Capita (Banstead 2011) Ltd & Anor v RFIB Group Ltd

A continuing professional retainer does not, by itself, turn an unremedied breach into fresh negligence accruing from day to day. Whether an obligation is continuing depends on the proper construction of the contract. A duty to perform a specific task by a specified time is ordinarily breached once and for all.

Where loss has concurrent effective causes, an indemnity will ordinarily exclude recovery if one cause is the claimant’s post-transfer negligence or fraud. A later negligent or fraudulent representation may constitute a new cause of action and a concurrent cause, even though the original negligence remains causally effective.

The appellants purchased a pension consultancy company from the respondent. The share purchase agreement required the respondent to indemnify them against liabilities arising directly or indirectly from services or advice supplied before the transfer date.

Before that date, the company negligently failed to secure formal amendments to a pension scheme. The failure increased the scheme’s liabilities. After the transfer, the responsible employee failed to correct the position and later represented that the amendments had been made. The pension trustees’ claim was settled for £3.85 million.

Popplewell J treated the failure as a continuing breach and apportioned the indemnified loss equally between the periods before and after transfer. The central issues were whether the unremedied failure constituted fresh daily breaches after transfer and whether the later representations were concurrent causes excluding recovery under the indemnity.

1. By a majority, the appeal was allowed in part. Longmore LJ, with whom Henderson J agreed, held that losses incurred up to 31 December 2004 fell within clause 5.8.5 of the share purchase agreement. Only losses arising after that date were irrecoverable. The matter would be remitted to Popplewell J for reassessment if the parties could not agree the adjustment.

2. The indemnity allocated liabilities caused by pre-transfer conduct to the seller and liabilities caused by post-transfer conduct to the purchaser. Where pre-transfer wrongdoing and the purchaser’s later negligence or fraud were concurrent effective causes, the purchaser could not recover the resulting loss. The principles applied in EE Caledonia Ltd v Orbit Value Co Europe supported that construction. The comparable insurance rule was that cover fails where one concurrent cause is covered and another is excluded.

3. A continuing retainer did not itself make the failure to remedy earlier negligence a fresh breach accruing each day. The obligation was to implement particular pension amendments by specified dates. It was not an obligation to maintain a prescribed state of affairs. The original breaches occurred before the transfer date and remained unremedied. Following Bell v Peter Browne & Co, the majority held that the continued omission was not an additional concurrent cause.

4. The post-transfer representations were different. The updated guidance booklet issued in late 2004 or 2005 represented that the amendments had been effected by September 2004. Whether negligent or fraudulent, that representation created a new cause of action and was a concurrent cause of the later loss. Accordingly, losses after 31 December 2004 were outside the indemnity.

5. Gloster LJ dissented on the continuing-breach issue. She considered that the wide, proactive and ongoing consultancy retainer, together with the employee’s knowledge and continuing work on the amendment deed, imposed fresh contractual duties after transfer. She would have upheld Popplewell J’s decision in full.

1. Court of Appeal (Civil Division): By a majority, allowed the appeal in part. It held that losses up to 31 December 2004 were recoverable under the indemnity and that only later losses were excluded. Reassessment was remitted to Popplewell J if required.

2. High Court, Queen’s Bench Division, Commercial Court: Popplewell J held that the professional adviser remained in continuing breach after the transfer date and apportioned the settlement loss equally between the pre-transfer and post-transfer periods. No neutral citation is stated in the judgment.