Litigation Risk

A recurring issue for litigation lawyers is how best to advise clients on the merits of cases and their settlement value. The giving of optimistic advice can lead to a client who proceeds to trial and is disappointed by the outcome complaining that they were not properly advised about the risks. The giving of pessimistic advice can lead to a client who settles and later regrets doing so blaming their lawyer. The giving of advice which becomes more negative as trial looms may lead a client to question their legal team's stomach for the fight, or to lose confidence in their team's expertise.

A number of decisions in recent years have considered the question of when a lawyer will be found to have given negligent advice in relation to the prospects and settlement of litigation. For example, in the case of Levicom v Linklaters (2010), solicitors' advice had been expressed in terms that the contractual provision upon which a dispute turned was clear, when in fact the position was more complicated. The client had, on the basis of that advice, rejected settlement offers and commenced arbitration proceedings. It was found that the solicitors had given advice to the client in overly positive terms, and that had caused the bringing of the proceedings. Conversely, Berry v Laytons (2009) is an example of a case where solicitors were found to have conveyed a negligently pessimistic view of the prospects of successfully litigating a claim, leading to the client settling the claim on terms which were less favourable than they should have been.

While it remains vital for solicitors to take care in the formulating, delivering and recording of advice on litigation, the recent Court of Appeal decision in Langsam v Beachcroft LLP (2012) offers some reassurance to litigation lawyers that the courts will not take too prescriptive an approach to the way in which they give their advice. The decision will also be of interest to solicitors who instruct leading counsel to advise on the merits and settlement in the lead up to trial.

Facts

The claimant businessman, Mr Langsam, instructed Hacker Young, a firm of accountants, to advise him in relation to negotiations with the Inland Revenue about obtaining non-domiciliary status for tax purposes. The Inland Revenue ultimately declared that he had such status. In due course, Mr Langsam and his then business

partner entered into an equity release arrangement which involved a bank making a loan to the partnership so as to enable the partners to withdraw equity and to invest the funds released. The advantage of this to Mr Langsam was that, as a non-domiciled person, he was able to invest the sums out of the jurisdiction, with consequent tax benefits.

Mr Langsam then brought a professional negligence claim alleging that Hacker...