This article reports on the case of Levicom International Holdings BV and another v Firm X (a firm) [2010] EWCA Civ 494.

This is a professional negligence case against a firm of solicitors. The facts of the case are as follows:

Two companies, Levicom and NetCom, had become embroiled in dispute. Levicom felt that Netcom had breached a shareholders agreement to which each were party that served to regulate the affairs of a Baltic Telecoms company. Levicom argued that Netcom were in breach of the shareholders agreement by subsequently buying a separate telecoms company trading in the Baltic region.

Netcom offered terms to settle, but Levicom approached Firm X for advice as to what their prospects of success would be should they wish to bring an action against Netcom. The advice from Firm X was positive. Levicom were told they had not less than a 70% chance of success should they wish to commence arbitration against Netcom and that they should reject Netcom’s offer. Levicom did therefore arbitrate, but as time went by, the advice from the solicitors became less strong. Eventually, Levicom accepted an offer from Netcom which was not as good as the previous offer.

Levicom sued Firm X. It argued that if the solicitors’ initial advice had not been so positive, they would have accepted the initial offer and would not have arbitrated.

The Court of Appeal held on the facts that the advice given was negligent, as whilst Firm X’s analysis of the construction of the Shareholders agreement was one possible interpretation, they should not have advised that it had such high prospects of success, and shouldn’t have advised Levicom to reject Netcom’s original offer.

The interesting point is that Levicom succeeded in showing that the negligence caused the loss. The argument could be raised that even if correct (more cautious) advice had been given, Levicom would still have rejected the initial offer and arbitrated. The Court of Appeal found that there was good evidence to show that Levicom would not have proceeded with arbitration if the advice was not so positive. Further, the Court of Appeal felt that it was for the solicitors to show that its advice did not cause Levicom to arbitrate. They did not do so.

It appears also that the Court were influenced by the fact that the solicitors involved were a large London firm. As Lord Justice Stanley Burnton stated, “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.”

It is unclear whether the Court is drawing a distinction on causation between the larger City solicitors’ firms and others, and whether the test on causation on this point is thus more difficult for the larger firms to overcome, but what is clear is that all professionals should provide their advice carefully in a reasoned manner following thorough analysis of all the facts and evidence. If they fail to do so and the client suffers loss, they open themselves up to a potential professional negligence claim, and can not rely with all certainty on a court subsequently blindly accepting the submission that the client would have followed the course it did irrespective of the advice given.

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