Awards of damages in three recent cases provide powerful ammunition for insurers seeking to reduce their claims exposure.

Clack v Wrigleys Solicitors LLP

Rely on this case to limit loss with causation arguments, even where it is clear the insured has breached its duty.

A claimant who made a £600,000 loan to a third party based upon the security of shares in a company without conducting adequate checks on the financial standing of the company could not recover the whole of his resultant loss from the solicitors he had retained to draft the loan and security documents relating to the transaction. The judge held, following the decision in SAAMCo, that although the solicitors were found to be negligent in not providing adequate advice in respect of the effectiveness of the security, they were “…not liable for the consequences of risks that Mr Clack would have taken upon himself even if they had performed their duty”. The claimant was therefore awarded just £30,000, which was what the judge considered the claimant would have been paid (as a director of the company) had there been an effective charge over the shares.

AIB Group (UK) plc v Mark Redler & Co

The case to roll out when claimants are pressing for full loss on the basis of a breach of trust. Causation defences can be relied on even in breach of trust cases.

The appropriate award of damages in circumstances where a solicitor has acted in breach of trust was recently re-examined in this case and an equitable remedy applied. The breach of trust was that the solicitor released part of the re-mortgage advance to the borrowers having not realised that there were two charges to be redeemed rather than just one. The advance monies were therefore paid out contrary to the express and implied authority that had been given by the lender. However, the claimed remedy of full reconstitution of the trust fund was not justified. The judge held that the lender would have lent in any event and should therefore bear an equitable share of the consequences of its own poor decision to lend.

Whalley v PF Developments

Defendants need to ensure that (1) they are clear on what exactly is being pleaded and only address those points; and (2) they are pro-active in challenging evidence relating to heads of loss not formally pleaded. The defendants’ failure to do so in this case was one reason why they were not considered to have suffered any prejudice from the inclusion of the additional items of damages claimed at a later stage.

The Court of Appeal disagreed with the damages awarded by the judge below, holding that she was wrong to allow only the heads of loss that had been formally pleaded and not the further heads of loss that had been set out in witness evidence.

The judge had ordered that the parties file sequential witness statements in preparation for a hearing on remedy. The claimants’ witness statement set out full details the heads of loss sought, including several items which had not formed part of the particulars of claim. The defendants responded, also by witness evidence, disputing the various heads of loss and not challenging the additional items of damages claimed. However, when it came to an award, the judge declined to make any award for the additional damages on the grounds that these had not been pleaded

It was held on appeal that, as long as adequate notice is given and therefore no prejudice is suffered by the other party (in this case it was significant that the witness evidence was exchanged sequentially and not simultaneously), additional heads of loss other than those formally pleaded can be the subject of an award of damages.