Lowick Rose LLP (in liquidation) (Appellant) v Swynson Limited and another (Respondents)

The case involves a claim by Swynson Ltd, and its principal shareholder and beneficial owner, Mr Michael Hunt, against Hurst Morrison Thomson LLP (HMT) for damages for negligence in the preparation of a due diligence report. Swynson made three loans to Evo Medical Solutions Ltd (EMSL) in 2006, 2007 and 2008, which were secured by charges over EMSL's and Evo's assets. The loans were made on the strength of HMT's negligent report, which failed to identify significant financial problems with Evo. The loans were not repaid, and Swynson suffered loss. In December 2008, Mr Hunt made a further loan to EMSL, which used the money to repay the 2006 and 2007 loans to Swynson. Swynson and Mr Hunt sued HMT for damages. The central issue before the court was whether the repayment of the 2006 and 2007 loans by EMSL to Swynson discharged the loss which Swynson would have been able to recover from HMT, and whether Mr Hunt could recover any loss which HMT had been unjustly enriched at his expense. The court held that the repayment of the loans did not discharge the loss which Swynson would have been able to recover from HMT, and that Mr Hunt could not recover any loss on the basis of unjust enrichment. The reasoning was based on the principle of res inter alios acta, which states that loss which has been avoided is not recoverable as damages, although expense reasonably incurred in avoiding it may be recoverable as costs of mitigation. The court held that the repayment of the loans was not a collateral benefit but was made to discharge the very liability which represented Swynson's loss. The court also held that Mr Hunt could not recover any loss on the basis of unjust enrichment because HMT's enrichment was not at his expense and was not unjust. The court held that the enrichment was not unjust because the absence of the stipulated benefit disrupted a relevant expectation about the transaction under which the money was paid. The court held that Mr Hunt had not been defeated in his expectation of some feature of the transaction for which he may be said to have bargained. The court held that Mr Hunt's mistake did not render it unjust for HMT to escape liability in the context of an unjust enrichment claim. The court held that the purpose of unjust enrichment is to correct normatively defective transfers of value by restoring the parties to their pre-transfer positions. In this case, Mr Hunt got precisely what he thought he was getting from the transaction in question, namely repayment to Swynson of the original loan, and a right to recover the new loan from EMSL. The court held that unless the facts of this case justify a departure from the normal scope of unjust enrichment cases, Mr Hunt's unjust enrichment claim must fail. The final order of the court was that the appeal brought by HMT was allowed, and the claims brought by Swynson and Mr Hunt against HMT were dismissed.