ADVISING CLIENTS AS TO THE RISKS OF LITIGATION: “CLIENTS WANT TWO INCONSISTENT THINGS”: CASES AND GUIDANCE
A recent decision by the Bar Standards Board held that a barrister had not acted with reasonable competence when he failed to inform his client in relation to the risks of bringing a private prosecution. This decision highlights the need to inform clients of the risks of all elements of litigation. It also highlights the fact that there is very little practical guidance given to lawyers in relation to advising clients about risks. Here we look at some of the cases and the small amount of guidance available.
“Clients, I know, want two inconsistent things. They want confident advice on which they can act, and they want cautionary advice about the risks of doing so. It is a solicitor’s unhappy lot to have to try to satisfy both requirements simultaneously.”
(Sedley LJ Queen Elizabeth’s Grammar School Blackburn Ltd -v- Banks Silson  PNLR 300.)
There was a review of previous decisions by Morgan J in Thomas -v- Albutt  EWHC
- Queen Elizabeth’s Grammar School Blackburn Ltd v Banks Wilson  PNLR 300, the defendant solicitors had drafted a restrictive covenant to be entered into by the claimants when they purchased a property. Thereafter, in October 1994, the solicitors gave the claimants advice as to what the covenant meant. The advice was that certain action would not be a breach of covenant. The solicitors knew, when they gave that advice, that the covenantee was asserting the opposite. The first question before the Court of Appeal was whether there was real scope for a dispute as to the meaning of the covenant. The court held that there was. It was then held that the solicitors were negligent when they advised on the meaning of the covenant; they ought to have pointed out the possibility of and the risk of their construction of the covenant being wrong given that they were advising a lay client.
- In Hermann v Withers LLP  PNLR 28, the claimants were intending to purchase a high value residential property and it was a matter of great importance to them to know whether the owner of the property would enjoy a legal right to use a nearby garden. This involved a somewhat arcane point of property law. The defendant solicitors advised the claimants in the affirmative. In other proceedings, the court held that the owner of the property did not enjoy such a right. In subsequent proceedings which the claimants brought against the defendant solicitors for negligent advice, Newey J held that the solicitors’ opinion was a possible one and it was not negligent to form that opinion. Nonetheless, the solicitors were held to have given negligent advice. They should have appreciated, and should have advised, that the correct legal answer was open to significant argument. They should not have advised in unequivocal terms but should have warned of the existence of the contrary arguments.
- Levicom International Holdings BV v Linklaters  PNLR 29 involved an allegation that the advice given by solicitors as to the meaning of a document, in circumstances where the client was advised to commence arbitration proceedings seeking relief in accordance with the advised meaning, had been too optimistic and had been wrong. I am far from clear that the judgments of the Court of Appeal lay down a general principle as distinct from assessing the detailed facts of that case. At , Stanley Burnton LJ held that the solicitors could not sensibly have advised that the meaning of the document was “clear” and they ought to have given a balanced view of the rival arguments particularly in the context of potential arbitration proceedings. In the light of Mr Jourdan’s submissions as to there being a 65% chance of success in this case, it is interesting to note that the Lord Justice thought that a solicitor should only give prospects of success “in the region of, but not less than, 70 per cent” when he was “very confident indeed” as those prospects of success were “high”.
- In Thomas -v- Albutt  EWHC The claimants were bringing an action against the defendant barrister alleging negligence in the conduct of a judicial review where planning consent granted to them was set aside. (The judge rejected almost all the allegations of negligence, the one criticism he made was not causative of any loss). One of the issues was a general failure to warn about the risks of litigation. The judge reviewed the above cases and stated
“I am not persuaded by those decisions, or otherwise, that Mr Albutt was negligent because he failed to warn that there were risks in litigation generally, or in this case in particular. At all times, he was instructed by solicitors. The two solicitors involved, Mr Davies and Mrs O’Connor could be expected to be fully aware that there are risks involved in litigation. Indeed, both Mr Davies and Mrs O’Connor gave evidence to that effect. At the conference on 6 January 2009, Mr Albutt was not asked to advise on the merits. At the conference, the prospects of success were not clear, not least because the protocol letter relied on a large number of factual assertions which were strongly disputed by Mr and Mrs Thomas. He could not be expected to predict the outcome of the case at that point and he did not do so. He correctly distinguished between the possible outcome where Mr and Mrs Thomas were involved in some misconduct and the possible outcome where they were not so involved. As to the comment made by Mr Albutt on 23 February 2009, this comment was made to a solicitor, Mrs O’Connor, and she, rightly, did not take it literally. The conferences on 8 and 23 July and 5 August 2009 were for the purpose of preparing the evidence which was to be served on behalf of Mr and Mrs Thomas. I have held that Mr Albutt’s belief in the prospects of success at the time of those conferences was not a negligent belief. He was not asked during those conferences to assess the prospects of success. So far as he knew, Mr and Mrs Thomas were determined to fight the judicial review and his job was to get on with it. On 29 September 2009, he did express his opinion on the case more generally and he expressed the view that it was well worth fighting the judicial review and that it was difficult to predict the course of the litigation. In that context, I do not regard the reference to the risks as to costs being “low” as inappropriate or negligent.””
GOOD ADVICE – AND WELL GIVEN: YOU DON’T PAY ME TO SAY WHAT YOU WANT TO HEAR
Seery -v- Leathes Prior (a firm)  EWHC80 (QB) the claimant complained that his previous solicitors had been “too cautious” in the advice they gave him which led to the “undersettlement” of an action. This argument was rejected by the trial judge.
THE LETTER GIVING ADVICE
The letter that the solicitor wrote was set out in detail in the judgment. I know (because about a dozen solicitors have told me) that this letter has been used as a template for advice given to clients about the risks of litigation.
“… I have a strong feeling that we might be at the end of the road in these negotiations; I know my counterpart feels that his clients are also being ’emotive’ about the dispute and thus perspective is being lost. He feels also there is not likely to be any more movement from his clients, rightly or wrongly.
So I suggest you discuss the current offer – which totals 310k with 210k being paid up-front (I think we should be able to reallocate the figures to get it all net, so assume this for the time being) 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. We will need to fight the Tribunal claim, issue winding up petitions and, to gain any real value (since the Tribunal claim is worthless in real terms), issue (and succeed on) a High Court unfair prejudice claim. The costs will be enormous (not by SJ Berwin standards, of course, but huge nonetheless) and no guarantee of any return whatsoever if FWA go bust in the meantime (or manage to reallocate their assets). So take some time to seriously consider your options, and check that you and your wife are comfortable with where we are going – as I say, my very strong hunch (and I am usually right on these things) is that their offer is now their final offer. Of course, that doesn’t make it right or mean you should accept it – but I need to advise you of the consequences of rejecting what might well be their final offer. As experienced litigators, we tend to have a feel for how these sort of cases pan out, and you don’t pay me to tell you what you want to hear, but what I would advise. In this particular case, if it were me then I would accept the offer, bank the cash (as galling as it undoubtedly is to you) and get on with my life. But it is not me who is living this case, and I shall do whatever you instruct me to do!
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! You would not be too pleased with me, either, if I had not have advised (sic) you to accept that 310k! And then I would be getting sued for negligence!”
GOOD SERVICE NOT NEGLIGENT ADVICE
The judge found that not only was this advice not negligent it was “good service”.
I am not persuaded, therefore, that there was any breach of duty on Mr Chapman’s part, or on that of the Defendant firm. Indeed, it seems to me that the Claimant received a very good service from them in the difficult circumstances in which he found himself.
There would also have been real problems for the Claimant on causation. Even if Mr Chapman had been more “neutral” or “balanced” on the merits of costly and acrimonious litigation in November or December (over and above the commencement of tribunal proceedings), I see no evidence to suggest that the Claimant would then have opted to take that course. There was no way that Mr Chapman was ever going to make a positive recommendation to sue. (I do not believe that Mr Aylwin goes so far as to submit that he should have done so.) Without that, I do not believe that the Claimant would have overcome his reluctance, or willingly embraced the risks that had been pointed out to him throughout in no uncertain terms. It would still have been a huge gamble and contrary to his personal inclinations, as hitherto clearly expressed. There was certainly no rational basis for reversing his instructions at that time. I would proceed on the basis that there is no way that he would have changed his spots and chosen to spend money litigating for six months or a year in the High Court – even if he could afford it.
GUIDANCE ON ADVISING ON LITIGATION RISKS
There is relatively little guidance given on the duty to advise on “the risks of litigation”. There is some discussion in the SRA “Walking the line: the balancing of duties in litigation”.
There is an interesting definition of litigation risks in the Clyde & Co article: Litigation Risk – A necessary evil or Can it Be Avoided?