Berry v Laytons & Anor

A specialist solicitor advising on commercial-agent termination must identify and explain material statutory rights with reasonable skill, care and clarity. Where the agency is valuable, exclusive and long-established, advice that the agent’s prospects of challenging a contractual cap on compensation are wholly uncertain may be negligent, even though the precise legal issue has not been decided. The court assesses causation by asking what advice was most likely to have been given with proper care. Loss may be valued as the lost chance of negotiating or litigating the underlying claim. Rights under regulation 8 may be contractually excluded where the Regulations contain no equivalent prohibition on derogation to that in regulation 19; advice concerning such a claim may therefore cause no recoverable loss.

The claimant, the principal partner in an agency business, claimed damages from the defendant solicitors for breach of contract and professional negligence. The solicitors had advised on the termination of the agency by its principal and on the claimant’s rights under regulations 8 and 17 of the Commercial Agents (Council Directive) Regulations 1993.

The claimant alleged that the advice caused him to accept contractual termination payments substantially below the compensation he could have claimed under regulation 17. He also alleged that he lost post-termination commission under regulation 8. The issues were the scope and quality of the advice, reliance and causation, and the value of the lost opportunity.

1. Duty and scope of retainer. The defendants owed contractual and tortious duties to advise with the skill and care reasonably expected of solicitors holding themselves out as specialists in commercial-agency law. Advice also had to be conveyed with proper clarity. The retainer required advice on what the claimant could legitimately claim under the Regulations, not merely advice on the express terms of the agency agreement.
2. Regulation 17. By May 2000 it was well recognised that compensation under regulation 17 was intended to compensate the agent for the value of the agency lost on termination. Guidance could legitimately be taken from French law, although the two-year gross-commission approach remained uncertain. The agency in question was exclusive, profitable, long-established and supported by a substantial clientele. It therefore presented a strong claim for substantially more than three months’ commission.
3. Regulation 19 and negligence. The contractual provision fixing compensation at three months’ commission was very likely vulnerable as a derogation to the agent’s detriment. The advice that the claimant could not be advised on his prospects, that an unreasonable clause might nevertheless be valid, and that five months’ commission might be reasonable was confused and plainly wrong. The advice was negligent.
4. Reliance and causation. The claimant reasonably understood the advice as pessimistic and as making litigation a gamble. The appropriate counterfactual was the most likely advice that would have been given with proper care, not necessarily the middle of a range of reasonable opinions. On that counterfactual, the claimant would have pursued the principal by negotiation or proceedings.
5. Loss. The claim was a loss-of-chance claim. The likely outcome was a negotiated settlement rather than trial. The court assessed the net lost opportunity, after credit for the sum already received, at £192,189, with interest.
6. Regulation 8. The claim failed. Regulation 8 contained no prohibition equivalent to regulation 19, and the contractual exclusion might have prevented recovery. In any event, the advice caused no recoverable loss.