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Solicitors: duty to advise in litigation – appeal upheld 18 May 2010

In a recent decision, the Court of Appeal have allowed Levicom’s appeal of the first instance judgment in their £37 million loss of chance claim against Linklaters.

The case stems from advice given by Linklaters to Levicom relating to a dispute with a Swedish telecoms group. Levicom alleged that, had Linklaters not given negligently over-optimistic advice, it would have settled its dispute at a much earlier stage, on more favourable terms, rather than embarking upon arbitration that settled on unsatisfactory terms.

Although the judge at first instance found that Linklaters’ advice was negligent in certain respects, he held that that negligence caused no loss to Levicom. He did not accept that Levicom would have entered into an earlier and more favourable settlement had it received “proper advice”, i.e. that it would not have acted differently had Linklaters’ advice been more pessimistic. Levicom was, therefore, awarded nominal damages of £5.

In allowing Levicom’s appeal, the Court of Appeal ruled that the first instance judge had not approached the causation issue correctly. In this regard, the approach of Levicom in negotiations with the other side was inevitably informed by the negligent advice it had received. The normal inference is that when a solicitor advises that his client has a strong case and should commence proceedings rather than settle, such advice is causative. The evidential burden, therefore, passed to Linklaters to rebut that presumption and to prove that its advice was not causative. As Lord Justice Stanley Burton put it, “one has to ask why a commercial company should seek expensive City solicitors’ advice (and do so repeatedly) if they were not to act on it”.

The Court of Appeal was unanimous in ruling that, had Levicom received “proper advice” on the merits and quantum of its case, it would have settled its dispute with the Swedish companies on terms similar to those available at the outset.

The case has been remitted for damages to be assessed, if not agreed by the parties. Linklaters have indicated that they will pursue an appeal to the Supreme Court.

Comment

The decision will be of concern for City firms and their insurers. As well as adopting a tough line on causation by putting the onus on the solicitor to establish that its negligent advice was not causative, the Court of Appeal also adopted a harsher approach on breach of duty.

The first instance judge did not consider that Linklaters’ bullish and robust advice fell outside a range of opinions that a reasonably competent solicitor could have formed. Rather, he thought Linklaters was negligent in the manner in which it had conveyed its advice, in that it had failed properly to bring the difficulties in the case to Levicom’s attention.

The Court of Appeal endorsed the judge’s findings of negligence but was more critical of the advice given by Linklaters; it considered that it fell far short of what Levicom was entitled to expect from a reasonably competent solicitor. The Court of Appeal was critical of both the absence of any significant analysis or discussion of the issues and the failure to qualify advice where there was, on any view, uncertainty. The distinction between the advice that Linklaters intended to give and the advice it did, in fact, convey to the client was also rejected – only the latter was relevant.

Although the standard of skill and care is that of the reasonably competent solicitor undertaking the type of work in question, i.e. “the reasonable average”, in practice, the courts often apply the standard of the particularly diligent and meticulous practitioner. That standard can, in practice, be even stricter in claims against large City firms (although much may depend upon which party attracts the sympathy of the court).

The case also highlights the difficulty in relying upon causation defences. What the Court of Appeal said is that, where a client has sought advice from a top tier firm, the presumption is that the client would follow any non-negligent advice that should have been given. This applies (not unreasonably) even where the clients are experienced businessmen with their own strong views on matters, as were the directors of Levicom. Whilst such cases are fact-sensitive, it follows that cogent evidence on causation will generally be required in order to rebut the presumption of reliance.

This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, please go to www.law-now.com.

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