Sound advice

The recent Appeal Court decision in Levicom International Holdings BV and another v Linklaters [2010] EWCA Civ 494 has a considerable impact on the way solicitors should be conducting their risk management. By creating a rebuttable inference that, when a solicitor advises a client that they have a strong case to enter litigation, and the client does that, the advice was causative, the court is warning solicitors to ensure that they have properly analysed and assessed their client's case before recommending litigation. This case raises two important questions: how far does the rebuttable inference extend and how can we protect ourselves from potential professional negligence claims?

Linklaters advised that Levicom were 'on strong ground' and that they should 'take a hard line' in negotiations. They also made it clear that Levicom should not accept Netcom's offer and quantified their prospects of success at 'in the region of, but not less than, 70 per cent'. Netcom made subsequent offers, which Linklaters also advised should be rejected. Levicom then entered into arbitration and during the course of it, Linklaters' advice became less positive. Mid-way through the arbitration, Levicom accepted an offer that was less advantageous than the original offer. As a result, Levicom brought a professional negligence claim against Linklaters.

Big buts

On appeal, the court found striking what it called the 'bullish nature' of the advice given by Linklaters and the lack of any significant analysis of why the terms of the offer did not fairly compensate Levicom. The court did not see how that advice could be given without some assessment of Levicom's recoverable loss. With regard to the advice that Levicom's prospects were in the region of 70 per cent, the court did not think it unrealistic to consider that lawyers do not advise that the prospects of success are that high unless they are very confident indeed. The court could see no point in Levicom seeking and paying for Linklaters' advice if it was not to influence their conduct in the dispute. The court held that when a solicitor gives advice that his client has a strong case to start litigation rather than settle, and the client does just that, the normal inference is that the advice is causative. However, this presumption is rebuttable.

The rebuttable inference appears to apply only to instances where solicitors have advised a client that their case is strong and that they should litigate rather than settle. In such situations, solicitors should now be even more considered in their advice.

The advice given in this case was extremely optimistic. Subject to the Supreme Court's ruling, it is unlikely that this inference will apply beyond instances where solicitors advise litigation over settlement. However, pending the Supreme Court's decision, it would be wise to be cautious when advising clients on the strength of their claim as the decision may be widened if the court has the opportunity to consider the issue again.

Check yourself

At the very outset of an instruction it is good risk management, prudent and good practice to carefully to analyse and report on the strengths and weaknesses of a client's case, taking into consideration their recoverable loss. While we may be encouraged to give quick, practical and commercial advice, it would be sensible to caveat any positive advice with the considered risks involved.

Think very carefully before giving a case strong prospect of success without knowledge of the full facts and in the face of an early offer to settle from the opponent. Very often, when giving early advice, solicitors have not seen all of the evidence which only unfolds later in the life of the dispute. For example, all witnesses may not have been proofed; we do not know what the other side's witnesses may say; we may not have full expert evidence on key issues; we may not have seen all the key documents. It may be sensible to make advice conditional on that evidence coming to light or documents being seen later in the action and on which the initial advice is not given.

If an offer is on the table pre-action, consider the risks and give the prospects and risks a lot of thought before advising the client to reject the offer and head into litigation or arbitration.

All settlement offers should, as ever, be considered carefully with the client, whenever they are made. It would be wise to advise of the potential risks the client may run by rejecting the offer and electing to litigate or continue with litigation or arbitration.

That said, the issue of 'the rebuttable inference' should not deter solicitors from advising clients in their best interests and seeking to achieve the best outcome. In instances where litigation is preferable to settlement, we should protect ourselves by providing the client with considered reasons why they should not settle. These reasons should take into account all risks, to enable the client to make an informed decision to enter litigation. Most notably, all advice should be put in writing and a detailed record of the client's response to that advice should be made.

By ensuring following these steps, solicitors can attempt to protect themselves against potential professional negligence claims and exercise proper risk management.