Astle & Ors v CBRE Ltd

On an application for summary judgment, a claimant relying on negligent information must show both loss and that the loss falls within the scope of the defendant’s duty. Under the SAAMCo principle, an information-provider is generally liable for the consequences of the information being wrong, not for losses which would have occurred even if it were correct. The analysis normally involves identifying the basic loss and then assessing the maximum loss attributable to the inaccuracy. The second stage is a legal, fact-sensitive exercise rather than a scientific causation inquiry. Where information is supplied to investors about the viability of a wider transaction, and the investment structure involves subordination and indirect interests in the underlying assets, the appropriate application of the principle may require a trial. A pleaded duty concerning the tax status of investment instruments may also raise a triable issue where disseminated material arguably represented that the instruments had a particular status.

The claimants invested in a Jersey-based trust whose assets included fire control centres and a commercial property. They brought claims against the Evans Randall Companies and CBRE alleging negligent misstatements and breaches of statutory duties in an investment memorandum, including inaccurate valuations and misleading information about the investment structure. They also alleged that the Loan Notes had been incorrectly drafted so as not to qualify as non-qualifying corporate bonds for UK tax purposes.

The defendants applied for summary judgment and/or strike out. The court had to decide whether the losses claimed were outside the scope of the defendants’ duties under the SAAMCo principle, and whether the pleaded facts disclosed a real prospect of establishing a duty concerning the tax status of the Loan Notes.

1. Applications dismissed. The claims against ERIML, CBRE and the Evans Randall Companies were allowed to proceed to trial.
2. Under South Australian Asset Management Corporation v York Montague Limited [1997] AC 191, a claimant must establish both loss and that the loss falls within the scope of the relevant duty. Where the duty is to provide information, rather than advice on whether to enter a transaction, the defendant is generally liable only for the consequences of the information being wrong.
3. The SAAMCo analysis ordinarily has two stages. First, the court identifies the claimant’s basic loss. Secondly, it identifies the maximum loss capable of falling within the duty by examining the consequences attributable to the inaccurate information. The second exercise is a legal rule applied robustly, not a detailed scientific inquiry into causation.
4. The claimants had a real prospect of establishing that their investment losses were attributable, at least in part, to inaccurate valuation and other information in the investment memorandum. The information arguably concerned not only asset value but also the commercial viability of the wider transaction, the counterparties and the characteristics of the assets. The investors’ subordinated and indirect interests made the ordinary valuation comparison more complex, but did not justify determining the issue summarily.
5. The precise scope of ERIML’s duty could not properly be determined without a trial. The issue was fact-sensitive and involved disputed evidence about the information supplied, the parties’ relationship and the intended use of the information.
6. There was also a triable issue that the Evans Randall Companies owed a duty to take reasonable care to ensure that the Loan Notes were non-qualifying corporate bonds, or to make clear that their status was unknown. The KPMG Opinion, surrounding correspondence, the companies’ role and expertise, and the dissemination of the material to investors were capable of supporting such a duty. The relevant disclaimers and non-reliance warranty were not sufficiently clear to resolve the issue summarily.