Lawyers Sued for Failing to Warn of Possibility of Nil Recovery

Lawyers Sued for Failing to Warn of Possibility of Nil Recovery



Lawyers Sued for Failing to Warn of Possibility of Nil Recovery

Professional Negligence – Breach of Contract of Solicitors

In the case of Hyland v Campbell, clients of a law firm successfully sued their solicitors for losses incurred when the lawyers failed to warn them of the very real possibility of nil recovery in their claim, however on appeal, damages were substantially reduced. The issues in the professional negligence civil litigation surrounded what the law firm’s responsibility was in advising their client of the potential of not recovering damages.

Original Claim  – Negligence and Failure to Warn

Mr Campbell had engaged the solicitors to act on his behalf in a claim against a Mr Robertson, who owed him money after failing to pay him his share of proceeds from the sale of Mr Campbell’s cattle, housed on Mr Robertson’s property.

The appellant law firm in this proceeding (the solicitors) obtained declaratory relief in the original case but failed to make a claim for damages, an omission held by the trial judge and court, and the solicitors themselves as negligent.

Following the award of declaratory relief, the original proceedings were adjourned for further consideration. At that point, the solicitors conveyed to Mr Campbell a “very strong optimism” about his prospects of success. They then, knowing they should have in the first place, sought to amend the pleading in the litigation to include damages, however this was refused and consequently nothing came from the action against Mr Robertson.

In the time between the optimistic representation by the appellants and their denied application to amend pleadings to include damages, Mr Campbell made a number of “disadvantageous commercial decisions” that ultimately led to a significant financial loss. These decisions were made in reliance on the misleading assurance by his solicitors that he would succeed and receive the sum of $95,000 from Mr Robertson. Based on this belief, Mr Campbell invested a significant amount of money into the purchase of horses and a property on which to set up a horse breeding business, as well as selling his Carina home.

Outcome of Trial

In the original trial against the solicitors for negligence, the trial judge found that the solicitors had breached their duty to their client. Mr Campbell’s lawyers had assured him that he would receive $95,000 from his original claim, which was agreed by the trial judge as the amount owed by Mr Robertson. However the trial judge reached the conclusion that based on the personalities and personal relationship between the parties and the likely inability of Mr Robertson to pay the full amount, the court would only have enforced $35,000 as the recoverable amount.  Accordingly, Mr Campbell was awarded $35,000, to be paid by his solicitors, as the sum he would have attained had the proceedings against Mr Robertson been conducted competently.

He was awarded an additional $350,000 for the loss suffered by Mr Campbell as a result of the business decisions made in reliance on the false assurance by his solicitors that money would be received from the claim against Mr Robertson.

Outcome of Appeal

The appeal by the solicitors was in relation to the amount of damages owing to Mr Campbell as a result of their negligence (the finding of their negligence being undisputed). In the appeal, the amount of damages was reduced to allow for the possibility that Mr Campbell would have made the same business decisions that led to his substantial loss, with or without the assurance of his law firm in regard to his claim. Account was also taken of the fact that whether money was received or not, the business itself still would have been likely to fail, resulting in a loss.

It was also argued by the appellant lawyers that the two amounts awarded at trial constituted the award of duplicate damages, in allowing for a sum to be given for what would have been recovered as well as a sum for bad advice. While it was admitted that there was ambiguity in the trial judge’s reasoning, it was determined that the general premise was that each figure flowed from distinct breaches by the law firm; one to do with the conduct of the Robertson suit and one to do with their failure to warn.

This case highlights the result and possible remedies in a case involving lawyers’ professional negligence, not just in failing to competently argue a case, but then also in failing to appropriately advise a client of their prospects of success. It also demonstrates the importance of having reliable and competent legal representation to ensure the best result is achieved in the first place, as can be seen, the potential remedy that would have been available in the first instance was significantly reduced due to a variety of “what if” factors that had to be considered in the consequent proceedings against the solicitors.

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