LITIGATION: EVIDENCE; MITIGATION OF LOSS AND "BLACK BOXES" IN THE EVIDENCE
The case of Rentokil Initial -v- Goodman Derrick LLP  EWHC 2994 (Ch) contains some interesting observations on evidence. In particular what is the position when a party claims privilege and fails to disclose legal advice relating to a settlement when the settlement is a key part of the claimant’s claim for damages.
The facts of the case are succinctly described in an article by Beth Fisher in Development Finance Today. This was a negligence action by a property owner against their former solicitors. It was alleged that the solicitor was negligent in failing to advise in relation to planning conditions. A proposed purchaser refused to complete. Arbitration proceedings were settled by the owner with the owner suffering a loss of £1 million and £600,000 in costs. The claimant claimed these sums from its former solicitor.
THE EVIDENTIAL ISSUES: THE BLACK BOXES
What is surprising about the case was the claimant’s failure to disclose any of the legal advice that led to the terms of the settlement. This led the judge to observe:-
“113. The claimant has decided, as it is entitled, not to reveal the undoubtedly privileged advice that it was given by its new solicitors and counsel in relation to the merits and prospects of success in the arbitration. There was a team of lawyers working on the matter. This has been described by Mr Seitler as one of the two “black boxes” in this case. Thus Mr Brown, and I assume the claimant, formed the view that as the matter proceeded to arbitration the claimant’s chances of success improved, but I cannot be told the reason for that assessment. That has undoubtedly hampered me in my analysis of a number of issues.”
118. The appearance is of somebody who was increasingly desperate to avoid the arbitration, but the reason for that is not, and has to my mind, not been made clear. I find that the real likelihood is, as put to Mr Brown in evidence, that he was not concerned about the risks of losing the litigation but that his primary concern was to ensure a sale of the property at a renegotiated price which both parties could live with. The absence of comprehensive disclosure in respect of the settlement negotiations, which Mr Seitler describes as the second black box, hinders me in making findings of fact about the process.
THE CONCLUSION: THE CLAIMANT FAILED TO PROVE ITS CASE
There were a number of reasons that the claimant failed. However the “black boxes” were an important feature.
146. The defendant says that the claimant has failed to provide sufficient evidence to prove on the balance of probabilities that the claimant acted reasonably in the way in which it compromised the dispute with Taylor Wimpey or that it acted reasonably in purportedly mitigating its loss. The claimant says (paragraph 26 of the particulars of claim) that it mitigated its loss by going to arbitration and by compromising those proceedings in the way that it did and relies on the factors identified in paragraph 97 of Mr Brown’s witness statement, as amended by his second statement, in support of its contention that it acted reasonably. The claimant submits that in asserting that the claimant acted unreasonably in the conduct and settlement of the arbitration thereby breaking the chain of causation it seeks to sidestep the rule that the burden of proving failure to mitigate it on the defendant for the reasons explained by Lord Macmillan in Banco de Portugal v Waterlow & Sons Ltd  AC 452 at 506: —
“… it is often easy after an emergency is passed to criticise the steps which had been taken to meet it, but such criticism does not come world from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of the duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held to be distant title to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”
The claimant submits that having analysed the risks involved in the arbitration “it was better to take the bird in the hand” than run the risk of failing to obtain the full contract price and being left with a property worth significantly less than that the date that the contract was entered into. It is submitted that this cannot be criticised as an unreasonable decision.
147. Again I am faced with the difficulty that the claimant has decided not to waive privilege in relation to the advice which it was given in respect of the arbitration (after the defendant was disinstructed) and during the course of the settlement negotiations. The claimant says that it need not waive privilege because the court can conclude that the course which it adopted was inherently not unreasonable. I am not persuaded that the claimant was placed in “a difficult situation” by reason of the defendant’s breach of duty. Further, not only is there is no evidence which can persuade me that the claimant analysed the risks of the arbitration and then decided to protect its interests by negotiating a settlement it seems to me, for the reasons that I have already given, that the reason for settlement was not connected to the alleged breach of duty. Ultimately I cannot undertake the task of analysing whether the claimant “has acted reasonably in the adoption of remedial measures” and, given my view that it would have succeeded in the arbitration, I have come to the conclusion that in settling the arbitration, when it need not have done so, it acted unreasonably.
THE RISKS OF NOT WAIVING PRIVILEGE
There was no discussion in the judgment of the principles in Wiszniewski v Central Manchester Health Authority  PIQR P324. A failure to adduce evidence on a point usually leads to a presumption against the party who calls that evidence. See the discussion in my article in the Local Government Lawyer Silence is not Necessarily Golden. However despite the express reference to these principles the net result was the same. In the absence of evidence on a key point the judge, certainly, drew no inferences in the claimant’s favour.