The Court confirmed that in circumstances where a reasonably competent solicitor could have obtained advice on evidence from counsel earlier, but that advice would have been the same whenever counsel was asked, a claimant's action for professional negligence succeeded on liability but failed on causation.

Facts

The Claimant, Mr Hicks, brought a claim in professional negligence against Russell Jones & Walker (“RJW”) in relation to the firm’s preparation of appeal proceedings against a third party.

Mr Hicks was the shareholder and former director of Hinckley Island Hotel Limited (“HIHL”) that owned a hotel of the same name. Between January 1990 and July 1991 HIHL borrowed substantial sums of money from the Humberclyde Group.

In 1991 the Humberclyde Group took possession of the hotel on the basis that HIHL was in default of its payment obligations. Mr Hicks believed that the repossession of the hotel had been due to an unlawful conspiracy between the Humberclyde Group and HIHL's former accountants and consequently brought proceedings against them.

In 1993 HIHL was wound up and the court ordered the liquidator to assign three actions that HIHL had brought against the Humberclyde Group, to Mr Hicks on the basis that the hotel had been worth between £18 million and £20 million at the time of the repossession, whereas the debt to the Humberclyde Group was approximately £13.5 million. The Humberclyde Group appealed and sought to adduce fresh evidence as to the debt and the hotel's value. RJW were instructed to act on Mr Hick’s behalf at the appeal. Unfortunately RJW failed to arrange a consultation with counsel until six days before the appeal hearing. At that stage counsel took the view that it would not be necessary to prepare any further evidence for the appeal.

The Court of Appeal allowed the Humberclyde Group’s appeal on the basis that after setting off the maximum amount recoverable in HIHL's actions, against the sums owed to the Humberclyde Group, HIHL's actions were of no value. Mr Hicks submitted that RJW were negligent in failing to ensure that appropriate evidence was adduced before the Court of Appeal and that if RJW had performed its duty properly the appeal would have been dismissed leaving Mr Hicks free to pursue the claims. Damages were therefore claimed for the loss of opportunity to pursue the actions.

Decision

Mr Justice Henderson decided that, in considering whether RJW were in breach of their duty to Mr Hicks, RJW were not liable for what may in the result turn out to have been errors of judgment unless the error was such that no reasonably well-informed and competent solicitor could have made. He said that the standard to be applied was that of a reasonably competent solicitor with experience in the fields of commercial litigation and insolvency, including the conduct of complex appeals. He also decided that RJW must be judged in the light of events as they appeared at the time, and not with the benefit of hindsight.

On the facts, Mr Henderson was unpersuaded by RJW’s submission that this was a classic example of the inappropriate use of hindsight to judge the actions of solicitors in the context of complex litigation and developing circumstances.

Mr Henderson decided that it was self-evident that something had gone badly wrong with the preparation of the appeal on behalf of Mr Hicks. He said that by the time advice was sought from counsel, six days before the appeal hearing, it was on any reasonable view too late to prepare and serve further evidence. Mr Henderson therefore concluded that RJW were in breach of their duty to Mr Hicks.

On the question of causation, Mr Henderson decided that if the appeal had been competently prepared by RJW, advice on evidence would have been sought from counsel in good time before the hearing. However, on the facts, counsel’s advice would not have been to file any further evidence before the trial in any event. Accordingly, the position when the appeal was heard was exactly the same as it would have been if counsel’s advice had been obtained earlier, and Mr Henderson concluded that Mr Hicks had not suffered any loss.

Comment

This case serves as a timely reminder of the importance of the proper preparation of evidence. Whilst in this case the outcome was unaffected by the delay in obtaining counsel’s advice, RJW suffered criticism for their failure to review the need for counsel’s advice at an earlier stage.