Wellesley Partners Llp v Withers Llp
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Mr Justice Roth,Lord Justice Longmore |
| Judgment Date | 11 November 2015 |
| Neutral Citation | [2015] EWCA Civ 1146 |
| Docket Number | Case No: A3 2014 1026 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 November 2015 |
[2015] EWCA Civ 1146
Lord Justice Longmore
Lord Justice Floyd
and
Mr Justice Roth
Case No: A3 2014 1026
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE NUGEE
Royal Courts of Justice
Strand, London, WC2A 2LL
Ms Fiona Parkin QC and Mr Micha Balen (instructed by Enyo Law LLP) for the Claimant
Mr Michael Pooles QC (instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 30 June, 1 July 2015
We have before us appeals by both parties from the judgment of Nugee J dated 11 March 2014 in a professional negligence action, and from his consequent order. The appeals raise issues about the appropriate rule for remoteness of damage where a claimant has concurrent causes of action for pecuniary loss in tort and in contract, and about the application of the "loss of a chance" principle to the assessment of damages.
In the action, Wellesley Partners LLP ("WP") claimed damages against Withers LLP ("Withers") for negligence in the drafting of a partnership agreement for WP. The judge found in favour of WP and awarded damages of £1,612,313. On this appeal, as below, the case for WP was argued by Ms Fiona Parkin QC with Mr Micha Balen and the case for Withers by Mr Michael Pooles QC.
The facts
Background
The background to the action is set out in the lucid and comprehensive judgment of Nugee J: [2014] EWHC 556 (Ch). For the purpose of understanding the issues in this appeal, the following précis, which borrows heavily and gratefully from the judgment of the judge, is sufficient.
WP carried on the business of an executive search consultancy or head hunter specialising in the investment banking sector. WP's founders were Mr Rupert Channing and Mr Christian Brun. By the time of the relevant events, Mr Channing was WP's leading light. Mr Channing was recognised to be among the most successful consultants in his field, with an excellent reputation for successfully completing assignments. Between 2000 and 2004 Mr Channing had worked at Heidrick & Struggles International ("Heidrick & Struggles"), one of the world's leading executive search firms. Whilst there, he successfully built the financial services team and had been in the top echelon of fee producers globally in that firm. Put shortly, he was a star in his particular firmament.
Withers are a well known firm of solicitors. In 2008 Withers acted for WP in connection with changes to WP's partnership agreement ("the LLP agreement"). The changes were necessitated by the admission of new investors who were to become members of the partnership. One of these investors was to be a Bahraini bank, Addax Bank BSC ("Addax"). Addax was to make a capital contribution of some US$5 million to WP in return for which it would acquire a 25% interest in the partnership.
Withers were instructed by WP on the basis of terms partly set out in a letter dated 15 January 2008 and partly in terms of business attached thereto. The letter explained that the work which Withers were instructed to carry out would be performed by Mr Simpson, a partner, and by Mr Jamie Cuffe, a junior associate solicitor. The letter stated that the services which Withers would be required to provide included:
"1. reviewing the current LLP agreement;
2. advising on and drafting new provisions of the LLP agreement required by the investors such as pre-emption rights, veto rights and management provisions generally…"
Clause 14 of the attached terms of business included a limitation of liability clause which said:
"We will only be liable to you for any loss arising from the work carried out for you by Withers LLP up to £10 million unless the law, practice or professional rules say otherwise."
It was agreed between WP and Addax that Addax should have an option which would entitle Addax to withdraw half its capital contribution, and thereby reduce its interest proportionately. The LLP agreement executed on 14 May 2008, as drafted by Withers, gave Addax such an option exercisable at any time within the first 41 months of the agreement. In February 2009 Addax intimated an intention to exercise its option and withdraw half its capital contribution. In May 2009, only 12 months into the LLP agreement, Addax exercised its option. This led WP, and Mr Channing and Mr Brun personally, to become engaged in litigation with Addax. The litigation was not settled until 2011.
The negligent drafting of the agreement
WP's claim in the action was that, in drafting the LLP agreement, and in particular the option, Withers had negligently failed to give effect to Mr Channing's instructions on behalf of WP. According to Mr Channing, he had given instructions that the option should only be exercisable after 42 months from the execution of the agreement, not within the first 41 months as Clause 25.2 of the LLP agreement provided. The judge accepted Mr Channing's evidence and found that WP had established negligence in that respect. There is no appeal from that finding of negligence. If the clause had been drafted in accordance with Mr Channing's instructions, Addax would not have been able to exercise its option until November 2011, 2 years 6 months after they did so in fact.
The events of 3 February 2009
WP made other allegations of negligence about the service provided by Withers in connection with the LLP agreement, all of which the judge rejected. One of these allegations is sought to be resurrected on this appeal: a complaint about the advice given, or not given, on 3 February 2009 at the moment when Addax first intimated that it was thinking of exercising the option.
On the morning of 3 February 2009 Mr Channing received a telephone call from the chief legal officer at Addax, Ms Hajjar-Alami, in which she told him that Addax intended to exercise its "put option", by which she meant its option to withdraw half its capital. No doubt surprised by this development, Mr Channing telephoned Mr Cuffe at Withers. Mr Channing asked Mr Cuffe to check what the LLP agreement said about when the Addax option could be exercised. Mr Channing said that he thought that the option could not be exercised until November 20Mr Cuffe agreed to check the wording of the Agreement. Mr Cuffe told Mr Channing that his recollection was the same as his, namely that Addax was wrong, but he would check the agreement. Mr Cuffe had at this stage forgotten the detail of the drafting of clause 25.2.
Mr Cuffe then checked the LLP Agreement, and e-mailed Mr Channing to say that Addax was in fact right. Mr Cuffe had at that stage only called up the agreement, found the relevant section and drafted the e-mail response to the client. He had not by then undertaken any review of the file. There was a further brief call in which Mr Channing and Mr Cuffe agreed to speak later in the day.
Between that call and a third call later in the morning Mr Cuffe looked at the earlier versions of the agreement. He identified, correctly, from his review of the file that the final form of clause 25.2 was the result of a change which had been made in the draft early on in the negotiations with Taylor Wessing ("TW"), the solicitors for Addax. The change was made from a version which would have precluded the exercise of the option in the first 42 months. Mr Cuffe did not at that stage focus on who was responsible for the change, or precisely how it had come about. What he was interested in was the fact that it had been in the draft for some time and in versions which had gone to Mr Channing.
In the third call Mr Cuffe told Mr Channing that the clause had been in this form since early on. Mr Cuffe expressed some surprise at this because, as the first call indicated, this was not what he had expected to find. He said that since the clause was in the signed agreement, Mr Channing must have signed up to it. Mr Cuffe also said something to the effect that Addax presumably must have made the change. Mr Channing's note of the conversation questions whether there might have been a mistake in the LLP agreement. However, Mr Channing did not request Mr Cuffe to follow this up or track down precisely how the error, if it was an error, occurred; or advise whether he had any remedies if it were an error. Mr Channing then asked what all this meant for WP and what his options were. The discussion moved on to the practicalities of seeking to persuade Addax by negotiation that it was not in their interests to exercise the option.
There is no doubt that Mr Channing believed Addax to have been responsible for introducing the change. His note of a later meeting with Addax in early March (see below) makes this clear. This note refers to Mr Channing's disappointment with Addax for deliberately changing the terms of the deal, and with Withers for letting the change into the documents.
By the time Mr Cuffe sent an internal email to the responsible partner, Mr Simpson, at around noon, he had identified that it was Withers who had changed the clause from the TW draft. Mr Cuffe had gone back to the file and discovered that the change was in fact introduced by him in the draft of 18 April 2008. He had no recollection of having made the change, and assumed that it was made on Mr Channing's instructions. He did not, however, return to Mr Channing to explain that this was the case.
WP's US expansion
WP's case on quantum was, firstly, that because of Addax's withdrawal of capital it was unable to finance expansion of its business in London and abroad, particularly by...
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