The Court of Appeal has overturned a £2m negligence award made against a City firm after ruling that the claimant’s loss was outside its scope of duty.
Lewis Silkin had been ordered to pay compensation in the High Court to former client Timothy Wright after he had missed out on a £10m severance package.
Wright was offered the job of chief executive of Deccan Chargers Sporting Ventures (DCSV) Limited, owner of a cricketing franchise in the newly formed Indian Premier League, in May 2008.
The offer included an initial £300,000 annual salary and 3.5% of the equity of DCSV. Wright, who was advised by Lewis Silkin during contract negotiations, had also negotiated the severance guarantee in the event of his employment being terminated.
But the financial crash ended DCSV's plan to create a major Indian sports venture, and Wright was dismissed in January 2009. After a trial in 2012, His Honour Judge Seymour QC awarded Wright damages of £10m, but since that date he has faced a fruitless struggle through the Indian courts to enforce the judgment. There appears little prospect of recovering any money from Deccan.
In 2014, Wright claimed against Lewis Silkin for breach of contract and professional negligence. He alleged the firm had failed to advise on or consider securing enforcement of Deccan’s obligations. He also alleged that the firm failed to advise on jurisdiction matters to include a clause giving English courts exclusive jurisdiction.
Following a trial, Mr Justice Hamblen dismissed the first allegation but held that Lewis Silkin had breached its duty by not advising about the inclusion of a jurisdiction clause. The court found Wright would have had a 20% chance of recovering his severance, so awarded £2m.
That ruling was overturned this week in the Court of Appeal by Lord Justice Jackson.
Lewis Silkin argued in court that the trial judge had erred as there was no realistic chance of Wright recovering any compensation. This argument was dismissed, but Jackson did accept the plea that Wright’s loss of a 20% chance was too remote and outside the scope of the duty which the firm owed him.
In Wright v Lewis Silkin, Jackson cited Wellesley Partners LLP v Withers LLP, concluded between the High Court and Court of Appeal hearings, which supported Lewis Silkin’s case in terms of the scope of a firm’s duty in employment advice.
Even if Wright had lost his chance of recovering monies through defective contract drafting, Jackson said that loss was not damage of a kind either party in May 2008 would have had in mind. There was no reason to doubt the future solvency of Deccan, the judge added.
Even though Lewis Silkin had not taken the point at trial, Jackson allowed it to pursue the argument that the loss suffered was outside the scope of the duty which it owed.
The judge agreed damages to be paid by Lewis Silkin purely to cover Wright’s litigation costs incurred in enforcing the Deccan judgement, which amount to £40,000.
Following the ruling, Lewis Silkin said it was pleased with the outcome, adding it was ‘gratified that the court had acknowledged that it is not reasonable to expect a solicitors’ firm in these circumstances to protect against the financial collapse of a major commercial organisation years ahead of time’.
The firm added: ‘It is our hope that the conclusions and clarifications set out in this judgment may be of some help to others in similarly complex circumstances, and we look forward to putting this matter behind us.’
Wright called the judgment ‘perverse’ and described the hearing as a re-trial rather than an appeal.