Judgment creditors can celebrate in England — UK Supreme Court.

English courts are not very keen on judgment debtors who spirit assets away out of sight of our enforcement officers. The Supreme Court today showed they meant business when faced with this scenario. They confirmed in JSC BTA Bank v Khrapunov [2018] UKSC 19 that anyone who in England does anything to help a debtor do this can find himself at the receiving end of a civil claim from the judgment creditor.

Mukhtar Ablyazov, a colourful Kazakh politician, dissident and businessman who used to run the biggest bank in Kazakhstan, was successfully sued here by the bank for the moderate sum of US$4.6 billion. The court issued the usual congeries of worldwide freezing orders in aid of enforcement, which were disobeyed. In 2012 Mr Ablyazov, facing the prospect of time inside for contempt, fled England and continued with a large degree of success to move his assets around to make them inaccessible.

The Ablyazov cupboard being bare, the bank then turned to an associate, one Ilyas Khrapunov, who had allegedly agreed in England to help Mr Ablyazov to cause his assets to vanish and later done just that. It sued Mr Khrapunov in tort, alleging that the above acts amounted to an unlawful means conspiracy. Mr Khrapunov applied to strike, arguing that if (as is clear) contempt of court cannot give rise to damages, the bank shouldn’t be allowed to plead conspiracy to get a similar remedy by the back door. He also argued that in any case he was safely tucked up in Switzerland; that the assets were outside England; and that the mere fact that he had conspired in England to make those assets disappear did not take away his right under the Lugano Convention to be sued in his country of domicile.

Mr Khrapunov lost all the way in the Supreme Court. There was no reason why the fact that he had acted in contempt of court should not count as unlawful means for the purposes of conspiracy. Furthermore, the jurisprudence under the Brussels I / Lugano system made it clear that for the purpose of non-contractual liability, where jurisdiction laywas “either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage”, an agreement amounted to an ” event which gives rise to and is at the origin of that damage.”

Good news, in other words, for judgment creditors: bad news for friends of fugitive tycoons.

“Everywhere you go, you can be sure with Shell.” No arguable duty of care in respect of Nigerian oil pollution leaks.


The issue of a parent company’s potential direct liability in tort in respect of acts of one of its subsidiary companies has recently come before the Court of Appeal in Okpabi v Royal Dutch Shell and Shell Petroleum Development Company of Nigeria Ltd , [2018] EWCA Civ 191. The Nigerian claimants suffered from harm from pollution arising from oil leaks from Nigerian land pipelines due to the illegal process of “bunkering” by which oil is stolen by tapping into the pipelines.

The claimants wanted to sue  Shell’s Nigerian subsidiary SPDC, who operated the pipelines, in the English courts rather than in Nigeria. To this end they sued the English holding company, Royal Dutch Shell (‘RDS’), in the English courts. RDS would now serve as an ‘anchor defendant’ and the claimants obtained leave to serve SPDC out of the jurisdiction under para 3.1 of Practice Direction 6B, on the ground that there was between the claimant and RDS a real issue which it was reasonable for the court to try and the claimant wished to serve SPDC as a necessary or proper party to that claim.

RDS applied under CPR Part 11(1) for orders declaring that the court had no jurisdiction to try the claims against it, or should not exercise such jurisdiction as it had. At first instance Fraser J found that there was no arguable duty of care owed by the parent company Royal Dutch Shell Plc to those affected by the operations of its subsidiary in Nigeria.( [2017] EWHC 89 (TCC), noted in this blog on 2 February 2017. The governing law would be that of Nigeria, but the issue was decided under English law, because the legal experts for the parties were agreed that the law of Nigeria would follow, or at least include as an essential component, the law of England in this respect.

The Court of Appeal has now upheld the decision by a 2-1 majority, Sales LJ dissenting. The Court of Appeal applied the three stage Caparo Industries v Dickman test for assessing novel duties of care[1990] 2 AC 605 (HL) which set out three requirements, all of which had to be satisfied. (1) Was it foreseeable that if the defendant failed to take reasonable care, the plaintiff would be injured by the acts or omissions of the defendant (the foreseeability factor)? (2) Was there a relationship between the plaintiff the defendant characterized by the law as one of “proximity” or of being “neighbours” one to another (the proximity factor)? (3) as a matter of legal policy it would be fair and just to impose a duty of care on the defendant (the policy factor)? The duty of care argued for by the claimants foundered on the proximity requirement.

The claimants’ based their case on the duty of care owed by RDS to them on the fact that

“… [RDS] exerts significant control and oversights over [SPDC’s] compliance with its environmental and regulatory obligations and has assumed responsibility for ensuring observance of proper environmental standards by [SPDC] in Nigeria. [RDS] carefully monitors and directs the activities of [SPDC] and has the power and authority to intervene if [SPDC] fails to comply with the Shell Group’s global standards and/or Nigerian law.”

The claimants relied on five main factors to demonstrate RDS’s arguable control of SPDC’s operations: (1) the issue of mandatory policies, standards and manuals which applied to SPDC, (2) the imposition of mandatory design and engineering practices, (3) the imposition of a system of supervision and oversight of the implementation of RDS’s standards which bore directly on the pleaded allegations of negligence, (4) the imposition of financial control over SPDC in respect of spending which, again, directly relevant to the allegations of negligence and (5) a high level in the direction and oversight of SPDC’s operations.

Having reviewed the evidence submitted by the claimants Simon LJ concluded that none of the claimants’ five factors, either individually or cumulatively demonstrated a sufficient degree of control of SPDC’s operations in Nigeria by RDS to establish the necessary degree of proximity. There was no arguable case that RDS controlled SPDC’s operations, or that it had direct responsibility for practices or failures which were the subject of the claim. Simon LJ noted an important distinction between a parent company which controls, or shares control of, the material operations on the one hand, and a parent company which issues mandatory policies and standards which are intended to apply throughout a group of companies in order to ensure conformity with particular standards. “The issuing of mandatory policies plainly cannot mean that a parent has taken control of the operations of a subsidiary (and, necessarily, every subsidiary) such as to give rise to a duty of care in favour of any person or class of persons affected by the policies. [88]”.

A similar point was made by Sir Geoffrey Vos. The issue of mandatory policies, standards and manuals were of a highlevel nature and did not indicate control; control rested with SPDC which was responsible for its own operations.

“The promulgation of group standards and practices is not, in my view, enough to prove the “imposition” of mandatory design and engineering practices. There was no real evidence to show that these practices were imposed even if they were described as mandatory. There would have needed to be evidence that RDS took upon itself the enforcement of the standards, which it plainly did not. It expected SPDC to apply the standards it set. The same point applies to the suggested “imposition” of a system of supervision and oversight of the implementation of RDS’s standards which were said to bear directly on the pleaded allegations of negligence. RDS said that there should be a system of supervision and oversight, but left it to SPDC to operate that system. It did not have the wherewithal to do anything else.[205]”


Opkabi is one of three transnational tort claims involving attempts to sue a foreign subsidiary company using the English parent company as an ‘anchor’ defendant. In Lungowe v Vedanta and AAA v Unilever the court accepted that there was an arguable case that the anchor defendant owed a duty of care, although in AAA the claim foundered on the lack of foreseeability of the harm suffered by the claimants at the hands of third parties in the post-election violence in Kenya after the 2007 elections. An appeal is due to be heard later this year.

As a sidenote, in similar proceedings brought against SPDC in the Netherlands, using RDS as an ‘anchor defendant’, the Dutch Court of Appeal in December 2015 concluded that the claims against RDS were not bound to fail. They reasoned.

“Considering the foreseeable serious consequences of oil spills to the local environment from a potential spill source, it cannot be ruled out from the outset that the parent company may be expected in such a case to take an interest in preventing spills (or in other words, that there is a duty of care in accordance with the criteria set out in Caparo v Dickman [1990] UKHL 2, [1990] 1 All ER 56), the more so if it has made the prevention of environmental damage by the activities of group companies a spearhead and is, to a certain degree, actively involved in and managing the business operations of such companies, which is not to say that without this attention and involvement a violation of the duty of care is unthinkable and that culpable negligence with regard to the said interests can never result in liability.”


The claimants’ solicitors in Opkabi, Leigh Day, have indicated their intention to apply for leave to appeal to the Supreme Court.



Carry on suing in England – at least if you’re suing a non-European

In matters of tort foreign defendants domiciled in the EEA are reasonably well-protected from the exorbitant jurisdiction of the English courts. Both Brussels I Recast and Lugano II limit jurisdction to cases where where the act leading to liability, or the harm done by it, happened in England: furthermore, Euro-law makes it clear that the reference to harm here is fairly restrictive, referring only to direct harm and not to the financial effects of it, such as the straitening of an English widow’s circumstances following a wrongful death abroad.

By contrast, there is no such luck for defendants domiciled outside the EEA. For some time conflicts lawyers have remarked that English claimants, especially personal injury claimants, find it remarkably easy to establish jurisdiction against them. This is because CPR, PD6B 3.1(9), allows service out not only where damage results from an act “committed … within the jurisdiction” but also in all cases of damage “sustained …within the jurisdiction.”, and in a series of cases such as Booth v Phillips [2004] 1 WLR 3292 and Cooley v Ramsey [2008] ILPr 27 this has been held to cover almost any loss, even consequential, suffered in the jurisdiction. And in Four Seasons Holdings Inc v Brownlie [2017] UKSC 80 the Supreme Court by a majority (Lords Wilson and Clarke and Lady Hale vs Lords Sumption and Hughes) has now weakly upheld this distinction.

International law enthusiasts will know that this case arose out of a car accident in Egypt in which the late Prof Ian Brownlie was tragically killed and his widow was injured. The actual decision was in the event a foregone conclusion: by the time the case reached the Supreme Court it was clear that the defendants, the franchising company behind the Brownlies’ Egyptian tourist hotel which had organised the fatal car ride, had never contracted with the Brownlies and was not liable in tort for the acts of the hotel itself. Nevertheless, the majority in the Supreme Court, doubting the decision of the Court of Appeal on this point, made it clear that, while not finally deciding the issue, they were not prepared to condemn the older authorities. It seems likely that future cases will follow their lead.

One further point. Lord Sumption and Lady Hale made the point that the decision whether a contract was made in England, another of the “gateways” in non-EEA cases (see CPR, PD6B 3.1(6)), was in the light of cases like Entores v Miles Far East Corpn [1955] 2 QB 327, pretty arbitrary and could do with a look from the Rules Committee. They were right. Let’s hope something gets done.

Valuers’ negligence: no claim for more than lender loses

Not often do you find a Supreme Court decision in only 15 paragraphs that is clear, sensible and palpably right. Today we got just that in the valuers’ negligence decision of Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd [2017] UKSC 77. Although a land case, this is of equal, and large, significance to ship and other finance.

In 2011 Tiuta lent £2.475 million for a bijou Home Counties development against a valuation by De Villiers of £2.3 million undeveloped / £4.5 million complete, of which no complaint was made. After some months the developers ran into difficulties. In 2012 Tiuta made a new loan of £3.088 million against the same development, of which £2.799 million went to discharge the old loan plus accrued interest, and the balance of £289,000 was new money. This latter advance was made against a new valuation by De Villiers in the sum of £3.5 million undeveloped / £4.9 million complete. Shortly after all this, the developers went bust and Tiuta lost big money.

Tiuta sued De Villiers for their loss, alleging negligence in the second valuation. De Villiers riposted that they could not possibly be answerable for more than £289,000, since even if they had not been negligent Tiuta would still have been exposed to the original, largely irrecoverable, balance of £2.799 million. To everyone’s surprise, a majority in the Court of Appeal disagreed. The 2011 loan had been paid off and was now out of the reckoning: the 2012 loan in the figure of £3.088 million counted as an entirely new advance made against the suspect valuation, and on principle any loss on it was recoverable. McCombe LJ, the dissentient, was left gasping and stretching his eyes (remember Hilaire Belloc’s Matilda?) at the idea that new money injection of a mere £289,000 could give Tiuta, free gratis and for nothing, a claim of up to £3 million that had not been there before.

The Supreme Court swiftly restored orthodoxy. Whether the lenders provided new money of £289,000 and left the existing loan of £2.799 million untouched, or provided a new loan of £3 million-plus which was partly used to pay off the original loan, the result was the same: the only net increase in exposure was £289,000 and that was all that was recoverable. Nor could Tiuta get home by saying that the repayment of the original loan was somehow a collateral benefit to Tiuta: as Lord Sumption observed with merciless logic, it was in fact neither collateral nor a benefit.

Advantage PI insurers, to be sure. On the other hand, this still leaves some questions unanswered. If the first lender had been someone other than Tiuta, the result would presumably have been different. Does this mean that if a lender wants to avoid the result in Tiuta, all it has to do is to make sure that when it lends several times to the same project, each loan is made by a separate subsidiary special purpose vehicle (quite easy to arrange)? One suspects lawyers are already busy dealing with questions like this and advising accordingly.

Getting a freezing order can damage your wallet — official

The decision in Fiona Trust v Privalov [2016] EWHC 2163 (Comm) (noted in this blog here) has been upheld in the Court of Appeal: see SCF Tankers Ltd & Ors v Privalov [2017] EWCA Civ 1877. Readers will remember that Russian shipping conglomerate SCF (aka Sovcomflot, previously Fiona) sued another Russian businessman for serious money, alleging that he had bribed its officers to enter into all sorts of disadvantageous agreements, and in support of the action got a freezing order for something over half-a-billion dollars. Having recovered a measly $16 million, it was then hit by Males J with an order on its undertaking in damages amounting to something close to $50 million — a costly victory indeed. Little of substance to report about the CA decision: it essentially approved the findings below on causation and mitigation. Males J’s judgment, and our blog post, remain the go-to place for detailed discussion of the principles to be applied.

Parent company liability for subsidiary operations abroad.  


An interesting new Court of Appeal decision on transnational litigation in the  English courts concerning alleged torts committed overseas. Lungowe v Vedanta and Konkola Copper Mines [2017] EWCA Civ 1528 involved claims by Zambian citizens against the defendants alleging personal injury, damage to property and loss of income, amenity and enjoyment of land, due to alleged pollution and environmental damage caused by discharges from the Nchanga copper mine since 2005. Konkola Copper Mines (‘KCM’), a Zambian company, owned and operated the mine. Vedanta, a UK company, is a holding company for various metal and mining companies, of which KCM is one.

The claim was served on Vedanta by virtue of its domicile in the UK and permission was granted for the claim form and particulars of claim to be served out of the jurisdiction on KCM. Vedanta and KCM both applied for declarations that the High Court had no jurisdiction to hear the claims. In June 2016 Coulson J dismissed the challenges. The Court of Appeal has now upheld the dismissal.

  1. Vedanta’s position.

Under art. 4 of the Recast Brussels Judgments Regulation 2012 the claimants were entitled to sue Vedanta in the UK by virtue of its domicile. The Court of Appeal held that following the ECJ’s decision in Owusu v Jackson [2005] QB 801, it was clear that there was no scope for staying proceedings on the grounds of forum non conveniens where jurisdiction was established on the grounds of the defendant’s domicile under art. 4. Although in principle it might be possible to argue that invoking the rules in the Recast Regulation amounted to an abuse of EU law, there would have to be sufficient evidence to show that the claimant had conducted itself so as to distort the purpose of that rule of jurisdiction. The present case did not meet the high threshold for an abuse argument to succeed.

  1. KCM’s position

The application to serve KCM out of the jurisdiction in Zambia was based on para 3.1 of Practice Direction 6B on the ground that there was between the claimant and Vedanta a real issue which it was reasonable for the court to try and the claimant wished to serve KCM as a necessary or proper party to that claim. If the claimants could satisfy these conditions, the court still retained a discretion and CPR 6.37(3) provide that: “The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.”

An important issue in this analysis was whether there was a real issue between the claimants and Vedanta. This raised the question of whether a parent company could owe a duty of care to those affected by the operations of a subsidiary. Following the Court of Appeal’s decision in Chandler v Cape such a duty towards the employee of a subsidiary could arise where the parent company (a) has taken direct responsibility for devising a material health and safety policy the adequacy of which is the subject of the claim, or (b) controls the operations which give rise to the claim. The parent must be well placed, because of its knowledge and expertise to protect the employees of the subsidiary. If both parent and subsidiary have similar knowledge and expertise and they jointly take decisions about mine safety, which the subsidiary implements, both companies may (depending on the circumstances) owe a duty of care to those affected by those decisions. This type of duty may also be owed in analogous situations, not only to employees of the subsidiary but to those affected by the operations of the subsidiary. The Judge had decided on the basis of the pleaded case that it was arguable that such Vedanta did owe such a duty of care to those affected by KCM’s operations. The Court of Appeal concluded that the Judge had been entitled to reach that conclusion. There was a serious question to be tried which could not be disposed of summarily, notwithstanding that it went to the Court’s jurisdiction.

The Court of Appeal also upheld the finding that it was reasonable to try the issue between Vedanta and the claimants. Vedanta was sued within the jurisdiction pursuant to a mandatory jurisdictional rule and the claimants had an interest in suing Vedanta other than for enabling them to bring KCM within the jurisdiction. The claimants were suing Vedanta as a company with sufficient funds to meet any judgment of the English court, whereas they had grounds to believe, and evidence to show, that KCM might be unable or unwilling to meet such a judgment. KCM was a necessary and proper party to the Vedanta claim because the claims against the two defendants were based on the same facts and relied on similar legal principles and the Judge was entitled to conclude that Vedanta and KCM could be regarded as broadly equivalent defendants.

As to whether England and Wales was the proper place in which to bring the claim, the Court of Appeal again upheld the Judge’s finding that it was. Although, absent the claim against Vedanta, it would be clear that England would not be the appropriate forum for the claims – that would be Zambia, the position change once the claim against Vedanta was taken into account. It would be inappropriate for the litigation to be conducted in parallel proceedings involving identical or virtually identical facts, witnesses and documents, in circumstances where the claim against Vedanta would in any event continue in England.

The case can be contrasted with the earlier decision of Fraser J in Okpabi and others v. Royal Dutch Shell Plc and Shell Petroleum Development Company of Nigeria Ltd [2017] EWHC 89 (TCC), noted in this blog on 2 February 2017.  Fraser J found that there was no arguable duty of care owed by the parent company Royal Dutch Shell Plc to those affected by the operations of its subsidiary in Nigeria. He declined to follow Coulson J’s decision in the instant case, identifying facts that distinguished the two cases. The decision is under appeal.

Recovery by underwriters: an unconfident sequel to the Atlantik Confidence debacle.

It might look rather churlish for an insurer in paying out on a claim to talk in the same breath about what happens if it should later decide that it wants its money back. Nevertheless it was failure to do this that landed a group of marine underwriters in expensive satellite litigation in Aspen Underwriting Ltd & Ors v Kairos Shipping Ltd & Ors [2017] EWHC 1904 (Comm).

The background to all this was last year’s decision in Kairos Shipping v Enka & Co LLC [2016] EWHC 2412 (Admlty) (noted here for the benefit of our readers), where following the loss of the 27,000 dwt bulker Atlantik Confidence in the Middle East, cargo underwriters successfully broke limitation on the basis that the sinking was a put-up job. The vessel’s hull underwriters, having previously paid out on the orders of her owners’ bank under an insurance assignment provision, now sued the bank to recover their money. The bank, based in the Netherlands, tried to put a spanner in the works by denying the jurisdiction of the English courts under Art.4 of Brussels I Recast, and very nearly succeeded.

The agreement under which the underwriters settled the payout contained an English jurisdiction clause. However it had been signed by the underwriters and the owners, and not by the bank, which had merely given consent for any monies to be paid out to a third party rather than themselves (they were actually paid to the brokers).  Teare J was not prepared to infer that the owners had signed for the bank as principals, or that the bank by agreeing to payment to a third party (the brokers) had demanded payment so as to bring themselves within the doctrine of benefit and burden. The underwriters only won, by the skin of their teeth (and the skill of IISTL stalwart Peter Macdonald-Eggers QC), because of a just plausible alternative argument that some kind of tort of misrepresentation had been committed by or on behalf of  the bank which had had its effects in England, thus enabling the underwriters to invoke Art.7(2) of Brussels I.

Moral (it would seem): all policies should contain a term, rigorously enforced, stating that no monies will be paid out save against a signed receipt specifically submitting to the exclusive jurisdiction of the English courts in respect of any subsequent dispute respecting the payment.

Hopeful law professors will of course look forward to a decision on the substantive point of recovery (which raises interesting issues of tort law, not to mention restitution should the entire litigation take place here with the agreement of the bank). But one suspects they will do so in vain. It seems likely that this case, like so many others, will end up in the great mass of claims “settled on undisclosed terms.”

Product liability EU-style: bad news for liability insurers

The ECJ today made life more difficult for insurers covering risks arising under the Product Liability Directive. This Directive, you will remember, says that the victim of a defective product need not prove negligence, but must prove defectiveness and causation. W v Sanofi Pasteur [2017] EUECJ C-621/15 was a vaccine damage case. A couple of years after beginning a course of anti-hepatitis vaccination, W had multiple sclerosis. There being no clear medical evidence as to how the disease came about, a French court was prepared to infer from the proximity between vaccination and disease and the lack of any other explanation that the vaccine had been defective and had caused the injury. It therefore gave judgment for W, a view held justified by the Cour de Cassation. After a few further procedural skirmishes, Sanofi — or, one suspects, its insurers — went to the ECJ, alleging that inferences of this sort were contrary to the explicit requirement in Art.4 that the claimant actually prove these matters, and that strict proof in every particular ought to be required.

The ECJ, as expected, was having none of it. The Directive existed to make life easier for  injured consumers; furthermore, the real complaint related not so much to the burden of proof as to the means of proof, which was a matter of procedure left up to national courts.

Stand by underwriters, as we said, for increased payouts under our home-grown version of the Directive, Part I of the Consumer Protection Act 1987.

Want to stymie a judgment creditor? It’s not as easy as you think.

English courts aren’t best pleased when they give judgment, only to find someone busily trying to frustrate the claimant’s efforts to collect on it. Last year, in JSC BTA Bank v Ablyazov [2016] EWHC 230 (Comm) (noted here on this blog), Teare J very rightly decided that an elusive judgment debtor’s pal was liable in tort to the judgment creditor when he helped the debtor shuffle his assets around in an elaborate “now you see them, now you don’t” exercise. Yesterday, in Marex Financial Ltd v Garcia [2017] EWHC 918 (Comm), Knowles J carried on the good work. Marex had got judgment in England for some $5 million, plus the usual freezing orders, against a couple of BVI companies controlled by SG, a globetrotting businessman. SG thereafter took care to avoid the UK, instead taking steps to spirit away the English assets of his companies to a web of entities in far-flung jurisdictions where it was difficult, if not impossible, for Marex to track them down. Marex thereupon sought permission to sue SG out of the jurisdiction, alleging a tort committed in England. What tort? In so far as SG might be deemed to have acted with the companies’ consent, inducement of breach of contract (i.e. the implicit contract by the companies to pay the judgment debt); and in so far as the companies hadn’t consented and hence he was in breach of duty to them, causing loss to Marex by unlawful means. Knowles J agreed with both limbs of the argument, swiftly disposed of a forum non conveniens point, and allowed service out, thus giving Marex at least a decent chance of getting paid.

Good news, therefore, to judgment creditors. Moreover, while this was a non-EU service out case, note that so long as any relevant monkey-business took place in England, its reasoning will apply equally to EU and EEA-based defendants under Brussels I and Lugano, because the tort “gateway” has been interpreted similarly in both cases since Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665; [2016] 1 W.L.R. 1814.

So good luck and good hunting.

Investors — beware how you handle corporate structures

Most serious investors in everything from ships to real estate to businesses act through the medium of ‘tame’ companies. They do this for very good reasons. However, the Supreme Court gave a salutary warning this morning that even the simplest structures of this kind can provide pitfalls for the unwary.

Slightly simplified, in Lowick Rose LLP (in liquidation) v Swynson Ltd [2017] UKSC 32 what happened was this. A wealthy investor H used a wholly-owned special purpose vehicle S Ltd to make a loan of £15 million to EMS Ltd to enable EMS to buy MIA Inc. Due diligence, or rather a lack of it, was provided by accountants HMT, who failed to notice glaring problems with MIA. The trouble quickly surfaced. As a damage limitation exercise H caused S to lend a further £1.75m to EMSL in 2007 and £3m in 2008, H at the same time obtaining a large holding in EMS. Things went from bad to worse, and in 2008 more refinancing was necessary. H personally lent EMS some £19 million, most of which went to pay off EMS’s borrowings from S, with the rest being new money. To no avail: MIA collapsed, and with it the whole house of cards.

H and S sued HMT for losses of some £16 million. At this point an awkwardness arose. HMT was held on the facts to have owed no duty to H. As regards S it admitted negligence, but argued that in so far as S’s loans to EMS had been paid off (by H) the loss was H’s and not S’s. Reversing the Court of Appeal, the Supreme Court decided for HMT. S had indeed suffered no loss. The loan by H to EMS to pay off S was not an unconnected benefit, so as to be regarded as res inter alios acta. Nor could S invoke transferred loss and the rule in Dunlop v Lambert (1839) 2 Cl & F 626; nor yet could H use the doctrine of subrogation to keep the loan from S to EMS alive and claim in the name of S.

A nice windfall for HMT’s professional indemnity insurers, and an unnecessary one. Had H lent the money to S for S to use to refinance EMS, there would have been no problem; H, through S, would have been £16 million to the good. But he hadn’t done that, and that was an end of the matter. As we said above, when using corporate structures any failure to take care to guard your back can be very costly.

Solicitors also note: you are now on notice. Since this decision, unless you take great care in advising on refinancing deals, the SIF is likely to have some less-than-kind words for you too.