Stephen John Finnan v Charles Russell Speechlys LLP

In a professional negligence claim, causation of loss is an essential part of the cause of action. The claimant must plead a coherent counterfactual showing what advice or act should have occurred, what the claimant would then have done, and how that would have produced a better net recovery.

For a professional adviser, the scope of duty is assessed by the purpose of the retainer and the maximum recovery the adviser could realistically have achieved, taking account of the costs of achieving it. A claim may be struck out where the pleaded case does not identify a viable route to a better outcome. A further opportunity to amend is unnecessary where the evidence and proposed amendments cannot support a realistic case on causation.

The claimant brought a professional negligence and breach of contract claim against his former solicitors. He alleged that they negligently advised him to present unfair-prejudice petitions under section 994 of the Companies Act 2006 in a dispute with his brother concerning jointly owned property companies.

The defendant applied to strike out the claim or obtain reverse summary judgment. The central issue was whether the claimant had pleaded, or could realistically plead, a coherent counterfactual in which different advice would have produced a better financial outcome than the settlement and recoveries actually achieved.

1. Disposition. The claimant’s particulars of claim disclosed no reasonable grounds for bringing the claim. The claim was struck out. No further opportunity to amend was granted.
2. Causation. Causation of loss was essential to both possible causes of action. In tort, the cause of action was incomplete without damage caused by the alleged breach. In contract, a claim without a recoverable benefit would serve no useful purpose. The pleading needed to identify the advice or act that should have occurred, the claimant’s resulting action, and a consequence including a net recovery greater than that actually obtained.
3. Scope of duty and factual causation. Applying the relevant parts of the six-stage analysis in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20, the scope of the solicitors’ duty was assessed by reference to the purpose of the retainer and the maximum net value that could realistically have been extracted from the companies and the brother. The evidence showed that the companies lacked the cash to repay the loans and that the settlement gave the claimant the means to realise the companies’ available value. The proposed demand-based counterfactual merely described demands that had in fact been made and did not identify any route to a better result.
4. Strike out and amendment. The court could determine the strike-out application from the deficiencies in the pleading and did not need to resolve criticisms of the defendant’s evidence. A further amendment opportunity would have been justified only if the claimant’s evidence supported a coherent and realistic case with a reasonable prospect of success. It did not. The allegations concerning dishonesty and procedural objections did not provide an answer to the causation problem.