Swynson Ltd & Anor v Lowick Rose Llp

A professional adviser’s knowledge that an individual may suffer loss through a company does not, by itself, create a parallel duty of care to that individual. The relevant question is whether responsibility was objectively assumed to the claimant who entered the transaction and relied on the advice. A refinancing transaction between connected parties may be disregarded when it is peculiar to the claimant and does not represent ordinary mitigation of the defendant’s breach. Further loans made in a reasonable attempt to preserve the original investment may be recoverable as mitigation losses. Contractual liability caps may be increased by agreement after the work is completed, and written documents may establish that agreement. Interest may be awarded at a commercial rate without reduction for delay where the delay was reasonable in the circumstances.

Swynson lent money to EMSL to fund the acquisition of Evo Medical Solutions. The claimants alleged that Hurst Morrison Thomson, now Lowick Rose LLP, had negligently prepared financial due diligence and advised on the transaction. Negligence and causation were conceded during the trial.

The remaining issues concerned whether a duty of care was owed to Mr Hunt personally; the effect of a later refinancing on Swynson’s loss; the effect of a deemed asset value; whether later loans were reasonable mitigation; the agreed liability cap; and the appropriate rate and period of interest.

1. Duty of care. HMT owed no personal duty of care to Mr Hunt. The objective question was to whom HMT assumed responsibility for the accuracy of its advice. That person was Swynson, the company that entered into the loan transaction. Mr Hunt’s personal exposure, control of Swynson, receipt of the advice, and provision of funds did not establish a separate assumption of responsibility or separate reliance. Treating Swynson’s money as Mr Hunt’s would impermissibly disregard the corporate structure. The same conclusion followed under the threefold approach in Caparo Industries Plc v Dickman [1990] 2 AC 605.
2. Refinancing. The 2008 partial refinancing did not extinguish Swynson’s recoverable loss. Applying the principles in British Westinghouse Electric and Manufacturing Company Ltd v Underground Electric Railways Company of London Ltd [1912] AC 673 and Mobil North Sea Ltd v P J Pipe & Valve Co [2001] EWCA Civ 741, the transaction was peculiar to Swynson, funded by its owner for separate tax and corporate reasons, and was not an ordinary or prudent step taken to mitigate HMT’s negligence. The alternative arguments based on subrogation and transferred loss therefore did not require determination.
3. Asset valuation and mitigation. The deemed value in the collateral surrender agreement merely quantified partial satisfaction of the debt between the parties to that agreement. It did not determine the value of the assets for all purposes or reduce Swynson’s loss. The 2007 and 2008 loans were reasonable attempts to prevent total loss of the 2006 loan and were recoverable despite their failure.
4. Liability cap and interest. The written engagement documents established that HMT agreed to increase the cap from £10 million to £15 million. Interest was payable at 1 per cent above the prevailing Bank of England base rate. The delay in commencing proceedings was not unreasonable and did not justify reducing the period of interest.