Court of Appeal finds Solicitor at fault in failing to give explicit warning of danger of a Court case being struck out

A recent judgement of the Court of Appeal is important for two reasons, firstly for setting out the duty owed by a solicitor in providing clear advice, options and warnings to clients and secondly for setting out the principles governing the proper approach of an appeal court to findings of fact and inferences made by the court of first instance.

The Plaintiffs, Emerald Isle Assurances and Investments Limited, Timothy Maverly and James Morey, appealed the judgment and order of the High Court dismissing their claim for professional negligence against their former solicitors, Patrick Dorgan and others practicing as Coakley Moloney Solicitors.  Mr Maverly and Mr Morey (“Personal Plaintiffs”) are directors of Emerald Isle Assurances and Investments Limited (“Emerald”), which company acted as a life insurance agent. The action arose out of the conduct of proceedings by the Defendant solicitors on behalf of the Plaintiffs against Hibernian Life Limited (“Hibernian”), which were ultimately settled in 2010 for €300,000.

When this matter came before the High Court, the President of the High Court at the time, President Kearns, found that the Defendant solicitor (Mr Duane) was at fault in failing to give a detailed, explicit and elaborate warning as to the consequences that would or might follow from further inordinate delay of the proceedings. However he also found that any such warning would not have made any difference in the circumstances because the Personal Plaintiffs had not indicated that they would have responded to such a warning.

Grounds for Appeal

The Plaintiffs appealed the decision of the High Court on the following grounds:-

1. The High Court should have held that the Defendant solicitor was negligent in his overall handling of the case from an early stage and particularly in respect of the delay in engaging an expert forensic accountant, failing to take action to resolve the impasse between the Plaintiffs and the forensic accountant concerning the damages claim, failing to communicate with A&L Goodbody, the solicitors for Hibernian in the period between 2003 and 2009 and for taking no action between receiving the final report from the forensic accountant in 2007 and October 2009.

2. The High Court was in error in holding that the only breach of duty by the Defendant solicitor in the conduct of the litigation was the failure to give a sufficiently detailed warning of the risk of a motion to dismiss for want of prosecution.

3. The High Court was in error in holding that if a proper warning had been given it would not have made any difference.

The Plaintiffs challenged the finding by Kearns P. that the Personal Plaintiffs never said in evidence that they would have settled for a particular sum, on the basis that it was not relevant to the issue and that it was not in fact accurate because they gave evidence that in the course of negotiations in January 2003 they were willing to settle their case against Hibernian for IR£2m.  The Defendant solicitor in question confirmed in his evidence having received such instructions. The Plaintiffs submitted that Kearns P, was in error in adopting an incorrect approach to the question of whether a warning would have made a difference by reference to the evidence that the parties had given.

Defendant’s submissions

In their submissions the Defendants stated that the core issue in the action was where responsibility lies for the delay in bringing the case against Hibernian to trial. The Defendants contented that the Plaintiffs rejected their solicitor’s advice to accept the opinion of the forensic accountant and to bring the case to trial and they also rejected the alternative option to engage another expert. The impasse between the Plaintiffs and their forensic accountant continued and was intractable, and there was nothing that anybody could have done or said to persuade either side to change their minds. The Defendants’ position was that there was a complete disagreement as between the Plaintiffs and the forensic accountant and that the Defendant solicitor had found himself in an unfortunate position of not being able to make any progress in the circumstances.

Judgment

In delivering the judgment, the Court of Appeal referred to Hay –v- O’Grady [1992] 1IR 2010, where the Supreme Court set out the principles governing the proper approach of an appeal court to findings of fact and inferences made by the Court of first instance. The Court of Appeal summarised the principles as follows:-

1. Were the findings of fact made by the trial judge supported by credible evidence? If so, the appeal court is bound by the findings, however voluminous and apparently weighty testimony against them.

2. Did the inferences of fact depend on oral evidence of recollection of fact?  If so, the appellate court should be slow to substantiate its own different inference.

3. In regard to inferences from circumstantial evidence, an appellant court is in as good a position as the trial Judge in that regard. Did the Judge draw erroneous inferences?

4. Was the conclusion of conclusion of law drawn by the trial Judge from a combination of primary fact and proper inference erroneous?  If so, the appeal should be allowed.

5. If, on the facts found, and either on the inferences drawn by the trial judge or on the inferences drawn by the appellant court in accordance with the principles set out above, it is established to the satisfaction of the appellant court that the conclusion of the trial judge as to whether or not there was negligence on the part of the individual charged was erroneous, the order will be varied accordingly.

In making its finding, the Court of Appeal stated that “it is obvious that Mr Duane should have warned the plaintiffs explicitly that the longer things went on without agreement or some kind of resolution as to the presentation of the claim for damages the greater was the risk that not only might another strike-out motion be issued, but that on this occasion there was a real risk that the entire action would be struck out”.

The Court of Appeal’s starting point was that the Defendant solicitor was at fault in failing to warn the Plaintiffs of the possible consequences of failure to get the damages claim in order.  The Court of Appeal considered that the Defendant solicitor did have a number of options available to him in order to progress the case albeit noting that the options were not perfect.  These options included obtaining the opinion of Senior Counsel as to how he was to deal with the impasse between the forensic accountant and the Plaintiffs in respect of the damages claim, engaging another expert accountant, or relying on the Plaintiffs’’ in-house accountant. The Court of Appeal stated that there was nothing to stop the Plaintiffs from proceeding with their claim as originally set out. The court noted however that at the trial the figures would be tested and the Plaintiffs might be exposed to embarrassing criticism, and even to the risk of having some of the legitimate parts of their claim disallowed by unfortunate association with the parts which the Court held to be wholly exaggerated or unreasonable or unsustainable. Those were risks that should have been set out to the Plaintiffs.

The Court of Appeal stated that the Defendant solicitor displayed “a woeful pattern of sporadic, ineffectual efforts to make progress, but without any proper appreciation of the danger that the case would become impossible and was inexorably becoming untenable as time wore on”.  The Defendant solicitor’s obligation was to address the situation and to give clear advice to his clients as to what the options were and what the risks were. The Court was critical of the Defendant solicitor for “his ineptitude in regard to this case”. The Court considered that his negligence went far beyond the failure to give a more elaborate warning to the plaintiffs.

In relation to the separate question as to whether the High Court was correct in deciding that it would not have made any difference even if the Defendant solicitor had given the appropriate detailed advice to the Plaintiffs, the Court of Appeal found that the High Court was in error in its finding on this point. The evidence in the case did not demonstrate complete incapacity on the part of the Personal Plaintiffs to take advice.

The judgment makes clear that a solicitor’s duty and obligation is to set out the position clearly to his/her clients, to include all options and risks associated with those options. The Court of Appeal said that the Defendant solicitor needed to present the Plaintiffs with the situation that they could proceed with their case as matters stood and with the evidence that they had originally relied but that there were risks and dangers in that course.

The conclusion of the Court of Appeal is that the failure in this case is not simply one of the precise terms of a particular letter, it is a failure of advice and a course of conduct that simply failed to address a particular issue or difficulty that had arisen and that it was not an impossible or intractable problem but one that had options and consequences just like many other situations that present themselves to a competent legal or other advisor. In closing, the Court of Appeal again made reference to Hay – v – O’Grady and stated that the conclusions reached by the High Court were erroneous. “The essential facts - all of the facts on the decision as to the negligence of the Defendant solicitor falls to be made - are not in dispute and the question for this Court is whether the inferences and conclusions that were drawn by Kearns P. were correct”. The Court of Appeal considered that the inferences and conclusions were not correct. In those circumstances the Court of Appeal allowed the appeal and remitted the matter to the High Court for assessment of damages.

The importance of this case is two-fold, firstly in relation to setting out the principles governing the proper approach of an appeal court to findings of fact and inferences made by the court of first instance, as set out in Hay –v- O’Grady, and secondly in relation the duty owed by solicitors in adequately providing clear advice, options and warnings to their clients.