Haugesund Kommune and Another v Depfa ACS Bank and Another: CA 28 Jan 2011

Lawyers had negligently advised that a Norwegian local authority had legal capacity to enter into a loan agreement, when it did not. A local authority’s legal capacity to borrow might fairly be thought fundamental to any decision to lend it money, and the evidence was that but for the lawyer’s advice the bank would not have lent. But under Norwegian law the debt would not have been enforceable against the assets of the authority even if legal capacity had existed, making the debt in effect one of honour only.
Held: It was an ‘information’ case, because legal capacity was only one factor in a wider assessment of whether to lend the money, with which the lawyers were not concerned.
Rix LJ said: ‘It is of course true that Depfa would not have entered into the transactions at all unless it could be advised that the contracts were valid and within the kommunes’ capacity. In effect, that causal connection between advice and loss goes without saying in all such cases. It is not in itself the reason for finding that the scope of duty concerned embraces all the loss consequential upon entering into the transaction concerned. For these reasons it does not seem to me that it is a sufficient explanation for characterising a case as a category 2 [sc ‘advice’] case to say that, without the forthcoming albeit negligent advice, the transaction concerned would not have been ‘viable’. That is simply another way of saying that, if the claimant had not received the advice it did, it would not have entered into the transaction.’
Rix, Gross LJJ, Peter Smith J
[2011] EWCA Civ 33, [2011] PNLR 14, 134 Con LR 51, [2011] 1 CLC 166, [2011] 3 All ER 655, [2012] Bus LR 230, [2012] 1 All ER (Comm) 65
Bailii
England and Wales
Cited by:
CitedBPE Solicitors and Another v Hughes-Holland (In Substitution for Gabriel) SC 22-Mar-2017
The court was asked what damages are recoverable in a case where (i) but for the negligence of a professional adviser his client would not have embarked on some course of action, but (ii) part or all of the loss which he suffered by doing so arose . .

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Updated: 12 February 2021; Ref: scu.428310