HAUGESUND KOMMUNE V DEPFA ACS BANK

[2011] EWCA Civ 33, Court of Appeal (Civil Division), Lord Justice Rix, Lord Justice Gross and Mr Justice Peter Smith, 28 January 2011

Damages - Measure of loss - Restitutionary rights - Recovery of damages from third party did not need to be preceded by deduction of amounts recoverable from defendant

In a first judgment, [2009] EWHC 2227 (Comm), Tomlinson J had determined that certain Norwegian municipalities were entitled to declaratory relief and that they were not bound by the swap transactions into which they had entered with Depfa, a bank, because those transactions were loans prohibited by the Norwegian Local Government Act 1992. In a second judgment, he had held that the third party, the Norwegian law firm WR, had been in breach of its contractual duty to exercise reasonable care and skill in failing to advise Depfa that the swaps were prohibited loans. He then went on to decide the issue of quantum, namely the consequential issue of what amount of damages Depfa could recover from WR. Depfa claimed that its loss as against WR was to be assessed independently of the possibility of further recoveries from the municipalities. It argued that its rights to recover further amounts from the municipalities did not reduce the amount for which it is entitled to judgment against WR; and that it was under no obligation to pursue its rights against the municipalities and was entitled without more to recover its outstanding loss in full against WR. Tomlinson J concluded that Depfa was entitled to judgment for the full amount from WR without credit for the value of its right in restitution against the municipalities. This was the appeal of that decision.