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Loss of chance and solicitors’ negligence

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26/01/2017

Walker Morris has reported previously on the earlier Court of Appeal decision in Wellesley v Withers [1].  In that case the court concluded that where concurrent liability in tort and contract exists, a claimant is not entitled to choose whichever test for calculating damages appears to be the most advantageous to its case. Instead, the contractual test will be applied, rather than the arguably wider test applicable to claims in tort.

Court of Appeal case

Concurrent contractual and tortious liability often arises in solicitors’ negligence cases, where a breach of retainer also amounts to a breach of the solicitors’ duty of care. That was the position in the recent case of Wright v Lewis Silkin LLP [2], in which the defendant solicitors failed to advise in relation to jurisdiction when drafting an employment contract between the claimant and its employer, a foreign company.

At first instance the High Court had decided that the solicitors were liable in contract and in tort and ordered them to pay £2 million to the claimant to compensate it for the lost chance to obtain payment from the employer of an English judgment sum. The absence of an exclusive English jurisdiction clause in the employment contract had caused a delay in the claimant obtaining a judgment against the employer and, by the time it came to enforcement, the employer was insolvent and so the judgment sum was not paid.

The Court of Appeal, however, applied Wellesley v Withers, and adopted the more restrictive contractual measure of damages.  In so doing, the court found that the claimant’s inability to obtain payment of the judgment sum was not damage that would have been in the contemplation of a reasonable person in the position of the defendant solicitors, as being not unlikely to result from a breach, at the time the employment contract was drafted.  As such the £2 million was too remote and not recoverable.

As an aside, although it was not necessary in the context of the judgment overall [3], the Court of Appeal also commented that, in the alternative, it considered that the claimed £2 million loss was outside the solicitors’ duty of care in any event, and would therefore be precluded by the operation of the ‘SAAMCO cap’[4].

Legal and practical implications of interest to mutuals

Wright v Lewis Silkin is an important endorsement of the Wellesley finding that, where concurrent contract and tort liability exists, the tougher contractual test for the calculation of damages will apply.  It also confirms, certainly pending further consideration of the question by the Supreme Court, that the SAAMCO principles for limiting professional negligence liability apply to solicitors’, as well as to surveyors’, negligence cases.

Mutuals should be aware that claimants therefore need to ensure that they can establish a sound basis on which a loss of chance claim can be said to have been within the reasonable contemplation of the parties at the time the retainer and the professional duty of care came into effect. Equally, defendants should seek to challenge loss of chance claims wherever there is the possibility that loss claimed is too remote to pass the contractual test.

(In relation to the Supreme Court’s imminent further guidance on the applicability of SAAMCO principles to solicitors’ negligence cases, Walker Morris will monitor and report on developments in due course.)

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[1] Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146
[2] [2016] EWCA Civ 1302
[3] …and because the applicability of SAAMCO principles to solicitors’ negligence cases is currently under consideration by the Supreme Court in another case in any event (i.e. in BPE Solicitors and another v Hughes-Holland (in substitution for Gabriel) – judgment in that case is awaited as at the date of writing)….
[4] In South Australia Asset Management Corporation v York Montague [1996] UKHL 10 the House of Lords held that surveyors who provide negligent overvaluations are only liable for loss caused by the negligent valuation itself, and not for loss caused by any extraneous factor(s). That proposition has become known as the SAAMCO principle or ‘cap’, and is frequently relied upon to limit negligence liability.