income. A number of points can be made. First, Mr Mather regarded it as exaggerated. He put the claim at £200 per month. Second, Mrs Hogg could derive some income from the capital she was to receive under the settlement. Third, Mrs Hogg offered to capitalise her claim at £35,000. In so far as Mrs Hogg was receiving more than £16,000 capital than Mr Hogg this goes a long way to meeting that need. Fourth, 58% of the Hogg Trust would have provided Mrs Hogg with an income of nearly £5,000. To my mind there is little that should have been made over the claim for income.

    64. The total value of all four pensions was £313,374. Mrs Hogg already owned pensions with a value of £57,341. The transfer of the whole of the Hogg Trust would mean that the value of her pension rights would be £200,682 or nearly 2/3 of the combined pension pot.

    65. In my view it is inconceivable that DJ Hall would have ordered that the whole of the Hogg Trust to be transferred to Mrs Hogg. This view is fortified by his preliminary view that the distribution should have been in accordance with the actuary's report.

    66. In my view, therefore, the offer was overgenerous to Mrs Hogg. In my view any competent matrimonial solicitor or counsel should have appreciated that fact and given clear advice to Mr Hogg to that effect. He should in my view have been advised that the capital offered was more than 50% of the total capital assets, and that there was no need to offer more than the 58% suggested by the actuary in relation to the Hogg Trust.

    67. It may be that Mrs Hogg was seeking more. However, Mr Hogg's lawyers should have analysed the arithmetic and satisfied themselves that Mrs Hogg's demands were unrealistic. Mr Hogg should have been given that advice.

    68. For reasons I have given I am not satisfied that either Mrs Blount or Mr Mather ever advised fully or clearly on the offer. It is not clear why. It may be that they did not analyse the figures sufficiently carefully. This is demonstrated by the mistake that was made over the balancing payment.

    69. It follows that I am satisfied that the failure to give the advice was negligent. I am also satisfied that if appropriate advice had been given Mr Hogg would not have offered to transfer the whole of the Hogg Trust and would only have offered the 58% suggested by the actuary and which appealed to DJ Hall.

    70. It follows that liability is established.

    71. The assessment of damages is based on the loss of the chance that Mr Hogg would have achieved a better settlement. The starting point is the value of 42% of the Hogg Trust or £60,202.75. Miss Dixon submitted that there should be a discount from this figure to take into account the chance that DJ Hall would have made an income award against Mr Hogg. To my mind that chance is very small for the reasons I have set out above. I cannot completely ignore it and I propose to discount this sum by 5%. Thus I would award Mr Hogg the sum of £57,192.61 under this head. He is entitled to interest on this figure.

    The Scottish Widows

    72. I propose to deal with this quite shortly. As Miss Dixon pointed out there was never any suggestion by anyone that Mrs Hogg should transfer any part of the Scottish Widows Fund to Mr Hogg. The Scottish Widows Fund was only valued at £34,822.50. It is referred to in some of the file notes so it was not overlooked. If Mrs Blount had suggested to DD that part of the Scottish Widows Fund be transferred to Mr Hogg it is quite possible that DD would have asked for an order in relation to Mr Hogg's second state pension which was valued at £112,692.

    73. In my view it cannot possibly be said that Mrs Blount was negligent in failing to seek an order in relation to the Scottish Widows Fund. In my view she was sensible in not doing so. It would have increased the costs and might well have backfired on Mr Hogg.

    74. The claim in relation to the Scottish Widows Fund fails.

Judgment, published: 22/11/2016

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Published: 22/11/2016

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