Wellesley Partners Llp v Withers Llp

A solicitor is liable where contractual drafting departs from the client’s instructions, even if the instructions were unclear and the solicitor misunderstood them. The solicitor’s duty in that situation is to obtain clarification.

The duty to volunteer advice is fact-sensitive. It does not generally require a solicitor documenting commercial terms to explain obvious consequences or business risks within an experienced client’s competence. In professional-negligence claims, loss of profits must be linked to the particular breach. A claimant must establish the hypothetical business activity on the balance of probabilities; contingencies affecting the amount of profit are then assessed without a further general discount. Where loss depends on a third party’s decision, the claimant must establish a real and substantial chance of obtaining the benefit.

Wellesley Partners LLP claimed damages from Withers LLP for professional negligence in drafting and advising on an amended LLP agreement for the admission of investors, including Addax Bank. The principal complaint concerned an option allowing Addax to withdraw half its investment.

The agreement ultimately allowed the option to be exercised during the first 41 months, although Wellesley contended that it should have been exercisable only after 42 months. Further claims concerned repayment in US dollars, redistribution of Addax’s interest, and advice given when Addax threatened to exercise the option.

The central issues were whether Withers had breached its duties, whether Wellesley was contributorily negligent, and what losses were caused by the breach.

1. Liability. Withers was negligent in changing clause 25.2 so that Addax could exercise its option during the first 41 months. The change was not intended by Wellesley. The likely instruction was for a one-month window after 41 months, which the solicitor misunderstood, recorded incorrectly, or misremembered. A solicitor cannot avoid liability by asserting that unclear instructions authorised an unclarified drafting change: the proper course is to obtain clarification (paras [100]-[119]).
2. There was no negligence in recording Addax’s capital contribution in US dollars. The agreement entitled Addax to repayment of the relevant dollar amount, and the resulting currency risk was an obvious commercial consequence rather than a hidden legal pitfall. The duty to volunteer advice depends on the circumstances and does not generally extend to explaining business matters within an experienced client’s competence (paras [120]-[132]).
3. There was no negligence concerning redistribution of Addax’s cancelled interest. The agreement’s cancellation mechanism left the remaining interests enlarged pro rata, while Addax retained more than half of the investors’ votes. The pleaded risk was apparent from the agreement and did not require special warning (paras [133]-[141]).
4. There was no breach in the advice given when Addax threatened to exercise the option. The solicitor did not know that the agreement contained an error, and was not required, without being asked, to investigate rectification, advise the client to change solicitors, or explain that the drafting change had been made on the client’s presumed instructions (paras [142]-[149]).
5. Wellesley was not contributorily negligent. In the circumstances, it was reasonable for the client to rely on communications stating that later drafts contained no material changes and to focus on blackline amendments rather than reread the entire agreement (paras [150]-[157]).
6. Loss and disposal. Applying Parabola and Vasiliou, Wellesley established on the balance of probabilities that it would have expanded in London and opened a New York office. Loss relating to the Nomura opportunity was assessed as a lost chance under Allied Maples, valued at 15% for a sole mandate and 45% for a shared mandate. Damages totalled £1,612,313, comprising US loss of profits, London loss of profits, and diversion of the principal’s time. Legal costs attributable to the drafting breach were referred for assessment. Interest under section 35A of the Senior Courts Act 1981 remained to be determined (paras [182]-[188], [201]-[208], [278]-[279]).