Agouman v Leigh Day (a firm)

A solicitor assuming responsibility for managing a substantial settlement fund for unsophisticated overseas clients must make safe arrangements for receiving, safeguarding and distributing it. The standard is that of a reasonably competent firm specialising in comparable group litigation, assessed objectively and without hindsight. Where known conditions create a real risk of dishonest claims supported by an unreliable legal system, holding the whole fund in that jurisdiction may fall below the required standard. The breach need only be an effective cause of loss. Loss is assessed by reference to the kind of loss contemplated from the breach, not the precise mechanism by which it occurs. Where the counterfactual involves uncertain conduct, damages may be assessed on a broad loss-of-chance basis rather than by applying the balance of probabilities to quantification.

The claimant was one of nearly 30,000 Ivory Coast claimants represented by the defendants in the Trafigura litigation. The litigation settled for approximately £30 million, paid into an account in the defendants’ name with an Ivorian bank and held on trust for the settling claimants.

After a fraudulent claim by a purported national victims’ organisation, supported by corrupt Ivorian court decisions, the fund was frozen and part transferred. The claimant received nothing. She alleged that the defendants were negligent and in breach of trust in arranging for the fund to be held in Ivory Coast and in failing to transfer it before the freezing order. The central issues were breach of duty, causation, remoteness, the measure of damages, and relief under section 61 of the Trustee Act 1925.

1. Claim upheld in contract and negligence. The defendants owed duties to make safe arrangements for receiving, safeguarding and distributing the settlement fund. The appropriate standard was that of a reasonably competent firm specialising in group litigation with an international element for unsophisticated clients arising from events in a poor and unstable African country.
2. The defendants should have undertaken a thorough and methodical assessment of the risks. They knew of the country’s poverty, political instability, corruption, weak rule of law, weak judicial independence, prior fraud affecting compensation, and the activities and claimed influence of local representatives. They should have recognised a real risk of a dishonest claim to the fund and that they might be unable to protect it through the Ivorian courts. Holding the whole fund in an Ivorian account therefore breached the duty.
3. The defendants also breached their duty by failing to transfer the fund out of Ivory Coast after the October 2009 events and the representative’s assertion that he acted nationally for the victims. An overseas account or a tranche arrangement would have provided safer alternatives.
4. The defendants’ breach was an effective cause of the loss. Judicial corruption did not obliterate the breach or constitute a novus actus interveniens. The dishonest claim and the corrupt decisions could also be effective causes.
5. Remoteness was governed by contractual principles because the defendants owed parallel contractual and tortious duties. The loss was of the kind that should have been contemplated as resulting from failing to protect the fund from dishonest acquisition. The precise fraudulent mechanism and extent of loss did not need to have been contemplated.
6. The claimant was entitled to damages, but the amount was not assessed. The court would assume the defendants adopted the safer method more favourable to them for quantification, and directed an inquiry as to damages unless agreed.
7. The breach-of-trust claim was not determined. The court indicated that, if pursued and liability were established, relief under section 61 of the Trustee Act 1925 would not be granted because the defendants had not acted reasonably.