The claimant brought an action in professional negligence against the defendant solicitors for recovery of her share of a settlement sum in group litigation.
The solicitors had acted for a group of claimants from the Ivory Coast in relation to the discharge of chemical waste from a tanker. The litigation was settled in September 2009 and the settlement sum was paid into an Ivorian bank account nominated by the solicitors. In October 2009, the solicitors were contacted by an individual (G) who claimed to represent a victims’ organisation. G obtained a freezing order from the Ivory Coast courts over the funds in the bank account. The funds were ordered to be transferred to the organisation. The solicitors applied unsuccessfully for a stay of the transfer order pending an appeal. They entered into agreements with the organisation, as a result of which the majority of the claimants were paid their share of the settlement sum. The claimant, as representative of those who remained unpaid, brought the instant claim. The claimant’s case was that: (i) the payment of the settlement sum into an Ivory Coast bank account left it vulnerable to dishonest claims, including claims by a corrupt judiciary; and (ii) the solicitors had failed to retrieve the funds from the account before the freezing order was made. The claimant relied on the evidence of a witness (W), an Ivory Coast citizen who had assisted the solicitors by liaising with local representatives. Shortly before the settlement, W had sent a newspaper article to members of the solicitors’ firm containing allegations of dishonesty against G. The solicitors denied negligence, claiming that there was no causal connection between the loss and the matters complained of, and that the loss was too remote to be recoverable.
HELD: (1) The solicitors were under a duty to exercise reasonable skill and care in making safe arrangements for receiving the settlement sum, in safeguarding it pending distribution and in distributing it to the proper recipients. However, they had paid insufficient attention to the newspaper article and had failed to consider whether it had any implications for their plans for distributing the settlement funds. The firm had expertise in organising group litigation for unsophisticated clients in various African countries. However, the plan for managing the settlement monies had apparently been left to two paralegals with no relevant experience, without any proper rigorous analysis of the risks having been undertaken by a senior practitioner and without a proper assessment of the information about corruption in the Ivory Coast. Nor were the paralegals sufficiently closely supervised to compensate for their inexperience. In view of the available information as to the poor economic position of the Ivory Coast, its political instability and corruption among public officials, the solicitors were in breach of their professional duty in deciding to hold the entire settlement sum in an Ivorian account pending distribution. They should have recognised the risk that a large sum such as the settlement fund would be subject to a dishonest claim and that they might not be able to protect the fund without a robust legal system and a judicial system of reliable integrity. In any event, the fund should have been transferred after the events of October 2009 when G asserted his claim to represent the victims (see paras 76-77, 79, 82-83, 97-98, 101-103, 110-112 of judgment).
(2) Although the solicitors were in breach of their duties in both contract and tort, the claimant was entitled only to damages that were recoverable in contract, Wellesley Partners LLP v Withers LLP  EWCA Civ 1146,  2 W.L.R. 1351 followed. It had to be assessed whether the loss was of a kind or type of loss that satisfied the contractual test, regardless of whether the parties should have reasonably foreseen the particular loss that occurred, Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co (The Wagon Mound)  A.C. 388 followed. In the instant case, the type of loss that was suffered was that, as a result of the solicitors’ failure properly to protect the settlement sum, the claimant did not receive her share. That was a loss of exactly the kind that would be contemplated as the likely result of their breach of duty. It followed that causation had been established (paras 121-122, 124, 126).
(3) The court was not in a position to assess damages as there were too many uncertainties, including the reason why some claimants, but not others, remained unpaid; the possibility that the claimant would not have received her entitlement in any event; and the fees and charges that might have been inapplicable if the solicitors had used an overseas account (paras 131-133).
Judgment for claimant