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Brown v KMR Services Ltd

[1995] 4 All ER 598

Case summary last updated at 04/01/2020 13:51 by the Oxbridge Notes in-house law team.

Judgement for the case Brown v KMR Services Ltd

B was advised on investing by K who, in breach of contract, failed to advise him to limit the number of high risk syndicates in which he was investing. When there was a market crash of unprecedented scale, B sued K and K claimed that the damages were too remote. CA held that although the scale of the crash was not foreseeable, the directly foreseeable loss of money was (i.e. the type of loss was foreseeable and therefore not too remote). Also NB that where a contract applies, even if the claim is brought in tort (as here), the contract standards apply. 

Stuart-Smith LJ: He acknowledges the Victoria Laundry rule that ordinary loss is compensable whereas exceptional or unforeseeable loss is not. However in this case there is no way of dividing up total loss into that which is “ordinary” and that which is exceptional and unforeseeable i.e. If B lost £1m, how much of that is “ordinary”. Any figure would be arbitrary. WORNG: he could look to evidence to see how much of a loss most advisors to investors would have considered normal during that period i.e. how much of a loss would a reasonable advisor have foreseen as possible

Hobhouse LJ: Not only was the type of loss reasonably foreseeable, but to divide up claims of financial loss into parts which are ordinary and parts which are not, we would create bad consequences: An insurer could refuse to pay out part of claim on a contract because it was not “reasonably foreseeable” that the claimant’s loss would be so big. 

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