“6. For the purposes of the preliminary issues, the court is asked to assume that the relationship is governed by a Funded Solicitors Agreement (“FSA”). Part of the role performed by the panel solicitors under the FSA was the vetting of claims which members of the public wished to pursue. Claims accepted under the Scheme had to have prospects of success of at least 51% and be for a minimum amount of£1,000 . In respect of claims accepted, CLE acting on behalf of NIG would issue an ATE policy of insurance insuring the Scheme Claimant. In conjunction with the policy, a Funder (either First National Bank or Bank of Scotland as appropriate) would grant a loan to the Scheme Claimant which would be the source for payment of (i) the premium for the ATE policy and (ii) funded disbursements. NIG also entered into agreements with the Funders under which it agreed to indemnify the Funder in respect of the loan in certain circumstances, for example where NIG avoided the ATE policy for misrepresentation. 7. The allegations made by Axa which are relevant to the preliminary issues are that, pursuant to the FSA and/or at common law, panel solicitors owed duties to NIG, as insurer, to: (1) Vet and only take on Scheme Claims that had (i) greater than a 50% prospect of success and (ii) a likelihood of damages of£1,000 . (2) Conduct cases with reasonable care and skill thereafter. This duty falls into two relevant categories. First a duty to notify to NIG Scheme Claims for withdrawal of indemnity where (i) the prospects of success fell below 50% and/or (ii) it became clear that damages would not exceed£1,000 . Second, a duty to conduct claims with due care and diligence (where appropriate to a successful conclusion). 8. The requirement that a claim should not only have greater than 50% prospects of success but should also be likely to result in a damages award of at least£1,000 resulted from the costs regime on the small claims track. If the value of the claim was less than£1,000 then it was extremely unlikely that the Scheme Claimant would be able to recover his costs and disbursements, including the sums insured by NIG under the NIG Policy, (which NIG would have to pay out instead). These requirements that the claim should be worth at least£1,000 and should have greater than 50% prospects of success are alleged by Axa in para 1.3 of the Amended Generic Particulars of Claim to be “vital to the success of the [CLE] Scheme (and to the financial interests of the Insurer thereunder)”. 9. Axa contends that by reason of panel solicitors' breaches of those duties, NIG suffered loss and damage, consisting in essence of the following: (1) In relation to breach of the duties set out at para 7(1) above (“vetting breaches”) the amount paid by NIG to the relevant Funder to discharge the Scheme Claimant's loan account and/or other amounts paid pursuant to the NIG Policy (such as the successful party's costs) when a Scheme Claim failed; and (2) In relation to breach of the duties set out at para 7(2) above ('conduct breaches'), either: i. The extra interest and/or disbursements incurred during the period where a Scheme Claim was wrongly continued; or ii. The lost opportunity of securing a successful outcome at trial or settlement and so avoiding a call on the NIG Policy, where a Scheme Claim should have been brought to a successful conclusion.” (1) Vet and only take on Scheme Claims that had (i) greater than a 50% prospect of success and (ii) a likelihood of damages of£1,000 . (2) Conduct cases with reasonable care and skill thereafter. This duty falls into two relevant categories. First a duty to notify to NIG Scheme Claims for withdrawal of indemnity where (i) the prospects of success fell below 50% and/or (ii) it became clear that damages would not exceed£1,000 . Second, a duty to conduct claims with due care and diligence (where appropriate to a successful conclusion). (1) In relation to breach of the duties set out at para 7(1) above (“vetting breaches”) the amount paid by NIG to the relevant Funder to discharge the Scheme Claimant's loan account and/or other amounts paid pursuant to the NIG Policy (such as the successful party's costs) when a Scheme Claim failed; and (2) In relation to breach of the duties set out at para 7(2) above ('conduct breaches'), either: i. The extra interest and/or disbursements incurred during the period where a Scheme Claim was wrongly continued; or ii. The lost opportunity of securing a successful outcome at trial or settlement and so avoiding a call on the NIG Policy, where a Scheme Claim should have been brought to a successful conclusion.”
“3. Bysection 36 of the Solicitors Act 1974 the society is required to maintain and administer a compensation fund for the purpose of making grants for, among other things, the relief of loss caused by dishonesty on the part of a solicitor. The society has power to make rules about the fund and theSolicitors' Compensation Fund Rules 1995 contain "guidelines" which explain the circumstances in which grants will ordinarily be made. General principle (a) says that the "basic object of the fund is to replace 'client's money' misappropriated by a solicitor". General principle (b) emphasises that grants are wholly at the discretion of the council and that "no person has a right to a grant enforceable at law" but that the intention of the council is to "seek to administer the fund in an even-handed and consistent manner". Claims must be made in a form prescribed by the society (rule 5) and delivered to the society within six months after the loss has come to the knowledge of the applicant (rule 6).”
“by reference to the immediate effect of the execution of the mortgage on the value of the plaintiff's equity of redemption … It has been contended that the principle underlying the English decisions extends to the point that a plaintiff sustains loss on entry into an agreement notwithstanding that the loss to which the plaintiff is subjected by the agreement is a loss upon a contingency. For our part, we doubt that the decisions travel so far. Rather, it seems to us, the decisions in cases which involve contingent loss were decisions which turned on the plaintiff sustaining measurable loss at an earlier time, quite apart from the contingent loss which threatened at a later date … If … the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred.”
“21. Next, there are a number of cases in the Court of Appeal which involve transactions, with both benefits and burdens, into which the plaintiff entered as a result of the negligence or breach of contract of the defendant. None of these cases concerned purely contingent obligations. It is only necessary to observe that in such bilateral transactions the answer to the question of whether damage has been suffered may be different according to whether the liability is for the consequences of the defendant not performing his duty or (as is usual in claims for misrepresentation) the consequences, or some of the consequences, of the plaintiff entering into the transaction. If the liability is for the difference between what the plaintiff got and what he would have got if the defendant had done what he was supposed to have done, it may be relatively easy, as Bingham LJ pointed out in D W Moore & Co Ltd v Ferrier[1988] 1 WLR 267 , to infer that the plaintiff has suffered some immediate damage, simply because he did not get what he should have got. Thus in Knapp v Ecclesiastical Insurance Group plc [1998] PNLR 172, where the plaintiff paid a premium for a voidable fire insurance policy because his insurance broker had failed to disclose material facts, the Court of Appeal held that he had suffered immediate damage because he "did not get what he should have got", namely a policy binding on the insurers. On the other hand, if the damage is (as it was in the Nykredit (No 2) case[1997] 1 WLR 1627 and First National Commercial Bank plc v Humberts [ 1995] 2 All ER 673) the difference between the defendant's position after entering into the transaction and what it would have been if he had not entered into the transaction, the answer may be more difficult. Despite the breach of duty, the transaction may on balance have originally been advantageous to the plaintiff and some evidence may be necessary to show when he was actually in a worse position. The judgment of Mason CJ and his colleagues in the Wardley case drew attention to this distinction 175 CLR 514, 530-531: “Another element in some of the English decisions … is the conclusion that, because the subject matter of the agreement lacked the qualities which it had been represented as having, that subject matter was therefore less valuable than it would have been if the representations had been true. That conclusion is acceptable in cases in which the contract measure of damages is appropriate but it is not acceptable here where the contract measure of damages does not apply. The application of that measure of damages [sc the difference between the value of what the plaintiff got and what he would have got if the defendant had performed his duty] may, in some situations, enable a court to conclude more readily that the plaintiff first suffers loss or damage on entry into an agreement." “Another element in some of the English decisions … is the conclusion that, because the subject matter of the agreement lacked the qualities which it had been represented as having, that subject matter was therefore less valuable than it would have been if the representations had been true. That conclusion is acceptable in cases in which the contract measure of damages is appropriate but it is not acceptable here where the contract measure of damages does not apply. The application of that measure of damages [sc the difference between the value of what the plaintiff got and what he would have got if the defendant had performed his duty] may, in some situations, enable a court to conclude more readily that the plaintiff first suffers loss or damage on entry into an agreement." 22. Thus cases like Bell v Peter Browne & Co[1990] 2 QB 495 and Knapp v Ecclesiastical Insurance Group plc [1998] PNLR 172 are readily explicable as cases in which the damage was the difference between the plaintiff's position as it was and as it would have been if the defendant had performed his duty and in which it was possible to infer that the plaintiff's failure to get what he should have got from a bilateral transaction was quantifiable damage, even though further damage which might result from the flaw in the transaction was still contingent. The plaintiff had paid money, transferred property, incurred liabilities or suffered diminution in the value of an asset and in return obtained less than he should have got. But these authorities have no relevance to a case in which a purely contingent obligation has been incurred.”
“29. It also seems to me irrelevant that a prudent accountant, drawing up the accounts of the compensation fund to give a true and fair view of its assets and liabilities, would have included provision for contingent liabilities. As Lord Radcliffe pointed out in Southern Railway of Peru Ltd v Owen[1957] AC 334 , 357, the principles upon which such provisions are made does not depend upon "any exact analysis of the legal form of the relevant obligation" but upon estimates of what in practice is likely to happen. A cause of action, however, connotes a legal obligation and its existence must be determined by rules of law. 30. In my opinion, therefore, the question must be decided on principle. A contingent liability is not as such damage until the contingency occurs. The existence of a contingent liability may depress the value of other property, as in Forster v Outred & Co[1982] 1 WLR 86 , or it may mean that a party to a bilateral transaction has received less than he should have done, or is worse off than if he had not entered into the transaction (according to which is the appropriate measure of damages in the circumstances). But, standing alone as in this case, the contingency is not damage. 31. The majority of the Court of Appeal appear to have decided the case on the basis that the Law Society did not enter into any transaction giving rise to the contingent liability. It did nothing and the contingent liability was created by the misappropriations and the previous existence of the compensation fund and the rules which governed its administration. No doubt in most cases in which a party incurs a contingent liability as a result of entering into a transaction, that liability will result in damage for the reasons already discussed in relation to bilateral transactions. But I would prefer to put my decision on the simple basis that the possibility of an obligation to pay money in the future is not in itself damage.”
“At the hearing and in the judgment much reliance was placed on the cases where the claimant entered into a transaction which through a breach of duty owed to the claimant provided the claimant with less rights than should have been secured, or imposed liabilities or obligations on the claimant which should not have been imposed. Examples of these cases are: Forster v Outred & Co[1982] 1 WLR 86 , Iron Trade Mutual Insurance Co Ltd v J K Buckenham Ltd[1990] 1 All ER 808 , and Bell v Peter Browne & Co.[1990] 2 QB 495 . In all those cases, however, the court was able to conclude that the transaction then and there caused the claimant loss, on the basis that if the injured party had been put in the position he would have occupied but for the breach of duty, the transaction in question would have provided greater rights, or imposed lesser liabilities or obligations than was the case; and that the difference between these two states of affairs could be quantified in money terms at the date of the transaction.”
“45. The three cases cited by Saville LJ in this passage were all cases where the client had through the negligence of his professional adviser ended up with a package of rights less valuable than he was entitled to expect - damaged or defective goods, to pursue the metaphor, rather than the undamaged and serviceable goods which he should have got. In Forster v Outred & Co[1982] 1 WLR 86 it was a mortgage (securing the existing and future liabilities of the claimant's son, who later went bankrupt) burdening the claimant's previously unencumbered freehold property…”
“48. In all these cases the claimant has as a result of professional negligence suffered a diminution (sometimes immediately quantifiable, often not yet quantifiable) in the value of an existing asset of his, or has been disappointed (as against what he was entitled to expect) in an asset which he acquires, whether it is a house, a business arrangement, an insurance policy, or a claim for damages. Your Lordships have not, I think, been shown any case in which the imposition on a claimant of a purely personal and wholly contingent liability, unsecured by a charge on any of the claimant's assets, has been treated as actual loss. That would have been the position if the claimant in the Forster case[1982] 1 WLR 86 had given a personal covenant guaranteeing her son's debts (which she seems not to have done - she paid them simply to prevent enforcement of the security on her farm) and if she had not given any security over any of her own assets.”
“70. In all these cases except Forster v Outred & Co[1982] 1 WLR 86 the defendant failed to preserve or procure for the claimant an asset (including a particular chose in action) which could and should have been preserved or protected by proper performance of the defendant's duty in relation to the transaction affecting the claimant's legal position. In Forster v Outred & Co the claimant's case was that, but for the defendant's negligence, she would never have entered into the transaction at all. But in that case, by doing so, she clearly depreciated the value of her house in a measurable way. However, while a defendant's failure to preserve or protect a particular asset by proper performance of his duty in relation to a particular transaction may readily be seen to have caused measurable loss, negligence causing a claimant to enter into a transaction which he would not otherwise have entered may not immediately, or indeed ever, cause measurable loss to any particular asset.”
“76. Whether or not that is, however, accepted, no English authority indicates and I do not consider that the society's present cause of action should be regarded as accruing before any change in its legal position occurred and it received any claim on the fund. First and foremost, the society's legal position remained unchanged, even in public law, at least until after it received a claim. Second, it was not possible until after a claim was received for anyone to know which client(s) of Payne & Co might suffer what loss, whether any of them might be able, and choose, to assert that they had as a result suffered hardship justifying a grant out of the fund and what the circumstances were in which the society would have to exercise its discretion to make or refuse a grant. Third, in this situation, it is not appropriate to talk of the fund or any other specific asset of the society as having suffered any loss at least until after a hardship claim was made on the society.”
“77. It may be that, if the facts had been known contemporaneously, some statistical or experience-based assessment could have been made of the likelihood of a claim or claims emerging, and of the fund having eventually to make payments, as a result of Mr Payne being able to continue his scheme of fraud. A similar assessment might be made of the risk of future loss of a physical asset (deeds or valuables) of which a solicitor was failing to take reasonable care, but which had not yet been lost or stolen. But I do not consider that the law should treat purely contingent loss assessed on so remote a basis as sufficiently measurable, in the absence of any change in the claimant's legal position and of any diminution in value of any particular asset. Even where negligence brings about a specific transaction and thus a change in the claimant's legal position, Lord Nicholls observed in the Nykredit (No 2) case[1997] 1 WLR 1627 , 1631c-d in the passage cited in para 73 above, that the mere entry into the transaction under which "Financial loss is possible, but not certain" is not sufficient detriment. 78. Looking at the matter more generally, I also see no particular reason to accelerate the accrual of a cause of action where there has been no transaction changing the claimant's legal position and no diminution in value of any particular asset. Where such factors are present the English authorities considered in paras 67-70 above take a clear-cut, though perhaps strict, view. The House has not been asked to review such authorities, nor would I think it appropriate to do so in the light of the way that they and the English legislation have developed. But where such factors are not present, I see attraction in the approach taken by the Australian High Court in the Wardley case 175 CLR 514, the effect of which is that unless and until a remote contingency eventuates the claimant is not expected to issue proceedings which he would not normally issue or wish to issue unless and until that point arrives.”
“But I do not consider that the law should treat purely contingent loss assessed on so remote a basis as sufficiently measurable, in the absence of any change in the claimant's legal position and of any diminution in value of any particular asset.”
“Rather, it seems to us, the decisions in cases which involve contingent loss were decisions which turned on the plaintiff sustaining measurable loss at an earlier time, quite apart from the contingent loss which threatened at a later date … If … the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them.”
“...the possibility of an obligation to pay money in the future is not in itself damage”
“measurable economic detriment irrespective of whether its performance is secured or accounted for. ... The question of actual detriment to the person giving a guarantee or indemnity is one of fact turning on the terms of the obligation and the existence of the principal debt.”
“in a transaction in which there are benefits (covenant for repayment and security) as well as burdens (payment of the loan) and the measure of damages is the extent to which the lender is worse off than he would have been if he had not entered into the transaction, the lender suffers loss and damage only when it is possible to say that he is on balance worse off.”
“20. The Nykredit (No 2) case[1997] 1 WLR 1627 therefore decides that in a transaction in which there are benefits (covenant for repayment and security) as well as burdens (payment of the loan) and the measure of damages is the extent to which the lender is worse off than he would have been if he had not entered into the transaction, the lender suffers loss and damage only when it is possible to say that he is on balance worse off. It does not discuss the question of a purely contingent liability.”
“…. within the bounds of sense and reasonableness the policy of the law should be to advance, rather than retard, the accrual of a cause of action. This is especially so if the law provides parallel causes of action in contract and in tort in respect of the same conduct. The disparity between the time when these parallel causes of action should be smaller, rather than greater.”
“Consideration and Insurance The Insured having made a proposal and declaration and having entered into a Conditional Fee Agreement with the Appointed Solicitor and having paid or agreed to pay the Premium, the Company will, subject to the terms, conditions and exclusions of the Policy (compliance with such conditions being a condition precedent to the liability of the Company) indemnify the Insured up to the Limits of Indemnity in respect of Opponent’s Legal Costs under section 1 below and/or Deficiency of Damages under section 2 below incurred by the Insured exclusively in connection with the Proceedings, provided that the Proceedings are conducted exclusively within the Territorial Limits.”
“Prospects of Success The Company has provided cover under this Policy on the basis that it offers reasonable prospects for the recovery of damages in the Proceedings. The Company or the Coverholder on its behalf may discontinue cover if during the course of the Proceedings it considers that such prospects no longer exist. If the Company or the Coverholder discontinues cover it shall notify the Insured in writing and shall inform the Insured of its reasons which, subject to the provisions of Section 5 (Disagreement) below, shall be final. If cover is discontinued, the Company shall be liable only for Opponent’s Legal Costs up the date of notification of the discontinuance of cover and Insured’s Disbursements up to that date. Notwithstanding notification, the Company shall be entitled to retain the whole of the Premium.”
“Mr Stuart-Smith contends, on behalf of the defendants, that when she signed the mortgage deed she suffered actual damage. By entering into a burdensome bond or contract or mortgage she sustained immediate economic loss; her valuable freehold became encumbered with a charge and its value to her was diminished because she had merely the equity of redemption, varying in value at the whim of her son’s creditors; she could not sell the land without discharging the mortgage; she could not prevent her son from borrowing on the security of her mortgage to the extent of the full value of the land; she could have sued the defendants in February 1973 for an indemnity or for damages on the basis of the diminished value of the land or the amount of the outstanding debt to the mortgagor.”
“What is meant by actual damage? Mr Stuart-Smith says that it is any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous provisions or covenants in leases. They are all illustrations of a kind of loss which is meant by ‘actual’ damage.”
“Although there is no more direct authority than those cases among those which have been cited to us, I would accept Mr Stuart-Smith’s statement of the law and would conclude that, on the facts of this case, the plaintiff has suffered actual damage through the negligence of her solicitors by entering into the mortgage deed, the effect of which has been to encumber her interest in her freehold estate with this legal charge and subject her to a liability which may, according to matters completely outside her control, mature into financial loss, as indeed it did. It seems to me that the plaintiff did suffer actual damage in those ways, and subject to that liability and with that encumbrance on the mortgage property was then entitled to claim damages (not, I would think, an indemnity and probably not a declaration) for the alleged negligence of the solicitor which she alleges caused her that damage. In those circumstances her cause of action was complete on8 February 1973 and the writ which she issued on25 March 1980 was issued too late to come within the six years’ period of limitation.”
“In this case, as soon as she executed the mortgage the plaintiff not only became liable under its express terms but also, and more importantly, the value of the equity of redemption of her property was reduced. Before she executed the mortgage deed she owned the property free from encumbrance; thereafter she became the owner of property subject to a mortgage. That, in my view, was a quantifiable loss and as from that date her cause of action against her solicitor was complete, because at that date she had suffered damage. The actual quantum of damages would, of course, depend on events between that date and the date when the damages had finally to be assessed, but the cause of action was complete when she executed the mortgage, without proof of special damage.”
“The liability was, therefore, in conformity with the opinion of the Full Court, contingent and executory. The likelihood, perhaps the virtual certainty, that there would be a loss, in the light of Rothwell’s actual financial position as it stood when the indemnity was executed, did not transform the liability into an actual or present liability at that time.”
“It has been contended that the principle underlying the English decisions extends to the point that a plaintiff suffers loss on entry into an agreement notwithstanding that the loss to which the plaintiff is subjected by the agreement is a loss upon a contingency. For our part we doubt that the decisions travel so far. Rather, it seems to us, the decisions in cases which involve contingent loss were decisions which turned on the plaintiff sustaining measurable loss at an earlier time, quite apart from the contingent loss which threatened at a later date.”
“If, contrary to the view which we have just expressed, the English decisions properly understood support the proposition that where, as a result of the defendant’s negligent misrepresentation, the plaintiff enters into a contract which exposes him to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred.”
“The conclusion which we have reached is reinforced by the general considerations to which we referred earlier. It is unjust and unreasonable to expect the plaintiff to commence proceedings before the contingency is fulfilled. If an action is commenced before that date, it will fail if the events so transpire that it becomes clear that no loss is, or will be incurred. Moreover the plaintiff will run the risk that damages will be assessed on a contingency basis, in which event the compensation awarded may not fully compensate the plaintiff for the loss ultimately suffered. These practical consequences which would follow from an adoption of the view for which the appellants contend outweigh the strength of the argument that the principle applicable to the cases in which the plaintiff acquired property (or a chose in action) should be extended to cases where an agreement subjects the plaintiff to contingent loss. In such cases it is fair and sensible to say that the plaintiff does not incur loss until the contingency is fulfilled.”
“Stephenson LJ said (at p 98) that he accepted Mr Stuart-Smith’s statement of the law. The ambiguity in these passages (in an unreserved judgment in an interlocutory appeal) arises from the inclusion of the words “it includes liabilities which may arise on a contingency” in the second quotation. As appears from the first passage, the thrust of Mr Stuart-Smith’s argument was that the mortgage, although the liability which it secured was contingent, had the immediate effect of depressing the value of Mrs Forster’s farm. But the reference to contingent liabilities in the second passage could give the impression that merely incurring a possible future liability (for example, by giving a guarantee or indemnity unsecured upon any property) counted as immediate damage.”
“Next, there are a number of cases in the Court of Appeal which involve transactions, with both benefits and burdens, into which the plaintiff entered as a result of the negligence or breach of contract of the defendant. None of these cases concerned purely contingent obligations. It is only necessary to observe that in such bilateral transactions the answer to the question of whether damage has been suffered may be different according to whether the liability is for the consequences of the defendant not performing his duty or (as is usual in claims for misrepresentation) the consequences, or some of the consequences, of the plaintiff entering into the transaction.”
“Your Lordships have not, I think, been shown any case in which the imposition on a claimant of a purely personal and wholly contingent liability, unsecured by a charge on any of the claimant’s assets, has been treated as actual loss. That would have been the position if the claimant in Forster[1982] 1 WLR 86 had given a personal covenant guaranteeing her son’s debts (which she seems not to have done — she paid them simply to prevent enforcement of the security on her farm) and if she had not given any security over any of her own assets.”
“I would therefore reject Sephton’s submission that it was enough that the Law Society was, every time that misappropriations were made after the issue of defective accountant’s certificates, at risk of having to meet claims from clients from whom Mr Payne misappropriated funds — even if that risk (of a future eventuality) is beguilingly expressed as “exposure to claims” (suggesting a present or current condition). It was in a sense a detriment, but it was not a detriment of the sort described in Forster v Outred & Co[1982] 1 WLR 86 , 94 as understood and developed in the later authorities.”
“75. Wardley was considered in Knapp [1998] PNLR 172. Hobhouse LJ viewed it at p.178A as adopting a different approach to the English approach. Buxton LJ at p.192A-D endorsed the rejection in Wardley of any proposition that “the plaintiff necessarily suffers loss on entry to an agreement notwithstanding that the loss to which [he] is subjected by the agreement is loss upon a contingency: what is required is actual loss on entry, quite apart from the contingent loss threatened at a later date.”
“In my judgment, the judge was correct for the reasons he gave. When the Watkins entered into the building agreement they acquired a bundle of rights. That bundle of rights was of lesser value than they were on their case led to believe that it would be. Those rights were an asset capable of valuation. Thus, the Watkins suffered measurable loss when they acted on the allegedly negligent advice to enter into the later transaction. Accordingly, that claim is statute-barred. ”
“The PFW scheme was a different kind of transaction from the advance of a loan on the security of a mortgage on property. It was a transaction under which Mr Shore obtained a bundle of rights which, from the outset, were less advantageous to him than the benefits that he enjoyed under the Avesta scheme. On the facts of this case, it was not necessary to wait to see what happened to determine whether Mr Shore was financially worse off in the PFW scheme than he would have been in the Avesta scheme. For these reasons, I would hold in relation to the primary claim that Mr Shore first suffered loss on28 April 1997 .”
“I would reject this argument for the same reasons as those for which I have rejected the corresponding argument in relation to the primary claim. The essence of the complaint is that SFS failed to take steps to protect him from the risks inherent in the PFW scheme by purchasing an annuity as from July 1997. For the reasons already given, Mr Shore suffered loss in July 1997 when he did not acquire an annuity which would yield a secure income instead of the uncertain income that could be withdrawn under the PFW scheme.”
“Mr Hollander submits that the relevant asset, the premium, was not ‘damaged’ when the transaction was entered into and that the asset remained worth the same, unless and until the claim failed for whatever reason and it was only then that NIG suffered actual damage. I agree with Miss Carr that the fallacy in that argument is that it ignores, in a wholly artificial manner, the fact that, because the prospects of success were 50% or less, the insurer is exposed to a greater risk for the relevant premium than was intended and thus the insurer is not getting what it was the panel solicitors’ duty to ensure that it got.”
“The questions whether and when damage is suffered are questions of fact … But the receipt of something less valuable or the transfer of something of value without an agreed protection is itself damage. There must be actual damage within the measure of damage applicable to the wrong in question for the cause of action to accrue but an increase in a plaintiff's obligations plainly may constitute such actual damage. Nor is it relevant that the damage may later become more serious or capable of more precise quantification. I have already recorded that the claims in respect of fronting are alleged in paragraph 16 of the Points of Claim to have caused loss to Imperio by exposing the company to a greater liability or potential liability than the net liability subscribed and for which the premium was calculated and paid. In the course of the hearing Mr Flaux was not inclined to dispute that such exposure for no compensation was damage and thus that the cause of action in tort accrued, as the cause of action in contract, when Imperio was committed by Heaths to front. In this, in my judgment, Mr Flaux was plainly right. Insurance is the business of undertaking risk for reward. An insurer who is committed to a greater risk than agreed for no reward has thereby suffered a real loss.”
“But, in this case, I do not think the court is addressing a loss which is only prospective and might never be incurred. By becoming a Name (and joining a Syndicate or Syndicates) a Name was committed to the liabilities of that Syndicate under RITC it had written and on all business (including RITC) it did write in the course of his membership. Quite apart from joining fees and the provision of charges and guarantees (ASF 2.2.27) there were therefore actual liabilities undertaken albeit unquantified. This was not a contingency standing alone in the sense with which, as I understand their speeches, their Lordships were concerned in Sephton: see in particular, Lord Hoffmann at paragraph 30. The Names were worse off than if they had not become or continued to be Names.”
“No doubt in most cases in which a party incurs a contingent liability as a result of entering into a transaction, that liability will result in damage for the reasons already discussed in relation to bilateral transactions.”