In a recent High Court judgment, Sir David Eady, has dismissed a professional negligence claim against a firm of solicitors.
The claimant, Mr Seery had sought advice from the defendant firm of solicitors, Leathes Prior, in relation to negotiating the settlement of a dispute between himself and a company called FWA West Ltd, of which he had been an employee, minority shareholder and finance director. Mr Seery had fallen out with two former colleagues and claimed that they had wrongfully excluded him from participating in the company’s management.
An agreement was eventually reached in which Mr Seery received £317,000 by way of:
- a termination payment;
- to cover shares he had in the company;
- for a director’s loan account and
- as a contribution towards legal costs.
Mr Seery then alleged that Leathes Prior should have provided better advice about whether to settle the dispute. He maintained that there should have been greater encouragement to think about pursuing litigation which could have assisted him in achieving a higher level of compensation.
After receiving an offer from FWA West, Mr Chapman of Leathes Prior advised Mr Seery:
“I suggest you discuss the current offer – which totals 310k with 210 being paid up-front…and the remaining 100k paid over 18 mths with interest – with your wife tonight. It seems to me a huge financial decision for you and your family; if we reject this now I think we will be tied down to litigation for sometime…The costs will be enormous…and no guarantee of any return whatsoever if FWA go bust in the meantime…
Please don’t misunderstand me – I (and my firm) will be more than happy to fight this all the way. However, I have a duty to ensure that you (and your family) are fully aware of what you are getting yourselves into. I don’t want to be walking out of the High Court in 2 years time, telling you that whilst we have won the total damages you are able to recover from FWA amount to zero since the company has gone into liquidation, and then handing you my firm’s bill for 70k, at which point you might wish you had accepted the 310k on offer!”
Mr Seery also suggested that at times he had been so stressed that he had been unable to understand the legal advice he was being given.
Top tip: ensure you always fully understand your solicitor’s legal advice
Sir Eady considered the following points as being relevant to this allegation:
- Mr Seery did not tell Mr Chapman at the time of receiving the advice that he did not understand it;
- the majority of the advice was in writing, allowing Mr Seery to re-read the advice when he was less stressed;
- if this allegation was true then it backs up Mr Chapman’s advice that pursuing uncertain and stressful litigation would not be in Mr Seery’s best interests; and
- a solicitor will have fulfilled his duty if he gives an explanation in terms the client reasonably appears to him to be able to understand, and to have understood even if the client later alleges that he did not in fact understand what was said.
Sir Eady said that it was important to remember the circumstances of the case when reaching his decision about whether Leathes Prior had acted in Mr Seery’s best interests.
In particular, Mr Chapman was acting for a client who at that time:
- had limited means to fund the litigation;
- had significant commitments in respect of outstanding loans;
- wanted to use a re-mortgage loan he had obtained for the purpose of investing in a new business;
- wanted to move on with his life and invest in a new business;
- had two hostile and apparently “dodgy” adversaries;
- lacked up to date information about the firm’s finances and medium term prospects;
- might find his conduct criticised at court;
- may have to overcome significant hurdles if he wished to establish “unfair prejudice”;
- may not be able to recover any monetary award if FWA went into liquidation; and
- did not wish to become embroiled in costly and acrimonious litigation.
In light of these considerations, Sir Eady found it difficult to see what further steps Mr Chapman could have taken to act in his client’s best interests.
He was not persuaded that Mr Chapman had breached his duty to Mr Seery.
Instead, he found that there was no evidence that Mr Seery would have achieved a significantly better outcome than Mr Chapman had negotiated by pursuing litigation. In fact, he concluded that Mr Seery received “a very good service…in the difficult circumstances in which he found himself”.
Comment
Hindsight makes it easy for an upset client to believe their solicitor should have advised them to hold out for better terms of settlement.
It is also easy to conclude that litigation would have resulted in a larger settlement.
It is important to remember that the courts are always going to consider the circumstances that were known to the parties at the time the advice was given.
As Sir Eady summarised in this case, no solicitor advises in a vacuum: “there are almost always inconvenient circumstances which have to be taken into account. These will impact correspondingly upon the scope of the duty to be discharged and upon the limits of what can be achieved”.
