JP Morgan Chase Bank & Ors v Springwell Navigation Corporation

Claims for loss of an investment portfolio and loss of profits from opportunities that the portfolio would have funded are not necessarily inconsistent or duplicative. The question is whether the claims compensate the same loss. A claim for the portfolio’s lost value may coexist with a claim for profits generated by reinvesting the value that the portfolio should have had in other capital assets. Double recovery arises where the claimant also seeks compensation for the value of those assets, or claims both the notional return on the restored portfolio and the profits from assets purchased with it. Such claims may raise substantial issues of remoteness, causation, knowledge and quantification, but those issues do not justify striking out an arguable claim at the pleading stage.

Chase appealed from the Commercial Court’s refusal to strike out Springwell’s claim for losses said to have resulted from negligent or fraudulent investment advice: [2005] EWHC 1044 (Comm). Springwell claimed both the diminution in value of its investment portfolio and profits allegedly lost because the reduced portfolio could not fund a planned fleet-rebuilding programme.

The appeal concerned only whether the two heads of loss were mutually inconsistent and amounted to double recovery. The Court of Appeal considered whether the portfolio should be treated as having been surrendered when applied to acquire ships, or as having been reinvested in capital assets which would generate profits.

1. Appeal dismissed. The claim was arguable and was not liable to be struck out merely because Springwell claimed both the lost value of the portfolio and lost shipping profits.
2. The compensatory principle requires close examination of the basis of each claim and whether both claims compensate the same loss. On the pleaded case, the portfolio would have been used to acquire ships. The ships would then have generated profits. The shipping losses were therefore an additional head of loss arising from the loss of the portfolio’s availability for further trading, rather than merely an alternative monetary valuation of the portfolio’s lost value.
3. Double recovery would arise if Springwell claimed both the portfolio’s lost value and the value of the ships it could not acquire. It would also arise if it claimed both interest or other notional returns on a restored portfolio and the shipping profits generated by ships purchased with that portfolio. No such claims were advanced.
4. The claim fell within the second limb of Hadley v Baxendale, because the pleaded case was that Chase knew of the intended use of the funds. The authorities concerning alternative measures of the same loss, including Cullinane v British “Rema” Manufacturing and Primavera v Allied Dunbar, were distinguishable. Wadsworth v Lydall and its approval in President of India v La Pintada Compania supported the conclusion that unavailability of funds is not, by itself, a bar to recovery.
5. Issues of remoteness, proof of Chase’s knowledge and quantification remained for trial. The appeal was dismissed.

• Court of Appeal (Civil Division): Buxton LJ delivered the judgment, with Parker LJ and Wall LJ agreeing. The appeal was dismissed.
• Commercial Court, Queen’s Bench Division: Mr Justice Aikens refused to strike out the shipping-losses claim: [2005] EWHC 1044 (Comm).