Our Insights

The Court of Appeal has held that agreements governed by Greek law had not been negligently drafted by an English law firm, and that any loss suffered by the appellant was not attributable to the drafting.

The appellant had invested in solar energy projects in Greece using an agent to find suitable local partners. The respondent solicitors drafted relevant agreements with the agent and a Greek partner. The projects failed. The solicitors sued the appellant for their unpaid fees, who counterclaimed alleging negligence in the solicitors’ drafting of the agreements by failing to advise that the vehicles used for making the necessary applications to the Greek authorities should be limited liability companies rather than partnerships (which in the event were used). In particular, the appellant alleged that the solicitors had been negligent in failing to advise him to secure the necessary control over the Greek partner by purchasing a small shareholding in the partnerships. The partner had demanded more money from the appellant for not selling the partnerships, which the appellant held that he had paid under duress. The appellant argued that lack of control over the partner (being the fault of the solicitors) resulted in significant losses.

The Court of Appeal dismissed the appeal, holding as follows:

• An appellate court should not interfere with the trial judge’s conclusions on primary facts unless satisfied that he was plainly wrong – McGraddie v McGraddie [2013] UKSC 58.
• The appellant had not sought express advice about the corporate structures to be put in place. The solicitors had not been asked to give general structuring advice; the structure had already been agreed, and their job was to incorporate it into a contract. The solicitors had in fact advised the agent to take 1% holdings in the partnerships. The agent understood the purpose of the 1% holdings, and he and the appellant chose not to take advantage of this protection. Consequently, the inclusion of such a provision made no difference to the train of events that followed. Moreover, the trial judge had been correct in finding no negligence in the drafting of the agreements.
• The appellant and his agent began ignoring the agreements soon after execution. The agreements did not oblige the appellant to make additional payments, and he did so for his own commercial reasons: he saw the potential for large profits and was willing to finance the projects well beyond his contractual obligations. His actions could not be attributed to the drafting of the agreements.

Watson Farley and Williams (a firm) v Ostrovizky [2015] EWCA Civ 457, 12 May 2015