The High Court has rejected a professional negligence claim potentially worth more than £15m against a City firm.
Former Ernst and Young partner Cathal Lyons had sought to claim against his former legal advisers Fox Williams in relation to insurance settlements made following a motorcycle accident 10 years ago when he was chief financial officer and managing partner of operations of EY's Moscow arm.
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He suffered injuries to his shoulder and foot, and claimed against his firm’s insurance cover.
Lyons brought legal proceedings against Fox Williams in relation to advice from its litigation partner Tom Custance, alleging he had not been advised about a potential long-term disability (LTD) claim and suffered negligence through the non-inclusion of an English law and jurisdiction clause in a 2009 ‘exit’ agreement with EY.
Lyons said he had missed out on around £3.8m in LTD payments and £11.7m – the alleged difference between the sum he accepted in settlement of a subsequent claim against EY, and the value of the lifetime insurance benefits he alleged he would have received if no such dispute had arisen.
The judgment, running to 262 paragraphs, was based on 110 pages of skeleton arguments and involved decisions on 36 issues. The trial bundle consisted of more than 40 lever-arch files of documents.
Fox Williams, represented by national firm DAC Beachcroft, said the issues relating to LTD fell outside the scope of Custance’s retainer and disputed whether he was eligible to claim under LTD policies.
Lawyers described Custance’s involvement in the 2009 agreement as ‘informal’ and denied he was instructed to prepare a long-form agreement.
In any case, they argued, EY would not have agreed to an English law and jurisdiction clause and the outcome of the litigation between EY and Lyons would have been the same even with the clause.
In Cathal Anthony Lyons v Fox Williams LLP , Mr Justice Turner (pictured) said resolution of the LTD issue was ‘bedevilled’ by problems – not least that Custance took few notes from his conversations with Lyons.
The lawyer was also noted to have failed to call for a full copy of EY’s insurance policies.
But Turner said Lyons was making an ‘opportunistic attempt to make the facts fit his case’ by suggesting they had discussed LTD issues in any depth.
‘If the claimant had asked Mr Custance to advise on the scope and operation of the LTD policy then at least some more specific reference to this would have appeared,’ said Turner.
‘Defendants in professional negligence claims do not necessarily enjoy a monopoly of happy hindsight.’
The judge added that Custance did not have a duty within his retainer to advise on potential LTD policies which he had not previously considered.
Turner found Lyons had taken a ‘deliberate and calculated risk’ to enter an agreement with EY without an English law and jurisdiction clause.
The judge said Custance was negligent in failing to point this out and strongly recommend to Lyons that the agreement should include the clause.
But Lyons’ claim failed on causation as it was found that the absence of such a clause made no material difference to the outcome of his claim.
Following the judgment, DAC Beachcroft said this was a case that hinged on the claimant presenting a ‘picture of retainer drift’ beyond those agreed with solicitors.
‘Professional indemnity insurers and solicitors will no doubt welcome another case where such attempts have failed,’ said the firm.
‘This demonstrates that a client will struggle to prove that the scope of the retainer extends beyond the duties clearly identified in the engagement letter in the absence of clear and unambiguous supporting references in the contemporaneous documentation.’
City firm defeats £15m negligence claim over extent of retainer
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