In Levicom International Holdings BV and anr v Linklaters (a firm) [2010] EWCA Civ 494, Levicom appealed against the first instance decision of  Mr Justice Andrew Smith that, although Linklaters had negligently advised Levicom, Levicom had suffered no damage as a consequence because it would have proceeded in the manner that it had even if it had received non-negligent or proper advice. As such, Smith J awarded only nominal damages plus costs.

Linklaters had been instructed to advise Levicom on possible breaches of a shareholder agreement to which Levicom was a party. Levicom submitted that, having received negligent advice from Linklaters, it had lost an opportunity to accept and/or negotiate an early settlement offer due to its belief in the strength of its position.

In his decision, Smith J set out four considerations that contributed to his finding that Linklaters’ negligence had no causative effect:

  • Levicom could not show, in respect to the stance that it had taken in negotiations, whether weight was placed on Linklaters’ advice or on commercial considerations;
  • Levicom could not show that, if having received proper advice, it would have adopted a more compromising position;
  • Levicom knew that there was some risk that it would not succeed in obtaining substantial damages; and
  • Levicom was reluctant to accept Linklaters’ advice on quantum.

The Court of Appeal agreed with Smith J’s finding that Linklaters had been negligent in its advice. However, it found his decision on causation to be flawed. The court considered that the evidential burden should have shifted to Linklaters; it was for Linklaters to prove that its advice was not causative. Lord Justice Jacob neatly summarised the issue of causation:

“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 [emphasis added]. Of course the inference is rebuttable – it may be possible to show that the client would have gone ahead willy-nilly … The Judge should have approached the case on the basis that the evidential burden had shifted to Linklaters to prove that its advice was not causative.”

Lord Justice Stanley Burnton remarked 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. I think that the evidence that a client did not act on advice in a case such as the present must be stronger than that which persuaded the judge“.

A further hearing is expected to determine the quantification of damages.

This case has highlighted the burden that has been placed on solicitors, which may impact on their professional indemnity insurers, when advising clients as to whether to settle early or proceed with litigation or arbitration. It continues to provide a timely reminder as to the importance of contemporaneous evidence of advice and discussions between a solicitor and his client.

To view the decision in its entirety please click here http://www.bailii.org/ew/cases/EWCA/Civ/2010/494.html