This decision was the culmination of extended litigation brought by Mr Hicks (H) following the collapse of his hotel business in the 1990s. H and his wife were shareholders and directors of a company which owned the Hinckley Island Hotel in Leicestershire. In 1990 and 1991 the company borrowed substantial sums of money from Humberclyde Group on the basis of valuations of the hotel of £22.5m in 1989 and £10m in 1991. In 1991 Humberclyde took possession of the hotel under its security when the company defaulted on its payment obligations.

H believed that the downfall and repossession of the hotel was brought about by an unlawful conspiracy between Humberclyde and the company’s accountants, Robson Rhodes. H brought three actions, in the name of the company, seeking relief.

In 1993 a winding up order was made against the company. The company’s liquidator agreed to assign the company’s actions to H. The liquidator applied to the court for directions. Chadwick J ordered the liquidator to assign the company’s actions to H. In coming to his decision Chadwick J relied upon the 1989 valuation when the Humberclyde debt was £13.5m so it was not self-evident that H’s claim would be nominal. Humberclyde appealed.

H had been represented by Russell Jones & Walker (RJW) since January 1998. H obtained legal aid for the appeal which was due to take place in May 1998. H and RJW were only able to obtain Leading Counsel’s advice on the appeal, and on evidence for it, six days before the appeal was due to be heard. Humberclyde’s appeal was successful, on the ground that, after setting off the maximum sum recoverable in the company’s actions against the sums due to Humberclyde, the company’s actions were of no value. The Court of Appeal relied upon the 1991 valuation, compared to the higher valuation from 1989 relied upon by Chadwick J.

H sued RJW alleging that the firm had been negligent in failing to ensure that appropriate evidence was adduced before the Court of Appeal to demonstrate that the hotel was in fact worth the higher sum on which Chadwick J had relied. A split trial was ordered, and Henderson J determined various issues relating to liability and causation.

Henderson J held that RJW’s breach lay in the failure to obtain advice from Leading Counsel in good time. The question of how to deal with the evidence served on behalf of Humberclyde was a difficult one which “cried out for” advice from Leading Counsel who would be briefed for the appeal. A reasonably competent solicitor would have identified the need for such advice at an early stage. RJW had become bogged down in discussions with the Legal Aid Board and lost sight of the need for urgency in obtaining that advice. By the time RJW sought Leading Counsel’s advice, it was too late to do anything about it.

Notwithstanding the finding of breach of duty, Henderson J found that even had RJW consulted Leading Counsel in good time, he would have advised RJW and H not to prepare or seek to adduce fresh evidence and not to seek any further retrospective valuation of the hotel. This advice would have been given as much for tactical reasons, to avoid highlighting the differing valuations, as on the merits. Although that advice might (with the benefit of hindsight) have been mistaken, Henderson J said it would not have been negligent, and RJW could not have been criticised for following such advice.

Therefore the position at the appeal would have been exactly as it in fact was. It followed that, although RJW were found to have been in breach of duty to a limited extent, H was unable to establish that he had suffered any loss caused by that limited breach. H was awarded nominal damages alone for breach of contract.

Comment

This is yet another example of how important issues of causation can be in claims for professional negligence. An adverse costs order for the claimant will most likely follow an award of nominal damages only.