Cutting a fine line

In a recent decision, the Court of Appeal has allowed Levicom's appeal of the first instance judgment in their £37m loss of chance claim against Linklaters.

The case involves advice given by Linklaters to Levicom relating to a dispute with a Swedish telecoms group. Levicom alleged that, had Linklaters not given negligently over-optimistic advice, it would have settled its dispute at a much earlier stage, on more favourable terms, rather than embarking upon arbitration that settled on unsatisfactory terms.

Although the judge at first instance found that Linklaters' advice was negligent in certain respects, he held that the negligence caused no loss to Levicom '“ he did not accept that the company would have acted differently in the underlying dispute. Levicom was, therefore, awarded nominal damages of £5.

The Court of Appeal allowed Levicom's appeal and ruled that the first instance judge had not approached the causation issue correctly. In this regard, the approach of Levicom in negotiations with the other side was inevitably informed by the negligent advice it had received. The normal inference is that when a solicitor advises that his client has a strong case and should commence proceedings rather than settle, such advice is causative. The evidential burden, therefore, passed to Linklaters to rebut that presumption and to prove that its advice was not causative. As Lord Justice Stanley Burton put it: 'One has to ask why a commercial company should seek expensive City solicitors' advice and do so repeatedly, if they were not to act on it.'

The Court of Appeal was unanimous in ruling that, had Levicom received 'proper advice' on the merits and quantum of its case, it would have settled its dispute with the Swedish companies on terms similar to those available at the outset.

The case has been remitted for damages to be assessed, if not agreed by the parties. Linklaters has indicated that it will pursue an appeal to the Supreme Court.

The decision in Levicom v Linklaters [2010] EWCA Civ 494 will be of concern for City firms and their insurers. As well as adopting a tough line on causation by putting the onus on the solicitor to establish that its negligent advice was not causative, the court also adopted a harsher approach on breach of duty.

Negligent advice

The first instance judge did not consider that Linklaters' bullish and robust advice fell outside a range of opinions that a reasonably competent solicitor could have formed. Rather, he thought Linklaters was negligent in the manner in which it had conveyed its advice, in that it had failed properly to bring the difficulties in the case to Levicom's attention.

The Court of Appeal endorsed the judge's findings of negligence but was more critical of the advice given by Linklaters; it considered that it fell far short of what Levicom was entitled to expect from a reasonably competent solicitor. The court was critical of both the absence of any significant analysis or discussion of the issues and the failure to qualify advice where there was, on any view, uncertainty. The distinction between the advice that Linklaters intended to give and the advice it did in fact convey to the client was also questioned '“ only the latter was relevant.

Although the standard of skill and care is that of the reasonably competent solicitor undertaking the type of work in question, here, the reasonable average, in practice the courts often apply the standard of the particularly diligent and meticulous practitioner. That standard can, in practice, be even stricter in claims against large City firms, although much may depend upon which party attracts the sympathy of the court. A solicitor is entitled to take a robust view, so long as it does not fall outside the range of opinions that a reasonably competent solicitor could have arrived at.

Taking care

However, this case signals the need for caution and for a solicitor to always point out to his client any potential difficulties. In particular, it can fall within a solicitor's duty to correct a client where he knows that the client has a strong view on a particular aspect with which the solicitor disagrees. Failure to do so may lead to recriminations later if a matter turns sour.

The decision also highlights the care that solicitors should take in attributing percentage chances to outcomes. Linklaters' advice to Levicom was that its chances of success were 'in the region of, but not less than, 70 per cent'. The judge at first instance observed that this implied up to a 30 per cent chance of failure and thereby conveyed a warning to Levicom that it might lose. Lord Justice

Stanley Burnton's view was that lawyers do not advise that the prospects of success are that high unless they are very confident indeed.

Although Linklaters was not held to be at fault in failing to obtain leading counsel's advice at the outset, this is one way in which solicitors can seek to protect themselves when advising on a client's prospects in litigation. Solicitors should not shy away from advising a client to obtain a QC's opinion in appropriate circumstances. Clearly by doing so a solicitor reduces the chances of him subsequently facing a negligence claim.

Finally, the case illustrates the difficulty in relying upon causation defences. What the Court of Appeal said is that, where a client has sought advice from a top-tier firm, the presumption is that the client would follow any non-negligent advice that should have been given. This applies, not unreasonably, even where the clients are experienced businessmen with their own strong views on matters, as were the directors of Levicom. While such cases are fact-sensitive, it follows that cogent evidence on causation willgenerally be required to rebut the presumption of reliance.

Whether Linklaters is granted permission to appeal to the Supreme Court remains to be seen, although it may be difficult to establish that the legal issues are of general public importance.