Sayers v Clarke Walker (a firm)

A client’s refusal to waive legal professional privilege cannot support an adverse inference about the advice received. Where a professional undertakes, for reward, a retainer encompassing particular advice and negligently fails to give it, the client’s failure to obtain equivalent independent advice does not ordinarily break the chain of causation. Intervening conduct must be utterly unreasonable or reckless before it has that effect.

An appellate court will not interfere with a trial judge’s discretionary costs order merely because another allocation might also have been reasonable. Intervention requires an error of law or a decision outside the wide ambit of the judge’s discretion.

The claimant purchased a company using a structure which caused adverse taxation and company-law consequences. The defendant accountants had undertaken a retainer which included advice about the transaction’s tax implications. Buckley J found that they negligently failed to recommend an alternative structure which any competent accountant should have known about. He awarded the claimant £68,854 in damages and interest and 60% of his costs.

The defendants did not challenge the primary findings, the scope of their retainer, the finding of negligence or the assessment of damages. They sought permission to appeal on the grounds that the claimant’s failure to obtain independent financial advice broke the chain of causation, that an adverse inference should have been drawn from his refusal to waive legal professional privilege, and that the costs order was wrong.

Application for permission to appeal refused. In the joint judgment delivered by Brooke LJ, with Kay LJ sitting, the court held as follows.

1. No adverse inference could be drawn from the claimant’s refusal to waive privilege in the legal advice he had received. The courts had refused to permit such an inference since Wentworth v Lloyd (1864) 10 HLC 589. That principle had recently been applied in Oxford Gene Technology v Affymetrix Inc and was reinforced by the affirmation of legal professional privilege in R v Derby Magistrates’ Court ex p B [1996] AC 487. The dictum relied upon from Ridehalgh v Horsfield [1994] Ch 205 did not provide a realistic ground of appeal because Wentworth had not been cited there and Ridehalgh preceded Derby Magistrates’ Court.

2. The defendants had accepted that the required advice fell within the retainer they undertook for reward and that their failure to give it was negligent. Although the claimant may have acted rashly by declining specialist or independent advice, that was his choice. The accountants remained content to act and were required to exercise the competence ordinarily expected within the scope of their retainer.

3. To break the chain of causation, the defendants had to establish utterly unreasonable or reckless conduct by the claimant, consistently with County Ltd v Girozentrale [1996] 3 All ER 834. The claimant did not know of the difficulties which a competent accountant should have foreseen and explained. His failure to seek alternative advice therefore did not make him the author of his own loss. There was no real prospect of overturning the judge’s causation conclusion.

4. The proposed costs appeal also had no real prospect of success. The judge had addressed the relevant principles under Part 44 of the Civil Procedure Rules 1998, including the claimant’s limited success and late introduction of the successful issue. His award of 60% of the claimant’s costs remained within the wide ambit of his discretion. An appellate court would not merely substitute a different permissible allocation.

1. Court of Appeal (Civil Division): By [2002] EWCA Civ 910, refused the defendants permission to appeal on the merits and costs.
2. Court of Appeal (Civil Division): By [2002] EWCA Civ 645, had previously extended the time for seeking permission to appeal.
3. Queen’s Bench Division: Buckley J found the defendant accountants negligent, awarded the claimant £68,854 in damages and interest, and ordered the defendants to pay 60% of his costs.