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What do you do if you believe your bank has given poor investment advice? Shrug your shoulders and walk away?
To the uninitiated, it sounds like the driest form of legal jargon. But a ‘Part 36 procedure’ is helping thousands of people get speedy access to justice. It’s a reform which could help you settle disputes without the expense of a day in court. Leeds businessman Derek Mitchell used Part 36 to pursue a successful professional negligence claim against a banking giant. The seeds of his dispute with Lloyds TSB were sown in late 1999. Mr Mitchell was advised by his local Lloyds TSB branch to buy shares in a new private company. He invested £35,000 in Leeds-based GTL Holdings, which traded as Admiral Lifts. It proved to be woeful advice. The new business made substantial losses and was wound up in 2003. Mr Mitchell faced losing his entire investment, and was determined to gain compensation for the flawed advice. Mr Mitchell, who is the owner of Environmental Lining Systems, which installs membranes for landfill sites, lakes and lagoons said: “It seemed to be a very good investment but proved to be a bad one. I wrote to the bank and they gave me short shrift”. So he hired Levi Solicitors to take on his case. Paul Sykes, head of litigation, approached the bank, and then the bank’s City of London Solicitors, who rejected any claim for compensation. Mr Sykes made a Part 36 offer to accept a £30,000 settlement. But what is a Part 36 procedure? It’s where you claim someone owes you money, and there is a dispute over the figure. You can then make a confidential offer, stating the amount you would be prepared to accept. If your opponent rejects the offer, and you are later awarded more in court, the judge has the power to penalise them for not settling earlier.
Levi's issued proceedings claiming professional negligence. The bank continued to fight until a couple of weeks before the trial. Paul Sykes said: “Mr Mitchell was resigned to having to call witnesses and to go to trial. Finally, the bank began to make proposals, but even at this last minute they refused to pay anything towards our client’s legal costs. After further rounds of tough negotiations, the bank eventually capitulated. They agreed to meet Mr Mitchell’s offer that he had made at the start, by paying him £30,000 damages”. “Because they had to accept that it was unreasonable for them to have rejected his original Part 36 offer at £30,000, the bank agreed to judgment being entered for £30,000 plus interest at the penalty rate of 14.75 per cent. “The bank agreed to pay Mr Mitchell’s legal costs on the indemnity basis. On top of that the bank agreed to pay interest on the indemnity costs at 14.75 per cent.”
This case showed that victims of bad professional advice should be tenacious in their quest for justice. He added: “We are regularly encountering cases where an early and very carefully calculated Part 36 offer is put, but rejected by an opponent. “Ultimately, the opponent has to back-track as the trial date approaches. This can result in the opponent capitulating and having to pay not only for the damages that would have been accepted in the first place, but legal costs on top, and in some circumstances punitive interest on top of the damages and on top of the costs.” A spokesman for Lloyds TSB said the bank had always been confident of its position in this case, but was unable to present its arguments in court: “Therefore the decision was taken to settle this matter out of court with Derek Mitchell.” Mr Mitchell feels his lone stand should inspire others. “Lloyds TSB thought that if sufficient time elapsed I would back down and withdraw my claim, “ he said. “But I felt I was justified in what I was doing. If you feel strongly about something you should stick to your guns. Just because they are large doesn’t mean they are right.”
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