Reconsidering Transferred Loss
| Author | Andrew Trotter |
| DOI | http://doi.org/10.1111/1468-2230.12425 |
| Date | 01 July 2019 |
| Published date | 01 July 2019 |
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Modern Law Review
DOI: 10.1111/1468-2230.12425
CASES
Reconsidering Transferred Loss
Andrew Trotter∗
The Supreme Court’s recentreconsideration of the ‘transfer redloss’ exception stopped shor t of
clarifying why it is justified at all. The usual candidates are that it applies to loss transferred with
property, or operates more broadly to vindicate the claimant’s interest in performance. This
note suggests that neither is a sound basis for the rule, and that the promisee ought generally
to be entitled to sue for loss suffered by third parties, but is obliged to pass on the damages he
recovers.
The Supreme Court in Swynson Ltd vLowick Rose LLP (formerly Hurst Morrison
Thomson LLP) (in liquidation)1(Swynson) revisited the so-called ‘transferred loss’
exception permitting a promisee to recover substantial damages for breach of a
contract under which the benefit would have accrued to a third party.
Mr Hunt and his company Swynson made their money out of lending
money to risky borrowers. To conduct due diligence on one such borrower,
Swynson engaged HMT (renamed Lowick Rose by the time of the litigation).
The report was negligent and within a year the borrower defaulted. Throwing
good money after bad, Swynson made two further loans, neither of which were
repaid. Mr Hunt then refinanced the loans so that the borrower owed most of
the debt to him personally.2HMT accepted that it owed and breached duties
to Swynson in contract and tort. But, it said, following the refinancing it was
Mr Hunt who suffered the loss — and he was a third party with no cause of
action.
Mr Hunt and Swynson unsuccessfully tried to chart four routes around this
difficulty. One of those routes was that Swynson should be able to recover on
Mr Hunt’s behalf because the loss was ‘transferred’ to him when the loans were
refinanced. That argument failed.3The contract with HMT was never for the
benefit of Mr Hunt; he simply assumed the loss caused by the negligence by
refinancing the loans.4
∗Barrister, Blackstone Chambers, London.
1Swynson Ltd vLowick Rose LLP (formerly Hurst Morrison Thomson LLP) (in liquidation) [2018] AC
313.
2ibid at [46].
3 The other three arguments were that the refinancing was res inter alios acta,thatHMTowed
Mr Hunt a duty of care, and that HMT was unjustly enriched at Mr Hunt’s expense. These all
failed for reasons beyond the scope of this note.
4Swynson n 1 above at [18], [54], [108].
C2019 The Author. The Modern Law Review C2019 The Modern Law Review Limited. (2019) 82(4) MLR 727–736
Published by JohnWiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 101 Station Landing, Medford, MA 02155, USA
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