#6599 - Haugesund Kommune V. Defpa Bank - Commercial Remedies BCL

Haugesund Kommune v. Defpa Bank

Facts

A firm of Norwegian lawyers advised the bank in relation to swap contracts into which it proposed to enter with two Norwegian local authorities. The lawyers advised the bank in unqualified terms that the swap contracts were not loans for the purposes of Norwegian law and that the local authorities had full capacity to enter into them. They also advised the bank that a claim against a Norwegian local authority could not be enforced. The contracts, which contained English law and jurisdiction clauses, were entered into and substantial sums were advanced under them to the local authorities. For a while the local authorities performed their payment obligations under the contracts, but when questions were raised in Norway as to the validity of the transactions, no further payments were made. The local authorities commenced proceedings in the English High Court for a declaration that the contracts were invalid because they had lacked the capacity to enter into them. The bank counterclaimed in restitution for the return of the sums advanced. It also commenced Part 20 proceedings against its Norwegian lawyers, alleging that it had entered into the transactions in reliance on their contractually negligent advice. The judge held that the local authorities were not bound by the swap contracts but that they were liable to make restitution to the bank. The judge also found that the lawyers had been in breach of their contractual duty to exercise reasonable care and skill when they advised the bank that the local authorities had had the capacity to enter into the swap contracts.

Nature of the claim against the lawyes: Depfa also brought Wikborg Rein into the litigation by means of Part 20 proceedings under which it alleged that it had entered into the contracts in reliance on Wikborg Rein's advice, and that that advice had been negligent. It alleged that it had suffered loss in the amounts advanced by it to the kommunes, although it would give credit for such recovery as it made in respect of such advances. The claim was brought in contract, under Norwegian law, which did not recognise alternative duties in tort.

Holding

SAAMCO Principle applies to both tort and contract

It seems to me that the primary question raised by this appeal is as to the scope of Wikborg Rein's duty. It may be that in the context of contract that might have to be rephrased as a question of assumption of responsibility, but the South Australia Asset Management line of cases shows that English law is prepared to adopt the phraseology of tort, scope of duty, even in cases where there are parallel obligations in contract and tort. I bear in mind that in the present case, which is formally one of Norwegian law, Wikborg Rein's obligation arises only in contract. But the obligation remains one to exercise a duty of care, and it has been common ground in this court, as before Tomlinson J, that it is appropriate to consider the scope of that (contractual) duty in the terms laid down in the South Australia Asset Management case [1997] AC 191 and the cases which follow it.

Application of SAAMCO to facts

Nevertheless, it seems to me that it is difficult to see Wikborg Rein's duty as being that of a general, as distinct from a specific kind. Wikborg Rein was asked to advise about a specific question, the validity of the proposed swap contracts. It did not have a general retainer to report or notify problems about the proposed transactions. It was not concerned with the creditworthiness of the kommunes. It warned Depfa that it could not execute a judgment against the kommunes, so...