Jaguar: Clients were eyeing up dealership opportunity
A law firm provided negligent advice to a client looking to develop a Jaguar Land Rover (JLR) dealership but he would not have listened to the proper advice anyway, the High Court has ruled.
Mrs Justice Falk dismissed [1] the negligence claim against West Midlands firm Higgs over causation.
James Brearley left car dealership group Pendragon in August 2015 to pursue what was called the ‘Wolverhampton opportunity’ to build a JLR dealership.
The following month, Pendragon sent Mr Brearley a ‘cease and desist’ letter, threatening proceedings unless he gave undertakings.
Pendragon alleged that Mr Brearley dissuaded it from pursuing the opportunity only to do so for his own benefit.
He did not provide the undertakings until after Pendragon began legal action. The dispute settled in March 2016, with Mr Brearley agreeing not to pursue the opportunity. A JLR dealership was eventually developed on the site by another company.
Mr Brearley, his corporate vehicle, property developer Rodger Danks and his company all alleged that Higgs failed to advise them that Mr Brearley was likely to breach his fiduciary and contractual duties to Pendragon and that restrictive covenants in his contract would likely prevent him from pursuing the opportunity for a year after he left its employment.
They also argued that Higgs failed to advise Mr Brearley that Pendragon’s complaints in the letter were very likely to succeed and so he should provide the undertakings.
Higgs contended that it only owed duties to Mr Brearley initially and then his company too after the letter was received. However, Falk J concluded that, in addition, the two companies were its clients from the start – but Higgs had no retainer with Mr Danks.
She found that in a phone call ahead of Mr Brearley resigning in April 2015, employment partner Damian Kelly “should have done more… to convey to Mr Brearley the potential extent of the legal risks that he was running” by doing so.
The judge added: “I accept that Mr Kelly needed significant additional information to give full advice about the extent of the risks, and that he expressed willingness to advise on receipt of it, but any warning that he managed to convey was limited to the possible impact of the restrictive covenants, and also did not extend to any suggestion that Mr Brearley should delay his planned resignation or cease work on the Wolverhampton opportunity pending further advice.
“In my view a reasonably competent employment specialist, armed with the information that Higgs had, would have alerted Mr Brearley to the potential risk that he was in breach of the duties to which he was subject during the course of his employment, and give some indication of the possible consequences.”
The other key event was a meeting about the cease and desist letter. The judge found that Mr Brearley’s instructions were “to prepare as robust a response as possible, because he wanted to play for time”. He also did not want give the undertakings.
Further, Mr Brearley did not give “an accurate portrayal of the factual position”, and the function of the meeting was not to provide “considered legal advice”.
Nonetheless, Falk J held that Higgs again did not “clearly” spell out the legal risks its client faced, in particular in relation to the exposure to an account of profits.
The claimants argued that, but for the negligent advice, they would have ceased their pursuit of the opportunity and Mr Brearley would have sought to reach an agreement with Pendragon.
The judge observed that Mr Brearley had been working on the project for several months before approaching Higgs and that he saw it as a “once in a lifetime opportunity”.
She concluded: “I am not persuaded on the evidence that Mr Brearley would have allowed Higgs to prevent his continued pursuit of the Wolverhampton opportunity, when he believed that his ability to do so would not be determined by a legal analysis of his employment position but instead by the commercial reality of JLR’s influence and the impact of that on Pendragon.
“Instead, he would have sought to continue to pursue it. In those circumstances, and as actually happened a few months later, Pendragon would still have been in a position to bring legal proceedings, with the consequences that the Wolverhampton opportunity would have been lost and costs of those proceedings would have been incurred.
“Fundamentally, Mr Brearley misjudged both the level of JLR’s influence and Pendragon’s tenacity.”
She continued that the claimants did not show a “substantial chance” of Pendragon permitting Mr Brearley to pursue the opportunity even if he had been open with them.