Relaxation of burden of proof regarding causal links in cases involving the liability of legal advisors and tax consultants

The claimants, shareholders of a German limited liability company (GmbH), were claiming damages from the defendant, a lawyer, on account of provision of incorrect legal advice. The claimants pleaded that the defendant had not given them adequate advice on the options for drafting a purchase agreement for selling their company shares in 2000. The value guarantee clause contained in the purchase agreement turned out to be ineffective when the claimants asserted claims under this clause before the courts.

The Federal Court of Justice upheld its established case law and stated that in cases involving the liability of legal advisors and tax consultants the relaxation of the burden of proof regarding causal links between the breach of duty and the loss are determined by the standards of prima facie evidence. It said that only the standards of prima facie evidence led to an appropriate allocation of risk between the legal advisor and the client. According to the court, if the client left open which of several possible courses of action it would have decided on if it had been provided with due advice, the required probability of loss would only be given if the loss would arise in all potential series of causal events. The probability of loss would then have to be demonstrated for all these series of events and evidence of this would have to be provided.

The claimants said that the losses incurred were due to the profits they could have generated if they had invested the capital that would have remained if the value guarantee clause had been correct. In connection with the supposed value of the loss, the court stated that although section 252 subsection 2 German Civil Code in conjunction with section 287 German Code of Civil Procedure allowed the injured party to carry out an abstract valuation of the loss arising as a result of lost profit, it is still necessary to demonstrate and, where appropriate, prove the necessary linking factors. Consequently, it reasoned, the claimants should have demonstrated and substantiated what specific form of investment they would have opted for to then be able to calculate a loss based on this.

Furthermore, the Federal Court of Justice decided that pre-litigation legal costs in the shape of lawyers’ hourly fees generally have to be reimbursed as losses up to the value of the statutory fees. It added that other costs could only be claimed if the injured party was allowed to view them as necessary and expedient taking into account the particular circumstances in the specific case. This may be assumed to be so if it is not possible to find a lawyer who is suitable and willing to represent the client or a necessary specialist lawyer who will work for the statutory fees.