Despite its rather unusual subject matter, and the fact that it is a
first instance decision, the recent judgment in Agouman v Leigh Day
[2016] EWHC 1324 (QB)
http://www.bailii.org/ew/cases/EWHC/QB/2016/1324.html may be of
interest because it raises some points of general relevance,
particularly concerning issues of foreseeability, remoteness and 'loss
of chance' in claims for professional negligence..

In brief, the Defendant firm of solicitors had acted in a claim in the
English Courts (the “Trafigura Claim”) in which nearly 30,000
nationals and/or residents of the Ivory Coast (of which the Plaintiff
in this case was one) sued Trafigura in respect of the discharge of
chemical waste from a tanker (the “Incident”).

The Trafigura Claim was settled for about £STG30,000,000, the
(“Money”), which the Defendants were to distribute to their clients.

The Defendants held the Money in an account in a French bank within
the Ivory Coast, where it was impounded and transferred to a body
purportedly representing victims of the Incident (the “Entity”) by
virtue of orders made by the Courts of that country. It was common
ground before the Court (and assumed by the Court for the purpose of
the case) that those orders had been procured by corruption. (As a
side note, I find it surprising that a Court would be prepared to make
that assumption, even with the agreement of the parties, given the
broader issues that such an assumption entails but I accept that this
is the currently applicable approach in systems which adhere to the
adversarial model of litigation.)

Some victims were subsequently compensated by the Entity but not the claimant.

The solicitors were held liable on the basis that given their dealings
in the Ivory Coast, they should have been aware of the risk that if
all of the Money was paid into an account in the Ivory Coast, it could
be misappropriated. The Court concluded that the solicitors should
have protected their clients by either:
1. Transferring the Money into the Ivory Coast in tranches, which
would be topped up as funds were drawn down by their clients. (Many
clients did not have bank accounts and the solicitors had set up a
system of ATM cards through which funds could be drawn); or
2. Holding the Money in a bank outside the Ivory Coast altogether and
issuing cards to the clients which would draw directly on the account
outside the Ivory Coast (which the Court acknowledged would have
involved some costs.); or
3. Adopting another money transfer method which would put the Money
beyond the reach of orders of the Courts of the Ivory Coast procured
by corruption.

The Court also held the Defendant solicitors negligent for not
transferring the Money to an account outside the Ivory Coast, when the
first intimation of a fraudulent claim to the Money was made to them.

In the course of a long and careful judgment, the Court held that the
solicitor’s negligent decision to pay the Money into an account in the
Ivory Coast was the effective cause of the loss (since the risk of
corrupt judicial or political claims in respect of the Money was
foreseeable and should have been guarded against) and that the corrupt
judicial decisions concerning the Money were not a Novus Actus
Interveniens. the Court addressed an argument that the loss was too
remote as follows:

“121. ... Although Leigh Day owed parallel duties both in contract and
in tort and was in breach of both, questions of remoteness of damage
in respect of both claims are governed by the principles that apply to
contractual claims: see Wellesley Partners LLP v Withers LLP, [2015]
EWCA Civ 1146. In that case the Court of Appeal rejected the
submission that, because solicitors owe parallel duties in tort and
contract, a claimant is entitled to have damages assessed by reference
to the less demanding test typically applied to cases of tortious
negligence, whereby a defendant is liable for any type of damage which
is the reasonably foreseeable consequence of its breach. Accordingly,
Ms Agouman is entitled only to damages that are recoverable in
contract, where the basic rule is that "a contract breaker is liable
for damage resulting from his breach if, at the time of making the
contract, a reasonable person in his shoes would have had damage of
that kind in mind as not unlikely to result from a breach": see the
Wellesley Partners case (loc cit) at para 69 per Floyd LJ. As Floyd LJ
went on to observe (at para 74), "Damage may be of a kind which is
reasonably foreseeable (and therefore recoverable in tort) yet highly
unusual or unlikely (and therefore irrecoverable in contract)": such
damage would not be recoverable.

122. However, whether the applicable test for remoteness is the
contractual test or one of reasonable foreseeability, what matters is
whether the loss is of a kind or type of loss (or, to use the
terminology of Lord Hoffmann in Jolley v Sutton LBC, [2000] 1 WLR
1082, 1091D, a "genus" of loss) that satisfies it. It does not matter
whether the parties should have contemplated or reasonably foreseen
the particular loss or its extent, nor whether the precise manner in
which it came about would have been within the parties' reasonable
contemplation: Overseas Tankship (U.K.) Ltd v. Morts Dock and
Engineering Co. Ltd ("The Wagon Mound") (no 1), [1961] AC 388,
http://www.bailii.org/uk/cases/UKPC/1961/1.html Hughes v. Lord
Advocate, [1963] AC
837.http://www.bailii.org/uk/cases/UKHL/1963/1.html Nor does it matter
whether it is thought likely that the contract will be broken: the
question is what should have been contemplated assuming that the
contract is broken.

123. How then does the court go about deciding how a loss is to be
categorised in order to examine whether it is of a kind that is
recoverable? The authorities give some guidance as to the proper
approach, at least where the court is applying contractual principles.
In The "Achilleas", [2008] UKHL 48 Lord Hoffmann said (at para 22)
that in cases of contract the only rational basis for distinguishing
what loss is of the same type to what the parties should have
contemplated and what is of a different type is by reference to a
distinction that "would reasonably have been regarded by the
contracting party as significant for the purposes of the risk that he
was undertaking".

124. Mr Smith argued that the losses that were suffered by the
claimant were not of a kind that would have been within the parties'
contemplation because Leigh Day could not reasonably have been
expected to foresee, let alone to have it within their contemplation,
that funds in SGBCI would be "attacked by a corrupt judicial
decision". But this argument again depends on characterising the type
of loss by reference to the manner in which it came about. The type of
loss that was suffered was that, as a result of Leigh Day not taking
proper steps to protect the settlement sum from being acquired
dishonestly by third parties making claims to it, Ms Agouman (and
apparently other Trafigura Claimants in her position) did not receive
her due. In my judgment, the loss was of exactly the kind that would
be contemplated as the likely result of breach of the duty.

125. I add that to my mind it adds nothing to recast the argument that
the loss was too remote from the breach to be recoverable by
submitting that it was outside the scope of the duty. The choice
between these two formulations is, as Lord Hoffmann observed in the
Jolley case, simply a matter of taste.

126. I therefore conclude that the claimant has established that Leigh
Day's breach of duty caused her loss.”

The Court went on to consider the principles applicable to the
assessment of damages

127. “If I am right in these conclusions, the claimant suffered some
loss as a result of Leigh Day's breach of duty. Mr Smith submitted,
however, that the claimant lost only the value of the chance that, but
for the breach, she might have safely received her due under the
settlement. His argument was that the value of that chance depended on
(i) an assessment of the likelihood that but for the breach Leigh Day
would have found a safer way of distributing the funds, and (ii)
whether, if they had, they would have implemented it, and as a result
the claimant would have received all her compensation. This involves
an assessment of what advice would have been given by consultants had
Leigh Day sought advice about how the fund might best be handled, and
so what Mr Smith called "the hypothetical conduct of third parties".
He submitted, citing the judgment of Floyd LJ in the Wellesley
Partners case, that the court will widely apply "the 'lost chance'
doctrine where the conduct of third parties is involved".

128. A string of authorities following Allied Maples Group Ltd v
Simmons & Simmons, [1995] 1 WLR 1602 establishes that the court will
assess the loss of a chance where the recoverability of loss "depends
on the actions of a third party whose conduct is a critical link in
the chain of causation": Vasiliou v Hajigeorgiou, [2010] EWCA 1475 at
para 21 per Patten LJ. However, as Patten LJ goes on to explain (at
para 22) in these cases "The loss of a chance doctrine is primarily
directed to issues of causation and needs to be distinguished from the
evaluation of factors that go only to quantum".

129. Here there can be no doubt that, because Leigh Day arranged the
settlement sum to be held in SGBCI and kept it there until the
so-called freezing order was made, Ms Agouman was paid nothing from
it. Mr Smith's argument was that the measure of recoverable loss
depends on an assessment of what might have been advised or done by
third parties in what Patten LJ called "the alternative scenario he is
presented with". The nature of the exercise undertaken by the court in
these circumstances was explained by Toulson LJ in Parabola
Investments Ltd v Browallia Cal Ltd, [2010] EWCA Civ 486 (at para 22):
some forms of consequential loss "are not capable of … precise
calculation because they involve the attempted measurement of things
which would or might have happened (or might not have happened) but
for the defendant's wrongful conduct, as distinct from things which
have happened. In such a situation the law does not require a claimant
to perform the impossible, nor does it apply the balance of
probability test to measurement of the loss". Toulson LJ went on to
explain (at para 23) that, rather than apply a balance of
probabilities approach, the court "estimates the loss by making the
best attempt it can to evaluate the chances, great or small (unless
those chances amount to no more than remote speculation), taking all
significant factors into account". This might involve assessment of
chances in a manner akin to that explained in the Allied Maples case,
but only as part of a broader assessment of an admittedly rather
imprecise kind.

130. Mr Isaacs identified the overseas account method and the tranches
method as safer ways of distributing the settlement sum. No other
proper method has been identified and therefore the assessment of
damages must be on the basis that one of these two methods was
adopted. In my judgment Leigh Day would have fulfilled their duties to
the claimant if they had adopted either method. Therefore, in
assessing the quantum of damages Leigh Day are entitled to have the
court suppose that they adopted the method that is more favourable to
them, that is to say that produces the lower measure of damages.”

The Court did not assess damages but it noted that the Defendant
solicitors would be entitled to have the chance that a traunch of the
Money might have been misappropriated, once paid into the Ivory Coast
banking system taken into account in any such assessment because the
Defendant solicitors were entitled to be treated as having fulfilled
their duty to the Plaintiff and others in her position in the way
least onerous for them.

Interestingly, a claim for breach of trust does not seem to have been
the focus of much separate argument (see paragraphs 134 and 135). The
Court seems to have proceeded on the basis that the claim for breach
of trust was made out (which was obviously right) but would lead to
the same result as the claim in contract and tort. I am not sure if
that is right (it was not the subject of argument). I would have
thought that in a claim for breach of trust, where the trust property
was lost because of the trustee’s breach of trust, the Trustee could
not be heard to say that the sum due to the beneficiary should be
reduced by reference to defalcations of a third party which might have
occurred had the trustee fulfilled their duty in one particular way
but which did not in fact happen. At first blush, I would have
thought that in those circumstances, the duty of the trustee is to
reconstitute their trust. Open to correction on that. In any event,
the point may not prove significant in this case.

Kind regards

Ger