Primavera v Allied Dunbar Assurance Plc

In assessing damages for negligent financial advice, a claimant’s later gain does not automatically reduce the loss. The question is whether the breach caused the gain as part of a continuous transaction, or merely created the opportunity for it. Once the claimant has a genuine choice about how to deal with the consequences of the breach, subsequent gains and losses ordinarily fall on the claimant’s own account. The same date and causation analysis applies to both benefits and detriments. A later benefit arising from independent investment or financial decisions is collateral and cannot be set off against the original loss. Costs reasonably incurred to correct a separate negligent misrepresentation remain recoverable.

The respondent purchased an executive retirement plan linked to a £500,000 loan. The appellants negligently failed to advise him that substantial Schedule E salary payments were required to obtain the anticipated tax-free lump sum. They later misstated the effect of the 1987 Budget, causing further delay and legal costs.

The High Court awarded £241,000, comprising £101,000 for the reduced value of the pension fund and £140,000 for loan interest. The respondent later increased his salary and, by November 2000, could have obtained the £500,000 tax-free lump sum. The appeal concerned whether the later increase in the fund avoided the earlier loss, whether the two principal heads involved double recovery, and whether £2,632 legal costs were recoverable.

1. Appeal allowed in part. The award was reduced from £241,000 to £103,632, comprising £101,000 for the loss crystallised in 1995 and £2,632 for costs caused by the later negligent misrepresentation, with interest on each element.
2. The £140,000 claim for loan interest could not be recovered in addition to the £101,000 fund shortfall. If the loss was assessed in 1995, the £101,000 represented the full diminution in the fund caused by the failure to advise about the required Schedule E income.
3. The relevant inquiry was whether the later benefit was caused by the breach as part of a continuous transaction, or whether the breach merely created the opportunity for the benefit. The claimant’s conduct after a choice became available was his own speculation. The same analysis applied to any later loss: a claimant could not claim adverse market consequences while the defendant claimed credit for gains.
4. The court applied the approach in British Westinghouse Electric and Manufacturing Co -v- Underground Electric Railways Co (London) Limited [1912] AC 673, as developed in Hussey -v- Eels [1990] 2 QB 227 and Blue Circle Industries plc -v- Ministry of Defence [1999] Ch 289. The respondent’s decision to retain and restructure the fund was not a reasonable mitigating step forming part of the original transaction. It was an independent decision taken for his own benefit and risk.
5. The £2,632 solicitors’ costs were caused by the separate misrepresentation about the 1987 Budget. The later tax benefit was of a different character and was not caused by that misrepresentation, so it could not be used to extinguish the costs claim.

• Court of Appeal (Civil Division): Primavera v Allied Dunbar Assurance Plc [2002] EWCA Civ 1327 allowed the appeal to the extent of reducing the damages award to £103,632 plus interest.
• High Court, Queen’s Bench Division: His Honour Judge Hawkesworth QC awarded £241,000 damages and £87,962.40 interest.