DE: Scope of legal advice

Nov 10, 2021 Benn-Ibler Rechtsanwälte

The German Federal Supreme Court (Bundesgerichtshof, BGH) ruled that the lawyer's duty to inform his client about the prospects of success of a prospective legal action does not end with its initiation. If the legal and effective situation changes during the proceedings, the lawyer must inform the client about a related deterioration of the prospects of success, regardless of whether the legal expenses insurer has agreed to cover the costs.

A legal expenses insurer had filed a lawsuit against lawyers on the basis of the transferred rights of two of their policyholders for reimbursement of court costs and lawyers' fees incurred. In the course of a legal dispute conducted by the lawyers, the policyholders' prospects of success deteriorated considerably due to a decision of the BGH.

The BGH affirmed the claim for reimbursement under Sections 280 para 1, 675 para 1 of the German Civil Code (Bürgerliches Gesetzbuch, BGB), which had passed from the policyholders to the insurer under Sec. 86 of the German Insurance Contract Act (Versicherungsvertragsgesetz, VVG). According to the BGH, there was no mandate-related duty to conduct a legal dispute that was hopeless from the beginning. However, it was the duty to advise the client on the prospects of success of the legal dispute and to make this clear, especially in the case of a practically hopeless lawsuit. The BGH also clarified that the duty to advise does not end with the initiation of legal proceedings, but continues throughout the entire period of the legal dispute. The duty to advise also includes changes in the legal situation due to the case law of the highest courts. In the event of an unfavourable change in the legal situation during the course of proceedings and a court order has been given, the lawyer has a duty to provide information. The client must be in a position to weigh the risks and benefits of his legal dispute.

However, a breach of this duty to advise does not always lead to reimbursement of costs. The decisive factor is how a client would have acted if the lawyer had given him due advice. In principle, it can be assumed that clients with legal expenses insurance are more risk-friendly than others. Nevertheless, if the outcome of the proceedings is clearly hopeless, the limit of the client's risk tolerance must be drawn.

BGH IX ZR 165/19 (16.09.2021)