Wellesley Partners LLP v Withers LLP

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 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.

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.

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 2011. Mr 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 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 opening an office in New York. In consequence they had lost profits which they would otherwise have made.

By April 2008 WP were contemplating expanding into the US. A business plan (“the Revised Business Plan”) was drawn up in May 2008, at about the same time as the partnership agreement was being drafted by Withers. The Revised Business Plan contained projections for profitability of, amongst other things, the North American and London ventures. It also dealt with a Middle Eastern venture, in respect of which no claim was made in the action because it had been abandoned before Addax intimated its intention to withdraw.

The financial crisis triggered by the collapse of Lehman Brothers (“Lehman”) in September 2008 had a profound effect on executive recruitment in the investment banking business. In the case of WP it put a stop to the steps they were taking to develop their business in the Middle East. After the collapse, Nomura acquired Lehman’s non-US investment banking business. Lehman’s US business was purchased by Barclays. However Nomura’s purpose in acquiring the Lehman business was to obtain a foothold in the global investment banking business. For this purpose it needed a US presence, and to grow it quickly. The evidence referred to this exercise by Nomura as its “US build out”.

Well before the crisis, Mr Channing had established a relationship with Lehman. This relationship arose from his time at Heidrick & Struggles. In that capacity he had dealt with Ms Bridget Anderson who was the head of human resources for Lehman Investment Banking Division. After Mr Channing established WP, Ms Anderson continued to work with Mr Channing, and WP was appointed a preferred supplier. Being a preferred supplier involved signing up to a framework agreement which specified a variety of general matters, including fees. We were shown a copy of the agreement dated November 2008. Although it had no express territorial limitations, it was expressly governed by English law, all sums were expressed in sterling and its non-solicitation clause related only to Europe and the Middle East.

Mr Channing also had a close relationship with a Mr Christian Meissner of Lehman. Mr Meissner was a member of WP, having a 1% interest. Mr Meissner joined Lehman in 2003 as head of European Investment Banking. After the Nomura take over of Lehman, Mr Meissner remained in a senior position and in due course became Nomura’s Global Head of Investment Banking.

Very little had been done towards the opening of an office in the US when the Lehman crisis hit. Thereafter Mr Channing was clearly alive to the opportunity which the Nomura US build out presented. He mentioned it to Addax when he visited Addax in Bahrain in January 2009. Mr Channing’s evidence was that Nomura wanted him to handle the Nomura US build out through WP.

In the event WP did not make any formal bid for the Nomura mandates. Soon after Addax had intimated its intention to exercise the option, Mr Channing joined forces with CT Partners (“CT”) with the aim of making a joint bid for the work. The Vice-Chair of CT was a Mr Burke St John. A meeting took place in New York on 16 April 2009. Although initial signs after that meeting remained positive, Nomura did not ultimately award any part of the mandate to CT/WP. Instead Nomura ultimately hired two of the largest global firms, Heidrick & Struggles (Mr Channing’s old firm) and Korn/Ferry. Mr Channing was told by Mr Meissner that the reason why CT/WP did not get the mandates was because Mr Meissner did not like Mr St John.

WP also claimed some £1,500,000 in lost revenues flowing from the diversion of Mr Channing’s time away from generating revenue for WP’s London business caused by Mr Channing having to deal with the disputes with Addax.

Mr Channing's evidence was that from February 2009 when Addax first threatened to exercise its option, a large amount of his time was spent on a succession of disputes with Addax. In summary these were:

Following the unwelcome news received on 3 February 2009 that Addax claimed that they had the option to withdraw half their investment with immediate effect, Mr Channing proposed to Addax that they might exit WP altogether. Ms Hajjar-Alami (“FHA” in the note below) suggested that Mr Channing put his proposal in writing. At the beginning of March Mr Channing flew to Bahrain and had the meeting mentioned above with Ms Hajjar-Alami and a Mr Sohab Rashid. Mr Channing's note of the meeting included the following:

"Option exercise. RC confirmed was extremely disappointed to discover Addax had deliberately changed terms of original deal without ever discussing or advising WP of such change. Very difficult meeting. No comment from FHA on deal change. Said that Board had instructed to exercise because of market conditions affecting bank. No comment on change of deal. RC said couldn't believe that Withers so crap as to let change into docs. Typical. RC Livid. FHA embarrassed and evasive."

Mr Channing also indicated that he wished to buy Addax out completely as his trust in Addax was broken, and was putting together an offer to buy out its interest over a two year period. Ms Hajjar-Alami indicated Addax would look favourably on such a proposal, and Mr Channing agreed to put together a proposal for her to put to the Board.

It will be seen that Mr Channing was still operating on the footing that Addax had introduced the change although, of course, Withers knew that it had been introduced by the WP side, not by Addax.

Mr Channing was unable to agree terms with Addax, and so on 7 May 2009 Addax served notice under clause 25 of the LLP Agreement requiring WP to terminate its membership of WP in relation to 50% of its interest, and stating, (in the defined terms used in the LLP Agreement) that the Cancellation Sum due was 50% of Addax's Capital Contribution of $4,750,000.

On 18 June 2009 TW sent WP a formal letter before action in relation to non-payment of the Cancellation Sum threatening proceedings unless it was paid within 7 days, and saying that such proceedings would include Mr Channing and Mr Brun personally as defendants for failure to procure payment of the sum as required by clause 25.

Once the letter before action had been received and discussed with Withers, Withers stated that, although they would act for WP, Mr Channing and Mr Brun should obtain independent advice. In due course Mr Channing instructed separate solicitors to act for him personally.

Addax issued proceedings against WP, Mr Channing and Mr Brun on 26 June 2009, claiming US$2,375,000. On 2 July Mr Channing spoke to Addax on a without prejudice basis, and later that day he told Mr Cuffe that agreement had been reached in outline to settle the dispute. TW also confirmed on 6 July that their instructions were that a settlement had been reached and attempts were then made to draw up a settlement agreement. There followed lengthy attempts to reach a comprehensive agreement which would not only settle the proceedings but effect various amendments to the LLP Agreement. By 24 July Withers were in a position to send to TW a draft settlement agreement together with a draft amended LLP Agreement. TW's response however on 28 July was that it had not been agreed that the LLP Agreement would be amended, the proposed amendments were far reaching and were not necessary to effect the settlement, and that they were primarily for the benefit of Mr Channing, although WP was bearing the costs, giving rise to a concern that there was a conflict of interest.

At the end of July WP paid Addax $1.525m as a sign of good faith, and in August a further $700,000 in return for Addax discontinuing proceedings against Mr Channing and Mr Brun. That left $150,000 outstanding.

Further drafts of a settlement agreement and of an amended and restated LLP agreement were prepared by Withers during the autumn of 2009 and eventually sent to TW on 4 January 2010. One of the questions raised by Withers in the course of preparing the drafts was what was to happen to Addax's withdrawn 12.5% interest. A draft of the amended LLP agreement provided by Withers to Mr Channing on 8 December had the profit entitlements adjusted so that the 12.5% was reallocated 1% to Mr Brun and the balance to Mr Channing, but in a covering e-mail Mr Simpson advised:

"We would expect that Addax will require the re-allocation to be pro rata. Please can we discuss."

This was discussed with Mr Channing, as a result of which the next draft (sent to him on 11 December) provided that Addax's 12.5% was allocated pro rata to the other investors (but not Addax itself), with nothing for Mr Brun and the balance for Mr Channing, 5% of Mr Channing's interest then being allocated to a new member. Mr Channing had no comment on this and it was in this form that the draft amended LLP agreement was sent to TW. Even before taking instructions TW's immediate comment on 5 January 2010 was:

"One initial drafting observation on the LLP agreement is that as 50% of Addax's interest had been cancelled as opposed to transferred, the increase in each member's ongoing partnership interest should be pro-rata including Addax's, as opposed to applying to all members other than Addax. Please confirm that this is agreed."

On 7 January 2010 TW said that Addax would not discuss settlement until certain financial information had been provided, but that the terms of the settlement went far beyond those discussed in September.

Despite Mr Channing's further attempts to settle matters, and despite further payments of $50,000 on 1 April 2010 and $21,000 on 23 April 2010, no settlement was reached. In May TW wrote indicating that negotiations were at an end, and in June issued a summary judgment application.

In the meantime on 7 May 2010 Mr Channing had had a telephone conversation with Mr Adam Duthie of Withers, who was Head of the Corporate Department and who called him about outstanding fees. In the course of the conversation Mr Channing had said that the drafting of the option was not what had been commercially agreed, and the failure to provide that the option be exercisable only after the third anniversary was a mistake. This set in train events which led to Mr Channing taking advice from another firm with the result that, in early July, WP changed to them.

The summary judgment application was heard by Eady J on 12 July 2010. In his judgment dated 23 July he rejected an argument that Addax was entitled to be repaid half the sterling sum actually transferred and held that it was entitled to be repaid half the US$ sum shown as its capital contribution. However he held that WP had an arguable legal or equitable set-off for two sums of £50,000 due as monthly retainers under arrangements for services made with Addax in January 2008, and since the payments made by WP had reduced the outstanding debt to Addax to $79,000 (together with some interest) which was less than the amount of the cross claim, he rejected the claim for summary judgment.

A settlement agreement between WP, Mr Channing, Mr Brun and Addax was eventually reached in October 2011, providing for payment to Addax of various sums in satisfaction of its interest in WP and the stay of the proceedings save for the purpose of giving effect to its terms (a Tomlin order).

As I have indicated, the judge found that Withers were negligent in drafting clause 25.2 of the LLP agreement. The negligence consisted in failing to give effect to Mr Channing’s instructions. If they had complied with those instructions Addax would not have been entitled to withdraw their money when they did.

The allegations of negligence advanced by WP at the trial in connection with the events of 3 February 2009 were that Withers:

The answers given by the judge to these allegations (adopting this numbering) were:

The judge went on to consider quantum. A preliminary issue was the place which “loss of a chance” played in the law relating to loss of profits. He reviewed the authorities, including Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 ("Allied Maples"); Parabola Investments Ltd v Browallia Cal Ltd [2010] EWCA Civ 486 ("Parabola"); and Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475 ("Vasiliou"). From these cases he distilled the following principles:

“(1)

There is a difference between the question whether a loss has been caused by the wrong complained of, and if it has, the quantification of that loss. The fact that there is a distinction is in principle clear; what is not always clear is where the line is to be drawn.

(2)

Sometimes what the claimant has lost was only ever an opportunity to obtain something else, for example the chance to take part in a competition or the opportunity to bring litigation. Such an opportunity is a valuable right in itself, and what the claimant proves (on the balance of probabilities) is that he has lost that right; the assessment of the value of the right then depends on the chances of success. As Patten LJ says in Vasiliou at [21] this is because what has been lost is by definition the loss of a chance. It would obviously be wrong to value the right to take part in a competition at the value of the prize that might be won as the claimant never had a right to the prize, only the right to enter the competition. It would also be wrong to value the right to bring litigation as if it were bound to succeed, if, as is almost inevitably the case, the outcome of the litigation is uncertain. A claim with a prospect of success has a value, but until judgment has been obtained (and indeed it is clear that it can be successfully enforced) that value is not the same as the amount which would be awarded were it to succeed.

(3)

What Patten LJ makes clear, which had not I think been so clear before, is that this is not quite the same type of case as Allied Maples. In an Allied Maples case the claimant has not lost a valuable right, but he has lost the opportunity of gaining a benefit, albeit one which depends on a third party acting in a particular way. In such a case the claimant is not required to prove that the third party would have acted in that way, only that there was a real and substantial chance that he would. This is still a question of causation, not of quantification (see Vasiliou at [22], and also First Interstate Bank of California v Cohen Arnold & Co [1996] CLC 174 at 182 per Ward LJ, cited in Vasiliou at [43]); but if the claimant does establish that there was such a real and substantial chance, then when it comes to quantification, his damages will be assessed not at 100% of the value of the benefit he would have obtained, but at the appropriate percentage having regard to the chances of his obtaining it. I only add the obvious point that in some cases, where the chance is found to be say 30%, the requirement that the claimant only need show that he has lost a real and substantial chance is beneficial to him (as if he had to prove how the third party would have acted on the balance of probabilities, he would recover nothing); but in other cases, where the chance is assessed at say 70%, it has the effect of only enabling him to recover 70% of the damages he otherwise would. But as I read the authorities, the claimant does not have a choice whether to adopt the Allied Maples approach; if the case is an Allied Maples type of case, this is the appropriate way to approach the issues of causation and quantification.

(4)

However, as Parabola and Vasiliou illustrate, there are other cases where the claimant does not seek to establish as a matter of causation that he has lost the opportunity of acquiring a specific benefit which is dependent on the actions of a third party; rather, he claims he has lost the opportunity to trade generally, and claims the loss of profits that he would have made.

(5)

It seems that in such a case the Court must first decide whether the claimant would have traded successfully. It is not entirely clear if this is part of the question of causation and a separate exercise from quantification; or whether it is to be regarded as part of the quantification exercise. Toulson LJ in Parabola at [23] fairly clearly treats the finding of Flaux J that "on a balance of probability Tangent would have traded profitably…" as part of the question of causation as he deals with it in the context of the claimant having first to establish an actionable head of loss, and coming before the "next task" which is "to quantify the loss". On the other hand Patten LJ in Vasiliou at [23] seems to have regarded the question as part of the exercise of quantification: see his reference to there being "no doubt at all that the breach had caused the loss subject only to the quantification of that loss", and to Mr Vasiliou's competence and the restaurant's prospects of success not being matters that went to causation at all but being relevant at most to the assessment of how profitable the restaurant would have been.

(6)

On either view this is clearly a different type of exercise from that undertaken in an Allied Maples case. It does not require the Court to find that there was a real and substantial chance of a third party acting in a particular way; but to reach a conclusion whether trading would have been profitable or not. However the exercise is characterised, I think it must follow that this is a simple yes/no question (would the trading have been profitable ?), and hence falls to be decided on the balance of probabilities. I accept that this is so, even though as a matter of strict logic it is not entirely obvious why there should be such a sharp difference of approach from the Allied Maples type of case. The profitability of the restaurant in Vasiliou presumably depended on whether it would have attracted sufficient custom, or in other words whether a number of third parties would have chosen to come to Mr Vasiliou's restaurant; and this does not seem very different in kind, only in degree, from the question in Allied Maples which was whether the third party in question would have chosen to accede to Allied Maples' request for a particular contractual term. It may be that the difference is between one particular third party and a pool of potential customers; in the case of an individual third party, the Court must assess the chance of his acting in a particular way, but in the case of a pool of potential customers, the Court is not concerned with how any individual would have behaved but with whether there would have been sufficient custom generally to make the business a success.

(7)

Be that as it may, it is clear from Parabola and Vasiliou that if the Court finds that trading would have been profitable, it then makes the best attempt it can to quantify the loss of profits taking into account all the various contingencies which affect this: see Parabola at [23]. This neither requires any particular matter to be proved on the balance of probabilities (see Parabola at [24]) nor has anything to do with the loss of a chance as such (see Vasiliou at [25]). The assessment of the loss will itself include an evaluation of all the chances, great or small, involved in the trading (see Parabola at [23]). Once the judge has assessed the profits in this way, any further discount is therefore inappropriate (see Vasiliou at [28]).

The judge also had to address an argument advanced by Withers that, where there is concurrent liability in contract and tort, the contractual test for remoteness of damage applies. The judge expressed himself to be strongly attracted to the idea that there should be one test for remoteness in such a situation and that it should be the contractual one. Nevertheless he felt himself constrained by the fact that there was high authority for the proposition that a professional retained by a client has (usually) a concurrent liability in tort as well as contract, and that the client is normally permitted to take advantage of more advantageous rules afforded by the tortious cause of action (for example longer limitation periods). He accordingly held that WP was entitled to take advantage of the more generous tortious test for remoteness.

If WP was to obtain the Nomura mandates for its US build out, it was essential that it open an office in New York. The judge concluded that if Addax had not been able to withdraw its money, WP would have opened such an office and pitched for the Nomura business on its own. Addax’s threat to withdraw half its capital made it impossible for WP to do so, and it was this which precipitated a quick decision by WP to make the joint pitch with CT instead.

There is no doubt that if the Nomura business had been obtained it would have been very profitable. Before the judge WP put its case on the basis that the Nomura business was no more than an example of the sort of business WP would have obtained if they had opened a New York Office, and that even if they had not obtained the Nomura business, the New York Office would still have been profitable. The judge rejected this approach on the facts. He concluded that, apart from Mr Channing’s very close relationship with Lehman (and hence Nomura), there was no evidence that WP had any similar relationship, or anything approaching it, with anyone likely to bring business to a New York office. He also heard expert evidence as to the difficulty of breaking into that part of the market. Accordingly he made a very clear finding that it was not established that WP’s US office would have been profitable absent at least some of the Nomura mandates.

The judge next addressed the question of whether WP would have secured the Nomura mandate. He took into account the first class relationship which Mr Channing had with individuals such as Ms Anderson and Mr Meissner. Despite this he considered that success in obtaining the mandates was by no means assured. He set out the various imponderables. These included:

In making these points the judge had regard to expert evidence which was called, namely that of Ms Joannafey Mills for WP and Mr Jonathan Baines for Withers, both of whom he described as impressive witnesses. Ms Mills had had a career in the executive search industry with a particular focus on investment banking since 1995, and was currently a partner in a specialist boutique firm focused on investment banking. Mr Baines had a career dating back to 1986 when he started his own firm, and was currently Chairman of the European business of Korn/Ferry.

The judge also noted the submission made on behalf of Withers that Mr Meissner, one of the key decision makers at Nomura, was not called as a witness. This was of note because of Mr Meissner’s close relationship with WP, holding a small interest in it. The judge expressed his conclusions on this part of the factual case in the following way:

“I have taken all these matters into account. I do not feel able to reject either Mr Baines' views or Miss Mills' views as wrong: the various matters on which they disagree are a reflection of how many imponderables there are. It is impossible in these circumstances to form any definite view as to the likelihood of WP being awarded all or any part of the mandate, and I consider there are substantial doubts whether they would have pulled it off; but I find that if WP had opened an office in New York it would have had a real and substantial chance of being awarded at least some of the mandate. I find however that this was by no means assured, and even if it had been, the likelihood is that it would only have been awarded part of the mandate. It is necessary, although inevitably artificial, to put a percentage figure on these chances; I assess the prospects of WP being awarded some part of the mandate at 60%; and if it had been, I assess the likelihood as being 25% that it would have been awarded a sole mandate, and 75% that it would have been appointed together with one or more other firms, and would in effect have had half the mandate. In other words I assess the overall chance of being awarded the sole mandate at 15%, and the chance of being awarded half the mandate at 45%.”

Applying the test for remoteness in tort, the judge noted the following:

On this basis the judge found, applying the tortious test, that the loss of the chance of the Nomura opportunity was a type of damage that was reasonably foreseeable and not too remote to be recovered in the tort of negligence.

The question of whether the damages would have been too remote if the contractual test for remoteness was applicable did not therefore arise. The judge did however go to express the provisional view that he was not satisfied that damages in respect of the Nomura opportunity would be recoverable in contract. The Nomura opportunity was a very particular, and potentially very remunerative, opportunity that did not exist in May 2008 and could not reasonably then have been contemplated. He drew an analogy with the loss of profits on the lucrative contracts refused in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 (“Victoria Laundry”) and the loss of profits on the forward charterparty in Transfield Shipping Inc v Mercator Shipping Inc [2009] 1 AC 61 ("The Achilleas"). He rejected an argument that WP was not claiming damages for the loss of the Nomura opportunity as such, but for loss of profits generally in the US, and that the Nomura opportunity was merely an example of such loss.

So far as the diversion of Mr Channing’s time is concerned, the judge accepted that Mr Channing had spent a considerable amount of time on all the matters which I have listed in paragraph 25 above, but that it was impossible to identify how much. Mr Channing could not separate out the time he had spent on the different matters so listed. The judge explained that this gave rise to a significant practical problem. He had only found negligence in respect of the drafting of clause 25.2. He had to identify the loss caused by that breach, as opposed to all the other matters which took up Mr Channing’s time. He listed the following matters as not having been caused by the negligence:

“(i)

negotiations over buying out Addax completely;

(ii)

the dispute over how much was repayable to Addax (whether it was to be calculated in US dollars or sterling and if in dollars at what exchange rate; whether Addax was entitled to repayment of the Middle East contribution);

(iii)

the claim against Mr Channing and Mr Brun personally;

(iv)

negotiations, which took up a great deal of time in the autumn of 2009, over the redrafting of the LLP Agreement (how the Addax shares should be redistributed, whether the provisions for Investor Consent should be modified, and various other matters);

(v)

the set-off of the Addax monies; or

(vi)

most of the accounting issues arising on the audit.”

The judge accepted Withers’ contention that the bulk of the matters being considered over this period had nothing to do with the clause 25.2 issue. The fact that Addax was able to exercise its option in 2009 was the occasion for all the other issues to be raised, but the law only provided compensation for losses which are caused by a breach of duty in some legally relevant way. The judge awarded the equivalent of one month of Mr Channing’s time, or £125,000.

Overall the judge’s award was made up as follows:

Finally I would note that we were told that the judge calculated the US losses starting from figures in the Revised Business Plan, as this is how the claim had been framed. He did not do so by reference to the total estimated fees for the Nomura contract, which he estimated, at paragraphs 219-220 of his judgment, to be in the region of £6 million.

The sole point taken in Withers’ appeal relates to the US losses. Withers contend that the judge was wrong to apply the tortious test for remoteness and should have adopted the contractual test. It followed that the damages of £1,057,290 for loss of the Nomura mandates were wrongly awarded. By a respondent’s notice WP contend that, in the event that the tortious remoteness rule does not apply, the sums recovered in respect of the Nomura contracts remain recoverable as damages for breach of contract. I will call all this “the remoteness issue”.

WP has four main grounds of appeal:

Withers submit that in cases of concurrent liability for professional negligence in tort and in contract for pecuniary loss it is anomalous to adopt a different test for remoteness of damage in tort from that in contract. In such cases the parties are not strangers, and their relationship is essentially contractual. Mr Pooles referred us to paragraph 22-009 in McGregor on Damages 19^th Edition which advocated this approach, noting that a similar observation in the previous edition of the same work had been cited with approval by HHJ McKenna sitting as a High Court judge, albeit obiter, in Obsession and Hair Dry Spa Ltd v Hi-Lite Electrical Ltd [2010] EWHC 2193. He submitted that the decision of the House of Lords in South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 (“SAAMCO”) was of assistance to the argument. Although put in terms of the related question of the scope of duty and not the test for remoteness, the House of Lords in that case had equated the scope of duty in tort and in contract, the scope being defined by the contract between the parties. The test of remoteness in tort should similarly mirror that adopted in contract and likewise be defined by the retainer between the parties. Finally he relied on a passage in the judgment of Rix LJ (with whom Lloyd and Moore-Bick LJJ agreed) in Rubenstein v HSBC Bank plc [2012] EWCA Civ 1184, as an example of a case where the test for remoteness fell to be reviewed in the context of the relevant (in that case statutory) duty. He submits that it is no longer appropriate to speak of a single test of remoteness of damage in tort: the damage for which a claimant will be able to recover is informed by the scope of the duty in the individual case.

Ms Parkin relied on the existence of the separate cause of action in tort, as confirmed by Oliver J (as he was then) in Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384 and approved by the House of Lords in Henderson and others v Merrett Syndicates Ltd and others [1995] 2 AC 145. The distinct causes of actions had their separate and different rules about the remoteness of damage, just as they had their separate and different rules about limitation. Where there was concurrent liability the claimant was entitled to take advantage of the cause of action which was most favourable to it. She drew attention to the fact that the contractual and tortious rules are applied at different points in time, the former at the time when the contract was formed, the latter at the date when the tort was committed, and much may happen between these two dates. Moreover the fact that parties are in a contractual relationship makes it possible for them to exclude or limit liability, for example to such damages as would be recoverable in contract. The parties to the present contract had chosen to limit liability by reference to a particular sum of money, and not by reference to an alternative test of remoteness. SAAMCO was of no assistance to Withers because the judge had held that, applying the tortious measure, WP’s losses were recoverable and must therefore be losses of a kind which fell within the scope of Withers’ duty to WP.

In the alternative Ms Parkin submitted that the judge was wrong in his provisional view that applying the contractual test of remoteness resulted in WP’s losses not being recoverable. The Nomura losses were the type of damage that was recoverable in contract. Alternatively the Nomura profits were simply evidence of the sort of profits which WP would have made if it had been able to expand its business into the US. Even if the Nomura losses were analogous to the lucrative contracts in Victoria Laundry this did not prohibit WP’s ability to recover in contract altogether. WP could still recover the sort of profits that could reasonably have been expected from its overseas operations.

There is no doubt that a solicitor who fails to exercise reasonable care in providing services to the client who retains him can render himself liable both in contract and in tort unless tortious liability is validly excluded: see Henderson and others v Merrett Syndicates Ltd and others [1995] 2 AC 145. In that case Lord Goff gave resounding approval to the judgment of Oliver J in Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384, which he said at 191H-192A:

“broke the mould, in the sense that it undermined the view which was becoming settled that, where there is an alternative remedy in tort, the claimant must pursue his remedy in contract alone.”

Lord Goff traced the analogous development of the common law in Ireland, Canada, New Zealand and Australia. As to Canada, he expressly approved the statement of Le Dain J delivering the judgment of the Supreme Court in Central Trust Co. v Rafuse (1986) 31 DLR (4^th) 481 at 522 in a solicitors’ negligence case:

“A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequence.”

At an earlier point in his judgment Lord Goff said this:

“I think it is desirable to stress at this stage that the question of concurrent liability is by no means only of academic significance. Practical issues, which can be of great importance to the parties, are at stake. Foremost among these is perhaps the question of limitation of actions. If concurrent liability in tort is not recognised, a claimant may find his claim barred at a time when he is unaware of its existence. This must moreover be a real possibility in the case of claims against professional men, such as solicitors or architects, since the consequences of their negligence may well not come to light until long after the lapse of six years from the date when the relevant breach of contract occurred. Moreover the benefits of the Latent Damage Act 1986, under which the time of the accrual of the cause of action may be postponed until after the plaintiff has the relevant knowledge, are limited to actions in tortious negligence. This leads to the startling possibility that a client who has had the benefit of gratuitous advice from his solicitor may in this respect be better off than a client who has paid a fee. Other practical problems arise, for example, from the absence of a right to contribution between negligent contract-breakers; from the rules as to remoteness of damage, which are less restricted in tort than they are in contract; and from the availability of the opportunity to obtain leave to serve proceedings out of the jurisdiction. It can of course be argued that the principle established in respect of concurrent liability in contract and tort should not be tailored to mitigate the adventitious effects of rules of law such as these, and that one way of solving such problems would no doubt be to rephrase such incidental rules as have to remain in terms of the nature of the harm suffered rather than the nature of the liability asserted (see Tony Weir, XI Int.Encycl.Comp.L. ch.12, para. 72). But this is perhaps crying for the moon; and with the law in its present form, practical considerations of this kind cannot sensibly be ignored.”

Lord Goff thus recognised the difference in the tests for remoteness of damage between the two causes of action as one of the practical issues or problems of concurrent liability. What was in issue before their lordships in Henderson v Merrett was not the test for remoteness of damage in cases of concurrent liability, but whether there was in fact a concurrent cause of action in tort at all. Whilst the existence of the separate cause of action in tort is thus not open to challenge in this court, it is nevertheless open to us to consider the rule or rules for remoteness in the case of concurrent liability. Many writers support McGregor’s view that it is unsatisfactory to have two different tests in such circumstances. The judge put it well when he said:

“It seems odd, and to my mind distinctly unsatisfactory, that the law should give two different answers to the question “for what loss is a solicitor liable if he fails to take due care in carrying out a client’s instructions?”

The judge’s observation concurs with one of Scarman LJ in the well known case of H. Parsons (Livestock) Ltd v Uttley, Ingham & Co. Ltd [1978] 1 QB 791 at 807, albeit at a time before Henderson v Merrett:

“…the law must be such that, in a factual situation where all have the same actual or imputed knowledge … the amount of damages recoverable does not depend on whether, as a matter of legal classification, the plaintiff’s cause of action is breach of contract or tort.”

Whilst the two causes of action in contract and tort are independent, it is nevertheless significant that the tortious liability normally arises because one party has assumed a responsibility towards another: see per Lord Goff in Henderson v Merrett at pages 180-181. In a case such as the present (although not in all cases) the responsibility is assumed under a contract. It would be anomalous, to say the least, if the party pursuing the remedy in tort in these circumstances were able to assert that the other party has assumed a responsibility for a wider range of damage than he would be taken to have assumed under the contract.

The rule which controls what damage is recoverable in contract has been reviewed and analysed in many decisions since Hadley v Baxendale (1854) 9 E. 341. The rule was restated by the Court of Appeal in Victoria Laundry, re-examined by the House of Lords in The Heron II [1969] 1 AC 350 and most recently considered by the House in The Achilleas. It remains the basic rule that a contract breaker is liable for damage resulting from his breach if, at the time of making the contract, a reasonable person in his shoes would have had damage of that kind in mind as not unlikely to result from a breach. The principle is founded on the notion that the parties, in the absence of special provision in the contract, would normally expect a contract breaker to be assuming responsibility for damage which would reasonably be contemplated to result from a breach. The Achilleas shows that there may be cases where, based on the individual circumstances surrounding the making of the contract, this assumed expectation is not well founded. Thus, in that case, charterers of a ship were not liable for all the consequences of a late redelivery of the vessel, which had forced the owners to renegotiate a more favourable rate for a follow-on charter. The commercial pressure to renegotiate had arisen because of unusually and highly volatile market rates. According to Lord Hoffmann (see paragraph 23), with whom Lord Hope agreed, departure from the ordinary test was justified because the loss claimed would have been completely unquantifiable at the date of the contract and because the general understanding of the market was that the claimed loss was not recoverable. The charterer could not reasonably be taken to have assumed responsibility for the particular loss claimed. Lord Hoffman recognised that the mere fact that losses were unforeseeably large did not exclude recovery if loss of that type would fall within one or other of the rules in Hadley v Baxendale (see paragraph 21). Nevertheless there was also what he called an “exclusive principle” which meant that there could be some foreseeable losses for which the contract breaker would not be liable because they were not the kind or type of loss for which he can be treated as having assumed responsibility (ibid). Whether a type of loss was different is determined by asking whether it reflects what would reasonably have been regarded as significant for the purpose of the risk being undertaken (paragraph 22). Lord Hoffmann did, however, point out that:

“…cases of departure from the ordinary foreseeability rule based on individual circumstances will be unusual, but limitations on the extent of liability in particular types of contract arising out of general expectations in certain markets, such as banking and shipping are likely to be more common”.

Lord Rodger, with whom Lady Hale agreed, felt able to bring the case within the traditional remoteness rule, holding that the loss in question stemmed from an unusual occurrence of which the charterers were unaware and could not have been foreseen as being likely to arise out of the delay in question. He felt it unnecessary to deal with questions of assumption of responsibility in those circumstances (see paragraphs 60 and 63).

The speech of Lord Walker contains passages which appear to approve the “assumption of responsibility” approach of Lord Hoffman and Lord Hope: see for example his approval of the proposition that foreseeability itself is not a satisfactory test at paragraph 79. At paragraph 87, however, he allies himself in addition with the reasoning of Lord Rodger. I have not found it necessary to delve further into the question of whether this means that the true ratio of the decision is that given by Lord Hoffmann or Lord Rodger, or whether there are two inconsistent ratios.

I turn to consider the rules in tort. The primary rule which determines what damage is recoverable in tort remains that of reasonable foreseeabilty. As has been made clear by the decision of the House of Lords in SAAMCO, reasonable foreseeability is not the sole criterion. The damage must be of a kind which falls within the scope of the duty of care. In SAAMCO Lord Hoffmann explained at page 212 D-F that the scope of the duty is determined in the case of a statutory duty by deducing the purpose of the duty from the context and purpose of the statute. In the case of a tortious duty it is determined by the purpose of the rule imposing the duty. In the case of an implied contractual duty, the scope of the duty is that which the law regards as best giving effect to the express obligations in the contract.

SAAMCO was a group of cases brought against valuers who had provided negligent valuations to lenders on the strength of which money had been advanced. Concurrent duties were owed in contract and tort. Lord Hoffman said, after referring to Henderson v Merrett, that the scope of the duty in tort in such a case was the same as that in contract: see page 211 G. The question at issue was whether the valuers could be held responsible for the component of the lenders’ losses which was attributable to a general collapse in property prices which caused the lenders to suffer increased losses when the borrowers defaulted. The principle to be applied in such cases, as stated at page 214 C-D, limits the valuers’ liability to the consequences of the information being wrong. A duty which imposed on the valuer a responsibility for losses which would have occurred even if the information he gave were correct was not a fair and reasonable one to impose.

What then are the relevant differences in the rules governing the damage recoverable for breach of duty as between contract and tort? It appears to be accepted that the “reasonable contemplation” test in contract is more restrictive than the “reasonable foreseeability” test in tort: see the discussion of this in The Achilleas in the judgment of Lord Hope at paragraphs 31-32. Damage may be of a kind which is reasonably foreseeable (and therefore recoverable in tort) yet highly unusual or unlikely (and therefore irrecoverable in contract). Beyond this, although there are clear parallels between the contractual “assumption of responsibility” analysis of Lord Hoffmann and Lord Hope in The Achilleas and the “scope of duty” analysis in SAAMCO, they cannot be regarded as the same for all purposes, not least because the first depends on the individual circumstances surrounding the making of a contract and the second on the purpose of the rule imposing the tortious duty.

The passage in McGregor on Damages, on which Mr Pooles relies, argues as follows:

“Difficulties can arise where actions in contract and tort lie concurrently and, on the particular facts, the damages are wider in tort than in contract. Since the tort of negligence has been expanded to allow recovery for pure economic loss so that in cases of professional negligence there is concurrent liability in contract and in tort, the question arises whether, where it would make a difference, the victim of the negligence may rely on the wider tortious test of reasonable foreseeability and ignore the stricter and more limiting contractual test of contemplation of the parties. It is thought that there is much to be said for not allowing this to be done. Where the claim in tort is in the context of a contractual relationship, the parties are not strangers, as most tortfeasors and tort victims are, and they should be bound by what they have brought to their contractual relationship in terms of what risks have been communicated by the one and undertaken by the other. This question has not yet been faced by the courts but one day, hopefully soon, it will have to be. … It is thought also that this solution would not entail depriving the victim of contractual and tortious negligence of the entitlement to take advantage of the longer limitation period available in the tort. For the exclusion of the tort remedy on remoteness ground[s] is geared to what risks the contracting parties have undertaken, a consideration that has no application to the availability of limitation periods.”

There can be no real doubt as to the good sense of this proposal. In Rubenstein v HSBC Bank plc [2012] EWCA Civ 1184, a case on which reliance was placed by Mr Pooles, the claimant, Mr Rubenstein, wished to invest the proceeds of sale of his house in a safe investment pending the purchase of another property. The bank advised him to invest in a fund which they viewed as “the same as cash invested in one of our accounts”. In fact the relevant fund was subject to market fluctuations and an investor was only entitled to what the underlying investments were worth at the time repayment was requested. The 2008 financial crisis intervened and there was a run on the fund, causing Mr Rubenstein a significant loss. The trial judge found that the advice given by the bank was both negligent and in breach of statutory duties, but the damage was unforeseeable and too remote.

Rix LJ, with whom Lloyd and Moore-Bick LJJ agreed, pointed out at paragraph 114 that there was a danger in such cases in considering the position under the tort of negligence first and only subsequently turning to breach of statutory duty. He explained:

“As Lord Hoffmann pointed out in SAAMCO … in a case of statutory duty the question as to scope of duty is to be answered by reference to the statute itself, and in such a context the position in negligence and contract will fall in behind the statutorily discerned purpose. If, however, the position in tort or contract, absent the context of statutory duty, might lead to a separate result, as it might, there seems to me to be no profit in considering that position first in a case where breach of statutory duty has been established. To do so increases the risk of error.”

Later when dealing with an argument about remoteness of damage (the loss had occurred at a point in time later than the end of the period for which Mr Rubenstein had said he required the investment) Rix LJ said:

“Ultimately, the question of remoteness (at any rate in a contractual setting, which Lord Reid in The Heron II suggested was the more restricted one, because a claimant could stipulate contractually for his own protection) is a matter of the reasonable contemplation of the parties. In the context of statutory protection for the consumer, it seems to me that a bank must reasonably contemplate that, if it misleads its client as to the nature of its recommended investment, and thereby puts its client into an investment which is unsuitable for him, when it could just as easily have recommended something more suitable which would have avoided the loss in question, then it may well be liable for that loss.”

This passage indicates that the nature of the statutory duty was one of the factors which informs what is within the reasonable contemplation of the parties on the issue of remoteness. The case is not, however, authority for the proposition that the rules of remoteness in tort, contract and breach of statutory duty are the same in cases of concurrent liability. By applying the more restrictive contractual approach, Rix LJ both recognised that the tests are not necessarily the same and caused that question to be immaterial in the case before him.

Nevertheless, I am persuaded that where, as in the present case, contractual and tortious duties to take care in carrying out instructions exist side by side, the test for recoverability of damage for economic loss should be the same, and should be the contractual one. The basis for the formulation of the remoteness test adopted in contract is that the parties have the opportunity to draw special circumstances to each other’s attention at the time of formation of the contract. Whether or not one calls it an implied term of the contract, there exists the opportunity for consensus between the parties, as to the type of damage (both in terms of its likelihood and type) for which it will be able to hold the other responsible. The parties are assumed to be contracting on the basis that liability will be confined to damage of the kind which is in their reasonable contemplation. It makes no sense at all for the existence of the concurrent duty in tort to upset this consensus, particularly given that the tortious duty arises out of the same assumption of responsibility as exists under the contract.

I am not, however, persuaded that this conclusion results in the appeal being allowed. The judge has held that the damage represented by the loss of the Nomura mandates was a type of damage that was reasonably foreseeable. In holding Withers liable in negligence he must have considered that the damage was of a kind which fell within the scope of the duty of care in tort. It seems to me to be plain that it does fall within the scope of that duty. Withers were given express instructions to draft a clause which would prevent Addax from withdrawing half its capital until November 2011. I see nothing unfair or unreasonable, or inconsistent with the purpose of the duty in holding that damage which is the consequence of the unavailability of that capital should be the responsibility of Withers. This is not a case like SAAMCO where some of the damage arose from factors which had nothing to do with the incorrectness of information.

It is, I think, also clear that the damage must be taken to be of a kind for which Withers had assumed responsibility under their contract. Just as in SAAMCO, I would regard this as a case where the scope of duty in the two cases was the same. The damage awarded by the judge was not excluded by the principles enunciated by Lord Hoffmann and Lord Hope in The Achilleas. The special individual circumstances present in that case for holding that the charterer had not assumed responsibility for the loss are not, at least cumulatively, present here. The fact that the extent of loss cannot be predicted at the date of the formation of the contract cannot by itself amount to a sufficient reason for holding that the contract breaker has not assumed responsibility for it.

If the contractual test is to come to the assistance of Withers, it seems to me that it must be because the kind of damage, although reasonably foreseeable, cannot be regarded as within the contemplation of the parties as not unlikely to occur. In my judgment the damage was of a kind which was in the reasonable contemplation of the parties as not unlikely to result from a breach. Thus, whilst the judge only held that Withers knew sufficient for it to be reasonably foreseeable that if Addax were able to withdraw its capital WP might be prevented from earning profits in the US, it seems to me that, on the evidence which he summarised, it was equally within the reasonable contemplation of the parties that it was not unlikely that this would be so. Withers knew, on the judge’s findings, that WP was thinking of expanding into the US and this was one of the ways in which the capital raised by the Addax investment was to be used to make profits from head hunting in the investment banking sector. Neither party knew at the stage of making the contract any more about how the profits would be made, other than that they would be made by carrying out head hunting services in the investment banking sector: the common contemplation must have been that they would exploit such opportunities as arose. I think it is quite unrealistic, and uncommercial, to suppose that a solicitor drafting an agreement would consider the Nomura opportunity to be a different sort of risk from other opportunities in the United States which they must be assumed to have contemplated.

Three reasons seem to have motivated the judge as to his provisional view as to why the Nomura contracts should be treated as damage of a different kind from that which the parties would have contemplated as not unlikely: that the Nomura contract was a very particular contract, that it was very profitable, and that it was analogous to the forward charterparty in The Achilleas and the especially profitable government contract in Victoria Laundry.

It is true that the Nomura contract was a very particular one which arose through Mr Channing’s connections. The damage caused to WP by its loss was not in my judgment different in any relevant way from other business which WP might obtain. Mr Channing was a highly successful and well-connected head hunter who could be expected to exploit such connections as he had. It would be otherwise if the services to be offered by WP were different in kind, or in some other way a departure from their known ways of doing business. In fact the services to be offered by WP were in all respects the same as those which the parties contemplated being offered in the US.

It is also true that the Nomura contract was a profitable one. However this is a factor which, it seems to me, goes to the quantum of the loss and not its kind. The fact that the scale of the losses was unforeseeable does not make them too remote if they are losses for which the contract breaker has otherwise assumed responsibility: see per Lord Hoffman in The Achilleas at paragraph 21 and per Rix LJ in Rubenstein at paragraph 107 citing Brown v KMR Services [1995] 4 All ER 598, [1995] 2 Lloyd’s Rep 513.

I accept that there are factual analogies which can be drawn with the high value government contracts in Victoria Laundry. Factual analogies with other cases are, however, dangerous. The facts in Victoria Laundry justified the finding that a loss of a particular high value government contract unknown to the defendant was loss of a different kind from losses of the ordinary business of a laundry. The contract breaker had no knowledge that the laundry was proposing to undertake work of this kind. Lord Hoffmann explains this case in The Achilleas at paragraph 22 on the basis that the vendor of the boilers would have regarded the profits on these contracts as a different and higher form of risk than the general risk of loss of profits by the laundry. By contrast, it seems artificial to suppose that a firm of solicitors employed to draft a clause with the effect of preventing a withdrawal of capital would have regarded the loss of the Nomura contract as a different sort of risk. Moreover the expectations of the parties here were different. In Victoria Laundry the defendants had no reason to suppose that the laundry in question was anything other than an ordinary laundry. Here the defendants must be assumed to have been aware of Mr Channing’s star qualities. The two cases could not be more different in this respect.

The analogy with the forward charterparty in The Achilleas is also not persuasive. That case also turned, at least in part, on the particular commercial circumstances known to the parties at the time of formation of the contract. These included the evidence of the general understanding in the shipping market that liability was restricted to the difference between the market rate and the charter rate for the overrun period, and that any departure from this rule was likely to give rise to a real risk of serious commercial uncertainty which the industry as a whole would regard as undesirable. We are not in that territory in the present case.

The damages awarded by the judge are therefore recoverable applying the test for remoteness in contract. I would therefore reject this ground of Withers’ appeal.

Ms Parkin submitted that the judge approached the questions of causation and quantification of the US losses on an incorrect basis. There were two questions which the judge had to decide: (1) whether WP would have opened a New York office if Addax had not withdrawn its money; and (2) whether that business would have been profitable. The first question was one of causation which fell to be answered on the balance of probabilities, as the judge had indeed done. The second question, and indeed all other questions were part of the quantification exercise. Those questions were not to be decided by reference to any general discount for losses as, for example, was applied in Allied Maples. She relies for this purpose on the decisions in Vasiliou and Parabola.

Alternatively Ms Parkin submits that the judge should have found on the balance of probabilities that WP would have been awarded the Nomura mandates had it been able to open a New York office. She relies on a decision of Gross LJ sitting at first instance in Aercap Partners 1 Ltd v Avia Asset Management AB [2010] EWHC 2431 (“Aercap”). In that case Gross LJ had said that this was the appropriate course where the court had all the relevant evidence before it. In the present case, she submits, the judge had all the relevant evidence.

Ms Parkin did not pursue an argument which appears in her grounds of appeal and skeleton argument that the judge should have based his percentage award on the total fees which could have been earned from the Nomura mandate, estimated by the judge at £6m at paragraphs 219-220 of his judgment.

Mr Pooles supported the judge’s analysis of the loss of a chance principle as it applied to the assessment of the US losses. The judge had not been confronted with a claim based on evidence of profitable trading over a period of years which could form a basis for a calculation of what was lost. The claim was based on the prospects of obtaining the Nomura contract. It was anomalous to decide such a case other than by reference to the chance that it would be obtained. If it were not so, a claimant who established only a 51% chance of obtaining the mandates would get a full award, whereas if he only established a 49% chance he would get nothing.

The claimant in Chaplin v Hicks [1911] 2 KB 786 was prevented by a breach of contract from participating in the final stages of a prize competition. A number of arguments were advanced as to why she should recover no, or only nominal damages. One argument was that the loss depended on so many contingencies that it was incapable of assessment. All three members of the Court of Appeal rejected that argument. There was no doubt that the claimant had lost the opportunity to participate in the competition or the chance of winning the prize. That lost opportunity was itself a head of compensatable damage. The jury was entitled to award her proportionate damages which would value what she had lost, namely the chance of winning, notwithstanding the difficulties of assessment.

There is another and quite separate principle which arises not when there is a problem identifying a compensatable head of loss, but in the assessment or quantification of damages. It was expressed by Lord Diplock in Mallet v McMonagle [1970] AC 166 at 176 in the following way:

“The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards.”

The assessment or quantification of damages is itself an exercise which is different in nature from establishing whether any fact did or did not occur, or even whether any event would, in some hypothetical situation, have occurred or is likely in the future occur. One does not, for example, expect a party to show that the particular sum which he claims as general damages is more likely than not to be the precise damage which he has suffered.

As the passage from Mallet recognises, however, the assessment of damages may be dependent on the court’s view as to whether particular events would have occurred or will occur. Those chances are to be taken account of in the assessment of damages.

Questions of assessment of damage, however, have to be distinguished from questions of causation. These issues are discussed at length in the decision of this court in Allied Maples. As the court there explained, in the context of causation, some hypothetical questions (“what would have happened if ...”) do fall to be decided on the balance of probabilities. Thus (see Stuart-Smith LJ at page 1610 D-H) where the breach of a duty consists of an omission, for example to provide safety equipment, and the question is what the claimant himself would have done had the breach of duty not occurred – a question of causation - the claimant has to prove the matter on the balance of probabilities. He does not get a percentage award if he falls just short of the threshold, and he does not suffer a discount if he passes it.

Stuart-Smith LJ went on to explain that in many cases the causation of the claimant’s loss may depend on the hypothetical action of a third party, either in addition to the claimant himself or independently of him. In those cases the court does not demand that the claimant establish his case of causation on the balance of probabilities: see Allied Maples at 1611 A-C. All the claimant has to show in such cases is that the chance is a real or substantial one. Having done so he must still show, on the balance of probabilities that the defendant’s act has caused the loss of the chance (see to this effect per Lord Nicholls in Gregg v Scott [2005] UKHL 2 at [17]). Once the claimant has shown on the balance of probabilities that he has lost the relevant chance, the valuation of the chance is a question for the quantification or assessment of damages.

I would have thought that, applying those principles to the present case, it would be plain that, whilst WP would need to show on the balance of probabilities that, but for the negligence complained of, they would have opened a US office (a question of causation dependent on what the claimant would have done in the absence of a breach of duty), the actual loss which they claimed to have been caused by the defendant was dependent on the hypothetical actions of a third party, namely Nomura. Accordingly, in line with well established principle, the chances of Nomura deciding to award the mandates to WP would have to be reflected in the award of damages.

Ms Parkin submits, however, that subsequent cases show this result to be incorrect. The Owners of the Ship “Front Ace” v The Owners of the “Vicky 1” [2008] EWCA Civ 101, concerned a vessel which had been prevented by a collision from 57 days of profitable employment by its owners. The experts had proceeded to agree a figure for hire in that period without any suggestion of a reduction on the basis of a loss of a chance that the vessel would be profitably employed. Sir Anthony Clarke MR (with whom Dyson LJ and Jacob LJ agreed) said this:

“71.

… I am not persuaded that this is a case for the application of the loss of a chance approach discussed in Allied Maples among many other cases. This is not as I see it a case in which, as Stuart-Smith LJ put it at 1611A-B,

"… the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it."

It is not a case where the claimants' loss depends upon a chance of making a particular contract. The exercise upon which the experts were engaged was to find the appropriate market rate for the use of the vessel in the relevant 57 days in circumstances in which it was established that she would have been profitably employed during that period. The experts agreed the appropriate figure. So indeed did the parties, at any rate assuming that it was appropriate to adopt the time equalisation approach, which in my opinion it was.

72.

There are many cases in which courts or arbitrators have to determine what rate of profit would have been earned but for a tort or breach of contract. As I see it, in a case of this kind, where the court has held that the vessel would have been profitably engaged during the relevant period, where there is a relevant market and where the court can and does make a finding as to the profit that would probably have been made (and has been lost), there is no place for a discount from that figure to reflect the chance that the vessel would not have been employed.

73.

It has not in my experience been suggested in the past that any such discount should be made. This situation is to be contrasted with a case in which it is not shown that the vessel would have been profitably employed but she might have been. It may be that in those circumstances it would be possible to approach the problem as a loss of a chance. However, I would not wish to express a firm view on that question in this case, where it does not arise on the facts. Here, given the exercise carried out by the experts and given the figure agreed by them, there is in my opinion no warrant for a reduction of 20 per cent, either to reflect a risk that the vessel would not have been employed or for contingencies to reflect that the figure agreed might not be accurate.”

In Parabola (cited above) Tangent claimed damages in deceit for capital losses, and lost profits lost through being induced to engage in loss-making trades. The judge found on the balance of probabilities that, but for the deceit, Tangent would have traded profitably at a particular level. On appeal the defendants’ attack was on the figure for profitability on which the judge alighted. It was submitted that there was no basis for the finding that the claimant would have traded at this specific level of profitability. Toulson LJ, as he then was (with whom Mummery and Rimer LJJ agreed) rejected this argument:

“22.

There is a central flaw in the appellants' submissions. Some claims for consequential loss are capable of being established with precision (for example, expenses incurred prior to the date of trial). Other forms of consequential loss are not capable of similarly precise calculation because they involve the attempted measurement of things which would or might have happened (or might not have happened) but for the defendant's wrongful conduct, as distinct from things which have happened. In such a situation the law does not require a claimant to perform the impossible, nor does it apply the balance of probability test to the measurement of the loss.

23.

The claimant has first to establish an actionable head of loss. This may in some circumstances consist of the loss of a chance, for example, Chaplin v Hicks [1911] 2 KB 786 and Allied Maples Group Limited v Simmons and Simmons [1995] 1 WLR 1602, but we are not concerned with that situation in the present case, because the judge found that, but for Mr Bomford's fraud, on a balance of probability Tangent would have traded profitably at stage 1, and would have traded more profitably with a larger fund at stage 2. The next task is to quantify the loss. Where that involves a hypothetical exercise, the court does not apply the same balance of probability approach as it would to the proof of past facts. Rather, it estimates the loss by making the best attempt it can to evaluate the chances, great or small (unless those chances amount to no more than remote speculation), taking all significant factors into account. (See Davis v Taylor [1974] AC 207, 212 (Lord Reid) and Gregg v Scott [2005] 2 AC 176, para 17 (Lord Nicholls) and paras 67-69 (Lord Hoffmann)).

24.

The appellants' submission, for example, that "the case that a specific amount of profits would have been earned in stage 1 was unproven" is therefore misdirected. It is true that by the nature of things the judge could not find as a fact that the amount of lost profits at stage 1 was more likely than not to have been the specific figure which he awarded, but that is not to the point. The judge had to make a reasonable assessment and different judges might come to different assessments without being unreasonable. An appellate court will therefore be slow to interfere with the judge's assessment.”

Toulson LJ is thus saying that Tangent’s claim was not one which depended on “loss of a chance” in order to identify some head of loss. The judge had been able there to find that it was likely that Tangent would have traded profitably, as contrasted with cases such as Chaplin v Hicks where no analogous conclusion could be drawn. The judge was nevertheless required to take account, in the assessment of damages, of “the chances, great or small (unless those chances amount to no more than remote speculation), taking all significant factors into account.”

In Vasiliou the defendant was responsible for causing the claimant restaurateur to cease trading. There were two separate claims involved, but it is sufficient for these purposes to consider what was said about the first. The trial judge had concluded that, but for the difficulties created by the defendant, the claimant would have succeeded in running a successful restaurant. Patten LJ (with whom Ward and Black LJJ agreed) said this:

“21.

In the classic loss of a chance case the most that the claimant can ever say is that what he (or she) has lost is the opportunity to achieve success (e.g.) in a competition (Chaplin v Hicks [1911] 2 KB 786) or in litigation (Kitchen v Royal Air Forces Association [1958] 1 WLR 563). The loss is by definition no more than the loss of a chance and, once it is established that the breach has deprived the claimant of that chance, the damage has to be assessed in percentage terms by reference to the chances of success. But there will be other loss of chance cases where the recoverability of the alleged loss depends upon the actions of a third party whose conduct is a critical link in the chain of causation. The decision of this court in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 has established that causal issues of that kind can be determined on the basis that there was a real and substantial chance that the relevant event would have come about.

22.

To that extent the Allied Maples approach may assist a claimant by providing an alternative way of putting his case on damage which avoids the possibility of total failure inherent in the judge being asked to decide whether, on the balance of probabilities, the causal event would have occurred. But caution needs to be exercised in identifying the contingency which is said to represent the lost chance. The loss of a chance doctrine is primarily directed to issues of causation and needs to be distinguished from the evaluation of factors which go only to quantum.

23.

So in the first claim the respondent's case on causation was straightforward. The appellant's breach of covenant had made the operation of the restaurant a legal impossibility. As a result, it did not trade. There was therefore no doubt at all that the breach had caused the loss subject only to the quantification of that loss. The issues raised about the respondent's competence and the restaurant's prospects of success were not matters that went to causation at all. They were relevant at most to the assessment of how profitable (or not) the restaurant would have been had it been able to operate. If it would have been a commercial failure Mr Vasiliou could have received no more than nominal damages for the breach.

24.

Judge Levy, in the passages I have quoted from his judgment, found as a fact that Zorbas would have been a successful restaurant and therefore assessed its lost profits on that basis. His analysis of the variable factors I have outlined which formed the agreed components of that calculation involved taking into account the time needed to establish a reputation and other everyday contingencies but did not involve a more general discount of the kind described in Allied Maples to take account of the statistical possibility of failure. That was excluded by his finding that the restaurant would have been a success.

25.

Where the quantification of loss depends upon an assessment of events which did not happen the judge is left to assess the chances of the alternative scenario he is presented with. This has nothing to do with loss of chance as such. It is simply the judge making a realistic and reasoned assessment of a variety of circumstances in order to determine what the level of loss has been. This process was described by Toulson LJ in Parabola Investments Ltd v Browallia Cal Ltd & Others [2010] EWCA Civ 486…”.

Later, at paragraph 44, Patten LJ rejected an argument that the quantification of the lost profits should be discounted by a percentage to allow for the fact that the restaurant might have been a failure:

“… the issue of how successful the restaurant would have been was not an issue of causation. It was relevant only to quantum. Judge Dight and Judge Levy were satisfied that the restaurant would have been profitable and calculated the damages accordingly. One can express this in terms of them assessing the chances of success at 100% but either way there is no room for a further discount. The calculation of profits which they made was not determined as the best level of profits reasonably obtainable. It was the amount which on their findings he would have earned.”

In Aercap the claimant seller alleged that the defendant buyer was in repudiatory breach of a contract for the sale of two Boeing 757-200 aircraft. The seller resold at a reduced price and claimed damages. The buyer claimed that the seller had not been in a position to supply the contractually agreed engines, given certain leasing commitments into which it had entered. It argued that even if it was liable to the seller, its damages should be reduced by a factor to reflect the chance that the lessee would not have returned the engines in time for them to be delivered to the buyer. Gross LJ considered, in obiter and very tentative observations at the end of his judgment, that where the claimant can prove causation on the balance of probabilities, the authorities did not require the court to go on and evaluate the chances involved, even when it came to the assessment of damages. He went on to hold in any event that there was no relevant uncertainty.

The outcome in The Owners of the Ship “Front Ace” v The Owners of the “Vicky 1” depended on the fact that there was a finding that the vessel would have been profitably engaged and the existence of a relevant market. I do not think that it assists WP’s case here, where there was obvious uncertainty as to whether WP would find a market for its services in the US.

Parabola and Vasiliou are illustrations of the principles established by Allied Maples. As I have indicated, I do not read either judgment as disagreeing with Stuart-Smith LJ’s proposition in Allied Maples, that a judge’s evaluation of the substantial chance of obtaining the benefit in question forms a legitimate part of the quantification of damages. I do not think that Gross LJ was doubting these principles in Aercap. If he was, I respectfully disagree.

On the judge’s findings in the present case, the only viable claim to loss of profits in the United States was one to the loss of some of the Nomura mandates. WP’s case on causation, that Withers’ negligence caused WP to lose the Nomura mandates, was one which depended on the hypothetical actions of Nomura, a third party. WP had, first, to prove that its own actions would have been such as to place itself in a position to obtain that work, and it had to do so on the balance of probabilities. It did so. All that remained on the issue of causation was for WP to establish whether there was a real and substantial chance that Nomura would have awarded some part of the mandates to WP. It did so. That was the beginning and end of its case on causation.

It does not follow at all, however, that it is no longer relevant to consider the chances that WP would have obtained the mandates. The evaluation of that chance is part of the process of the quantification of damages. It would be wrong in principle to treat the conclusion on causation as if it meant that the chances of obtaining some part of the mandate were 100%. The judge was correct to reflect his view of the chances of WP obtaining the mandate in his quantification of damages.

I would therefore reject the first way in which Ms Parkin argues this ground of appeal.

In support of the second way of putting this ground of appeal, Ms Parkin argues that the judge was wrong to treat the matter as one dependent on the hypothetical actions of a third party. This was because the judge had heard evidence which ought to have satisfied him that the award of the Nomura mandates to WP was a “done deal”.

Ms Parkin pointed out that it was not only Mr Channing’s evidence which suggested that WP would have won the Nomura mandates. Ms Anderson had been called in support of this case as well.

Ms Anderson explained that she was responsible for the European business, and that the Asian or non-Japan business ran separately. She had, however, been involved in Nomura’s US build out quite extensively, but, as she explained “at the edges”. The decision to appoint the firms who were ultimately appointed had not been taken by her but by William Vereker, Head of Banking Europe who had been spending a lot of time in the US. Christian Meissner had been involved.

In her evidence she had pointed to the fact that WP were preferred suppliers, having signed up to the framework agreement, which she called the “fee agreement”. Her cross-examination included this:

“Q. Wellesley did bid for this business, didn’t it?

A. Oh absolutely. Before either Heidrick & Struggles or Korn/Ferry came on the scene, my understanding was that Wellesley were up and running; and certainly they were going to be formally mandated with some of the searches.

Q. They bid jointly with CT Partners, didn’t they?

A. No.

Q. … Is your answer “no” or is your answer that you don’t know?

A.

No, my answer is “no” because – well, my understanding of the situation is that Wellesley were – they had signed up to our fee agreement they were very well versed with the Lehman story. They had very deep and entrenched relationships with a number of our global group heads and they were ready to go. So my understanding of the whole – all the way along was it was going to be Mr Channing and Wellesley Partners leading the searches that we mandated them in New York. Subsequent to that, CT Partners came on the – were introduced, I think to Mr Meissner…”

Ms Parkin submits that the judge failed to have regard to this evidence, which, coming as it does from an individual within the Nomura organisation, ought to have been sufficient to establish that the Nomura mandates were coming to WP and that it was only the fact that WP was forced to bid jointly with CT Partners which caused them to lose out. She relies, in particular, on the passage in the cross-examination set out above where Ms Anderson states that WP were certainly going to be mandated with at least some the searches.

Ms Parkin also points to a finding which the judge did make, namely that it was “probable that if Mr Channing had made a pitch on behalf of WP alone, Mr Meissner would in principle have been equally happy to work with him and see him have the Nomura mandate”. Lastly Ms Parkin points to the evidence before the court as to Mr Channing’s historic successes in building profitable executive search businesses, in particular in Hong Kong.

I do not accept this argument for a number of reasons. Firstly I do not accept that the judge failed to have regard to Ms Anderson’s evidence. The judge referred in detail to her evidence at paragraph 166(7) of his judgment, drawing attention to the fact that WP were preferred suppliers, her high opinion of the reputation of WP and Mr Channing and the strength and depth of the relationship between Lehman’s Investment Banking Division’s key decision makers. He was not bound to conclude from the cross-examination of Ms Anderson that the appointment of WP was a done deal. Ms Anderson was not the decision maker, and the evidence of her “understanding” really went no further than to suggest that WP were well-placed to obtain some part of the mandates.

Secondly the judge was not bound to accept the evidence of Ms Anderson as to who would have been appointed as representing the inevitable outcome of the appointment process. Although it is true that she was giving evidence from within the organisation, the decision was the responsibility of others. There were numerous considerations, such as whether to go with a boutique firm or firms, or global players, and what the views of the Japanese officers of Nomura would be.

Thirdly, if the case was to be put as high as Ms Parkin now wishes to put it, namely that the Nomura mandates were a done deal, then the judge was entitled to take account of the fact that Mr Meissner was not called. If a party is seeking to establish a fact, then the fact that he is apparently able to but does not call a witness with first hand knowledge of that fact is relevant. The use of this principle must not be carried too far. As this court pointed out in Wisniewski v Central Manchester Health Authority [1998] PIQR P324, it is a factor which may weaken other evidence called on a point, provided that the opposite party has raised a case to answer. In the present case there was indeed evidence to which Withers could point to suggest that the WP appointment was not a done deal.

Fourthly, although the judge recognised that it was probable that if Mr Channing had made a pitch on behalf of WP alone, Mr Meissner would in principle have been equally happy to work with him and see him have the Nomura mandate, the grant of the mandates was not in Mr Meissner’s exclusive gift. The judge was not bound to leap from his finding as to Mr Meissner’s contentment with the position to the conclusion that the mandates would have been awarded to WP.

In these circumstances the judge was justified in holding that the award of the mandates was a future event which depended on the actions of Nomura, and was not a done deal. I would accordingly reject this alternative way of arguing the first ground of appeal.

Ms Parkin submits that the judge erred in the way in which he carried out the assessment of the chances of WP obtaining the Nomura mandate. Under this ground Ms Parkin rehearses all the evidence which I have reviewed under her ground 1. She submits that a 60% chance of obtaining the mandate is far too low.

Mr Pooles submitted that this ground was essentially an attack on the judge’s careful analysis of the factual evidence. Most of his skeleton argument on this ground is devoted to WP’s attack on the base figure for the profits from the Nomura contract, which was not pursued by Ms Parkin on this appeal.

In arriving at his figure of 60% the judge was making an evaluative judgment of a number of factors. This court is notoriously reluctant to interfere with evaluative judgments of this kind in the absence of an error of principle: see for example per Lord Hoffmann in Biogen v Medeva [1996] UKHL 18 at 54. Nowhere is this more so than in a judge’s assessment of damages. Toulson LJ put it in this way in Parabola:

The judge had to make a reasonable assessment and different judges might come to different assessments without being unreasonable. An appellate court will therefore be slow to interfere with the judge's assessment. As Lord Wright said in Davis v Powell Duffryn Associated Collieries Limited [1942] AC 601, 616-617:

"An appellate court is always reluctant to interfere with a finding of a trial judge on any question of fact, but it is particularly reluctant to interfere with a finding on damages which differs from an ordinary finding of fact in that it is generally much more a matter of speculation and estimate. No doubt, this statement is truer in respect of some cases than of others…It is difficult to lay down any precise rule which will cover all cases, but…the court, before it interferes with an award of damages, should be satisfied that the judge has acted on a wrong principle of law, or has misapprehended the facts, or has for these or other reasons made a wholly erroneous estimate of the damage suffered."

I have reviewed the evidence on which Ms Parkin relies in support of this ground when dealing with the loss of a chance issue above. I am quite unable to conclude that the judge’s assessment does not lie within the broad range of assessment which could reasonably be made on the footing of this evidence. I would also reject this ground of appeal.

Ms Parkin attacks the judge’s finding that, when Mr Cuffe discovered that Addax was not responsible for drafting the change to clause 25.2, he was under no duty to advise WP to correct the position.

WP’s primary case is that all the losses associated with the diversion of Mr Channing’s time all flow from the negligence in fact found by the judge in the drafting of clause 25.2. This allowed Addax to take its money out and made it necessary for WP to negotiate with them to produce as good an outcome as could be obtained. If that is not so then WP contends that these losses do flow from the events of 3 February. It is for this reason that it seeks to reverse the judge’s finding of negligence on 3 February. The uncorrected information that Addax was responsible for the drafting of the option led to a breakdown of trust between WP and Addax which was responsible for much if not all of what followed.

Ms Parkin first submits that the judge was wrong, if he did, to dismiss Mr Cuffe’s statement about the origin of the alteration to clause 25.2 as “a passing comment”. Information supplied in these circumstances is properly to be regarded as advice. The advice provided was wrong, and by the time Mr Cuffe had discovered the source of the alteration later in the day it was negligent of him not to correct it. In her submissions Ms Parkin went further and referred to events after 3 February 2009 which should have alerted Withers to the importance of the advice, but it seems to me that these extend beyond the pleaded case of negligence and the grounds of appeal.

Ms Parkin further submits that a solicitor’s duty is to identify matters which are or may be important to his client and bring them to the client’s attention. She relies on a passage in Jackson & Powell on Professional Liability 7^th Edition at paragraph 11-168:

“In the ordinary course of business a solicitor is likely to accumulate a substantial amount of information, much of which is of no interest to the client. It is the solicitor’s duty, however, to identify any matters which are or may be important to the client and bring them to his notice. In acting for a purchaser of property a solicitor would be negligent if he failed to advise his client of the existence of a right of way over the property, or of a defect in title, or the existence of a “contracts race”.”

Ms Parkin submits that it was or ought to have been clear to Withers that the source of the drafting error was important to WP because it would inform the negotiations with Addax which WP was necessarily to undertake.

Mr Pooles submits that Wellesley was not seeking advice and Withers was not therefore proffering advice about the genesis of the alteration to clause 25.2. The judge had been right to conclude that Mr Channing did not request Mr Cuffe to follow up how the change to the agreement occurred. The judge accepted that Mr Cuffe believed at all times that the change had been made on Mr Channing’s instructions.

Mr Pooles is correct that WP had not asked for advice as to the genesis of the alteration to clause 25.2. The principal questions Withers had been asked to advise on were whether Addax was right about its ability to exercise the option, and what WP could do about it. However, a solicitor must take care not only in the provision of advice which he is asked to give, but in relation to information which he provides to the client which is or may be important to the client.

I consider that Withers did have reason to believe that the information could be of relevance to the course of action which WP was contemplating. Withers had expressly advised WP to seek to negotiate directly with Addax on the exercise of the option under clause 25.2 and it was clearly of importance that WP should not do so on an incorrect basis. It was entirely foreseeable in the light of the exchanges on 3 February that Mr Channing would immediately accuse Addax of introducing the clause.

That being so, I have difficulty in seeing why Mr Cuffe should not have corrected the statement when, later in the day, he discovered that it was erroneous. He could begin to justify doing so if there was no reason for believing that the information could be of any relevance to the course of action which WP was contemplating, namely negotiating with Addax. If the information was or could be of relevance for that purpose it was plainly incumbent on Withers to provide the client with the correct information. Unpleasant as it might have seemed for Mr Cuffe to tell Mr Channing that he believed that the clause had been inserted on Mr Channing’s instructions, it remained his duty to tell him.

I have therefore come to a different view from the judge on this very narrow issue. I conclude that Withers were negligent in not telling Mr Channing about the origin of the clause 25.2 alteration on 3 February 2009.

WP’s primary case is that all the time taken by Mr Channing in dealing with (i) negotiations with Addax to buy them out completely, (ii) the dispute about how much was repayable to Addax, (iii) the claim against Mr Channing and Mr Brun personally, and (iv) the negotiations over the re-drafting of the LLP agreement all flowed from the negligent drafting of clause 25.2. In the alternative these losses flowed from the negligence of 3 February. Ms Parkin submitted in her skeleton argument that the judge should have awarded the equivalent of some eighteen months of Mr Channing’s time which, at £125,000 per month, equates to £2.25 million, and not just the single month of £125,000 which he awarded.

Ms Parkin submits that the negotiations with Addax were all catalysed by Withers’ negligence. It was reasonable for WP to take steps to seek to prevent Addax from exercising its option, or otherwise seek to extricate itself from the relationship with Addax. The remaining activities in which Mr Channing was engaged would not have been necessary had the clause been drafted correctly. The judge was wrong to hold that the negligence was merely the occasion and not the cause of these losses.

Withers support the judge’s assessment of the losses arising from the diversion of Mr Channing’s time. The decision to buy out Addax in full was Mr Channing’s independent decision, as was his decision to embark on negotiations about the re-distribution of shares and other matters in the LLP agreement. WP had been fortunate, given the paucity of evidence, that the judge had been prepared to make any award of damages under this head at all.

Losses must be caused by the breach of duty alleged: it is not sufficient if the breach of duty provides the occasion for the loss. This is sometimes expressed as the need for the breach of duty to be the effective cause of the loss: see e.g. Young v Purdy [1977] PNLR 130 at 138.

I think the judge was perfectly entitled to take a cautious view of this head of damages given the paucity of evidence and the inability of WP to be specific about the time spent on various tasks. However given the additional finding of negligence which I have made, it is open to us to reconsider the number of months which it is appropriate to award. The negligence of 3 February was, it seems to me, a direct cause of a souring of the relationship between Mr Channing and Addax which made it entirely reasonable to explore a range of settlements including buying out Addax entirely. I do not see why the claim against the partners personally should not be held to have been caused by the negligence. Whilst some of the disputes in the litigation were resolved against WP, it is not suggested that any of the points taken by them was unreasonable.

Doing the best I can I would substitute for the judge’s award of the equivalent of one month an award of the equivalent of four months.

I would accordingly allow the appeal on the issues of negligence on the 3 February 2009 and, to the extent indicated, of the diversion of Mr Channing’s time, but otherwise dismiss the appeals.