Levicom International Holdings BV & Anor v Linklaters (a firm)

A solicitor advising on commercial litigation must exercise reasonable skill and care both in forming legal opinions and in communicating them clearly. An advice letter may be negligent where its wording reasonably conveys a materially more optimistic view than the solicitor has a proper basis to give. A contractual restriction does not necessarily engage the minimum performance principle where the alleged breach consists of prohibited conduct rather than a choice between alternative contractual performances. Causation requires the court to assess how the client would have acted on proper advice. Where the client must prove a hypothetical settlement, it must establish the proposed different negotiating conduct on the balance of probabilities and a substantial chance of an acceptable response. Negligent advice does not cause recoverable loss where the client would probably have pursued the same course in any event.

Levicom alleged that its former solicitors, Linklaters, negligently advised it about a dispute with Tele2 and NetCom concerning the acquisition of a Latvian telecommunications company. The alleged negligence concerned the prospects of proving breach of a non-compete covenant, the remedies and damages available, the value of a settlement proposal, and the need to obtain leading counsel’s advice.

Levicom relied particularly on advice letters dated January and March 2001. It later commenced arbitration, incurred substantial costs, and settled the wider disputes in 2004. It claimed that proper advice would have led to an earlier and more favourable settlement. The central issues were whether the advice was negligent, whether Levicom relied upon it, and whether the negligence caused loss.

1. Duty and standard. Linklaters owed contractual and tortious duties to advise with the skill and care reasonably expected of solicitors of their standing. The assessment had to be made by reference to the information available when the advice was given, without hindsight. The duty included communicating advice with sufficient clarity for the client reasonably to understand it (paras [48]-[53], [279]-[280]).
2. Clause 13.1. The Pan-Baltic construction of the non-compete covenant was properly arguable and, in the judge’s view, correct. Linklaters were entitled to advise that Levicom had a strong case that the acquisition of Baltkom breached the covenant and that breach could be established relatively straightforwardly. Their optimism on liability was not negligent (paras [54]-[58], [281]-[286]).
3. Damages and the minimum performance principle. The covenant imposed a restriction, not a positive obligation to acquire Baltkom through AS Levicom Cellular. The minimum performance principle therefore did not apply. Nevertheless, Levicom had a reasonable argument that damages could be assessed by reference to an acquisition through AS Levicom Cellular, provided that the necessary factual case was proved. Linklaters were negligent because the January letter reasonably conveyed that such damages were likely to be substantial and available on that basis, although Linklaters lacked a proper and sufficient basis for that degree of confidence (paras [59]-[63], [287]-[299]).
4. Declaratory relief. The March letter was negligent in presenting declaratory relief and an order for disposal of the shares as a practical means of avoiding the difficult assessment of damages. The advice should have explained the discretionary nature of the remedy, the risk that it would be refused because of hardship, integration, delay or an unfair negotiating advantage, and the need to address damages in parallel (paras [302]-[311]).
5. Causation. The proper question was what advice should have been given and how Levicom would have acted on it. Levicom had to prove, on the balance of probabilities, that proper advice would have caused a different negotiating stance, together with a substantial chance that the Swedish companies would have accepted terms Levicom would have agreed. Levicom would not have simply accepted the first offer, and the evidence did not establish that proper advice would have materially changed its conduct. The negligence therefore caused no loss (paras [326]-[345]).
6. Disposition. Linklaters were in breach of contract and liable for nominal damages of £5 only. The claim for substantial damages and costs failed for want of causation (para [378]).

First-instance decision. No earlier judicial decision in the same litigation is stated.