Independents' Advantage Insurance Company Ltd. v Cook & Anor

On an application to strike out a professional-negligence claim, the court should not decide a developing and fact-sensitive duty-of-care question summarily unless the claim is plainly and obviously governed by existing authority and bound to fail.

Where the pleaded facts place the case at or near the margin of existing decisions, the proper course is ordinarily a trial. The court must assess proximity, foreseeability and fairness in their factual context. Knowledge that audited accounts will be supplied to, and relied upon by, institutions within an identified class may take a claim beyond an authority involving only foreseeable reliance, without knowledge of an intention that the accounts be supplied.

Independents’ Advantage Insurance Company Limited sued the personal representatives of Michael John Willis Cook and another defendant. The claim alleged that the defendants’ accountancy firm negligently prepared and audited Swift Travel’s accounts and reports, which Swift supplied to bodies and financial institutions including the claimant.

The defendants applied under CPR 3.4(2)(a) to strike out the particulars of claim and alternatively under CPR 24.2(a) for summary judgment. Mr Justice Lloyd dismissed the application on 11 November 2002, holding that the pleaded case was capable of establishing a duty of care. The central issue was whether the claim was plainly and obviously bound to fail on the pleaded facts.

1. Appeal dismissed. The defendants’ application was properly refused. The claimant’s pleaded facts had to be assumed for the purposes of the application.
2. The applicable test was under CPR 3.4(2)(a). Where the facts pleaded are accepted and no additional facts are relied upon, a pleading disclosing reasonable grounds for bringing the claim necessarily gives the claimant a real prospect of success. There was therefore no separate scope for CPR 24.2(a) on these facts.
3. The law governing professional advisers’ liability for inaccurate information or advice remained in a state of development. It was pragmatic, incremental and especially sensitive to the facts. Unless a case was plainly and obviously within decided authority, the question whether a duty of care existed should ordinarily be determined after a trial on the full facts.
4. The pleaded allegations that the accountants knew that Swift’s audited accounts would be provided to institutions such as the claimant, and that those institutions would rely on them when deciding whether to provide bonds or finance, took the case outside the factual situation considered in Al Saudi Banque. That case involved foreseeability that banks might obtain and rely on accounts, without knowledge that the accounts would be communicated to them. The present court expressed no view on the ultimate boundary of liability.
5. Lord Justice Chadwick gave the judgment. Lord Justice Potter and Mr Justice Cresswell agreed. The defendants were ordered to pay the claimant’s appeal costs, assessed on the standard basis if not agreed.

• Court of Appeal (Civil Division): The defendants’ appeal against the order of Mr Justice Lloyd dated 11 November 2002 was dismissed. The order requiring the claim to proceed was upheld.
• High Court of Justice, Chancery Division: Mr Justice Lloyd dismissed the defendants’ application to strike out the claim or alternatively obtain summary judgment.