Solicitor firm ordered to pay millions in professional negligence damages after failing to lodge caution in claim

About this case:

• Citation:
  [2023] CSOH 28
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Ericht

Centenary 6 Ltd had sought the sum of £35.169 million from solicitors TLT LLP, that being the amount the pursuer had sought in litigation in which the defender acted for them that was refused by the Court of Session. The defenders admitted liability for failing to give the pursuer adequate advice regarding the lodging of a caution but disputed the assessment of damages.

The case was heard by Lord Ericht in the Outer House of the Court of Session. Smith KC and T Young, advocate, appeared for the pursuer and McBrearty KC and Paterson, advocate, for the defender.

Loss of a chance

In 2016, the pursuer raised proceedings in terms of section 212 of the Insolvency Act 1986 seeking damages from the joint liquidators of a related company, Centenary Holdings III Ltd, for a breach of duty in connection with a decision to enter into a compromise agreement with a creditor, Deka Immobilien Investment GmbH. In this claim, the defenders acted as the pursuer’s solicitor. The case was refused as a consequence of the pursuer’s failure to lodge caution.

It was the pursuer’s case that, but for the actings of the joint liquidators in breach of their duties, the assets of CHIII would have been substantially increased and thus more funds would have been available in the liquidation for distribution to the contributories of CHIII, including the pursuer. As a result of the defenders’ negligence, it lost the chance to obtain a substantial amount in damages.

Counsel for the pursuers submitted that the chance of success in the failed litigation was high and the liquidators’ defence of prescription was a weak one while the pursuer had a compelling case on negligence. As it was the defender’s negligence that cost the opportunity to be lost, the court should tend towards a generous assessment of the uncertainties in calculating damages, with a chance of success of 66% or greater.

For the defenders it was submitted that the lost chance by the pursuer was either nil or negligible. There were six independent factors which had a bearing on the pursuer’s loss of a chance, including uncertainty as to the outcome of an English claim which was the source of the funds for its litigation, which together resulted in the pursuer having a nil or at best negligible chance.

Broad brush

In his decision, Lord Ericht began: “The issues raised in this case, with two exceptions, fall to be resolved on a loss of a chance evaluation. The first exception is the issue of prescription. That is a matter of law which can be determined by this court. The second exception is the issue of whether the pursuer would have funded the section 212 Note out of its own funds up until the court ruled on the question of prescription.”

Having answered those questions in the positive, he said of loss of a chance evaluation: “This issue can be taken shortly as the defender in its submissions accepted that the pursuer had proved that there was a real and substantial chance of the [pursuer] establishing breach of duty by the liquidator. The only matter in dispute between the parties was what that chance was. The pursuer submitted that the chance was a high one. The defender submitted that the chance was 50%.”

On the percentage chance of the pursuer’s success, Lord Ericht said: “It must be borne in mind that the defender in this action is the solicitors firm which was acting for the pursuer in the section 212 Note. There are obvious difficulties for a solicitors firm if having advised a client to proceed with litigation, it then seeks to defend a negligence claim relating to its conduct of the litigation by saying that that litigation would not have succeeded.”

Lord Ericht concluded: “I have assessed the chances of success in relation to the reaching of an agreement with Deka and the availability of a surplus as reasonable, but acknowledged the alternative possibilities. I have found that the chances of a judge refusing the section 212 Note on a discretionary equitable basis are nil. Taking all of that into account, and applying a broad brush, I find that the chances of the [pursuer] being successful in the section 212 Note are 65%.”

The judge therefore awarded the pursuer £9,122,000 in relation to its first conclusion, £148,500 in relation to its second conclusion, and £113,200 in respect of its third claim. Interest was set at 8% from the date of citation and 4% from 5 May 2017 to the date of citation in respect of the first and third claims.