Plaintiff building society victim of series of mortgage frauds – Defendant solicitors accepting liability for fraudulent conduct of former partner – Defendant claiming that plaintiff had exercised inadequate financial controls – Plaintiff contending that Law Reform (Contributory Negligence) Act 1945 inapplicable to damages recoverable for deceit – Judgment for plaintiff
The action involved 13 separate claims against the defendant firm of solicitors, in respect of losses suffered by the plaintiff in a series of mortgage frauds perpetrated by clients of the firm and their accomplices. Faced with overwhelming evidence that one of the two partners had, at all material times, been party to the fraudulent schemes, the defendant conceded that it was liable, subject only to questions of quantum. The defendant’s case was that much of the loss would have been avoided if the plaintiff had exercised reasonable financial controls. The sole issue at the hearing was whether the court had power to reduce damages under the Law Reform (Contributory Negligence) Act 1945 where the plaintiff had established the tort of deceit. In arguing that such a power existed, the defendant invited the court to depart from the contrary decisions of Mummery J in Alliance & Leicester Building Society v Edgestop Ltd [1993] 2 EGLR 229 and Carnwarth J in Corporacion Nacional del Cobre de Chile v Sogemin Metals Ltd [1997] 1 WLR 1396 (the challenged decisions).
Held: Damages could not be reduced under the 1945 Act.
1. The question turned on the true construction of the definition of “fault” as contained in section 4 of the 1945 Act. As judicially construed in the challenged decisions, the definition operated to confine the Act to such conduct on the plaintiff’s part as was either tortious (the first limb) or of such a character as would have furnished a complete defence at common law (the second limb). It was common ground that the second limb could not apply because the plaintiff’s alleged carelessness as regards his own interests (non-actionable negligence) did not afford a common law defence to the tort of deceit: see Central Railway of Venezuela v Kisch (1867) 2 LR 2 HL 99; Quinn v Leathem [1901] AC 495. The plaintiff contended that the first limb was also inapplicable because, on the reasoning in the challenged decisions, “negligence”, as used in the first limb, did not extend to non-actionable negligence. In the view of the court the challenged decisions should stand, not only because they were consistent with the decision of the Court of Appeal (unaffected by the subsequent ruling of the House of Lords) in Forsikringsaktielskapet Vesta v Butcher [1989] AC 852, but also because they adhered to the general policy of the law of imposing more extensive liability on intentional wrongdoers than on merely careless defendants: see Smith New Court Securities Ltd v Citibank NA [1997] AC 254 per Lord Steyn at p279.
2. Decisions where the Act had been held to be applicable in favour of defendants who had committed the (intentional) tort of assault were distinguishable as the alleged violence on the part of the plaintiffs in those cases, being tortious, fell within the first limb: Murphy v Culhane [1977] QB 94; Barnes v Nayer (unreported 3 December 1986); Malcolm v Walsh (unreported 13 May 1997) considered.
Michael Driscoll QC, Timothy Higginson and Ian Gatt (instructed by Dibb Lupton Alsop) appeared for the plaintiff; Nicholas Davidson QC and Francis Bacon (instructed by Browne Jacobson) appeared for the defendant.
Alan Cooklin, barrister
