Expert Witness Journal Issue 67 June/July 2026 - Flipbook - Page 101
“When a claimant seeks damages from a defendant
in the tort of negligence, a series of questions arise:
1.
Is the harm (loss, injury and damage) which is
the subject matter of the claim actionable in
negligence? (the actionability question)
2.
What are the risks of harm to the claimant
against which the law imposes on the defendant
a duty to take care? (the scope of duty question)
3.
Did the defendant breach his or her duty by his
or her act or omission? (the breach question)
4.
Is the loss for which the claimant seeks damages
the consequence of the defendant’s act or
omission? (the factual causation question)
5.
Is there a su昀케cient nexus between a particular
element of the harm for which the claimant
seeks damages and the subject matter of the
defendant’s duty of case as analysed at stage 2
above? (the duty nexus question)
6.
Is a particular element of the harm for which
the claimant seeks damages irrecoverable
because it is too remote, or because there is
a di昀昀erent e昀昀ective cause (including novus
actus interveniens) in relation to it or because
the claimant has mitigated his or her loss or
has failed to avoid loss which he or she could
reasonably have been expected to avoid? (the
legal responsibility question)”
these payments did not mean that the risks of
their doing so were within the risks of harm for
which Lupton Fawcett could be responsible.
ii. The same goes for the claim for expenditure
incurred in operating the Schemes. In a
counterfactual world in which the Schemes were
not CISs, then they would have been operated in
the same way, incurring the same expenditure.
iii. The potential FSMA compensation did, in
principle, fall within the scope of Lupton
Fawcett’s duty. However – had the Schemes
not been CISs then, whilst the potential FSMA
compensation may have been avoided, the
Schemes would still have been run as a Ponzi
scheme, ultimately failing, and investors would
still have had valid claims in contract or tort
against the Claimants which were at least as
good as any FSMA compensation claim.
Conclusion
This judgment reinforces and illustrates, in
practice and on a number of bases, the principle
that solicitors’ liability is limited to losses which
fall within the scope of the legal advice that they
are instructed to provide. This decision will be of
interest to professionals and insurers alike, o昀昀ering
a clear example of how the established scope of duty
principles in Manchester continue to be applied.
The Court of Appeal applied these principles in
considering the Claimants’ three grounds of appeal,
which were explained in the judgment as follows:
i.
Burges Salmon has extensive experience acting in
high-value and complex professional negligence
matters. If you would like to discuss this further,
please get in touch with:
The “£ in £ out” analysis was challenged on the
basis that once an investment was completed,
the Claimants paid out commission together
with legal and professional fees, and so had
su昀昀ered loss over and above any liability to
refund investors;
Caroline Brown
www.burges-salmon.com/our-people/caroline-brown/
Christina Evered
www.burges-salmon.com/our-people/christina-evered/
or your usual Burges Salmon contact.
www.burges-salmon.com
ii. The Claimants had also incurred necessary
expenditure in the early years of operating the
Schemes; and
References
iii. The liability incurred by the Claimants under
FSMA was not just to repay the investors
the amounts received but also to pay them
compensation.
1. Afan Valley Ltd & Ors v Lupton Fawcett LLP [2026] EWCA Civ
2 (05 January 2026)
Applying the Manchester Building Society
principles, the Court of Appeal held that Lupton
Fawcett was not responsible for the losses su昀昀ered;
and that such losses did not fall within the risks of
harm against which Lupton Fawcett’s duty of care
was intended to guard.
Lupton Fawcett’s duty of care concerned the impact
of FSMA if the Schemes were CISs. More speci昀椀cally:
i.
The payment of commissions and fees had
nothing to do with whether the Schemes were
CISs or not. That the Claimants might make
EXPERT WITNESS JOURNAL
99
JUNE 2026
