Sinclair Roche & Temperley (a firm) v Somatra Ltd

An appellate court should not overturn findings of primary fact merely because it might have assessed the evidence differently. The plainly wrong test remains applicable where contemporaneous documents are incomplete or privileged, although documentary contradictions or untestable evidence may demonstrate that the finding was plainly wrong. A solicitor’s breach may cause recoverable loss where it destroys a client’s trust and confidence shortly before trial and foreseeably leads the client to accept a settlement below the amount otherwise obtainable. The court may assess the lost opportunity of a satisfactory compromise without valuing the prospects of success at trial where a settlement offer would have been made and accepted. Indemnity costs may reflect seriously unreasonable litigation conduct, including unfounded attacks on a former client’s integrity, and pre-action conduct may be considered where linked to the action.

Somatra’s vessel was lost after an explosion. Its insurance claim was conducted first by Watson Farley Williams and then by Sinclair Roche & Temperley (SRT). The claim settled shortly before trial for two-thirds of its value.

Somatra sued SRT for professional negligence. Mr Justice Morison found breaches of duty, including conduct which caused Somatra to lose trust and confidence in SRT, and assessed the counterfactual settlement at 75% of the claim. He awarded the difference. He also ordered indemnity costs on the liability issues and interest on costs from the dates of payment.

SRT appealed, challenging one breach, causation, the value of the lost opportunity, the costs basis and interest. The central issues were whether the breaches caused the lower settlement and whether the judge’s findings of fact and discretionary costs order could be disturbed.

1. Appeal dismissed. The finding that SRT’s conduct at the 29 March meeting was a breach of duty was justified. Although a solicitor need not personally know every answer to an opponent’s questions, it is a breach to prevent people who possess the answers from giving them or to undermine their answers publicly. The unchallenged breaches were cumulatively capable of causing the loss of trust and confidence.
2. The judge applied the correct appellate approach to findings of primary fact. The test remained whether the findings were plainly wrong. The existence of contemporaneous documents which contradicted oral evidence, or evidence particularly within one party’s knowledge and therefore difficult to test, did not create a different test. Those matters could, however, show that acceptance of the evidence was plainly wrong. The judge was entitled to accept Mr Domingo’s evidence that he had authority to settle at 75%, despite the incomplete documentary picture and tensions with Mr Wilson’s reports.
3. The finding on causation was also open to the judge. SRT’s breaches had placed Somatra shortly before trial without trusted solicitors and without a realistic opportunity to change representation. It was foreseeable, and a reasonable response, that Somatra might settle for less than it otherwise would have obtained. The advice supporting a lower settlement did not compel the conclusion that Mr Alireza would have accepted two-thirds because he was expecting a better offer and acted under severe practical constraints.
4. The judge’s assessment was properly an assessment of the lost opportunity to obtain a satisfactory compromise. Since Mr Domingo had authority and would have made a 75% offer, and Mr Alireza would probably have accepted it, no discount for the chance that the offer would not be made was appropriate. It was unnecessary to assess the prospects of success in the underlying insurance action.
5. Under Civil Procedure Rules 1998, rr 44.3 and 44.4, the judge had a broad discretion on the basis of costs. Indemnity costs were justified by repeated lies and unfounded attacks on the integrity of former clients during the litigation. Linked pre-action conduct could be considered. SRT remained responsible for its partners’ conduct even though its insurers financed and directed the defence. The appeal on costs was dismissed.
6. Interest on costs was payable under CPR r 44.3(6)(g) at 1 per cent above Bank of England base rate from the dates on which Somatra paid the relevant invoices. The court refused permission to appeal, regarding the case as fact-specific.

• Court of Appeal (Civil Division) — [2003] EWCA Civ 1474, 23 October 2003: dismissed SRT’s appeal against the judgment and costs orders of Mr Justice Morison; refused permission to appeal.
• High Court of Justice (Queen’s Bench Division) — decision of Mr Justice Morison: found professional negligence, awarded Somatra the difference between a two-thirds settlement and a 75% settlement, ordered indemnity costs on specified liability issues, and ordered interest on costs from payment of invoices.