In a claim in tort, causation should normally be proven by the plaintiff.
The English Court of Appeal in Levicom International Holdings BV & Anor v Linklaters took the opposite view. It found that if a lawyer encourages a client to bring litigation, and the client is unsuccessful, the onus is on the lawyer to prove that the client would have proceeded with litigation notwithstanding the advice.
In practical terms, it would be difficult and perhaps even impossible for many defendants to discharge this onus if the decision in Levicom were to be applied in Australia.
The Appellants were part of the Levicom group, the largest private telecommunications business in the Baltic States of Estonia, Lithuania and Latvia in 1998.
In January 1999, Levicom entered into a shareholder agreement (CSA) with the Swedish company, Tele2. Under the CSA, Tele2 acquired a 90% interest in one of Levicom's Estonian mobile phone companies, Levicom Cellular.
The CSA had a non-compete clause: the parties were not entitled to carry on a similar cellular network business within the Baltic States to that carried on by Levicom.
The following year, Tele2 acquired a Latvian based mobile network operator, Baltkom, for about US$227m.
Levicom alleged that Tele2 had breached the non-compete clause and offered to resolve the dispute with Tele2 on the basis that:
- the Baltkom shares were transferred to Levicom, or
- 10% of the Baltkom shares (or an equivalent payment of US$22.7m) were transferred to the Levicom company, BV, the other Levicom shareholder.
Tele2 admitted that it had breached the CSA and made a counter-offer to Levicom to the effect that BV would acquire a 5.2% interest in Baltkom (rather than the 10% interest offered by Levicom).
Levicom instructed Linklaters to advise on Tele2's offer.
Linklaters gave what was described by the Court of Appeal as "bullish" advice. The substance of the advice was that:
- Tele2 was in clear breach of the non-compete clause
- Tele2's offer did not fairly compensate BV for Tele2's breach of the CSA
- the damages payable to Levicom could be very substantial, and
- if Levicom commenced arbitration, its prospects of success were not less than 70%.
Levicom commenced arbitration. As the proceedings continued, Linklaters' advice became increasingly pessimistic about Levicom successfully establishing breach and recovering damages. Levicom ended up accepting a less favourable offer than Tele2's first offer.
Levicom claimed, in proceedings against Linklaters, that it would not have commenced arbitration but for their negligent advice.
First instance decision
The trial judge found that Linklaters had no basis to advise that damages payable to Levicom were likely to be substantial: the measure of damages was subject to Levicom establishing that it would have acquired Baltkom and to the arbitrators approaching damages on that basis. The advice did not properly convey to Levicom that the claim may not succeed and was found to be negligent.
However, the trial judge found in favour of Linklaters on causation because Levicom failed to prove that had it received proper advice, it would have adopted a different negotiating position with Tele2. The trial judge found that Levicom would not have accepted Tele2's first offer because Levicom were encouraged by Tele2's admission that it had breached the CSA.
Court of Appeal decision
The Court of Appeal endorsed the trial judge's findings on breach and said the following about Linklaters' advice:
"What I find striking is the bullish nature of the advice given by [the Lawyers], and the lack of any significant analysis or discussion of the issues. ...I do not see how that advice could reasonably have been given without some assessment of Levicom's recoverable loss, if any."
The Court of Appeal also overturned the findings on causation. It found that Levicom was not comfortable proceeding to arbitration unless it had a very strong case and that if Levicom had been properly advised, it would have settled on terms similar to those initially offered by Tele2 and avoided the costs of arbitration.
Jacobs LJ at  said:
"When a solicitor gives advice that his client has a strong case to start litigation rather than settle and the client then does just that, the normal inference is that the advice is causative. ... the [trial judge] should have approached the case on the basis that the evidential burden had shifted to [the Lawyers] to prove that its advice was not causative."
The decision in Levicom has not been considered by Australian courts and it is doubtful that this decision will be followed here.
If Levicom was followed in Australia, its application is potentially wide-reaching and could extend well beyond claims for negligence against lawyers. The rationale in Levicom appears to be that once a professional recommends a course of action and the client embarks on that course of action, the professional's advice is causative. If the client suffers loss, the onus shifts to the professional to establish his/her advice was not causative. This could have wide application. It could include advice provided by financial planners, insurance brokers, accountants, finance and mortgage brokers, real estate agents and valuers.
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