Murfin v Campbell

Damages for negligent advice are intended to compensate actual loss, not provide a windfall. Although damages are generally assessed at the date of breach, the court may consider subsequent events where justice requires it. Where contractual arrangements mean that liability is effective only through set-off against contingent or deferred consideration, loss is not suffered unless and until the relevant consideration would otherwise have become payable and is reduced or withheld. If the loss is treated as arising earlier but remains contingent, the court must use known events up to trial to assess the actual loss. A claimant cannot recover damages for a loss that never materialised.

The claimant alleged that negligent advice caused him to give a warranty in a share-sale agreement concerning the losses of the target company. The warranty claim resulted in a judgment establishing liability of £934,411, but the agreement required that liability to be set off against Series A Loan Notes issued as deferred consideration.

The loan notes never became redeemable because the relevant profit thresholds were not met. The defendants applied for summary judgment on the pleaded claim for £934,411. The central issue was whether the claimant had suffered recoverable loss despite the contractual set-off and the subsequent events.

The application was determined on the assumption that the claimant could prove the alleged negligent advice and the other relevant pleaded facts. The court granted summary judgment for the defendants and dismissed the claims in paragraphs 28.1 and 29.1 of the Amended Particulars of Claim.

1. Actual loss. The conventional measure of damages for negligent advice seeks to place the claimant, so far as money can, in the position he would have occupied absent the wrong. The claimant would have received only the same unredeemable loan notes even if he had not given the warranty. Awarding £934,411 would therefore give him money he would not otherwise have received.
2. Effect of the SPA. Properly construed as a whole, the agreement capped warranty liability and required any settled warranty claim to be set off against the loan notes, whether or not they were then payable. No loss arose unless a sum became payable under the loan notes and was not paid because of the set-off, or a warranty liability arose after the notes had otherwise been redeemed or cancelled.
3. Subsequent events. No sum ever became payable under the loan notes. Consequently, no loss was suffered. Alternatively, if loss arose at the date of the warranty or notification of the claim, the loss remained prospective and contingent. The court was required to take account of the known events up to the assessment of damages, applying the approach associated with Kennedy v Van Emden and the Bwllfa principle.
4. Authorities. Burdis v Livsey concerned immediate physical damage and did not govern a claim where loss depended on future liability under deferred consideration. Gardner v Marsh & Parsons was treated as fact-specific and, insofar as inconsistent with Kennedy v Van Emden, as decided per incuriam. Hussey v Eels did not assist because it involved a different damages and mitigation analysis without double recovery.

The recoverable loss for the pleaded head of claim was therefore nil.