Leigh Day found not to have discharged its duty of care.
In September 2009 close to £30m ($39.5m) was paid into and Ivory Coast bank, in settlement of personal injury claims made by 30,000 Ivorian nationals arising from toxic discharge from a Tranfigura tanker. A month later, the settlement account was frozen on the apparently dishonest application of a third party. Despite representations by the account holder, UK law firm Leigh Day, the application was upheld by the Ivorian court. Consequently, 6,624 victims of the toxic waste discharge received nothing; their hard-won compensation having fallen into the hands of fraudsters.
Last month, in Agouman v Leigh Day, the UK High Court found Leigh Day had been negligent in arranging for the settlement money to be held by an Ivorian bank. A further enquiry into damages has been criticised by some commentators, but a closer look at the facts suggests Leigh Day was not as hard done by as some may believe.
Briefly, Leigh Day, a specialist in “group litigation for unsophisticated clients arising from events in a poor and unstable African country”, was well aware Ivory Coast was volatile, with a weak rule of law and an unfortunate predilection to corruption at all levels. Fraud was a known risk – an earlier Trafigura settlement had been beset by corruption, with many victims recovering no compensation.
While Leigh Day did have appropriate high-level expertise, the task of determining how best to manage the settlement distribution was delegated to unqualified and inexperienced paralegals, who were given little guidance and whose work was inadequately supervised (if at all). Ultimately, little real consideration appears to have been given to the decision to par the settlement monies into an Ivorian bank and the court found that other options, such as holding the funds offshore and/or transferring the funds in smaller tranches over a longer period, would have reduced the fraud risk.
It is therefore unsurprising Leigh Day was found not to have discharged its duty of care to the victims of the toxic waste discharge. The firm laid claim to specialist knowledge, but then failed to exercise it when making a key strategic decision. This case is an important reminder to all professional firms that delegation must be exercised carefully and the resulting work adequately supervised. Had Leigh Day engaged with the fraud risk to the settlement monies at a more senior level, this unfortunate result might have been avoided.
This article was originally published in Insurance Day on 20 July 2016.