The recent case of Wellesley Partners LLP v Withers LLP provides useful guidance on several areas related to a professional's duty to advise and professional negligence claims generally.
A claim for professional negligence was brought by Wellesley LLP against Withers LLP regarding Withers' allegedly negligent conduct in drafting a LLP agreement. The agreement was to facilitate direct capital investment from Addax Bank BSC in exchange for ownership rights in the limited partnership.
Wellesley claimed that Withers had been negligent in, amongst other things: (i) amending clause 25 of the LLP agreement to allow Addax to exercise its right of exit before 41 months, rather than after 42 months, contrary to instructions from Wellesley; (ii) failing to advise Wellesley that the LLP agreement allowed the bank to require its exit payment in dollars as opposed to sterling, thereby exposing Wellesley to currency exchange risk; and (iii) failing to advise Wellesley on the redistribution of capital following Addax's exit.
Withers' amendment of clause 25 followed a telephone call discussing amendments to the agreement. No written record or attendance note of the call existed and the solicitor on the call could not remember what was said. It is, of course, good practice and preferable to take attendance notes but despite this, the court did not hold that the lack of one counted against the solicitor in forming a view as to where the truth lay. It simply made it more difficult to resolve the question. Hence, lack of attendance notes are not fatal to professionals in putting forward their defences in claims of professional negligence. On the facts, the court held that there was a phone call and instructions were given. Withers must have either misunderstood the instructions or noted them down wrong and was therefore negligent in changing clause 25 when it had no instruction to do so.
In determining whether Withers were negligent in failing to advise on the ability of Addax to require its exit payment in dollars and the redistribution of ownership on Addax's exit, the key issue was that Wellesley did not specifically ask for advice on these particular issues. The allegation was that Withers should have taken it upon themselves to alert Wellesley to these points.
The court considered this a step too far. The extent of a solicitor's duty to actively give advice, when not asked for it, is a fact sensitive one. In these circumstances, and more generally, a solicitor is not negligent for failing to advise on the commercial impact of purely commercial decisions. Withers job was to document those decisions. It was not required to point out to an experienced businessman "matters which are well within the client's competence to appreciate and evaluate for himself, business considerations rather than legal ones" (such as potential currency exchange risks or the ownership structure of their business).
There will no doubt be a balancing exercise for professionals in deciding where the line is between what is within their scope and what is a "commercial" decision. If in doubt, you should advise. That said, it will come as a relief to professionals that, as a general trend, the courts are not prepared to see professionals as a general insurer for their clientele against all problems. It is not a professional's duty is not to advise on obvious or common sense risks.
Loss of chance
The court also considered the approach to be taken in bringing claims for loss of chance. Where the loss of chance relates only to the claimant's loss of opportunity to obtain a particular right as a result an omission by the defendant, the claimant must prove such loss on the balance of probabilities. The assessment of the value of that right then depends on the claimant's chance of success in obtaining that right, had the negligent omission not occurred.
However, where the loss is not a valuable right, but rather the chance to obtain a benefit dependent on an action of a third party, the claimant is not required to prove on the balance of probabilities that the third party would have taken that particular course of action. Rather, the claimant must show that there was a substantial, rather than speculative, chance that it would. This is still a question of causation, not quantification. Once the real and substantial chance has been proved, the value of the benefit will be quantified as a percentage having regard to the claimant's chances of obtaining it.