Aneco v Johnson, House of Lords, 18 October 2001

Background

In 1988, J&H invited Aneco to participate in a fac/oblig retrocession of an XL account underwritten by Norman Bullen at Lloyd's. Aneco's underwriter made it clear to the broker that its willingness to participate in these fac/oblig was subject to J&H being able to obtain satisfactory XL protection. Once J&H confirmed that XL cover would be available on acceptable terms, Aneco wrote the Bullen Treaty.

Later, a number of Aneco's XL reinsurers successfully avoided their participations on the basis that they had been told the Bullen Treaty was a quota share, not a fac/oblig. Aneco sought damages from J&H. Cresswell J. at first instance found that J&H had been negligent and awarded damages equal to the shortfall in Aneco's XL reinsurance. On appeal, the Court of Appeal found that XL cover would not in fact have been available if J&H had made full disclosure and that Aneco would not have participated at all if it had known this. It awarded Aneco damages equal to its entire loss under the Bullen Treaty. J&H appealed to the House of Lords.

Decision

By a majority of four to one the House of Lords upheld the Court of Appeal's decision.

In SAAMCO (South Australia Asset Management v. York Montague, 1997), and two subsequent decisions, the House of Lords has given guidance on assessing damages against advisors. In SAAMCO, Lord Hoffmann said:

"Ö a person under a duty to take reasonable care to provide information on which someone else will decide on a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty...