Wright v Lewis Silkin LLP [2015]
In Wright v Lewis Silkin LLP [2015] EWHC 1897 (QB) (03 July 2015) the Claimant was involved with the Indian Premier League (“IPL”). There were eight IPL franchises in the first season, the Hydrabad franchise was Deccan Chargers. The franchise formed part of a subsidiary company within a media group called Deccan Chronicle Holdings Limited (DCHL), the owners of the fourth biggest English language newspaper in India, the Deccan Chronicle. The Claimant was CEO of Deccan Chargers Sporting Ventures (“DCSV”) until he was constructively dismissed in January 2009.
The Defendants acted for the Claimant in respect of his employment contract. The Heads of Terms included a “Severance Guarantee” whereby the Claimant would be in line to receive £10m should he be constructively dismissed (“the severance guarantee”). The media group DCHL guaranteed in the Heads of Terms to meet the financial obligations of their subsidiary company, DCSV, to the Claimant. The Claimant has since 2009 been trying to obtain this payment without success and in the process has run up costs of more than £1m without recovering any money.
The Claimant’s claim was that the losses incurred by him were due to the negligence of the Defendant Solicitors particularly with regard to:
- “(1) Failing to consider or advise on securing effective means of enforcement of DCSV and DCHL’s obligations and in particular the obligation under the severance guarantee; and
- (2) Failing to advise in relation to jurisdiction matters and to include an exclusive jurisdiction clause with provision for service of proceedings in the UK”.
The Defendants denied negligence and causation of loss. . The Claimant and Defendant Solicitors worked on the Head of Terms together. The Claimant sent the Defendants an email on the 13th May 2008 at 12.15 (“the 12.15 email”) which set out the terms he had agreed and to be incorporated in the Heads of Terms. A telephone call lasting 12 minutes at 13.42 (“the 13.42 call”) followed and the Claimant sent the Defendant an email 14.13 (“the 14.13 email”) with the subject line, “English Law” stating:
- “English law or otherwise, can we just give some thought to how we would enforce the provisions of the contract on a company based in Singapore? Talk after 4.00 pm”.
The Claimant had stated that he had asked the Defendants “ during the 13.42 call the recommendation made by the “Wise Indian” for dispute resolution in England. This was denied by Mr Burd. His evidence was that the topic of English law as governing law had initially arisen because he had said that he was only competent to advise on English law.
The Claimant, in the meantime, met again with DC Holdings who discussed with him that “in order to allay any concerns Mr Wright might have, he would offer Mr Wright a guaranteed severance payment which would be payable if he was dismissed. He apologised for not having mentioned it in their previous conversations. He told Mr Wright that this would protect him from any such interference, but that Mr Wright had nothing to fear as he intended that they should work together until Mr Wright had so much money he did not want to work any longer”. The figure of £10m was then discussed and the Claimant was told to make sure his Lawyer put this in the Contract.
On the 15th May 2008 the Claimant and Defendant met at the Defendants offices at 11.24. The Claimant said he had arranged to sign the Heads of Terms at 14.00 “Mr Wright and Mr Burd sat down side by side at a table in a LS meeting room and Mr Burd drafted the Heads of Terms by hand. Mr Burd had a copy of the 12.15 email and Mr Wright’s email of the previous evening which he used as a guide”. Further meetings followed and at 10.00 am on the 24th May 2008 the Defendants met with the Claimant and the other parties to look at “the amendments made to the language around the provision of equity and the severance guarantee”.
After the Claimant started his employment, Lehman Brothers collapsed with the ensuing financial crisis whereupon the Claimant’s position within the Company had changed and following advice he relocated to London to work there until March 2009.
- “By January 2009, however, Mr Wright had concluded that the continuing failure on the part of DCHL/DCSV to act in accordance with the Heads of Terms, including failure to provide any of the benefits, failure to appoint him to the board of DCSV and failure to transfer to him 3.5% by value of the shares in DCSV, meant there was a serious problem. Accordingly, on 15 January 2009 he wrote to Mr Iyer setting out some of the issues and saying that: “…a number of the issues we agreed on over several days in London in May 2008 and which were reflected in the contract we signed have not eventuated.”. Mr Wright sent a copy of the letter to Mr Burd who replied. “Good letter”.
Following correspondence from India, the Claimant on the 26th January 2009 instructed Solicitors to act for him and they wrote “to DCSV asserting and accepting repudiatory breach of contract by DCSV and claiming a right to be paid sums in accordance with the Heads of Terms, including the £10m severance guarantee”.
The Claimants Solicitors advised them that DCHL/DCSV in India could challenge jurisdiction for the case to be heard in England as his contract was silent on this. His Solicitors wrote to the Defendants on the 18th March 2009 “Without prejudice save as to costs”. The letter asserted that “the failure to include proper machinery in the Heads of Terms to enable proceedings to be initiated in England was negligent”, that Mr Wright had a valid claim against LS in that regard and that LS should bring the matter to the attention of their professional indemnity insurers”.
The Defendants replied on the 24th March 2009 but updated by the Defendants in later correspondence of the 9th September 2009:
- “Mr Burd has, as a result of your most recent request gone back through the file in greater detail and reviewed the emails which are attached to this letter. The e-mail dated 13 May, timed at 12:15 and already referred to above is when Mr Wright first outlined to Mr Burd in writing the possible deal he had been discussing with Mr Iyer. There is no mention of jurisdiction. The second email sent on 13 May timed at 13:21, with the heading: “Comments on Indian group” was understood by Mr Burd to attach a note Mr Wright had received from this unnamed “wise Indian”. It contains no mention of jurisdiction. In the third email sent to Mr Burd by Mr Wright on 13 May and timed at 14:13 Mr Wright states: “English law or otherwise, can we just give some thought to how we would enforce the provisions of the contract on a company based in Singapore?” This email (and a reading of the time recording entry made by Mr Alexander on 12 May) has reminded Mr Burd that, at the time, Mr Wright thought the Deccan Chronicle holding company was a Singaporean corporation. Nothing happened between 13 May and the rushed drafting and meeting on 15 May to clarify the position and, as far as Mr Burd was concerned, he was having to deal with the drafting against the background of that uncertainty. It follows that what was stated in the final sentence of the paragraph numbered 1 of our letter to you dated 24 March 2009 was incorrect, and has to be qualified and corrected by the foregoing.”
The Claimant issued his first English proceedings on the 2nd February 2009 for damages of more than £10 million with permission to serve out of jurisdiction, DCSV and DCHL disputed that the proceedings had been validly served. The Claimant issued his second English proceedings on the 19th November 2009 requesting the Heads of Terms to be amended to express English jurisdiction. Appeals followed by DCSV and DCHL over jurisdiction and service and after service of a Defence and Counterclaim and List of Documents the two companies did not take any part in the second proceedings. Eventually the Claimant was awarded £10,323,094 indemnity costs.
The Claimant had sought on many occasions to enforce the judgment without success and up to November 2014, 41 out of 44 hearing dates were vacated.
The issues to be considered in the High Court were;
Was LS in breach of its duty of skill and care in:
- Failing to consider or advise on securing effective means of enforcement of DCSV and DCHL’s obligations?
- Failing to advise in relation to jurisdiction matters and to include an exclusive jurisdiction clause with provision for service of proceedings in the UK?
- If so did these breaches cause any loss and if so what amount?
The Judge found no evidence of a provision ever being included or even proposed for inclusion in an employment contract.Mr Burd had never seen such a clause being proposed.
- No authority had been identified describing or discussing such a provision.
- It ran contrary to and would undermine trust and confidence.
- Reliability of performance is essentially a commercial rather than a legal matter.
- At the time both parties understood DCHL to be a substantial business.
- Such an allegation was not included in the initial allegations of negligence made against LS.
- Three of the four means of providing security suggested for the first time in 2014 had since been dropped.
Mr Justice Tamblen then considered whether the Defendant was in breach of its duty of skill and care regarding jurisdiction matters and an exclusive clause for service of proceedings in the UK.He found that LS did not advise Mr Wright in relation to jurisdiction matters. If he did, he didn’t do so sufficiently clearly.
He did not consider it proved that LS was in breach of duty in failing to advise upon or include a provision for service of proceedings in the UK.
Mr Mohdi ,who at the time was the Commissioner of the IPL gave evidence that had Mr Wright obtained judgment against DCHL in early 2010, he would have told DCHL to pay Mr Wright the amount as enforcement proceedings brought in India by a former CEO would have tarnished the reputation of cricket in the country.
He stated he reported to the BCCI and they had the right to terminate the franchise and that threat would have resulted, he thought, in payment.
The Judge found Mr Wright did have a real or substantial chance of recovering the Judgment sum but that the value of that chance would have been low.
Mr Justice Tamblen then had to value the Claimant’s lost chance and having regard to his findings from the evidence before him and the submissions from the parties he found the “assessment of the value of that chance is 20% of the principal judgment sum of £10 million – i.e. £2 million. That conclusion is the same whether I take an overall view of the value of the lost chance or rate the chances of success for each contingency progressively”.
He continued “Mr Wright also had a real or substantial chance of a costs saving in the English proceedings as a result of avoiding a jurisdictional dispute. The relevant costs sum consists of the costs incurred in relation to the jurisdiction challenge, less those attributable to the service issue and those paid by DCHL. I find that the value of that lost chance to be 80% of that sum”.
He concluded by saying that the Claimant was entitled to £2million damages in respect of the loss chance of judgment satisfaction with a sum to be agreed as to costs saving.