Negligence - failure of auditor to set out technical provisions of actuarial liabilities - claim for loss of chance of sale of company's business not to be struck out at summary hearing

Equitable Life Assurance Society v Ernst & Young: CA (Lords Justice Brooke, Rix and Dyson): 25 July 2003

The claimant, an insurance company, brought an action against its auditors, alleging negligence in failing to set out technical provisions of actuarial liabilities in compliance with the claimant's statutory obligations and claiming substantial damages for the loss of chance of the sale of the company's business and loss of bonus declared.

At a preliminary hearing, the judge struck out the claim for the loss of chance on the ground that it had only lost a chance 'to effect a sale which probably would not have been achieved' and limited the claim for loss of bonus declared.

The claimant appealed and the defendant cross-appealed against the order allowing the bonus declared claim to proceed to trial.

Iain Milligan QC, Robert Miles QC and Guy Morpuss (instructed by Herbert Smith) for the claimant; Mark Hapgood QC and Cyril Kinsky (instructed by Barlow Lyde & Gilbert) for the defendants.

Held, allowing the appeal and dismissing the cross-appeal, that it was wrong to eliminate a claim for the loss of a chance of sale of the company's business as speculative where the claim was alleged to have arisen out of the auditors' negligence; and that in an area of developing jurisprudence, novel points of law should be resolved on the basis of actual findings of fact and it was inappropriate for the court to foresee, especially at the very outset of proceedings, a clear path to the summary dismissal of a case on the ground that, even though the issue of liability needed to go to trial, all issues of quantum ought to go against the claimant.