“In the present case, there is no dispute that the duty was owed to the lenders. The real question in this case is the kind of loss in respect of which the duty was owed. How is the scope of the duty determined? In the case of a statutory duty, the question is answered by deducing the purpose of the duty from the language and context of the statute: Gorris v. Scott (1874) L.R. 9 Ex. 125 . In the case of tort, it will similarly depend upon the purpose of the rule imposing the duty. Most of the judgments in the Caparo case are occupied in examining theCompanies Act 1985 to ascertain the purpose of the auditor's duty to take care that the statutory accounts comply with the Act. In the case of an implied contractual duty, the nature and extent of the liability is defined by the term which the law implies. As in the case of any implied term, the process is one of construction of the agreement as a whole in its commercial setting. The contractual duty to provide a valuation and the known purpose of that valuation compel the conclusion that the contract includes a duty of care. The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking.”
“In the tort of negligence C must establish five elements: that the claim relates to a form of actionable damage; duty; breach; historical involvement of the tortious conduct in C suffering actionable damage; and the scope of liability for consequences, the analytical step traditionally known as “remoteness” of damage in the Commonwealth and as “proximate cause” in the United States. Logically the first of these elements to be addressed is that the complaint refers to a type of harm that is actionable in this tort. Other elements of the tort such as duty, breach and cause-in-fact as well as the limitation issue are dependent on what types of interference have been allowed to form the gist of the action. “Damage” is the gist of the action in negligence. But not all types of interference with a person's interests are accepted by the law as actionable damage in this tort. For example, though mere annoyance by noise is actionable in nuisance it is not actionable in negligence. The list of types of harm that are accepted as actionable is not closed. For example, Hedley Byrne & Co Ltd v Heller & Partners Ltd is widely taken to be the case that added pure economic loss to that list for the tort of negligence. The argument advanced by C in Hotson v East Berks AHA was that this list should be expanded to include the loss of a chance to avoid a particular outcome. This “reformulation of actionable damage” is one of five principal forms of the “loss-of-a-chance” argument that have arisen in case law. In relation to the duty of care, the case law reveals a diverse range of concerns regarded as relevant to the issue of whether a duty should be recognised. Some concerns are of general application, such as the concern with indeterminacy of liability. Some are only rarely raised by the facts, such as the concern that the law should not positively encourage abortion. Moreover, a concern may weigh in favour of the recognition of a duty in one case and weigh against such recognition in another. The formulation of the duty, which group of defendants owes which group of persons a duty, can have a profound effect on the focus of the cause-in-fact issue, especially where the allegedly tortious conduct is nonfeasance. Suppose a parent fails to feed his or her baby who then dies from starvation. If the parent is viewed merely as a citizen, the parent's conduct is identical to that of the rest of society. But viewed against a comparator group of parents and those in loco parentis, the parent's conduct is exceptional. By restricting the duty of affirmative action in these cases to this comparator group the law ensures that the cause-in-fact issue is focused on the specific conduct raising concern. The duty of care should not be framed as being a duty only with respect to particular kinds of consequence. This “scope of the duty” or “scope of the risk ” approach which asks “what kind of harm was it the defendant's duty to guard against” at best conflates inquiries that it is clearer to keep separate and at worst encourages circular reasoning. It is preferable to keep “duty” as the issue that considers general concerns relating to whether the obligation of care should be recognised between the parties and without regard to the consequences of breach in the particular case. Where it is owed, the “scope of the duty” is simply to act reasonably in the circumstances. The breach analysis considers what reasonableness entails in the circumstances. Cause-in-fact provides the link between the breach and C suffering actionable damage. Finally, “scope of liability” then considers which of the stream of consequences of the tort that happened on this particular occasion should be judged to be within the scope of D's liability.”
“Just as the terms and policy of the rule imposing liability may enlarge the consequences for which one is liable, beyond those of the standard criteria, so it may restrict them. A good example is liability for negligent misstatement, where liability is imposed because the defendant has expressly or impliedly undertaken to use reasonable care in providing some information. If he is negligent, what are the consequences for which he should be liable? Should the damages be the extent to which the claimant is worse off than he would have been if he had acted upon information which was correct? Or should they be all the consequences of the claimant not having received the correct information? There may not at first sight seem to be much of a difference, but it emerges in the cases about the liability of valuers who negligently overvalue land offered to their clients as security for a loan. If one asks: what has the lender lost by lending on a valuation which was too high, the answer is the difference between the security he thought he was getting and the security he actually got. If one asks: what were the consequences of his being given the wrong information, it may turn out that if he had known the true value, would for some reason not have lent at all. In that case, the loss is whatever loss the lender has suffered from having made a loan. It will include losses due to a fall in the property market which the lender would have suffered even if he had lent on the correct valuation. It seemed to the House of Lords unfair to make the valuer liable for the fall in the property market. So the consequences for which the valuer could be liable were more restrictively defined. He was to be liable only for the consequences of the lender having had too little security. He was not to be liable for all the consequences of the lender having lent. In the South Australia case, I said that such a restriction followed from the scope of the duty of care in that particular case. Other judges have also spoken about the scope of the duty. Professor Jane Stapleton has pointed out that the language is inappropriate. The scope of the duty of care is to take reasonable care to get the valuation right. It has nothing to do with the extent of the consequences for which the valuer is liable. When one considers what causal relationship is required, one is really speaking about extent of the liability and not about the scope of the duty. Professor Stapleton is right. I shall try to mend my language in future. But I will say this. There is a close link between the nature of the duty and the extent of liability for breach of that duty. In the pollution case Environment Agency v Empress Cars (Abertillery)[1999] 2 AC 22 , liability extended to the acts of third parties because the nature of the duty was strict. In the valuer's case, liability was confined to the consequences of the client having too little security because the valuer had not been asked to advise on whether the client should lend. The valuation was to be only one factor which the client would take into account in making his own decision about whether to lend.”
“I add only the cautionary reminder that the loss must be relevant loss. To constitute actual damage for the purpose of constituting a tort, the loss sustained must be loss falling within the measure of damage applicable to the wrong in question”
“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.” [Emphasis added]
“because there was an immediate reduction in the value of her equity and a contingent liability — contingent, it is true, but nevertheless a liability — to repay the principal and interest on demand and that that was capable of assessment in money terms.”
“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.”
“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 … 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.”
“In my judgment, the damaged asset rule and the package of rights rule are best regarded not as a series of independent qualifications on the basic rule in the Sephton case that the assumption of a “contingent liability” does not cause the limitation period to start to run, but as different cases in which the courts have tried to express a central idea. That idea has to be found by seeking the ultimate ratio in the Sephton case, that is, a ratio which expresses the reason for the decision on which, despite the differences in expression, all the members of the House in that case were agreed. As I see it, the concept on which all the members of the House agreed was that there had to be measurable loss before time began to be run, that is to say, loss which is additional to the incurring of a purely contingent liability. In my judgment, for this purpose, rights of contribution or subrogation must be ignored because those rights arise by operation of law, unless excluded by agreement or statute. If they were taken into account, they would undermine the basic rule which is clearly established in [Sephton] that a pure contingent liability is not damage. In my judgment, the central idea in the Sephton case is that there has to be loss additional to that resulting from the incurring of a purely contingent liability.”
“If Southern had been materially in breach of this tortious duty, I would have decided that the claim for damages against Southern was not barred by limitation. One needs to have regard, in the context of a duty of care, such as this, which permits the recovery of economic loss, to determine when the relevant loss arises. By relevant loss I mean “loss falling within the measure of damage applicable to the wrong in question” (per Lord Nicholls in Nykredit v Edward Erdman Ltd[1997] 1 WLR 1627 at 1603F). In this case the relevant loss arises from the claim made by Linklaters against How (and McAlpine) and accordingly the earliest at which the relevant loss can be said to have been incurred was the time when the claim was first intimated (March 2007). In one sense, the date when a claim is intimated can be thought to be a haphazard date because theoretically the claim in a case like this could have been raised in, say 2006, when the corrosion problem was discovered, or even earlier if by chance a maintenance person had discovered it then. However, the duty of care was intended to guard How against the financial loss directly flowing from the breach of duty in question and the reality is that How would not in practice or in fact have incurred that loss prior to the time that the claim was intimated. Of course, How was liable in breach of contract as from the date, if not before, that it handed over its work (including any carelessly executed insulation work) but the tortious duty of care arose to protect it from the economic consequences of Southern's breach of duty which would not arise and indeed did not arise until much later. In forming this view I have also had regard to the House of Lords case of [Sephton]http://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=122&crumb-action=replace&docguid=I6F9E1950E43611DA8FC2A0F0355337E9.”
“From these authorities it can be seen that the cause of action can accrue and the plaintiff have suffered damage once he has acted upon the relevant advice “to his detriment” and failed to get that to which he was entitled. He is less well off than he would have been if the defendant had not been negligent. Applying this to the present case, the plaintiffs paid their renewal premium without getting in return a binding contract of indemnity from the insurance company. They had acted to their detriment: they did not get that to which they were entitled. The fact that how serious the consequences of the negligence would be depended upon subsequent events and contingencies does not alter this; such considerations go to the quantification of the plaintiffs' loss not to whether or not they have suffered loss. The risk of loss existed from the outset and in the absence of better evidence would have to be evaluated and assessed as a risk and damages awarded accordingly. … The plaintiffs suffered loss as soon as they received an insurance contract which was not binding upon the insurers. The subsequent events, the question whether or not the insurers would thereafter avoid the policy and with what consequences, went only to the quantification of loss not to the identification of the first moment at which a plaintiff suffered loss and the tort became actionable.”
“The solicitors' breach of duty in 1978 was remediable by the plaintiff, but that was only possible after he became aware that there had been a breach of duty. Apart from any other consideration, to treat the plaintiff's ability to remedy the breach himself without the concurrence of his former wife as a ground of distinction between this case and cases such as Baker v. Ollard would be to disregard the unlikelihood in practice of the plaintiff ever being in a position to remedy the breach. Once the solicitors closed their file, it was unlikely that failure (b) [the failure to register the caution] would come to the notice of the plaintiff or the defendants, until the house was sold and it was too late. That, on the pleaded facts, is exactly what happened. The first the plaintiff knew was his one-sixth share was not properly protected was after it had gone beyond recall. So his ability to remedy the breach before the house was sold was a matter of more theoretical interest than practical importance. In considering whether damage was suffered in 1978 one can test the matter by considering what would have happened if in, say 1980 the plaintiff had learned of his solicitors' default and brought an action for damages. Of course, he would have been entitled at least to recover from the defendants the cost incurred in going to other solicitors for advice on what should be done and for their assistance in lodging the appropriate caution. The cost would have been modest, but not negligible.”
“The transaction caused the plaintiff to exchange his valid legal estate for an equitable interest in the proceeds of sale which was dependent on the goodwill and solvency of the wife unless and until protected by a formal declaration of trust and the lodging of a caution. The failure to see that these steps were taken promptly meant that the plaintiff was actually and not just potentially worse off than if the solicitors had performed their task competently. The sale in 1986 simply meant that the breach and its consequences were unremediable. As Nicholls L.J. has pointed out, the solicitors' negligence had two different aspects: the wife's participation in a formal instrument, and the failure to protect the interest by a caution, but I respectfully agree with his view that this characteristic forms no ground for distinguishing Baker v. Ollard and Moore v. Ferrier which are binding on this court.”
“The benefit of this agreement may be assigned on two occasions only without the consent of the Consultant. The benefit of this agreement may not be assigned further without the prior written consent of the Consultant, which consent shall not be unreasonably withheld or delayed.”
“… [Don King, Frank Warren or Sports Network Limited] (as appropriate) shall hold all promotional and management agreements relating to the business of the partnership … to the benefit of the partnership absolutely without separate compensation therefor.”
“The essential task in construction is to deduce, if this is possible, from the two agreements construed as a whole against their commercial background the commercial purpose which the businessmen and entities who were parties to them must as a matter of business common sense have intended to achieve by entering into them; and if such intent can fairly be deduced and if this is necessary to effectuate that intent, the court may have to require what may appear to be errors or inadequacies in the choice of language to yield to that intention and be understood as saying what (in the light of that purpose) that language must reasonably be understood to have been intended to mean.”
“The applicable principles emerging from the authorities in a field still undeveloped are as follows. (1) It is not possible (save pursuant to statutory authority) without a novation to transfer the burden of a contract to a third party. … (3) The only assignment in respect of a contract which is legally possible is an assignment of the benefit of the contract (i.e. the rights thereby created) or some benefit (e.g. the profits) derived by the assignor from the contract. The distinction is between the assignment of rights under the contract and of what is referred to as "the fruits." A provision for the assignment of a contract is to be construed as the assignment of the benefit of the contract: see Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd. [1994] 1 A.C. 85, 103. … (5) The contract may expressly or impliedly permit assignment of rights not otherwise so assignable: see Devefi Pty. Ltd. v. Mateffy Pearl Nagy Pty. Ltd. [1993] R.P.C. 493, 503. The contract may likewise prohibit assignment of rights otherwise prima facie assignable. Such contractual provisions are legally effective. The purpose of the non-assignment clause is the genuine commercial interest of a party of ensuring that contractual relations are only with the person he has selected as the other party to the contract and no one else. This is particularly important in areas such as building contracts which are "pregnant with disputes:" see the Linden Gardens case [1994] 1 A.C. 85, 107, 108. Such a clause avoids the possibility of a third party being enabled to raise issues of set-off not available to the other contracting party. … (7) A declaration of trust in favour of a third party of the benefit of obligations or the profits obtained from a contract is different in character from an assignment of the benefit of the contract to that third party: see the Devefi case [1993] R.P.C. 493, 505. Whether the contract contains a provision prohibiting such a declaration of trust must be determined as a matter of construction of the contract. Such a limitation upon the freedom of the party is not lightly to be inferred and a clause prohibiting assignments is prima facie restricted to assignments of the benefit of the obligation and does not extend to declarations of trust of the benefit.”
“I accordingly hold that the clear intent of the parties manifested in the first and second agreements was that the [promotion and management] agreements should be held by the partnership or by the partners for the benefit of the partnership absolutely, and that this intent should be given fullest possible effect. The agreements have accordingly at all times been held by the partners as trustees for the partnership. Accordingly the ordinary equitable principles apply (including the rule in Keech v. Sandford (1726) Sel.Cas.Ch. 61) and the partnership assets include all renewal and replacement agreements obtained by any partner during the partnership and over the period between dissolution and the completion of winding up.”
“I agree with the judge that In re Turcan, 40 Ch.D. 5, 10 shows clearly that the court will protect the interests of those contractually entitled to have the benefit of an inalienable asset before the fruits of the asset have been realised. In that case, as the House of Lords considered in Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd. [1994] 1 A.C. 85, 106, the court gave effect to the intention of the parties by means of a declaration of trust.”
“There can be no doubt that it was the intention of the parties as demonstrated by clause 6.1 of the first agreement that the full benefit of the management and promotion agreements … should be partnership property. … Given the terms of clause 6.1 of the first agreement and the legalinability of Mr. Warren to assign the benefit of the agreements to the partners jointly a trust … was the only way the evident intention of the partners could be achieved. For the reasons I have given earlier, the fact that the benefit of the agreements could not be sold and were otherwise unassignable is no reason to refuse to recognise the trust which was necessary to give effect to the manifest intention of the partners.” [Emphasis added]
“87 … The fact that a prohibition on assignment between A and B cannot allow a third party, C, as A's purported assignee, to bring a direct contractual claim against B is not in dispute. It was held in Linden Gardens to be the consequence of the contractual prohibition. As Lord Browne-Wilkinson said (at 108F): ‘Therefore the existing authorities establish that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights. I regard the law as being satisfactorily settled in that sense. If the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, viz. to ensure that the original parties to the contract are not brought into direct contractual relations with third parties.’ 88 The ineffectiveness of the assignment in breach of a prohibition on assignment is understandable. It is not merely a matter of contract but of property. Although the would-be assignor has legal title to property in the form of a chose in action, he lacks the power, because of the terms on which the property is held, to transfer that property so as to entitle the transferee to exercise those contractual rights himself against the other party to the contract. However, he does not lack the power to render himself a trustee in equity of the property concerned. He would only do that if the prohibition on assignment extended as far as prohibiting a declaration of trust.”
“In these circumstances, I feel entitled to deal with issue 8(b) relatively briefly. The judge thought that if the commission in respect of the DSCC contract had not been assignable even in the absence of an express prohibition, then it would have been irrelevant that it had been expressly assigned by TTF to Explora. He rejected Mr Purle's submission that the ineffective assignment would have taken effect as a trust in favour of Explora (para 98). I would merely say that I do not see why such a trust would not take effect: see Linden Gardens at 108D, Don King at 320A/B, Chitty at 19–045. Therefore, if there is any commission still due under the 1995 agency agreement which falls within the assignment under the CSA agreement, TTF holds that in trust for Explora”
“The first question which arises is whether or not the debtor was a trustee for his wife and daughter of the benefit of the undertaking given by the English company in their favour. An examination of the decided cases does, it is true, show that the courts have on occasions adopted what may be called a liberal view on questions of this character, but in the present case I cannot find in the contract anything to justify the conclusion that a trust was intended. It is not legitimate to import into the contract the idea of a trust when the parties have given no indication that such was their intention. To interpret this contract as creating a trust would, in my judgment, be to disregard the dividing line between the case of a trust and the simple case of a contract made between two persons for the benefit of a third.”
“It now remains to consider the question whether, and if so to what extent, the principles of equity affect the position of the parties. It was argued by Mr. Denning that one effect of the agreement of September 20, 1940, was that a trust was thereby created, and that the debtor constituted himself trustee for Mrs. Schebsman of the benefit of the covenant under which payments were to be made to her. Uthwatt J. rejected this contention, and the argument has not satisfied me that he was wrong. It is true that, by the use possibly of unguarded language, a person may create a trust, as Monsieur Jourdain talked prose, without knowing it, but unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention.”
“The benefit of this agreement may be assigned on two occasions only without the consent of the Consultant. The benefit of this agreement may not be assigned further without the prior written consent of the Consultant, which consent shall not be unreasonably withheld or delayed.”