UK: Litigation Risk

A recurring issue for litigation lawyers is how best to advise clients on the merits of cases and their settlement value. The giving of optimistic advice can lead to a client who proceeds to trial and is disappointed by the outcome complaining that they were not properly advised about the risks. The giving of pessimistic advice can lead to a client who settles and later regrets doing so blaming their lawyer. The giving of advice which becomes more negative as trial looms may lead a client to question their legal team’s stomach for the fight, or to lose confidence in their team’s expertise.

A number of decisions in recent years have considered the question of when a lawyer will be found to have given negligent advice in relation to the prospects and settlement of litigation. For example, in the case of Levicom v Linklaters (2010), solicitors’ advice had been expressed in terms that the contractual provision upon which a dispute turned was clear, when in fact the position was more complicated. The client had, on the basis of that advice, rejected settlement offers and commenced arbitration proceedings. It was found that the solicitors had given advice to the client in overly positive terms, and that had caused the bringing of the proceedings. Conversely, Berry v Laytons (2009) is an example of a case where solicitors were found to have conveyed a negligently pessimistic view of the prospects of successfully litigating a claim, leading to the client settling the claim on terms which were less favourable than they should have been.

While it remains vital for solicitors to take care in the formulating, delivering and recording of advice on litigation, the recent Court of Appeal decision in Langsam v Beachcroft LLP (2012) offers some reassurance to litigation lawyers that the courts will not take too prescriptive an approach to the way in which they give their advice. The decision will also be of interest to solicitors who instruct leading counsel to advise on the merits and settlement in the lead up to trial.

Facts

The claimant businessman, Mr Langsam, instructed Hacker Young, a firm of accountants, to advise him in relation to negotiations with the Inland Revenue about obtaining non-domiciliary status for tax purposes. The Inland Revenue ultimately declared that he had such status. In due course, Mr Langsam and his then business

partner entered into an equity release arrangement which involved a bank making a loan to the partnership so as to enable the partners to withdraw equity and to invest the funds released. The advantage of this to Mr Langsam was that, as a non-domiciled person, he was able to invest the sums out of the jurisdiction, with consequent tax benefits.

Mr Langsam then brought a professional negligence claim alleging that Hacker Young should have realised that he was entitled to non-domiciliary status much earlier than they did and that, had they done so, he would at an earlier stage have entered into an equity release arrangement, invested the released funds offshore and obtained the tax benefits of doing so. This claim gave rise to difficult questions of causation and loss, with damages falling to be assessed on a loss of a chance basis taking into account a number of variables.

Beachcrofts were instructed to act for Mr Langsam in the claim and, in due course, instructed leading counsel. The solicitor at Beachcrofts with responsibility for the matter gave advice, including on quantum, from an early stage. In the run-up to trial, leading counsel advised on various matters including evidence, quantum and settlement. The proceedings were ultimately settled by consent shortly before trial, with Hacker Young paying Mr Langsam GBP 1 million inclusive of costs.

Disgruntled with that outcome, Mr Langsam subsequently brought proceedings against Beachcrofts. He claimed that they had given excessively cautious and pessimistic advice in relation to settlement in the run-up to trial. He appears to have been particularly aggrieved that the advice which he received in the period just before trial was less optimistic than that which he had been given previously, and also complained that he had only been given conservative advice about settlement based on figures at the bottom end of the bracket of what he might recover, rather than being advised about the spectrum of possible outcomes at trial. He also contended that Beachcrofts had failed appropriately to advise on the importance of certain witness evidence and had failed to obtain timely valuations of partnership assets. He claimed that these breaches of duty prevented him from recovering a total of around GBP 3 million from Hacker Young.

Beachcrofts denied negligence and argued that they had followed advice received from leading counsel. They also brought a counterclaim for fees which they contended were due under a conditional fee agreement. Neither party brought any claim against counsel.

The trial judge dismissed Mr Langsam’s claim, finding no negligence. Mr Langsam appealed.

Advice on settlement

The Court of Appeal upheld the trial judge’s decision that the advice which operated on Mr Langsam’s mind in settling the claim had been given not by Beachcrofts but by leading counsel. However, the Court of Appeal also considered the content of the advice given and found that, whilst it was on the conservative side, it was not negligent. A lawyer is not in breach of duty just because he does not provide an indication of the bracket or spectrum of likely quantum but only a figure at the bottom end of the bracket, provided that the advice given falls within the range of advice which a reasonably competent lawyer could give. Mr Langsam’s contention to the contrary was described as entailing “an over-prescriptive approach as to the way in which legal advice is given”. In any event, Mr Langsam had been given detailed advice on the computation of loss and had received more optimistic advice from Beachcrofts at an earlier stage – and the fact that there had been a change in the advice given did not of itself mean that the later advice was negligent.

The decision therefore offers some reassurance to litigation lawyers that the courts recognise that giving advice on the prospects of litigation and on settlement is an art rather than an exact science. Some lawyers are naturally more bullish, and others more cautious. That does not necessarily mean that the views or approach of either are wrong or negligent. The key is that the views expressed must be within the range of views that a reasonably competent solicitor could hold.

The involvement of counsel

Also of interest for litigation solicitors and their insurers is the decision in relation to Beachcrofts’ argument that they were relying on leading counsel and that it was his advice, not theirs, which was the operative advice.

The underlying principle in this area is that where a solicitor properly instructs leading counsel, and counsel gives considered advice to the client, the solicitor’s duty is only to apply his mind and expertise to the advice received and if, but only if, he considers that counsel’s advice on an important point is seriously wrong, to give separate advice. The more specialist the nature of the advice given by counsel, the more reasonable it is likely to be for a solicitor to accept it.

That principle has been upheld and developed in Langsam. By a majority, the Court of Appeal upheld the trial judge’s finding that the advice relied upon by Mr Langsam in settling the claim was that given by leading counsel, that in the circumstances the only duty on Beachcrofts was to apply their minds (including their specialist expertise) to that advice and to consider whether it was “obviously or glaringly wrong”, and that since the advice was not wrong (still less obviously or glaringly so) they had not breached their duty. The judge described the role of solicitors in such circumstances as a “whistleblower” role. The Court rejected Mr Langsam’s argument that Beachcrofts had given the relevant advice jointly with counsel, or that Beachcrofts owed more than a “whistleblower” duty because they had specialist professional negligence experience and the case was a professional negligence one. The Court further found that the fact that a solicitor gives advice which is consistent with advice previously given by leading counsel when leading counsel is not present does not mean that the solicitor has accepted an independent duty in relation to that advice.

It should be noted that Lord Justice Longmore departed from the judge’s decision and that of the majority of the Court of Appeal on one point. He considered that, on the facts of the case, it appeared that Beachcrofts had continued to advise after the instruction of counsel. He therefore commented that if the advice on settlement had been negligent, Beachcrofts should have been responsible for that negligence jointly with counsel. However, since he agreed that the advice given was not negligent, this point of disagreement was immaterial to the decision.

The Court of Appeal’s decision therefore confirms that a solicitor will not be under a duty to do more than alert a client to “obviously or glaringly wrong” advice just because he or she has specialist expertise in the area of law involved in a case. In addition, the repetition by a solicitor of leading counsel’s advice will not of itself amount to the acceptance of an independent duty in relation to that advice. The decision is therefore likely to be welcomed by solicitors and their insurers. However, there is a need for caution. As the dissenting judgment of Lord Justice Longmore underlines, decisions on the respective roles and duties of solicitors and barristers are fact-sensitive and there may well be circumstances in which a court will find that both a solicitor and a barrister were giving relevant advice on a case. Even the majority gave the example of the situation where a solicitor uses leading counsel effectively to “frank” his own advice.

In practice: a note of caution

The recognition by the Court of Appeal that different litigation lawyers may reasonably take a range of different approaches to the giving of advice on settlement is to be welcomed by litigators and their insurers. However, risk management remains as important as ever. What can be done to try to reduce the risk of being on the receiving end of claims arising out of the handling of litigation? Some points to keep in mind include the following:

  • Advice should be given in clear and unambiguous terms. Levicom highlights that, whilst a solicitor may tailor the manner in which he gives advice to the particular client, even sophisticated clients must receive clear advice

  • Both the positives and negatives of a piece of litigation, and the options available for taking the matter forward, should be spelled out for the client. Even following Langsam, it is likely to be a sensible precaution, wherever reasonably possible, to set out the spectrum of possible outcomes of the litigation as well as indicating where, in the lawyer’s professional judgment, he feels a reasonable settlement would lie

  • Particular care should be taken if advising in percentage terms: in Levicom the Court of Appeal considered that advice that prospects of success were in the region of 70% could reasonably be relied upon by the client as indicating that the case on liability was a “home run”

  • If possible, advice should be given in writing. If this is not possible, for example because the advice is given at court, then (as ever) it should be recorded in a detailed attendance note and, ideally, followed up afterwards in a letter to the client. Although litigation solicitors are generally good at making attendance notes, this practice can sometimes fall by the wayside where, for example, settlement discussions take place at the door of court and result in a settlement agreement recording what has been agreed between the parties and concluding the matter. Barristers are also well advised to keep detailed attendance notes, as far as is reasonably practical.

  • Where counsel is involved in meetings at which advice is given, or in settlement discussions, it may be prudent for the solicitor to ask counsel to review the solicitor’s attendance note. Likewise, barristers may wish to ask for copies of their instructing solicitors’ attendance notes so as to satisfy themselves that their contents are complete and accurate

  • The recording of advice and of the reasons for that advice is particularly important where there has been a change in advice, particularly if the advice has become less optimistic. This should help to dispel any impression on the part of the client that his legal team is simply ‘wobbling’ close to trial

  • Although Langsam has confirmed the availability of the defence of reliance on counsel even to specialist solicitors acting within their particular areas of expertise, all solicitors should keep in mind that the defence will not be available unless counsel has been properly instructed and provided with all of the necessary documentation

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.

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