The recent case of Wright –v- Lewis Silkin LLP emphasises the steps solicitors must take to ensure their clients are fully advised and provides a helpful example of the Courts applying “loss of chance” principles.
In 2008, the Indian Premier League (“IPL”) made its debut.
Mr Wright was appointed as Chief Executive Officer of Deccan Chargers Sporting Ventures Limited (“DCSV”), who controlled one of the teams, the Deccan Chargers. Mr Wright signed binding Heads of Terms (“the Heads of Terms”) in May 2008. The Heads of Terms included a provision that, in the event that Mr Wright’s employment was terminated, he was to receive the higher of either his total annual package at that time or £10 million. DCSV’s parent company, Deccan Chronicle Holdings Limited (“DCHL”) guaranteed its obligations.
The Heads of Terms contained a provision that English law applied but did not state which Court had jurisdiction to hear any dispute. Mr Wright mistakenly believed that because it had been agreed that English law applied it meant that the English Courts would also have jurisdiction to hear the matter. In fact, it is possible to have English law applying but for there still to be issues regarding which Courts can hear the matter. Choice of law and jurisdiction are distinct issues.
In January 2009, Mr Wright was constructively dismissed and therefore sought to claim £10 million.
The Original Proceedings
Mr Wright issued proceedings against DCSV and DCHL in February 2009. Both companies disputed whether the proceedings had been validly served and also argued that the English Court did not have jurisdiction. A second set of proceedings was issued in November 2009 to seek to deal with the service arguments.
The jurisdiction challenge was defeated in December 2010 before the English Courts and was upheld on appeal in May 2011. Mr Wright successfully obtained final judgment against DCSV and DCHL in England in July 2012 in the sum of £11.5 million plus costs. Subsequently, Mr Wright sought to enforce the judgment in India. DCHL became insolvent in September 2012 and Mr Wright has since been advised that there was no prospect of recovering the judgment sum.
The Claim against Lewis Silkin LLP (“LS”)
LS, a well-known firm of solicitors, advised Mr Wright on the Heads of Terms. He brought a claim against them for his losses suffered as a result of not being able to recover the losses from DCSV and DCHL. Mr Wright claimed that LS had been negligent in:
- Failing to consider or advise him on effective means of security against DCSV and DCHL – Mr Wright argued that LS should have advised him to obtain a UK bank guarantee or performance bond in his favour; and
- Failing to advise on jurisdiction and, in particular, to include an exclusive jurisdiction clause for the UK.
LS denied negligence. They argued that security of the type Mr Wright sought would be highly unusual in an employment contract of this nature. In relation to jurisdiction, LS claimed that advice had been given to Mr Wright and a decision had been taken not to limit jurisdiction. Mr Wright denied that any such advice had been given and said that, had LS given such advice, then he would have wanted English jurisdiction to be specified.
Were LS negligent?
The Court agreed with LS that there was no negligence in relation to the advice given on security. It was accepted that such a clause would “simply not be on an employment lawyer’s radar”.
However, in relation to jurisdiction, the Court found that LS had been negligent. The Court accepted Mr Wright’s evidence that he had not been given advice on jurisdiction and that, had he received such advice, he would have insisted on an exclusive English jurisdiction clause.
Was there a real or substantial chance that Mr Wright would have been paid if such a clause was included?
Even once Mr Wright had proved negligence, he still needed to show that the negligence had caused him loss. If the negligence had made no difference, then Mr Wright would not have been able to recover his losses. The Court therefore considered whether it would have made any difference if the exclusive jurisdiction clause had been included. Bearing in mind that Mr Wright had successfully obtained judgment in the UK, this was not a straightforward question to address.
However, the Court concluded that an exclusive jurisdiction clause would have made a difference. The issues would have been resolved at an earlier stage and Mr Wright would have obtained judgment in the UK in or around June 2011 instead of July 2012. Taking into account the fact the judgment would still have required enforcement in India, the Court found that it would still not have been enforced before DCHL became insolvent. However, the Court found that there was a real or substantial chance that the BCCI (the cricket governing body in India) would have applied pressure to DCHL to make payment once a judgment was obtained. As DCHL still had assets in 2011, the Court considered that there would have been a very strong incentive for DCHL to pay, to avoid losing its franchise.
The Court had to then consider the likelihood that DCHL would have negotiated such a settlement. It concluded that, whilst it was a real or substantial chance, the chance was relatively low and could not be higher than 20%. On such a loss of chance claim, the Courts award the successful party the proportion of the total damages which equate to the lost chance. Accordingly, the Court awarded Mr Wright £2,000,000 of the £10,000,000 sum against LS.
This is an unusual decision as the negligence of LS did not prevent Mr Wright from obtaining judgment nor did the Court find it would have led to Mr Wright being able to enforce the judgment in India. The Court relied on evidence that a third party, the BCCI, would have applied external pressure to DCHL to make payment, had an English judgment been available earlier.
It emphasises the test which applies when the way in which a third party would have acted is relevant to the dispute. The Court will first consider whether there is a “real or substantial chance” that the third party would have acted as argued by the claimant. If there is no such chance, then the claimant will receive nothing. However, if that threshold is met, the Court will then assess (as a percentage possibility) the chances of the third party acting in that way. The Claimant will then receive that percentage proportion of their total losses.