Supreme Court orders attorney to pay damages amounting to millions of kroner

Recently, the Supreme Court ruled that an attorney had provided insufficient advice to his client, which could trigger liability in damages. The ruling was specifically reasoned, but it could tell us something about the courts' present assessment of attorneys' liability.

In connection with an attorney's advice to a client on a potential purchase and financing of two gas stations, the attorney sent an offer on behalf of the client making no reservation as to the financing. The offer also mentioned a date of possession, which, according to the client's request, had been postponed, but the date of deposit had not been postponed accordingly.

The seller accepted the offer, but on the date of deposit, it became clear that the buyer was not able to finance the purchase and the buyer was therefore in breach of the agreement.

Consequently, the seller made a claim for damages against the buyer, who was ordered to pay DKK 5,543,106 resulting in the buyer's bankruptcy. Subsequently, the bankruptcy estate brought legal action against the attorney claiming liability in damages as a consequence of insufficient advice concerning the date of deposit and the financing.

NOT LIABLE DUE TO THE DATE OF DEPOSIT, BUT DUE TO INSUFFICIENT ADVICE ON THE FINANCING

First, the Supreme Court assessed the question concerning liability due to the attorney's failure to postpone the date of deposit. Even though the Supreme Court could not reject that the different dates of deposit and possession were a mistake on the part of the attorney, the required causal connection did not exist between the mistake and the buyer's loss. There was therefore no reason to believe that the mistake had had any material impact on the buyer's possibility of concluding the deal.

The Supreme Court then assessed the question as to whether the attorney should have provided advice on the financing. The Supreme Court was divided into two of which the majority found that the attorney should be held liable for the lacking advice on the financing as he should have made it clear to the buyer that there was no guarantee that the financing would fall into place and that the purchase involved certain risks. The majority therefore ordered the attorney to pay damages for the full loss of more than DKK 5.5 million.

ATTORNEY HAD OFFERED TO PARTICIPATE IN THE FINANCING

The Supreme Court made a very specific assessment of the liability in damages as a consequence of the insufficient advice on the financing. In the ruling, importance was attached to the attorney's long-term relationship with the client meaning that the attorney had good insight into the client's finances, and importance was also attached to the client's explanation that the attorney was going to help get the financing in place, and that he, prior to the offer, had expressed his own interest in participating in the financing. Further, it was taken into account that the attorney had mentioned to both his client and the client's bank that he could assist with the financing.

Due to these circumstances, the Supreme Court found that the attorney should have provided more specific advice on the financing prior to the offer.

COMMENTS

The ruling presumably indicates that if a client wishes to make a transaction involving great risks, the attorney must inform the client accordingly.

Further, it was considered an aggravating circumstance in the specific case that the attorney may have encouraged the client's risky action with his own statements or actions.

contacts

Jacob Møller Dirksen

Partner

Christina Steen

Partner

Daniel Haue Jakobsson

Attorney