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28 January 2014
The Levicom v Linklaters case sets a precedent that clients cannot point the finger at their lawyers just because they don’t like the outcome of a case.
By Fergal Cathie and Natalia Lyttleton
The recent decision of the Commercial Court in Levicom v Linklaters (2009) is a warning to claimants who contend that, with the benefit of hindsight, they would have acted differently in litigation. The case also provides useful guidance to solicitors when advising clients.
Levicom, a Baltic telecoms company, instructed its solicitors to advise it on a contractual dispute with two Swedish competitors. Levicom rejected an early settlement offer made by the Swedish companies, but following the instigation of arbitration proceedings, the dispute settled on considerably less favourable terms.
Disappointed with the outcome, Levicom argued that, had it been advised properly, it would have negotiated a settlement on similar terms to the original offer and not referred the matter to arbitration. Levicom alleged that its solicitors were overly optimistic about its prospects of success and did not properly explain the difficulties it would face in proving its case.
The court disagreed with Levicom, finding in favour of the law firm that its advice on the underlying claim was not negligent.
However, even if the lawyers had not been correct and their views were indeed more optimistic than those more cautious solicitors might have held, the court said they were entitled to reach the conclusions they did as long as these fell within the range of opinions that would be given by a reasonably well-informed and competent member of the profession. The court also found that the firm’s views on quantum were correct.
The court did find, however, that the firm’s letters of advice did not convey, as fully as had been intended, its own views on the question of quantum. Levicom had strong views about its prospects of success and the solicitors did not communicate as effectively as they might the extent to which they disagreed with those views. The court decided that it was reasonable for the company to believe that the solicitors’ advice meant that damages would be substantial.
Although the court agreed that Levicom, an experienced international company, was capable of analysing and questioning the advice and reaching an independent decision, the solicitors were nevertheless required to give advice of a proper standard.
However, as Levicom was a sophisticated client, the solicitors were entitled to assume that it knew there was scope for the court to disagree with its views. It would be too demanding to require a solicitor to identify and warn about every potential counter-argument when advising a sophisticated client.
As the court went on to consider the issue of causation, Levicom’s limited success in establishing its case soon became a pyrrhic victory. The court applied a three-limbed test:
- On the balance of probabilities, if advised properly, would Levicom have accepted the first settlement offer?
- If not, on the balance of probabilities, if advised properly, would Levicom have changed its negotiating stance so as to improve substantially the prospects of a settlement?
- If so, was there a substantial chance that the other party to the dispute would have been willing to settle the dispute on terms that Levicom would have accepted?
Levicom failed to pass the test. The court held that ‘proper advice’ was not the pessimistic advice that Levicom argued would have been the correct advice. Rather, the court considered what advice a letter that reflected the firm’s views more fully might have contained. Had that advice been communicated so that Levicom understood the solicitors’ views, there was nothing to suggest that the company would have accepted the first offer, or that it would have conducted itself differently so as to make a settlement substantially more likely.
Levicom therefore failed to prove that it had suffered any loss as a result of the solicitors’ advice and was awarded nominal damages of just £5. At a subsequent costs hearing the court held that the commercial reality of the decision was that the solicitors were the successful party. As a result the solicitors were awarded costs without any application of a discount.
This case is a salutary reminder to claimants that, even if they are disappointed with the outcome of a case, simply pointing the finger at the professional adviser is not sufficient to recover any loss. In many cases the court will conclude that events would have occurred just as they did, even if the advice had been different.
It also serves as a reminder to solicitors that advice should be recorded clearly and transparently, in a manner appropriate to the particular client. Although the business acumen of the client will be a consideration in assessing the level of detail that should be provided, care should be taken to give clear and unambiguous advice even to the most sophisticated of clients.
Fergal Cathie is a partner and Natalia Lyttleton an associate at Barlow Lyde & Gilbert