Solicitors Negligence Case law
Carruthers Law provides a review as to important recent cases brought against solicitors in negligence.
Elliott v Hattens Solicitors (a firm) [2021] EWCA Civ 720
In Elliott v Hattens Solicitors (a firm) [2021] the court considered the preliminary issue at trial of the question of whether or not the claim brought by Mrs Elliott (‘the Respondent’), against her solicitors, Hatten Solicitors (‘the Appellant’), was statute barred. The answer would depend upon when damage was sustained. Read more.
Edwards v Hugh James Ford Simey Solicitors [2019] EWSC 54
This case was in relation to a negligence claim against the Defendant firm for alleged failure to properly advise as to settlement of a claim for Vibration White Finger (“VWF”).
It was held at the Supreme Court that a Claimant is required to prove on the balance of probabilities loss of a real and substantial opportunity to bring his special damages claim for services available through the government’s compensation scheme.
It was held that the court at first instance had erred in valuing the lost claim on the basis of evidence which was unavailable at the time of the services claim. If a claim for services had been pursued, it would have been through the government’s scheme, where no expert report would’ve been commissioned under the said scheme, and as such it was not necessary to consider such a report.
It was held that the Claimant had lost the opportunity to claim for services.
BPE Solicitors v Hughes Holland [2017] UKSC 21
This decision reinforced the landmark decision of the House of Lords in South Australia Asset Management Corpn v York Montague Ltd [1997] A.C. 191 (‘SAAMCO’).
The Appellant (‘A’) sued his solicitors (as well as other parties) for losses sustained in relation to a loan he made to a company.
A believed the purpose of the loan was to develop a property owned by the company, when in fact the funds were to be used for the purchase of the property. A instructed his solicitor not to carry out the usual searches against the title at Land Registry and to proceed regardless.
Upon repayment of the loan together with interest, A was due to receive around £70,000 which included interest at 28% p.a. which was a significant profit. A actually received just £13,000 which was swallowed up by the related costs. The director of the company to which A loaned the funds, did make a voluntary payment for losses to A for just under £10,000. A brought a claim against his solicitor for losses as well as the company.
It was held that his solicitor’s liability was limited only to losses flowing from the negligent act, in this case, the solicitor failing to clearly identify A’s instructions. A had believed the loan was for development and not a purchase and a facility letter to that loan, drafted by his solicitor supported those instructions. Therefore, but for the solicitor’s breach of duty A would not have proceeded to make the loan to the company.
A was successful in his claims against the company as well however, it was insolvent therefore he was unable to recover any losses there.
This first instance decision was appealed to the Court of Appeal. It was held that the loss fell outside the scope of the duty owed to A by his solicitor. They were not concerned as to what the loan was for, they were not advising on the commercial viability and or risks. The court considered the high rate of interest attached to the loan reflected its risk assessment carried out by A. Therefore, the loss was not as a result of a breach of duty.
A disagreed and appealed to the Supreme Court, now by his trustee in bankruptcy, having met with some financial difficulties.
It was held that the solicitor was liable for consequences relating to the wrongful act. However, on the facts of this case, there was no evidence that A would not have recovered more had the funds been applied to the development rather than the purchase. The loss was not as a consequence of the funds being applied to the purchase instead.
This case reiterated the SAAMCO principle which is a limitation of a defendant’s liability based on a ‘developed judicial instinct about the nature or extent of the duty which the wrongdoer has broken’. Commentary was pronounced as to two different types of cases; an advice case and an information case.
A defendant in an advice case would be liable for foreseeable consequences where their duty was to consider the entire transaction and act in an holistic manner, rather than limited to one aspect. Whereas, in an information case, a defendant would only be liable for the losses sustained as a consequence of the information it provided, therefore limited. This limitation is necessary as otherwise a defendant would act as a underwriter for an entire transaction where only advised as to one aspect.
The court does appreciate that the application of SAAMCO may lead to mathematical inaccuracies but is necessary in the interest of justice.
Barker v Baxendale Walker Solicitors and another [2017] EWCA 2056 (Ch)
This case was brought by the Claimant following, what he alleged, to be negligent tax advice. Advice was given in respect of trusts and with reference to s. 28(4) of the Inheritance Tax Act 1984. The client was advised to set up an Employee Benefit Trust as a tax efficient vehicle for providing the proceeds of sale to his family and others.
10 years later HM Revenue and Customers (“HMRC”) challenged the scheme and said CGT was due on Mr Barker’s disposal of his shares. The Claimant settled with HMRC for £11.2m.
Mr Barker sued his solicitor. At first instance, the judge considered the solicitors interpretation of s. 28(4) was probably correct, and that they had no duty other than to provide a general warning of the possibility of a challenge by HMRC to the scheme, given that it was a tax avoidance scheme. However, they had no duty to warn specifically of the possibility that the scheme would fail to deliver the tax advantages because of an alternative interpretation of s. 28(4). The judge held a general warning would not have deterred Mr Barker from going ahead with the scheme anyway and the claim failed.
The Court of Appeal concluded that the Defendant’s construction of the statutory provision was “very unlikely” to be correct and found that the Defendant was in breach of his duty in failing to warn of the associated risks. Lady Asplin stated the following principles were likely to apply:
The question of whether a solicitor was is in breach of a duty to explain the risk that a court may come to a different interpretation would be highly fact sensitive;
If the interpretation of the provision was clear, it was likely that it would not be necessary to caveat the advice given;
However, it was possible to be correct about the construction of a provision or, at least, not negligent but still under a duty to point out the risks involved and to have been negligent in not having done so;
It would be more likely for there to be a duty to point out the risks or, that a reasonably competent solicitor would not fail to point them out when advising if litigation was already on foot, or if a point against the solicitor’s interpretation had already been taken;
The issue is not one of percentages or whether opposing possible constructions are “finely balanced” but is more nuanced.
The Court of Appeal considered that it would have been obvious to any reasonably competent solicitor practising in this area that there was a real risk that HMRC would take a point concerning s. 28(4) and, if necessary, pursue it, given the amounts at stake. The solicitors should have given a specific warning, relating to the alternative interpretation of s.28(4), that there was a significant risk that the tax avoidance scheme would fail.
Lady Asplin stated:
‘There can be no separation between the advice and any appropriate caveats as to risk,’ ‘They are one and the same. The lawyer as part of the legal advice he is providing, must evaluate the legal position and determine whether in all of the circumstances, he should advise his client that there is a significant risk that the view he has taken about the substantive matter in question may be wrong.’
Anderson Properties Ltd v Blyth Liggins (A Firm) [2017] EWHC 244 (Ch)
The Claimant instructed solicitors on the purchase of development land from a charity. The Claimant planned to develop the land and the contract was conditional upon the Claimant being granted planning permission by a certain date.
Planning applications were to be prepared by the Claimant and approved by the charity however this did not occur, and the contract was conditional upon the grant of planning permission acceptable to the Claimant however it waived this right. The charity refused to complete on the basis of uncertainty due to no suitable plans having been attached to the underlease and contract. The Claimant accepted a payment from the charity to abandon its claim and instead pursued the solicitor firm for a loss of chance to pursue other options.
The Claimant settled the contractual dispute with the charity and sued its solicitors for almost £8m, alleging negligence on the basis that the contract should have been enforceable.
The solicitors argued that, if the Claimant had applied for planning permission in accordance with the contract, there would have been no uncertainty. The area to be leased could have been identified by reference to the planning permission application and the contract would have been enforceable. The court agreed.
The question was whether the solicitors were negligent in drafting the contract so that it might be unenforceable if the Claimant failed to apply for planning permission.
The Claimant’s claim was dismissed. It was held there was good reason not to have the plans attached, as to allow maximum flexibility for the parties to negotiate the care facility. Had the Claimant followed the mechanism provided by the contract, it would have been enforceable.
All legal parties agreed the plans were not required and the Claimant had agreed, and although the Claimant was relying on legal advice, the solicitor had not been instructed that the contract should be enforceable regardless of whether or not a planning application had been made therefore could not be criticised for failing to draft the contract to include that option.
Seery v Leathes Prior (A Firm) (2017) WL 00219624
A solicitor firm acted for a minority shareholder of a company in relation to a dispute with the company directors and two other shareholders resulting in a full and final settlement sum of £317,000.
The minority shareholder subsequently claimed he was negligently advised and brought a claim against the solicitor firm.
It was claimed they failed to advise him to pursue an unfair prejudice claim which would enable him to obtain further information and provide an advantage in settlement negotiations; failed to advise that in pursuing an unfair prejudice claim, his shareholding would be valued without discount due to it being a minority holding; and failed to advise he retain his directorship, which would have given him standing to obtain warranties from the other directors as to the company’s financial status.
The court held the solicitor firm had not been negligent. It had not been under a duty to advise the Claimant to pursue an unfair prejudice action, would never have advised him to do so if it had been under a duty to advise and further that the Claimant would not have accepted advice to litigate. As the Claimant was a minority shareholder, the directors could have terminated his directorship at any time.
The Judge quoted from a letter from the solicitor to the Claimant which illustrated that the cost and risk of litigation were matters on which he advised. The Claimant could be in no doubt as to his views
“Please don’t misunderstand me – I (and my firm) will be more than happy to fight this all the way. However, I have a duty to ensure that you (and your family) are fully aware of what you are getting yourselves into. I don’t want to be walking out of the High Court in 2 years’ time, telling you that whilst we have won the total damages you are able to recover from FWA amount to zero since the company has gone into liquidation, and then handing you my firm’s bill for 70k, at which point you might wish you had accepted the 310k on offer! You would not be too pleased with me, either, if I had not have advised (sic) you to accept that 310k! And then I would be getting sued for negligence!””
Wright v Lewis Silkin LLP [2016] EWCA Civ 1308
A businessman brought a claim in negligence against a Defendant firm of solicitors for alleged negligent advice and drafting of Heads of Terms (‘HOTs’) relating to his employment in India.
The Claimant was employed by an Indian company, to run an Indian Premier League cricket franchise.
The HOTs included clauses that:
He be paid a severance of £10,000,000 in the event of his dismissal. The payment was guaranteed by the company’s parent company.
The agreement was to be governed by English law.
However, the terms were silent on jurisdiction.
The Claimant was dismissed from his employment. The company did not pay the severance payment and nor did the guarantor.
It was held at first instance that the Claimant should be awarded damages in the sum of 20% of the figure owing to him under the HOTS as a ‘loss of chance’ claim, as well as his legal costs incurred, in pursuing the Indian company over three years of litigation.
The Defendant appealed and were partly successful. It was held that the damage sustained by the Claimant was too remote and not reasonably foreseeable, therefore the loss of chance award was set aside.
At the time of the contact all parties had thought that the employer, a large Indian media group was a substantial entity. The Claimant had been confident that the company could pay the £10 million payment. In May 2008, and with the collapse of Lehman Brothers and the financial crash months away, the parties could not reasonably contemplate that within a few years the company would be unable to meet its debts and not honour the contractual severance payment and ignore a judgment of the Court.
However, the Defendant was ordered to pay to the Claimant the legal costs he incurred in pursuing his severance payment through the courts, the sum of £40,000 in relation to the litigation.
Connaught Income Fund (Series 1)(In Liquidation) v Hewetts Solicitors [2016] EWHC 2286 (Ch)
A claim for damages in professional negligence was brought against a solicitor firm in relation to losses sustained by a collective investment fund. The solicitor firm had been instructed to complete a Certificate of Title (‘COT’) by the company seeking to secure lending form the Fund. The company supplied the COT to the Fund, which relied upon it in granting a loan of £1.1million. The court was asked to consider whether or not the solicitor had a duty of care to the Fund despite it not having been instructed to act on its behalf; whether that duty of care had been breached in failing to note on the COT that property had previously sold for double the value of the present transaction and any other breach flowing from the general undertaking provided by the solicitor that there were no onerous burdens or conditions affecting title. In addition, the Fund claimed it would not have loaned the sum if the solicitor firm had not acted negligently.
The COT had failed to record that the property had previously valued at more than double the current transaction value which could have highlighted a sale at undervalue in this instance. The fund had not instructed the Defendant but had relied upon a Certificate of Title it had produced in deciding to authorise the loan.
It was held that the solicitor firm did not owe a wider duty of care in these circumstances, rather the duty was limited to exercising due skill and care in completing the COT, which it had exercised. The COT had been completed with the skill expected of a reasonably competent solicitor. The failure to record the previous value of the property was not strictly inaccurate as the question was in relation to the ‘sale’ value and no sale took place, rather the property had been valued upon the granting of an underlease. However, the value had been recorded on the Office Copies, the solicitor should have recorded the value in the COT and had therefore breached its duty of care in this regard.
It was held that whilst there were provisions which affected title such as relating to a change of use, they were not unduly onerous so as to breach the general undertaking supplied within the COT by the solicitor.
As the fund made it clear that had it known about the valuation, it would not have rejected the loan application, it was held that the breach of duty had not caused any loss or damage to the fund and the claim was dismissed.
Agouman v Leigh Day [2016] EWHC 1324 (QB)
The Defendant solicitors acted in a group litigation in respect of personal injury suffered as a discharge of waste from a tanker, in which they successfully recovered £30 million for the clients. Those damages were transferred to an account in Ivory Coast. A proportion of the recovered damages were subsequently stolen, and the Claimant along with many other Claimants did not receive their respective damages awards.
The Claimant, as a representative of the other Claimants do did not receive their damages, brought a claim against the Defendant solicitors alleging negligence for failing to protect the money prior to distribution, which resulted in dishonest claims, and failure to retrieve money from the bank account prior to a freezing order was obtained.
It was held that solicitors should have exercised reasonable care in skill in safeguarding, arranging and distribution of the damages based on (1) paralegals managing the damages recovered without any senior supervision without any proper assessment and (2) the instability of Ivory Coast on issues in relation to corruption. Defendant firm were found to be in breach of their duty.
Damages were assessed on the on the contractual basis, not tort, and as such the Claimants were only entitled to recover those damages available under contract.
LSREF III Wight Ltd v Gateley LLP [2016] EWCA Civ 359
A successful negligence claim was brought against the Defendant firm for failure to highlight a forfeiture clause which affected the charge on a property. Damages of £240,000 plus interest were awarded for loss attributable to the Defendant firm’s negligence. The loss was held to be at the date of the transaction.
The award was appealed on the basis that loss should be calculated as at the date of trial; and the Claimant failed to mitigate (reduce) their potential loss by agreeing to the Defendant firm providing the funds to vary the charge placed on the register of the property.
The Court of Appeal considered (1) Transactional loss (2) loss as a result of negligence. The transactional loss was, where the security had not crystallised as at the trial date, the transaction loss will be quantified as at the trial date itself, and not the transaction date. Further, the Court found that the failure to take the £150,000, the figure to vary the charge, displayed that the Claimant did not mitigate its loss.
The damages award was reduced to represent the cost of variation and the legal costs.
Dunhill v W Brook and Co and another [2016] EWHC 165 (QB)
A claim was brought by the Claimant for personal injury caused by being struck by a motorcyclist resulting in, as per the initial medical report, impairment in cognitive function.
A subsequent report- not commissioned as part of the PI proceedings- was produced which showed more severe impairment than was initially thought.
The claim proceeded to trial. In attendance was Counsel and a trainee solicitor. Two witnesses for the Claimant were unavailable, one being in prison and the other they were unable to locate. Counsel for the Claimant, as at the date of trial, did not have sight of the non-commissioned report.
As a consequence of (1) not having the key witnesses available; and (2) contributory negligence being alleged; the Claimant was advised to settle her damages claim for £12,500.00, given that the Counsel considered the damages claim would be substantially reduced and settled the claim for that figure in full and final settlement.
The Claim settled and the Claimant brought the instant claim for breach of duty of care by advising to settle on a full and final settlement. It was observed by the court that a trainee solicitor is required to adhere to the same standard a fully qualified and competent lawyer, and if counsel was found to be negligent then so would the Defendant firm for sending a trainee solicitor to assist as he was not able to exercise his own independent judgment as he would not have had the experience to detect it.
Further, the Counsel was entitled to assess (1) the merits making an application for adjournment of the trial, given that the witnesses were not able to appear, (2) contributory negligence on behalf of the Claimant, (3) Quantum. Counsel considered that a successful application for adjournment was unlikely, that the Defence of contributory negligence in the PI claim would succeed and reduce damages to some extent.
Caliendo and another v Mishcon de Reya (A Firm) and another [2016] EWHC 150 (Ch)
The Claimants, who combined owned a majority shareholding of a holding company of a Football club, brought a claim in negligence against the Defendant firm, who acted for the holding company in the transaction of selling the Claimants’ shares owned by the Claimants. They wished to sell those shares as the company was loss-making at the material time. The First Claimant had made loans to the company which were outstanding.
It was alleged, following the transaction, that there was an implied retainer by the firm to act on the Claimants behalf or had assumed responsibility, and the transaction was not as per instructed by the Claimants, in that the Defendant firm omitted items from the transaction document, and had included items which should not have been included.
The Claimant’s associate claimed against the holding company for repayment of his debts which reached a settlement, and the holding company subsequent repayment of debt from the first Claimant. A counterclaim was made by the First Claimant which was then discontinued with each side bearing their own costs, the First Claimant’s amounting to £505,000, which he sought from the Defendant Firm in the instant claim.
It was held by the court that the First Claimant failed to prove that the debts were owed by the holding company, and further the first Claimant had consulted his own tax and financial advisers.
There was no express instruction of the firm on behalf of the Claimants. However, it was held there was implied limited duty of care to exercise reasonable care and skill in negotiation and execution of the documents. Though no duty of care was owed in respect of interests which conflict between the holding company and the Claimants, nor on matters which were advised separately by the tax and financial advisers. Instead, the only duty the Defendant firm had was to ensure that the tax and financial advisers were in receipt of information and drafts provided by the representatives of the parties purchasing the shares.
With regard to the promotion bonus of £2m, the first Claimant was aware and had accepted that it was not included in the transaction document, thus there was no breach of duty.
In conclusion, the claim was dismissed and the costs of the proceedings (£505,000) was not as a result of a breach by the Defendant firm.
Kandola v Mirza Solicitors LLP [2015] EWCA 460
A solicitor firm was not negligent in advising a commercially sophisticated client in relation to a conveyancing transaction where the client disregarded advice. The Claimant had entered into private negotiations in relation to the purchase of a property, to include a loan agreement, unbeknownst to the instructed conveyancer and was subsequently advised against the terms agreed between the parties. The conveyancer advised the Claimant of the risk of losing the funds due to lack of security, the property having a number of charges with priority. The Claimant decided not to take the advice and signed a waiver enabling the transaction to proceed on the basis of ill-advised terms.
Unfortunately, after the loan was agreed and exchange of contracts took place, the vendor was declared bankrupt and the Claimant sought to recover his losses from the solicitor firm, claiming they had failed to adequately advise and that they did not carry out a bankruptcy search prior to exchange of contracts.
The court determined that the Claimant was not a credible witness as opposed to the experienced conveyancer who had advised caution. As the client was commercially sophisticated, it was held that he understood the advice he was given but chose to ignore it. Further, the conveyancer was only under a duty to advise of the risk and not to evaluate it. It was not common practice to obtain insolvency details prior to exchange of contracts unless otherwise instructed to do so, which the conveyancer was not. The Claimant also stated in evidence that even if he had been advised of the petition he would have likely proceeded leading to the loss.
Chinnock v Veale Wasbrough and another [2015] EWCA 441
A claim brought against a barrister and solicitor relating to advice they had given in a wrongful birth claim was held to have not been negligent. The mother had been advised correctly based on the applicable tests, being the standard of reasonable care provided by the medical professionals in her case. Nevertheless, the court determined that the claim was statute barred in accordance with s. 14A (10) Limitation Act 1980, as she had constructive knowledge of her potential claim and failed to seek legal advice in time to pursue it.
Orientfield Holdings Ltd v Bird & Bird LLP [2015] EWHC 1963 (ch)
A solicitor firm was held to be negligent as they were in breach of duty of care in the purchase of a £25 million property – the purpose of which was in dispute.
The claim in negligence was to recover losses sustained after recession of the contract following exchange which included 5% of the property value by way of deposit and associated professional fees. The Claimant conducted separate proceedings against the vendor in which it recovered 5% of the deposit and each agreed to discharge their own fees. The Claimant rescinded the contract upon learning of the redevelopment of a school in the vicinity of the property. The Claimant had not been made aware of the redevelopment by its solicitor despite them having carried out a search in which the information was provided.
The court held that where a solicitor obtained a particular search, they were under a duty to advise the client of its contents, and they were in breach of their duty when advising the report contained nothing that adversely affected the property, as a reasonably competent solicitor would have understood the significance of the redevelopment to the purchase. There were arguments as to the purpose of the property however it was determined that the property was likely an investment property but if it could not be sold on would be used as a residential property. There was no evidence that the Claimant would have continued with the purchase had it been so advised of the redevelopment. The separate proceedings were not a failure to mitigate and there was no contributory negligence on the part of the Claimant.
Goldsmith Williams Solicitors v E. Surv Ltd [2015] EWCA Civ 1147
A case relating to the negligent valuation of a property by a surveyor in which a solicitor firm was joined to make a contribution for loss sustained by the surveyor. The solicitor firm successfully appealed against being held liable to make a contribution.
The solicitor were found to have breached their duty of care, as a reasonably competent solicitor would have understood the non-confidential information which they received would have affected the value of the lenders security, and was therefore duty bound to report it to the Lender under the CML Handbook, which they did not. However, the surveyors did not prove to the court that had the lender received the information that the solicitor should have provided, that it would have reacted differently. The solicitors appeal was therefore allowed, and they were not liable in contributory negligence.
Rentokil Initial 1927 plc v Goodman Derrick LLP [2014] EWHC (Ch)
It was claimed that the solicitor negligently drafted terms of the conditional contract which enabled the purchaser to avoid completing in a failing market. It was also claimed that the solicitor failed to properly advise upon the meaning and effect of the contract.
The court considered the clauses and applied the test of ‘what a reasonably competent practitioner in the position of the solicitor in this matter would have drafted on behalf of its client’. It was held that the parties’ intentions were clear; the clauses reflected the parties’ intentions as per the Heads of Terms agreed between them and the contract reflected the parties commercial deal. The client had not been exposed to unnecessary risk and was a highly sophisticated commercial client that would have understood the contract with less assistance than a lay client. It could not be proved that the purchaser would have accepted any other deal.
Heron v TNT (UK) Ltd [2013] EWCA Civ 469
The Claimant brought a personal injury claim against his employer, the Defendant. Settlement offers were made between the parties, but the Claimant failed to beat the Defendant’s Part 36 Offer and was ordered to pay the Defendant’s costs. The claim was funded by way of a conditional fee agreement (“CFA”) but without the benefit of After the Event Insurance (“ATE”).
The Claimant was unable to pay, and the Defendant’s solicitors sought an order for costs against the Claimant’s solicitors alleging conflict of interest and that they had become a party to the claim. The Court found there was no impropriety on the Claimant’s solicitors behalf and was therefore not ordered to pay the costs.
In respect of negligence, failure to obtain ATE, when acting under the terms of CFA, was not a ground for breach of duty of care. Nor is it negligence if the solicitor knows or suspects that their client does not have sufficient assets to pay a potential costs order.
Newcastle International Airport Ltd v Eversheds LLP [2013] EWCA Civ 1514
The Defendant, a firm of solicitors, were instructed to draft new employment contracts for two executive directors of the Claimant, Newcastle International Airport Limited (NIAL).
These instructions were the product of a meeting between the executive directors and the chair of the Remuneration Committee.
The Defendant provided finalised drafts to the chair of the Remuneration Committee for signing following negotiations with the two directors.
The contract allowed for substantial bonuses and, a release from certain restrictive covenants.
When the size of the bonus liability became apparent, NIAL sued The Defendant, arguing that the solicitors were negligent in taking instructions from the same executive directors on the provisions of the service agreements without consultation with the Remuneration Committee.
The High Court found that the chair of the Remuneration Committee had ‘held out’ that the directors were specifically authorised to communicate with The Defendant direct on NIAL’s behalf. The Defendant was under no obligation to continually check with NIAL that the agent had actual authority to act on particular provisions of the draft contracts.
On Appeal the Court of Appeal held, that it did not allow the Defendant solicitors to treat the executive director simply as a part of the company; there was a clear conflict between the interests of the Directors providing instructions to the Defendant solicitors and the interests of the company. The Company had instructed the solicitors and it was the Company to which the solicitors owed a duty of care. The Court of Appeal stated that the solicitors should have provided a separate advice explaining the terms and effect of the service contracts to the Company
The Defendant solicitors were ordered to pay nominal damages. It could not be concluded that, had the Defendants provided the explanatory advice, the contracts would not have been signed. Even if the solicitors had provided the advice it was likely that the Chair would have misread it. The loss was not caused by the solicitors’ breach of duty but by the failings of its Chair and the Claimant was awarded nominal damages of just £2.
“I have taken a different view from the judge as to the extent of Eversheds’ duty of care, and would hold that, by failing to provide any explanatory memorandum to Ms Radcliffe, they breached their retainer. For reasons given, however, I agree with the judge that such breach was not causative of substantial loss. Formally, I consider that the correct course would be to allow NIAL’s appeal, set aside paragraph 1 of the judge’s order by which she dismissed NIAL’s claim and substitute for it an order that Eversheds must pay NIAL nominal damages of £2 for breach of retainer.”
The Court of Appeal later ordered the Company to pay all of the Defendant’s legal fees. The Company was ordered to pay the Defendant’s legal fees because the chairwoman of the Company admitted before the Court that she did not read complicated legal documents and sometimes failed to read emails from legal.
Langsam v Beachcroft LLP and others [2012] EWCA Civ 1230
A professional negligence claim was settled between the Claimant and his accountant following advice from the Defendant. Subsequent proceedings were brought by the Claimant against the Defendant firm, who were acting on his behalf in the case against his Accountant, alleging negligence for failing to properly advise.
It was held by the court that provided a solicitor advises on figures within a range of views of a reasonable and competent lawyer, he will not be negligent, regardless of whether or not those figures are pessimistic. Further, a solicitor applying his own expertise should consider advice from counsel as to whether it is glaringly or obviously wrong. If it is not, then a solicitor and client will be entitled to rely upon that advice.
Edenwest Ltd v CMS Cameron McKenna (a firm) [2012] EWHC 1258 (Ch)
A debenture-holder instructed the Defendant firm to advise on the instruction of administrative receivers and the sale of assets of the Claimant company. Advice was given that the potential claims against the company’s insurer/insurance broker following the withdrawal of insurance would be difficult to prove. The Claimant issued proceedings Claimant breach of duty in contract and tort as to pessimistic advice given as to the merits of those claims advised on.
It was found that although administrative receivers act for a company as an agent, this does mean that the company automatically becomes a party to the retainer entered into between the administrative receiver and solicitors’ firm, therefore a duty of care was not owed to the company. Instead, there would require some act or instruction and acceptance between the administrative receiver and the firm.
Lane v Cullens Solicitors and others [2011] EWCA Civ 547
The Claimant was an administrator of his sister’s estate, who died intestate. He instructed the Defendants in relation to administration of the estate. A third party prior to the distribution of the estate, asserted that the estate was being held on trust for her. The estate was then distributed between the beneficiaries, and the third party subsequently obtained a declaration that it was held on trust for her, and the money paid out by the Claimant to the beneficiaries be returned.
The limitation period for a claim in negligence is 6 years from the loss caused by the breach of duty of care. The Court of Appeal held in this case that the cause of action accrued at the date the administrator paid out from the estate, which is the point damage had been suffered by the administrator. The Defendant Solicitors were negligent for failure to advise him not to distribute the assets whilst there was an outstanding claim to the estate, though, the claim was struck out given that the claim was issued more than 6 years after the loss had occurred.
Levicom International Holdings BV and another v Linklaters (a firm) [2010] EWCA Civ 494
The Defendant solicitors were instructed to advise on the construction of clauses contained in a share-purchase agreement. Settlement offers were made but the solicitors provided an advice which stated that the Claimant had a strong prospect of succeeding in relation to the construction of the clauses and the Claimant subsequently brought arbitration proceedings based on that advice. The arbitration proceedings were subsequently settled in less favourable terms than had been offered previously with the addition of incurring costs.
The Court of Appeal found that the Defendant Solicitors were negligent in their advice on the construction of clauses stating that they were clear when the court considered they were not. Nor was there any effort by the Defendant solicitors to properly quantify the loss. Further, it was found that the Claimants relied upon the Defendant’s advice which caused their loss, and if at the outset they had been properly advised, they would not have initiated arbitration proceedings and would have settled on more favourable terms.