Thursday, June 6th, 2024

Inner House Refuses Reclaiming Motion in Solicitors' Negligence Claim

The First Division has refused the Defenders’ appeal against the judgment of Lord Ericht in a multi-million pound solicitors’ negligence claim.

The background to the case was complicated, and the issues at large concerned causation of loss. TLT admitted negligence, in failing to provide the correct advice to a client on how an order for caution (security for costs) should be satisfied. The original claim was dismissed by the court due to failure to lodge caution, and the client then sued the defenders claiming that it had lost the chance of success in the underlying claim. The defenders deployed many arguments to suggest that the underlying claim had no reasonable prospects of success. The ultimate award to the pursuers inclusive of interest to date is approximately £15m, one of the highest awards of damages in Scotland.

The important points to note from the judgment are these:

  1. That for the purposes of Prescription (time bar), knowledge of a shareholder is not knowledge of the company. And when the claim is against the liquidator, as long as the liquidator remains in office, the company cannot be considered to have that independent knowledge of a claim. Accordingly, unless and until the (negligent) liquidator demits office, the prescriptive clock is not ticking.
  2. That the liquidator owes a duty of care to the shareholders as much as to the creditors. Thus in recovering assets in the liquidation, it is not enough that the liquidator obtains sufficient only to satisfy creditors. If there is a reasonable ability to recover funds that affords a surplus for distribution to shareholders, the liquidator must recover those funds.
  3. When assessing a loss of a chance in a claim such as this, using a mathematical approach rather than a broad brush assessment of percentage, is only appropriate when the variables are truly independent of one another.

The Inner House agreed with the submissions in the principal appeal made on behalf of the Pursuer company.

This is an important case in professional negligence claims against both liquidators and solicitors. The Pursuers were represented by Andrew Smith KC, of Compass Chambers and Giles Reid of Ampersand. The Defenders were represented by Kenny McBrearty KC and Chris Paterson KC of Axiom Advocates. A copy of the Opinion can be found here.

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