Causation defences are often an important defence in claims against solicitors. In our experience, the consequences of the error may be conveniently overlooked by claimants in the rush to claim compensation. However, the Court of Appeal recently made some surprising findings in this area.
Defendants have the opportunity to knock claims out where any mistake was not causative of the loss alleged to have been sustained. However, the recent Court of Appeal case of Levicom v Linklaters (2010) suggests that causation defences, at least in certain circumstances, may be more difficult to establish in the future.
Facts
The claimants were a large corporate group. They instructed the defendant City law firm in connection with a dispute relating to a shareholder's agreement, which revolved around the construction of a particular clause in the agreement. Having rejected a number of settlement offers, the claimants proceeded to arbitration, eventually settling after the arbitration hearing had begun. The claimants subsequently brought proceedings against the solicitors alleging that their advice on the claimants' prospects of success in the arbitration had been too optimistic and wrong, and that if the claimants had been given proper advice they would not have proceeded to the arbitration.
We reported on the first instance decision in a previous edition of this publication. There, Mr Justice Andrew Smith held that, although the advice itself was not negligent, it fell below the requisite standard. However, there was no causative potency, as even if the advice had been properly understood, there was nothing to suggest that the company would have conducted settlement negotiations differently.
The Trouble with Causation
The Court of Appeal reversed the first instance decision. Stanley Burnton LJ found that the defendant had given negligent advice to the claimants that the relevant contractual clause at issue in the arbitration was "clear".
It was particularly relevant to give balanced advice in the context of arbitration proceedings, as an arbitration tribunal arriving at a different construction of the clause could not usually be the subject of appeal. The Court also held that the advice given in relation to the damages recoverable by the claimants was negligent, and the defendants had not considered properly whether the claimants had suffered a loss.
It was on the issue of causation, however, that the judgments were of most interest. Existing authorities show that the burden of proving causation falls on the claimant, albeit that the courts may lean on the side of the claimant where establishing what would have happened was a difficult exercise. For defendant professionals, such a test prevents disappointed claimants from looking back with hindsight and claiming that they would have acted differently and avoided suffering loss but for the errors of the professional adviser.
However, Jacob LJ held in this case that there was an inference that advice given to a client by a solicitor to start litigation rather than settle is causative, and the case should have been approached on the basis that the evidential burden had shifted to the solicitors to prove that it was not so. Stanley Burnton LJ accepted that the clients had certainly believed that they had a strong case, but he noted that "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". In this case, Stanley Burnton LJ noted that the solicitors' attendance note recorded that the claimants had stated that, unless they were right that they had a strong case, they were not happy to proceed with an arbitration. It was also significant they had asked the solicitors for their "concerted view" of the case. The first instance judge had based his finding of no causation on the fact that the claimants had not presented evidence as to the stance that they adopted in negotiations, that they did not present themselves to the other parties as uncompromising and inflexible, that they always knew there was some risk that they would not receive substantial damages, and that they were reluctant to accept the solicitors' advice on quantum. Stanley Burnton LJ held that the evidence that the client did not act on the advice must be stronger than was the case here.
It is perhaps surprising that the Court of Appeal went so far as apparently to reverse the burden of proof of causation. The judgments do not discuss existing case law in this area and it may be in practice that the impact of the decision will be confined to cases with similar facts.
However, the message is that solicitors should be careful about being too optimistic in their advice, even where the client is clearly sophisticated, and has its own strong views. Even though the business acumen of the client will be a factor in the level of detail in the advice that the solicitor is required to provide, it is always important to be careful to spell out and record in writing all of the options, even if it is clear that the client may already be aware of them.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
