A defendant in breach not fully liable

Andrews v Barnett Waddingham, (Court of Appeal - 21 February 2006)

Mr Andrews purchased an annuity from Equitable Life, relying in part on (inaccurate) advice from the defendant firm that such an annuity would be protected by the Policyholders Protection Act 1975 should Equitable Life become insolvent.

Equitable Life did not become insolvent but its liabilities towards 'guaranteed' policyholders impacted upon the level of pension payable to ordinary annuitants like Mr Andrews, who, therefore, suffered loss. He sued BW, asserting that had it not been for BW's wrong advice about the Act he would never have bought the annuity and suffered the loss. Justice Cox agreed and awarded him some £1m in damages.

The Court of Appeal reversed this decision, pointing out that since Equitable Life had not become insolvent, the kind of harm from which it was BW's duty to protect Mr Andrews had not occurred, and so he would not recover.

Comment: This is a classic example of the principle laid down by the House of Lords in Saamco (1997). A defendant in breach of duty is not liable for all the consequences of the breach but only for those falling within the scope of the duty. The fact that Mr Andrews would not have purchased an Equitable Life annuity had it not been for the negligent advice about the Policyholders Protection Act was not sufficient for him to recover the loss he sustained as a result of that purchase: such loss was unconnected with the Act (Equitable Life not having become insolvent) and, therefore, fell outside the scope of BW's duty. Philip Vallance QC, BLM London.

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