The Football League Ltd v Edge Ellison (a firm)

A solicitor’s retainer is defined by its terms and the circumstances in which it is given. For an experienced commercial client, a solicitor ordinarily has no implied duty to advise on the commercial wisdom of accepting an unsecured counterparty or to prompt the client to consider guarantees, where those matters fall within the client’s own competence. A different duty may arise when the solicitor is advising on a final contractual document that incorporates another document by reference. The solicitor must consider the incorporated material and advise on a potentially important term apparently offered by the counterparty. Breach does not establish substantial loss without proof that the client would have acted differently and that the proposed protection would have been obtained.

The Football League Limited claimed damages from its solicitors, Edge Ellison, alleging negligence in the negotiation of a television-rights licence with ONdigital. The licence was worth £315 million and ONdigital’s obligations were not guaranteed by its parent companies, Carlton and Granada. The League alleged that the solicitors should have advised on the need for security and should have acted on a provision in ONdigital’s 7 June 2000 bid document stating that ONdigital and its shareholders would guarantee the proposed funding.

Edge Ellison brought Part 20 proceedings against Active Rights Management Limited and Clive Stephen Townley. The principal questions were the scope of the solicitors’ retainer, whether duties arose in relation to guarantees, whether any breach caused loss, and whether the Part 20 defendants were liable to contribute.

1. Primary duty. The claim for substantial damages failed. The express retainer did not require Edge Ellison to advise on bidder solvency or guarantees. Applying the principles concerning the scope of a solicitor’s retainer, the court held that no such implied duty arose. The Football League’s executives and Commercial Committee were experienced in business, understood limited liability and parent company guarantees, and were competent to make the relevant commercial judgment. The solicitor was not required to prompt them about a purely commercial risk which they were capable of assessing themselves.
2. Bid document. A separate duty arose on 15 June 2000. Clause 18 of the short-form agreement referred to ONdigital’s 7 June bid document. A solicitor advising on the final agreement had to read incorporated material and advise the client about its significance. The financial arrangements paragraph could be read as offering parent-company guarantees. Mr Alderson should therefore have obtained instructions on whether guarantees should be included in the binding agreement. Had he done so, the League would have asked for them.
3. Causation. That breach caused no substantial loss. The evidence showed that ONdigital lacked authority to offer guarantees on behalf of Carlton or Granada, and any request would have required their consideration over several days. Faced with the risk of losing a highly valuable and time-sensitive deal, the Football League would have proceeded without guarantees. The breach therefore justified only £2 nominal damages.
4. Long-form agreement. A further breach occurred when Mr Alderson failed, after obtaining the bid document, to raise the guarantee issue during negotiation of the long-form agreement. The chance of obtaining guarantees at that stage was nil, so only a further £2 nominal damages was awarded.
5. The Part 20 claim against ARM and Mr Townley was dismissed. The court also stated, conditionally, that any breach by Edge Ellison at the earlier stage would have involved substantial contributory negligence by the Football League, assessed at 75 per cent.

First-instance decision of the High Court (Chancery Division). The judgment records the earlier dismissal of the separate guarantee action by Langley J, but that decision was not an appeal stage in the present proceedings.