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Solicitors' breaches caused their client to lose trust
and confidence in them and, as a result, forced the client to settle
a claim for less than it was worth.
A tanker which was owned by Somatra Limited, a company controlled by
a Saudi Arabian businessman, Mr Alireza, sank in the South Atlantic
in 1991. The immediate cause of the loss was a large explosion on board.
The vessel was mortgaged to the bank and was insured for $40.5m. The
proceeds of the insurance policy were assigned to the bank.
Somatra made a claim on the insurance, following the loss. Lead insurers
refused to pay on the grounds that the vessel was unseaworthy and that
the owners knew or should have known. Solicitors acting for Somatra
drafted particulars of claim but were then disinstructed and replaced
by Sinclair Roche Temperley (SRT). However, as a result of SRT's behaviour,
the client soon lost confidence in that firm and was forced to take
over negotiations with insurers personally on the eve of trial. A settlement
was agreed at two thirds of the value of the claim. Somatra then brought
proceedings against SRT alleging breaches of duty, on the basis that
they had caused the company to settle at a lesser value when it could
and should have settled for more (in fact, three quarters of the claim).
At first instance, the judge accepted that SRT had been in breach of
duty and Somatra would otherwise have won the trial. He said that had
there been no breach, Somatra would have settled for three quarters
of the claim and accordingly, he awarded the difference between two
thirds and three quarters. It was found during the course of the trial
that the partner involved had lied repeatedly to the client and disobeyed
instructions.
On appeal, it was held that the judge's findings of breach of duty
were justified by the underlying findings of fact he had made. Even
if that part of the judgment relating to SRT's appalling conduct of
meeting had been reversed, it would not have been sufficient to reverse
the global finding that, as a result of all the breaches, Somatra had
lost trust and confidence in SRT.
On the question of causation, foreseeability and loss, SRT failed to
show that the judge was plainly wrong in reaching his conclusions that:
1 The lead insurer's claims manager had authority to settle for up
to 75%; and
2 Somatra would not have settled for two thirds but for SRT's breaches
of duty.
The judge was entitled to conclude that SRT's breaches were the effective
cause of the settlement at less than 75%, even if there were other matters
which might have influenced Somatra's actions and did not amount to
breaches of duty.
The judge was right to conclude that Somatra's decision to settle the
case as it did was both a foreseeable response to the breaches and a
reasonable one.
The judge was entitled to order SRT to pay indemnity costs on the basis
of the conduct partner concerned.
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