Sea Accident Compensation Claim

Sinclair Roche & Temperley (A Firm) V Somatra Ltd (2003)

Solicitors had failed to show that the trial judge was wrong to find that their breaches of duty had caused their client to lose trust and confidence in them and to settle its claim for less than it was worth. The judge was entitled to decide that they were accordingly liable in damages for the difference between the settlement figure and what the claim would have been settled for otherwise.

Legal Profession - Professional Negligence - Contract - Damages - Civil Procedure

CA (Schiemann LJ, Tuckey LJ, Longmore LJ) 23/10/2003

LTL 23/10/2003 (Unreported elsewhere)

Document No.: AC0103649

Appeal by solicitors ('SRT') from the decision of Morison J (summarised below) that they were liable to former clients ('Somatra') for the difference between part of Somatra's claim against insurers, which Somatra settled, and the proportion of its claim that Somatra would have recovered but for the breaches of duty found by the judge to have been committed by SRT. A tanker owned by Somatra, a company controlled by a Saudi Arabian businessman ('S'), 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 were assigned to the bank. Somatra retained English solicitors who made a claim on the insurance in 1991. The lead insurer ('Arig') refused to pay on grounds that the vessel was unseaworthy and that owners either knew or should have known of that unseaworthiness. In 1992 the solicitors issued points of claim. S then decided to retain SRT in relation to Somatra's claim. Eventually Somatra settled its claim against the insurers for two-thirds of its value. It then commenced proceedings against SRT alleging breaches of duty, which caused Somatra to settle at that value when it could and should have recovered more.

The judge held that SRT had been in breach of duty and that Somatra would otherwise have won at trial. He concluded that, if there had been no breach, Somatra would have settled for three-quarters of its claim. He therefore awarded Somatra the difference between the two-thirds and three-quarters figures as damages. SRT appealed, challenging the judge's findings on one particular breach of duty and contending that Somatra in any event suffered no loss because two-thirds was all that was on offer and was what Somatra would have settled for in any event. The particular breach of duty related to the performance at a meeting of the relevant partner of SRT ('W'). SRT also appealed against the judge's award of indemnity costs (Somatra Ltd v Sinclair Roche & Temperley (2002) EWHC 1627 (Comm)).

HELD: (1) The judge's finding of breach of duty at the meeting was justified by the underlying findings of fact he made in his judgment. Even if that finding had been reversed it would not have affected the global finding that, as a result of all the breaches, Somatra lost trust and confidence in SRT.

(2) SRT failed to show that the judge's finding that Arig's representative had authority to settle for up to 75 per cent was plainly wrong.

(3) SRT failed to show that the judge's conclusion that S would not have settled for two-thirds, but for SRT's breaches of duty, was plainly wrong.

(4) The judge was entitled to conclude that SRT's breaches were the effective cause of the settlement at less than 75 per cent, even if there were other matters that would or might have influenced S's actions and did not amount to breaches of duty.

(5) The judge was entitled to conclude that S's decision to settle the case as he did was both a foreseeable response to the breaches and a reasonable one.

(6) The judge was entitled to order SRT to pay indemnity costs on the basis that W had repeatedly lied to the court and repeatedly made unfounded allegations against the integrity of his own client. His order was not plainly wrong.

Appeal dismissed.