The Court of Appeal has reconsidered the correct test to be used when assessing the level of damages due to a claimant after a firm of solicitors had been found to be negligent in advice given. The court held that the loss of a chance to secure a voluntary payment of over £10 million from the claimant’s former employer was too remote and could not be recovered. In reaching this decision, the judge applied the test that had been set out in the earlier decision of Wellesley Partners LLP v Withers LLP.

In 2008, the claimant, Mr Timothy Wright sought legal advice from Lewis Silkin LLP (LS) after he was offered a position as Chief Executive of Deccan Chargers Sporting Ventures Limited (DCSV), a media company operating in India. A substantial part of the deal included that Mr Wright would receive a signing on bonus of £250,000 and a guaranteed severance payment of £10 million in the event that he was dismissed. The terms agreed between the parties set out that the contract was to be governed by English law. Mr Wright thought that this term also meant that the English courts would have the exclusive right to hear any disputes about the contract. However, LS failed to advise Mr Wright that this was not the case. As the contract did not stipulate that any dispute was to be heard exclusively by the English courts DCSV was able to challenge the jurisdiction of the courts of England and Wales to hear a dispute that later arose. This effectively delayed Mr Wright in obtaining judgment against the company. Mr Wright argued that this delay resulted in him being unable to enforce his judgment against the company.

Relations between Mr Wright and DCSV turned sour and Mr Wright alleged he had effectively been dismissed by the firm in January 2009. Mr Wright then brought proceedings against his former employer because it refused to make the guaranteed severance payment of £10 million. The employer disputed that the English courts had jurisdiction to hear the dispute and whilst this was not successful it slowed down the procedure. As a result it took until July 2012 for the matter to come to trial and for the English court to award Mr Wright damages of £10.3 million plus interest. Mr Wright was unable to enforce his judgment against his former employer and by the end of 2012 DCSV appeared to be insolvent.

Mr Wright brought a professional negligence claim against LS on the basis that the fact he was unable to recover the damages was due to LS’s negligence in drafting and advising on the terms of the contract.

The High Court decision

The judge held that LS had breached its duty by failing to advise Mr Wright about the inclusion of a jurisdiction clause in the contract. If Mr Wright had received that advice he would have insisted upon the inclusion of an exclusive English jurisdiction clause. As a result the judge concluded that if the English jurisdiction clause had been included the litigation would have proceeded more swiftly, and Mr Wright would have had a 20% chance of securing the £10 million payment. Accordingly, he awarded Mr Wright £2 million damages and £40,000 towards the litigation costs that he would have saved.

The Court of Appeal decision

LS appealed this decision on the following grounds:

  1. The judge was wrong in failing to identify the advice which LS should have given and in finding that the lack of advice caused any loss.
  2. The judge was wrong in assessing Mr Wright’s lost chance of recovering the severance payment at 20%.
  3. Mr Wright’s loss of a 20% chance of recovering the severance payment was too remote and/or outside the scope of the duty which LS owed in relation to the advice relating to the English Court’s jurisdiction.

First ground: The advice issue

LJ Jackson held that it had not been necessary in this instance for the judge to spell out the advice that LS should have given because it is clear what Mr Wright would have done if he had been aware that there was not a jurisdiction clause. It was also clear from the evidence given by the solicitor at LS what advice he would have given. Accordingly, this element of the appeal was dismissed.

Second ground: The lost chance

LJ Jackson held that assessing the loss of a chance was an issue for the trial judge. He felt that the Court of Appeal should not step in unless the trial judge made an error of principle or reached a perverse decision. In this case he stated that in his view the judge had not made such an error. Accordingly, the second ground of the appeal failed.

Third ground: Remoteness and scope of duty

LJ Jackson also took into consideration the earlier decision in Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 (which had been heard shortly after the previous decision in this case). In that case the court held that where a defendant owed a claimant a duty of care in both contract and tort, the relevant test for determining what level of damages could be recovered from the defendant should be the same and should be the contractual one. LJ Jackson took into account the fact that DCSV suffered severe financial difficulties and lost a very lucrative franchise in the period between June 2011, when Mr Wright should have obtained judgment, and July 2012, when he actually secured the judgment. He concluded that as a result of the delay caused by the defective contract drafting Mr Wright lost the 20% chance that DCSV would honour the judgment debt voluntarily. Neither LS nor Mr Wright were thinking about this risk at the time they entered into the retainer. Therefore, this loss was too remote to be recovered. LJ Jackson ordered that the award of £2 million made by the previous judge should be set aside.

However, LJ Jackson held that the £40,000 wasted costs incurred by Mr Wright following DCSV’s challenge to the jurisdiction of the English courts could be recovered. This ground of the appeal was therefore successful, and the damages were reduced to £40,000.

While this judgment does not state any new legal principles, it affirms how the court will apply the test when determining what level of costs a claimant should be awarded. Claimants need to be aware of this more restrictive test, and ensure that they can demonstrate that at the time they entered into the contract, they were aware that the losses claimed might be suffered in the event the defendant is negligent.