Stephen John Finnan v Charles Russell Speechlys LLP

The claim in negligence and breach of contract against Charles Russell Speechlys LLP was struck out for failure to plead causation of loss. The court held that the particulars of claim did not identify a coherent counterfactual in which the claimant would have been in a materially better position, nor the factual basis by which any greater recovery could have been achieved. The judge applied the established tests for strike out and summary judgment (CPR 3.4(2) and CPR 24.2), and analysed scope of duty and factual causation by reference to the Manchester Building Society six-point framework and counterfactual testing. The court refused to grant a further indulgence to amend because the proposed amendments and the claimant’s evidence did not provide a realistic prospect of establishing causation or any greater recoverable value than the claimant in fact obtained.

The claimant, a retired professional footballer, sued his former solicitors CRS for professional negligence and breach of contract arising out of advice and conduct in shareholder disputes with his brother, including the presentation of petitions under section 994 of the Companies Act 2006. CRS applied to strike out the claim or for reverse summary judgment, asserting that the particulars of claim failed to plead causation and a coherent counterfactual and therefore disclosed no reasonable grounds for the claim. The claimant brought a retaliatory strike out/summary judgment application against CRS and sought to rely on a without prejudice transcript which the court rejected as totally without merit.

Key factual background: the claimant advanced substantial director’s loans to a number of companies run with his brother; disputes arose and s.994 petitions were presented in September 2016. A later settlement agreement transferred shares and provided for payments which were not fully made; the claimant recovered limited sums following realisations. The claimant pleaded multiple breaches by CRS and sought in excess of £6,000,000 for unpaid loans, share value, and legal costs.

Issues before the court:

• Whether the particulars of claim disclose a tenable cause of action in negligence or contract given the absence of a pleaded causal chain from any alleged breach to the claimed loss.
• Whether the claimant should be given a final opportunity to amend to plead a coherent counterfactual and causation.
• Whether summary judgment or strike out was appropriate under CPR 24.2 and CPR 3.4(2).

Reasoning and decision:

• The court observed that causation is an essential element of a negligence claim and that a contractual claim that yields no recoverable loss cannot sensibly proceed. The judge applied the general approach in Manchester Building Society v Grant Thornton (the six-point analysis) with emphasis on the scope of duty and factual causation.
• The pleaded case failed to set out a clear factual counterfactual (that is, what non-negligent advice would have been, what the claimant would have done, and how that would have led to a better net recovery). The partial counterfactual advanced — that demands for repayment of director’s loans should have been made — was shown by the claimant’s own evidence and correspondence to have in fact occurred, and to have produced the known outcome: no repayment beyond sums actually recovered.
• The Companies’ poor cash position and the terms and effect of the settlement agreement demonstrated there was no realistic means by which the claimant could have achieved a materially better financial result. The proposed amendments did not supply the necessary factual basis and were insufficiently particularised or supported by evidence.
• Given these defects, the particulars disclosed no reasonable grounds for the claim and there was no good reason to permit further amendment. The particulars of claim and the claim were struck out.

The judgment therefore disposed of the application by striking out the claim for want of causation and refusing further amendment.

This was a first-instance disposal. The court struck out the particulars of claim and the claim for want of reasonable grounds because the claimant failed to plead causation: there was no coherent counterfactual showing how non-negligent advice would have put the claimant in a materially better position. The judge refused to permit further amendment because the proposed pleadings and the claimant’s evidence did not show a realistic prospect of establishing causation or greater recoverable value than that obtained under the settlement.