Wellesley Partners LLP v Withers LLP [2015]
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Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 marked a pivotal moment in English contract law, bringing about a significant change in the approach to causation in professional negligence matters. The Court of Appeal's decision has introduced a shift from tortious principles of remoteness to a contractual approach in cases involving concurrent liability.
Wellesley Partners LLP, a recruitment firm, engaged Withers LLP to draft a new LLP agreement in 2008. The agreement included an option allowing Addax Bank to withdraw its capital contribution from Wellesley after 42 months. However, Withers negligently drafted the clause, enabling Addax to exercise the option within the first 41 months. As a result, Addax withdrew its investment early, disrupting Wellesley's business expansion plans. Wellesley brought a negligence claim against Withers, seeking damages for the loss of profit due to Addax's premature withdrawal. The central question was whether the losses should be assessed using contractual or tortious principles of remoteness.
The Court of Appeal ruled that in cases involving concurrent contractual and tortious duties with purely economic losses, the contractual test of reasonable contemplation should apply. This is because the contractual approach is more restrictive, allowing the parties to establish consensus on the type of damage likely to result from a breach. Despite this change in legal principle, the Court ruled against Withers on the facts of the case. The judge found that the type of damage was within the reasonable contemplation of the parties, as Withers knew about Wellesley's plans for expansion into the USA.
In conclusion, the case marked an important development in the law of causation, favouring the contractual approach over tortious principles in cases of concurrent liability. However, the practical impact may be limited, as the relationship between the two approaches is described as vanishingly close. The specific facts of the case resulted in Withers winning on the legal issue but losing on the facts. Due to this mixed outcome, it seemed unlikely that the case would be reconsidered by the Supreme Court.
Wellesley Partners LLP, a recruitment firm, engaged Withers LLP to draft a new LLP agreement in 2008. The agreement included an option allowing Addax Bank to withdraw its capital contribution from Wellesley after 42 months. However, Withers negligently drafted the clause, enabling Addax to exercise the option within the first 41 months. As a result, Addax withdrew its investment early, disrupting Wellesley's business expansion plans. Wellesley brought a negligence claim against Withers, seeking damages for the loss of profit due to Addax's premature withdrawal. The central question was whether the losses should be assessed using contractual or tortious principles of remoteness.
The Court of Appeal ruled that in cases involving concurrent contractual and tortious duties with purely economic losses, the contractual test of reasonable contemplation should apply. This is because the contractual approach is more restrictive, allowing the parties to establish consensus on the type of damage likely to result from a breach. Despite this change in legal principle, the Court ruled against Withers on the facts of the case. The judge found that the type of damage was within the reasonable contemplation of the parties, as Withers knew about Wellesley's plans for expansion into the USA.
In conclusion, the case marked an important development in the law of causation, favouring the contractual approach over tortious principles in cases of concurrent liability. However, the practical impact may be limited, as the relationship between the two approaches is described as vanishingly close. The specific facts of the case resulted in Withers winning on the legal issue but losing on the facts. Due to this mixed outcome, it seemed unlikely that the case would be reconsidered by the Supreme Court.
