IN THE SUPREME COURT OF JUDICATURE		QBCMF 98/0058/3
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Cresswell)
								Royal Courts of Justice
								The Strand
								London WC2

								Friday 30th July, 1999
	B e f o r e:

	LORD JUSTICE EVANS
	LORD JUSTICE ALDOUS
	LORD JUSTICE WARD

	- - - - - - 

	ANECO REINSURANCE UNDERWRITING LIMITED
	(IN LIQUIDATION)
	Appellant

	- v -

	JOHNSON & HIGGINS LIMITED
	Respondent
	- - - - - - 
	(Handed down Transcript of Smith Bernal Reporting Ltd
	180 Fleet Street, London EC4A 2HG
	Tel: 0171 421 4040
	Official Shorthand Writers to the Court)
	- - - - - - 
MR I HUNTER QC and MR D JOSEPH (Instructed by Messrs Cameron McKenna, London EC3N 4BB) appeared on behalf of the Appellant

MR C CLARKE QC and MR R SOUTHERN (Instructed by Messrs Clifford Chance, London EC1A 4JJ) appeared on behalf of the Respondent
	- - - - - - 
	J U D G M E N T
	(As approved by the Court)
	- - - - - - 
	©Crown Copyright

LORD JUSTICE EVANS:

1.	Large sums of money are involved in this appeal.  The plaintiffs have obtained judgment against the defendants for damages of U.S.$10,897,752 together with interest in excess of $3.5 million.  They now appeal, contending that the loss they in fact suffered was of the order of $30 million and that the judgment figure should be increased to that amount.  The appeal raises two issues, one of fact and one of law, or mixed fact and law.  The issues are clearly defined by the submissions we have received from counsel, both written and oral.  The submissions are of the highest quality and we are indebted to leading and junior counsel for them.

2.	The figure of $30 million represents (to a very large extent) losses which the appellants have suffered as the result of entering into a contract of reinsurance with a number of syndicates of Lloyd’s underwriters, known by the name of the leading underwriter, Mr N.T. Bullen.  They say that they entered into this contract, which I shall call the “Bullen treaty”, in consequence of negligent advice which they received from the respondents who are reinsurance brokers.  The appellants retained the respondents to obtain reinsurance for part of the liabilities undertaken by them as reinsurers under the Bullen treaty.

3.	Such further reinsurance is sometimes known, perhaps more accurately, as retrocession vis. the further insurance of reinsured risks.  But it has been referred to throughout these proceedings simply as reinsurance, and I shall do likewise.  It was of the type known as “excess of loss on excess of loss” (XL on XL) and it will be convenient to use that description for the cover which the respondents undertook to procure for the appellants.  They did in fact procure it in the form of a number of policies underwritten at Lloyd’s and by companies in London and overseas. The leading underwriter was Mr David King.  But the policies were avoided by most, though not all, of the underwriters on grounds of non-disclosure by the respondents of material facts, namely, the true nature of the underlying insurance which the appellants undertook under the Bullen treaty.

4.	The underwriters’ right to avoid the policies was upheld by an arbitration tribunal appointed by Lloyd’s (Sir Michael Kerr Q.C. and two insurers). The respondent brokers were not parties to the arbitration and the issue whether there was non-disclosure of material facts was re-litigated in the present proceedings.  The trial judge Cresswell J. held that there was, and it followed that, as between the appellants and the respondents, the underwriters who avoided liability under the policies were entitled to do so.  This led to the question whether the respondents failed in their duty, owed to the appellants, to exercise reasonable skill and care in placing the reinsurance on their behalf.  They do not challenge the judge’s findings that there was non -disclosure of material facts and that they were negligent and in breach of duty in that regard.

5.	The value to the appellants of the reinsurance cover which was avoided, had it been effective, has been assessed in the $10 million figure for which judgment was given.  The respondents say that that is the correct measure of damages for their negligence, and the judge agreed with them.

6.	In essence, therefore, the issue is this.  The respondents as reinsurance brokers obtained reinsurance cover for the appellants which the underwriters later avoided.  The grounds for avoidance was the respondents’ failure to disclose material facts.  They accept that there was material non-disclosure and that they were negligent and in breach of duty towards the appellants for that reason.  They submit that the correct measure of damages is the value of the reinsurance cover which the appellants lost when the cover was avoided.  The appellants on the other hand say that if the respondents had made full disclosure to the underwriters, as reasonable competence required that they should, then they would have discovered (if they did not already know or suspect it) that reinsurance cover of the kind which the appellants required was not available in the London market, either at all or alternatively on terms which made commercial sense, and they would have had to report this outcome to the appellants.  This, as the respondents knew, would have caused the appellants to decline to enter into the Bullen treaty, and they would not have incurred the losses of $30 million which they have suffered as the result of what proved to be an imprudent venture.  Hence, they submit, the whole of their losses was caused by the respondents’ breach of duty towards them.

7.	The issue of fact is whether reinsurance cover on `XL on XL’ terms was available in the London market for the liabilities which Aneco undertook under the Bullen treaty, assuming that full disclosure of material facts was made to the underwriters from whom it was sought, and if so, on what terms.  Christopher Clarke Q.C. for the respondents submitted that the burden of proof rests on the appellants as plaintiffs and this was not challenged by Ian Hunter Q.C. (for the appellants) before us.  He submitted rather that the burden of proof is irrelevant unless the Court is unable to decide where the probabilities lie, and that situation is unlikely to arise when, as here, much evidence including expert evidence was given.  In practical terms, the question is whether the evidence shows on the balance of probabilities that the appellants are correct in saying that reinsurance cover was not available in the London market for their liabilities under the Bullen treaty.

The law

8. 	Before the House of Lords’ judgment in Banque Bruxelles S.A. v. Eagle Star (see South Australia Asset Management Corporation v. York Montague Ltd [1997] A.C. 191), the extent of a person’s liability for breach of duty in failing to exercise reasonable skill and care was generally identified as an issue as to the correct measure of damages for the breach.  The defendant was liable to compensate the claimant for losses caused by the breach, subject to rules of law excluding consequences which, because not reasonably foreseeable, were regarded as too remote (Hadley v. Baxendale (1854) 9 Ex.341 (contract) The Wagon Mound [1961] A.C. 388 (tort)).  It was not enough for the claimant to prove that his loss was reasonably foreseeable.  He also had to show that it was caused by the breach, meaning that there was what the law regarded as a “sufficient causal connexion” between them.

9.	The leading authorities emphasised that this legal requirement was not satisfied merely because of some factual connection which might be sufficient for the philosopher (“twere infinite to dwell upon causes of causes”) but not for the practical man whose pragmatic standards were adopted by the Court.  “The interpretation to be applied does not involve any metaphysical or scientific view of causation.  Most results are brought about by a combination of causes, and a search for “the cause” involves a selection of the governing explanation in each case” (per Viscount Simon L.C. in Yorkshire Dale S.S. Co. v. Minister of War Transport [1945] A.C.691 at 698).  This led to enquiries as to whether the breach could be regarded as an effective cause (ibid.) or whether it merely provided the occasion for the event to occur which was regarded as the actual or direct cause (Galoo Ltd v. Bright Grahame Murray [1994] 1 W.L.R. 1360 adopting the valuable judgment of the Court of Appeal of New South Wales in Alexander v. Cambridge Credit Corporation (1987) 9NSWLR 310.  See also March v. E. & M.H. Stramore Pty Ltd (1991) 171 C.L.R. 506 H.C. Austr.).

10.	It was recognised that a different test of causation was applied in cases of fraud from those where the defendant was liable for negligence, including negligent misrepresentation of material facts.  In cases of fraud, the defendant is liable to compensate the claimant “for all the loss he has suffered .....for all the actual damages directly flowing from the fraudulent inducement” (per Lord Denning M.R. in Doyle v. Olby Ltd [1969] 2 QB at 167). 158.  This liability extends even to losses which would otherwise be regarded as too remote: Lord Denning added  “... it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen.”  It followed from this that the claimant in a fraud case could recover compensation for losses which he suffered by reason of entering into the contract which the fraudulent misrepresentation had induced.  This measure of damages restored him to the position in which he was when he was deceived; to the same position as if the fraudulent statement was never made (see now Smith New Court Securities Ltd v. Scrimgeour Vickers Ltd [1997] A.C. 254.)

11. 	In negligence, however, the damages were restricted, not only by the rule of remoteness, but also by what was in effect the narrower definition of legal cause, referred to above.  It was not sufficient for the claimant to show that the loss would not have occurred `but for’ the breach of duty by the defendant.  That would mean that the breach had done no more than “provide the occasion for” the loss.  The “direct” or “effective” cause could usually be identified, but it was not necessary to do so.  The inquiry was whether the breach could be so regarded, a question usually answered by reference to pragmatic considerations and common sense.

12. 	The Court of Appeal in B.B.L. adopted this approach.  For reasons which will appear below, I think it is helpful to summarise their judgment at this stage.  The relevant facts were stated briefly by Lord Hoffmann in the House of Lords:-

	"What is the extent of the liability of a valuer who has provided a lender with a negligent overvaluation of the property offered as security for the loan?  The facts have two common features.  The first is that if the lender had known the true value of the property, he would not have lent.  The second is that a fall in the property market after the date of the valuation greatly increased the loss which the lender eventually suffered”.

13. 	The judgment of the Court of Appeal includes the following:-

	"So the question arises; to what damages is the lender entitled against the negligent valuer?  The general answer given by authority is clear." (401G).

After citing well-known leading judgments, the Court continued:-

	"These unimpeachable statements of principle are the necessary point of departure in considering any novel issue of damages in contract or tort not involved in fraud or intentional wrong doing.  But their practical application calls for observance of other rules.  An injured claimant may be compensated only for loss which is held, on investigation of the facts, to have been effectively caused by the breach."(403A).

In connection with the valuer’s duty, whether in contract or tort it was the same: “to take reasonable care to give a reliable and informed opinion on the open market value of the land in question at the date of valuation.  In the ordinary way V does not warrant what the land would fetch on the open market the value he puts on it, any more than a medical practitioner warrants that he will cure a patient of illness.” (404A).  He was not concerned with future movement in property prices.  “But his concern is with current value only.  He is not asked to predict what will happen in future.  His valuation is not sought to protect L against a future decline in property prices.  In no sense is he a guarantor of L’s investment decision” (404E).

14. 	Turning then to Causation (406B), and after quoting from judgments of Viscount Simon L.C. in Yorkshire Dale Ss. Co. Ltd v. Minister of War Transport [1942] A.C. 691 at 698  (“the effective and predominant cause”) and from Lord Wright in the same case (“the real or efficient cause [chosen] by applying commonsense standards”), the Court referred to the application of commonsense as a “guiding principle” and it identified the valuer’s submission in B.B.L. as being that the negligent over-valuation “did not cause that part of L’s loss which is attributable to the fall in the property market” (406G).  There was no question of remoteness or failure to mitigate (407B) and, after considering a wide range of authorities the Court concluded:-

	"7 Since the valuer’s negligence caused the lender to enter into the transaction, which he would not otherwise have done and because he cannot escape from the transaction at will, we regard that negligence as the effective cause of the loss which the lender suffered as a result.  The market fall cannot realistically be seen as a new intervening cause."(420G).

15. 	The House of Lords approached the matter differently.  Their reasons are set out in Lord Hoffmann’s speech.  Before considering the question of damages, “it is necessary to decide for what kind of loss [the plaintiff] is entitled to compensation .... For this purpose it is better to be begin at the beginning and consider the lender’s cause of action."(211A).  The valuer was required to provide an estimate of the price which the property might reasonably be expected to fetch if sold in the open market at the date of valuation, but on the other hand “the valuer will not ordinarily be privy to the other considerations which the lender may take into account, such as how much money he has available, how much the borrower needs to borrow, the strength of his covenant, the attraction of the rate of interest or the other personal or commercial considerations which may induce the lender to lend.” (211C-F)  The plaintiff must show, however, both that the valuer owed a duty of care to him “and that it was a duty in respect of the kind of loss which he has suffered.” (211H).  This reflects the approach which the Court has adopted in deciding whether or not a professional person owes a duty of care in tort in respect of financial losses which may forseeably be suffered as the result of his negligence, by persons other than his employer on the particular occasion (cf. Caparo Industries p.l.c. v. Dickman [1990] 2 A.C. 605).  “The real question in this case is the kind of loss in respect of which the duty was owed.” (212C).  Asking the question “how is the scope of the duty determined”, Lord Hoffmann said this:-

	"The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking."(212F).

16. 	Lord Hoffmann concluded that the valuer was not liable for all the consequences of his negligence, but only for the consequences of the valuation being inaccurate.  I should quote the following two paragraphs -

	"Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy.  Normally the law limits liability to those consequences which are attributable to that which made the act wrongful.  In the case of liability and negligence or providing inaccurate information, this would mean liability for the consequences of the information being inaccurate” (213C)
	
	“I think that one can to some extent generalise the principle upon which this response depends.  It is that a person under a duty to take reasonable care to provide information on which someone else will decide upon 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 of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties.  It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them."(214C).

Between these two paragraphs, Lord Hoffmann illustrated his approach by reference to an example involving a mountaineer.  He considered that on the Court of Appeal’s principle, the doctor in the example would be held liable for injuries sustained by his patient in a climbing accident merely because the doctor negligently advised him that his knee was fit for the climb, when the accident was in no way related to the condition of his knee.  This result, Lord Hoffmann felt, “offends commonsense because it makes the doctor responsible for consequences which, though in general terms foreseeable, do not appear to have a sufficient causal connection with the subject-matter of the duty.”

17. 	Finally, I should also quote the following paragraph in which a distinction was drawn which forms the basis of Mr Hunter’s submission in the present case:-

	"The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take.  If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action.  If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken.  If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.” (214E).

18. 	In one of the B.B.L. cases, subsequent proceedings before the House of Lords were concerned with a question as to interest arising from the award of damages made in accordance with the B.B.L. decision; Nykredit Mortgage Bank p.l.c. v. Edward Erdman (No.2) [1997] 1 W.L.R. 1627.  Lord Nicholls of Birkenhead summarised the effect of the B.B.L. decision at 1631-2.:-

	“Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property.  When this is so, a professional negligence claim calls for a comparison between the plaintiff’s position had he not entered into the transaction in question and his position under the transaction  That is the basic comparison. ......  However, for the reasons spelled out [by Lord Hoffmann], a defendant valuer is not liable for all the consequences which flow from the lender entering into the transaction.  He is not even liable for all the foreseeable consequences.  He is not liable for consequences which would have arisen even if the advice had been correct.  He is not liable for these because they are the consequences of risks the lender would have taken upon himself if the valuation advice had been sound.  As such they are not within the scope of the duty owed to the lender by the valuer.  For what, then, is the valuer liable?  The valuer is liable for the adverse consequences, flowing from entering into the transaction, which are attributable to the deficiency in the valuation.  This principle of liability, easier to formulate than to apply, has next to be translated into practical terms. ..... If the basic comparison throws up a loss, then it is necessary to enquire further and to see what part of the loss is the consequence of the deficiency in the security.  Typically, the answer to this further enquiry will correspond with the amount of the loss as shown by the basic comparison, for the lender would not have entered into the transaction had he been properly advised, but limited to the extent of the over-valuation.”

19. 	In Platform Home Loans Ltd v. Oyston Shipways Ltd [1999] 2 W.L.R. 518, which was concerned with the application of section 1(1) of the Law Reform Contributory Negligence Act 1945 to damages assessed in accordance with the B.B.L. decision, Lord Hobhouse of Woodborough analysed the matter further.  He concluded that the principle “is essentially a legal rule which is applied in a robust way without the need for fine-tuning or a detailed investigation of causation.” (532D).  He observed that the concept is a legal one, analogous with the rule of remoteness applied in the Wagon Mound (above).  Although the effect of the rule may be to limit the amount of the claimant’s loss that is recoverable as damages, this is not because an artificial cap is placed on the amount of damages recoverable.  Rather, quoting from Lord Hoffmann’s speech, “the appearance of a cap is actually the result of the plaintiff having to satisfy two separate requirements: first to prove that he has suffered loss, and secondly, to establish that the loss fell within the scope of the duty he was owed” ([1997] A.C. at 220).  This was the rule of law introduced by B.B.L.

20. 	These authorities mean that the former search for an effective cause has been replaced by an inquiry into the scope of the duty of care which was owed by the defendant to the claimant in the particular case.  If the claimant has suffered loss which factually can be regarded as having been caused by the defendant’s breach, is it a kind of loss for which the defendant is liable, as a matter of law?  Relevant considerations are whether there is a “sufficient causal connection with the subject matter of the duty” (Lord Hoffmann at 214B) what the reasonable expectations of the claimant and the defendant were (paraphrasing 212F); and the result must not offend common sense (214B).  Specifically, the fact that the claimant would not have entered into a contract, under which the loss has been suffered, if the information or advice he received from the defendant and acted upon had not been negligent, does not mean that the defendant is liable for the whole of that loss.  He is only liable for that part of the loss which is regarded as a consequence of the information or advice being wrong. The link is only established if there is a sufficient factual connection between the loss in question and the wrongness of the information or advice.

21. 	In Royal Greek Government v. Minister of Transport (1949) 83 Lloyd’s Rep. 228.  Devlin J. (as he then was) said this:-

	"“Questions of causation can give rise to problems both of law and of fact; once the problem has been formulated, it will be seen whether its solution requires the application of some legal principle,. or arises out of some point of construction, or is to obtained by resolving a matter of fact or inference from fact.  At the threshold of the inquiry there often lies the question whether a suggested cause is in the legal sense a cause at all ...." (236).

Although that case was concerned with a contract to indemnify, these remarks are of general application and they remain valid today, with the possible qualification that the last sentence quoted has to be modified in relation to claims for breach of a duty to exercise skill and care such as arose in B.B.L.  The question whether a breach of duty was a cause of the claimant’s loss in a legal sense is replaced by, did the defendant’s duty extent to compensating the claimant for the kind of loss which he has suffered?  I doubt, however, whether this redefinition of the legal concepts materially affects either the substance of the question or the range of factual matters which is relevant to the answer.  When the claimant has entered into a contract with a third party in consequence of the defendant’s negligent and erroneous statement of information or advice, he cannot recover damages for the loss caused to him by doing so, except to the extent indicated in B.B.L.

22. 	As Millett L.J. said in Bristol and West B.S. v. Mothew [1998] Ch.1 at 12 (a solicitor’s negligence case):-

	"The measure of damages is not necessarily the full amount of the loss which the plaintiff has suffered by having entered into the transaction but only that part if any of such loss as is properly attributable to the inaccuracy of the information.  If the plaintiff would have suffered the same loss even if the facts had actually been as represented the defendant is not liable."

23. 	These statements of the law are not challenged by Mr Hunter.  Indeed it is common ground that the damages recoverable by reinsureds from their brokers, for breach of duty in obtaining cover which underwriters are entitled to and later do avoid for non-disclosure of material facts, are as a general rule limited to the value of the cover which they were instructed to obtain and reported that they had obtained.  His submission is that the scope of the respondents duty was wider in the present case, and that accordingly the damages which the appellants are entitled to recover is greater.  He relies upon the passage from Lord Hoffmann’s speech (214E) quoted above, where the person owing the duty of skill and care undertakes to advise on the course of action which the other should pursue.  The issue therefore, is whether the present case is within that category.

24. 	Mr Hunter points out, however, that the B.B.L. principle involved an assumption which he describes as a fiction, namely, that the claimant would have suffered the loss in question even if the negligent advice or information had been correct.  In fact, he would not have done so, because in that eventuality he would not have proceeded with the transaction which subsequently caused the loss.  If advised that his knee was unfit for the expedition, the mountaineer would not have been on the mountain and he would not have been injured as he was.  What can be said is that the injury occurred for reasons wholly unconnected with the subject-matter of the advice.  The wrong advice led to the claimant being there; in the outmoded language of the earlier authorities, it provided the occasion for the loss or injury, but could not properly be regarded as the legal or effective cause.  The more modern phraseology which I would adopt is that the risk was one which the claimant retained for himself.  He cannot say that the defendant assumed responsibility for it.

25. 	The primary considerations, in my judgment, are (1) the scope and nature of the risk which the defendant undertook , and (2) whether the claimant kept for himself the risk of loss or injury which in fact occurred.  Both must be objectively assessed.

26. 	A further factor makes the inquiry more complicated in the present case.  The appellants assert that no reinsurance cover was available on the market for the liabilities which they were proposing to undertake.  The judge held that it was, hence the first ground of appeal on that factual issue.  But if the appellants are correct, then losses they are entitled to recover under the BBL principle cannot be measured against the value of the cover which the respondents said that they had obtained for them.  No such cover existed.  On the other hand, the appellants entered into the Bullen treaty on the basis that it did.  This does not make the principle any easier to apply.

27. 	The liability of a broker who obtains re-insurance cover for his clients, the original insurers, was considered in Yossell v. Bland Welch & Co. Ltd [1990] 2 Lloyd’s Report 431 (known as “Superhulls No.2).  It provides direct assistance in the present case, but Mr Clarke submits that, in the light of the BBC decision in the House of Lords, it must be held to have been wrongly decided.  He points out also that there was no issue as to the correct measure of damages, which he submits further detracts from the authority of Phillips J.’s decision.  Nevertheless, the case merits careful consideration.

28. Superhulls No.2 - the facts

	London brokers (Sedgwick) were instructed to obtain cover for building risks about to be undertaken by insurers (Lloyd’s underwriters  and London companies) of Avondale Shipyard Inc. in the U.S.A.  The brokers knew that it would-be necessary to offer insurers excess of loss reinsurance if a significant proportion of the risk was to be successfully placed, and they invoked the assistance of reinsurance brokers (Bland Welch).  In the result, a master excess of loss cover (the Superhulls cover) was obtained, but it was subject to a 48 month clause under which the period of (reinsurance) cover terminated in respect of any vessel 48 months after construction began.  No such clause was included in the insurance contracts which the insurers then agreed.  Had the insurers been told that the reinsurance cover was subject to the 48 month clause, “they would not have accepted the reinsurance and would have written greatly reduced lines on the original insurance” (p.435).  They claimed as damages for negligence, which was established, “the payments that they have had to make in consequence of being induced by the broker’s misrepresentation to write larger lines on the original insurance” (ibid.)  It was agreed that reinsurance cover without the 48 month clause i.e. sufficient to indemnify the insurers in full (their claim against reinsurers failed: Superhulls Cover No.1 1990 2 Lloyd’s Rep. 423) could not have been obtained (p.443).

29. 	The findings of negligence were summarised by the judge as follows -
	"I have held that the brokers were in breach of duty in (i) Failing to give the insurers accurate information as to the reinsurance cover available.  (ii) Failing to draft the contract wording with proper skill and care.  (iii) Failing to inform the insurers that the reinsurance cover obtained did not comply with the cover ordered ....”(p.458).

The damages claim was put forward on two grounds, the first being -
	"On the basis, now common ground, that it was impossible to obtain sufficient capacity for the Reinsurance slip without the inclusion of the 48-month clause, the loss ... was the difference between the sum that [insurers] in fact paid .. and the sum that they would have paid had their overall participation been limited to the extent they say it would have been but for their ignorance of the period limitation in the Reinsurance"(p.463).

The judge then recorded that leading counsel for the brokers (both Sedgwick and Bland Welch) “accepted that, subject to liability, the first alternative represented the correct approach to assessment of damages”.

30. 	The judgment was given in March 1990.  Among the authorities cited was the Court of Appeal’s judgment in Banque Keyser Ullman en Swisse S.A. v. Skandia  Insurance Co. Ltd (UK) [1998 2 Lloyd’s Rep. 513, but this was later reversed by the House of Lords ([1991] 2 AC  249) on grounds which included the causation issue raised in that case and which Lord Hoffmann relied upon as authority for the BBL decision ([1997] AC at page 214G).  March 1990 of course was before any of the judgments in BBL itself, but it is noteworthy that Phillips J. decided that case in favour of the defendants on this issue ([1995] 2 All ER 759, and see generally per Lord Hobhouse in Platform Home Loans [1997] 1 WLR at 531).

31. 	Superhulls No.2 was not cited in BBL, but there is no indication in the speeches in the House of Lords that it was regarded as wrongly decided.  The question therefore whether it is inconsistent with the BBL principle remains open.

I shall return to this aspect of the legal issue after considering the facts to which the BBL principle has got be applied in the present case.

Background

32.	The appellants (whom I shall call “Aneco”) are a Bermudan company, now in liquidation.  They were represented for the purposes of the relevant transactions by Mr Jonathan Crawley.  He was approached in November 1988 by a reinsurance broker, Mr Paul Forster, on behalf of the respondents (“J & H”).  Mr Forster was acting on behalf of Mr N.T. Bullen, the leading underwriter representing four Lloyd’s Syndicates who wished to reinsure themselves against excess losses on their Marine Account (“Marine XL Account”).  The proposed reinsurance was neither for a proportionate share of the Bullen risks (quota share) nor against specific risks only (facultative), but rather a mixture of the two.  It was described as facultative/obligatory, called “fac/oblig” in the market, where it was known to be unpopular with some underwriters.  Its nature is described in Article III(i) of the Bullen Treaty which Aneco later entered into:-

	"The Reassured may cede .... and the Reinsurers shall accept .... risks up to a maximum of $25,000 any one unit in respect of any risk as may be declared."

So the reassured, Mr Bullen, could decide which risks to declare under the treaty, but the reinsurers Aneco were bound to accept them, within the treaty limits.  Some reinsurers regarded this as unattractive business, because they would not bear a proportionate part of the reassured’s account, good risks as well as bad, and they would not receive a proportionate part of the whole of the premium income.  Instead, they could be discriminated against and find themselves reinsuring the poorer risks without the better ones: the process known as “anti-selection” of risks.  The treaty contained practical safeguards for Aneco as reinsurers, but the market’s antipathy towards fac/oblig terms remained.

33.	Against this background, Mr Forster said that he could obtain further reinsurance cover for Aneco, if Aneco accepted the Bullen Treaty, and Mr Crawley instructed him to do so.  In this respect, Mr Forster on behalf of J & H was acting as agent for Aneco, and he undertook to approach insurers at Lloyd’s and in the companies’ Market, both in London and overseas.  He was to obtain Excess of loss cover for Aneco (hence “XL on XL”) and the practice of the market was such that separate reinsurances were placed for different `layers’ of cover, with individual premiums for each layer.

34.	Two things should be noted about the XL market at the time, November 1988, one general and one specific.  The Piper Alpha disaster earlier in the year had caused enormous losses and placed unprecedented burdens on the XL market, which underwriters owing to previous low rates of premium were ill-equipped to bear.  This factor was independent of the `spiral’ and other abuses of the market which reduced still further the capacity of underwriters to sustain the increased level of claims (see the judge’s general description in Society of Lloyd’s v. Clementson [1997] LR 175 at 207).  With regard to the future, however, market opinion was divided.  Some thought that with increased premiums and the statistical unlikelihood of further disasters occurring so soon after Piper Alpha the business was attractive for underwriters; others no doubt were more cautious, and in the event other disasters followed in 1989/1990 and the markets were overwhelmed, particularly at Lloyd’s.  Mr Crawley accepted that Aneco inclined towards the former view.  That was part of the attraction of the Bullen Treaty for him, if sufficient reinsurance could be obtained.

35.	The specific factor was that Mr Forster had recently embarked on placing the reinsurance of another fac/oblig treaty and was succeeding in obtaining cover.  This was the Mander Treaty, which I shall have to refer to in greater detail below.  Its general relevance is that it gave Mr Forster some confidence that the market’s resistance to fac/oblig treaties could be overcome.

The contracts

36.	The contracts subsequently entered into were the Bullen Treaty and a subsidiary treaty with Mr C.H. Bohling’s Syndicate which need not be separately mentioned, and six contracts of reinsurance (retrocession) representing the six layers of XL on XL cover which Mr Forster obtained for Aneco.  The layers and corresponding premiums were as follows:-

	1.	$400,000 excess of $200,000		-	30%
	2.	$600,000 excess of $600,000		-	17.5%
	3.	$1.2 million excess of $1.2. million	-	10%
	4.	$1.6 million excess of $2.4 million		-	 7.5%
	5.	$2 million excess of $4 million		-	 6.25%
	6.	$2 million excess of $6 million 		-	 5%

The aggregate cover therefore was $7,800,000 excess of $200,000 each and every loss; but the contracts provided for two reinstatements at the same rates, so that the total cover was $23,400,000 excess of $600,000. The overall adjusted Rate on Income was 51.025%, meaning that reinsurers received that proportion of the reassured’s (Bullen’s) premium for the ceded risks.  Since the estimated premium income was $1,350,000, the initial Deposit Premium was $690,000.

37.	The leading underwriter for each layer was Mr David King, a prominent figure in the XL market.  Substantial lines were underwritten on all the layers by Mr Adams and Mr Green.  Between them they signed for between 20 and 40% of each slip, and there was evidence that for a risk of this sort the acceptance of two or three leading underwriters each for a substantial percentage was essential if following underwriters were to be induced to complete the slips.

Avoidance

38.	Reinsurers representing about 70 per cent. of the security subsequently avoided the contracts of reinsurance.  The Lloyd’s Arbitration Tribunal by an Interim Award dated March 1995 held that they were entitled to do so.  Thirty insurers were respondents in the arbitration, and Aneco the claimants, but J & H were not parties to it.  The judge found that they failed to make a fair presentation of the risk and that there was misrepresentation and non-disclosure of material facts.  As to the former, the judge said this:-
	"The Bullen treaty was a fac/oblig treaty.  With a fac/oblig treaty, the reinsured has the right to select which risks he wishes to cede to that treaty and the reinsurer is obliged to accept those risks.  This contrasts with a quota share treaty where the reinsured is obliged to cede, and the reinsurer has to accept,. those risks covered by the quota share treaty.  The Bullen treaty could not fairly be described as a quota share treaty.  At the time of the presentations the only treaty that Aneco had formed an intention to write (or had written) was the Bullen treaty (and it accounted for the entire EPI).  The brokers should have disclosed that the only treaty that Aneco had formed the intention to write (or had written) at the time of the presentations was a fac/oblig treaty of the Bullen syndicates.  This should have been disclosed even if it was anticipated that Aneco might participate in and wish to reinsure other business at some later date.  A fair presentation of the risk required disclosure that the underlying business at the relevant time consisted of a fac/oblig treaty for the N T Bullen syndicates,  covering excess of loss Business where the rate on line of the original contract fell between 2% and 20%.  Further the information sheet stated “...1.  Estimated Premium Income US$1,200,000 to US$1,350,000.  2.  Aneco intend to participate in London Market Proportional Contracts covering Excess of Loss business having original Rates on Line of between 20% and 2% ...”  This gave the impression that the EPI was derived from a number of contracts.  The way the EPI was put in paragraph 1 would not indicate that such premium would be received under one face/oblig from N T Bullen only and this should also have been disclosed by the brokers.  As to the circular to the overseas market Mr Forster accepted that there was an element of ambiguity.  This understated the position,  An underwriter overseas reading the presentation would probably have reached the conclusion that the N T Bullen contract referred to was a quota share contract.  The matters referred to above should have been disclosed to the overseas market.,  The presentation to the overseas market was seriously misleading."

He stated his conclusion as follows:-
	"Having carefully considered all the evidence in the case I find that the brokers should have disclosed the following material circumstances:-
	
	(i)	that the only treaty that Aneco had formed the intention to write (or had written) at the time of the presentations was.
	
	(ii)	a fac/oblig
	
	(iii)	reinsurance of the Bullen syndicates and that
	
	(iv)	the whole of the EPI (US$1.2 to US$1.35 million) was derived from this (one) fac/oblig treaty.
	
	To the extent that J & H failed to disclose all (or some) of the above material circumstances, they failed to act with reasonable care and skill."

39.	There were further findings of misrepresentation and non-disclosure of material facts to following underwriters (including in the circumstances of this case the fact that the leading underwriters’ subscription had been obtained by misrepresentation and non-disclosure to them: judgment 87F).  Finally -

	"It follows that J & H were in breach of the implied term in the contract between Aneco and J & H that J & H would act with reasonable care and skill in and about obtaining quotes for and placing the excess of loss reinsurance and that J & H were  negligent, to the extent set out above."

	J & H does not challenge these findings.  At this stage it is sufficient to note that the principal headings of material facts, which were misrepresented or concealed, were (1) the fac/oblig nature of the Bullen Treaty, which was presented to underwriters as a “Special Priority Treaty”, and (2) the Bullen Treaty was the only treaty (apart from Bohling) which Aneco had so far entered into, although it intended to write more in the belief that XL business would become more favourable for reinsurers, as the result of increased premiums and the remote risk of further disasters in the wake of Piper Alpha.

Issues

41.	The judge heard many witnesses and his judgment contains careful assessments of the impressions he formed of them.  He was concerned primarily with the allegations of misrepresentations and non-disclosure and with the materiality or otherwise of the facts that were misrepresented or concealed.  His findings on these issues led to his conclusion that B & H acted negligently and in breach of the duty to exercise skill and care which they owed to the appellants.

42.	These matters are no longer in issue before us.  The emphasis has changed.  We are concerned with one factual issue only, namely, whether J & H could have obtained reinsurance for Aneco if they had made full disclosure of all material facts.  This involves asking whether “alternative security” was available to Aneco in the insurance market at the time, November/December 1988, and if so, at what rates.

43.	We also have to consider the evidence as to the relationship between J & H and Aneco, specifically to identify the extent of the responsibility undertaken by the former, so as to apply the BBL principle to the damages claim.  Here, the primary facts are not in issue, although the application of the principle to them forms the central issue in the appeal.

44.	I shall begin, therefore, with a summary of the evidence and the judge’s findings as to the circumstances in which J & H came to place the reinsurances for Aneco.

The placing

45.	In November 1988 Mr Paul Forster was a broker of about fourteen years’ experience and had been an Associate Director of J & H since 1985.  He became a director in January 1989.  He had had previous dealings with Aneco and knew from some time in September 1988 that Mr Jonathan Crawley “was keen on developing Aneco’s marine excess for loss portfolio .... by way of writing proportional contracts on excess of loss business in the London Market” (Statement para.3.1).  Mr Crawley agreed with this - “he was aware of my desire to try to get involved in other proportional reinsurances of London market marine excess of loss books of business” (Affidavit para.3).

46.	Mr Forster described how he identified Mr Bullen as a “potential client for Aneco” (Statement para.3.3) and contacted him in late September with a view to arranging a proportional reinsurance on his excess of loss account.  He drafted a Special Priority Treaty based on his previous experience with Aneco which he believed would be attractive to Mr Bullen.  He and Mr Bullen then produced an Information Sheet, and on 15 November he approached Mr Crawley, writing as follows:-

	"SUBJECT: N.T. Bullen - Special Priority Treaty
	We are very pleased to offer you a share in the above contract, full details of which please find attached.
	
	As you probably know Norman Bullen is a very well respected Marine underwriter who has underwritten an Excess of Loss account for many years. .....
	
	The treaty is new this year and has been designed to enable Norman Bullen to write a greater spread of Excess Loss business in the middle to top layer).  We feel that this contract will enable you to participate in a good spread of business which, as a consequence of the `Piper Alpha’ loss, is now generating considerably more premium than last year, indeed, if our own experience is anything to go by most layers this year at this level are at least doubling in price.
	
	As this is the first year the treaty will be in operation we do not have a proven record but would expect any loss falling under the contract to be a single “Market” type loss in the nature of `Piper Alpha’ disaster.  The estimated income each unit is $300,000 with Bullen expecting to place up to 10 units."

The attached Summary included:-
	"Type of business to be ceded to the above captioned treaty
	
	1. Whole marine accounts and specific marine accounts top layers only .... As with an approximate guide rates on line will be between 10% and 3% ....."

47. 	In a further letter dated 18 November Mr Forster wrote:-
	"..... 
	
	(1) Bullen is very confident that he can make the business and it is possible that income projections may well exceed $300,000 a unit
	.....
	(4) Would suggest you buy XL protection for up to 10 times income and would envisage comprehensive protection being available at between 30% to 40% of N.P.I. ....."

A meeting took place between them on 30 November.  Mr Bullen, his deputy underwriter and one of the joint managing directors of J & H were also there.  In the course of the meeting Mr Bullen indicated, in response to a request from Mr Crawley, that it was his intention to cede business with rates on line of between 2% and 20% rather than the original figures of between 3% and 10%.  The Information Sheet was amended accordingly.  Mr Forster’s note of the meeting includes:-

	"Special Priority Treaty
	
	Crawley has agreed to write 3-3½ Units on basis P.I. $400- - -$450 - 
	Changes from original presentation:- ......"

48.	On 5 December Mr Crawley sent the following telex to Mr Forster:-
	".... 
	This is merely to confirm that we will do you up to 3.50 PCT lines part of ten lines of which the reassured will retain not less than two lines ...
	Our participation must be subject to your obtaining satisfactory XOL terms for our net account excess of hopefully not more than DLRS 100,000"

49. 	Meanwhile, Mr Forster prepared an Information Sheet for the purpose of obtaining reassurance for Aneco.  This is dated 2nd December and reads:-
	"ANECO REINSURANCE UNDERWRITING LTD and/or QUOTA SHARE REINSURERS if any
	
	1. Estimated Premium Income US $1,200,000 to US $1,350,000
	
	2. Aneco intend to participate in London Market Proportional Contracts covering Excess of Loss business having original Rates on Line of between 20% and 2% .....".

On 5 December Mr Forster approached a leading market underwriter, Mr David King, and obtained preliminary quotations from him.  He then wrote to Mr Crawley confirming the meeting on 30 November and continued:-

	"Your Excess of Loss Protections
	
	We are pleased to advise the following quotations obtained from David King together with a suggested slip format and information sheet.  You will note from the wording we are trying to give you some flexibility should you decide to participate in similar additional contracts.
	[Rates of between 30% and 8.75% were quoted for four layers of cover totalling $3.8 million excess of $200,000.  The deposit premium of  $515,000 presented 43% of the estimated premium income for Aneco]
	
	.....In the current Marine Excess of Loss on Excess of Loss Market we feel that paying 42% of income is not unreasonable ..... We trust that you will be in agreement to these terms and look forward to your advices".

50. 	Mr Crawley, however, replied:-
	".....your draft outwards slip is also O.K. I do however find Dave King’s terms exhorbitant (sic) and they frankly spoil the attraction of betting (sic) involved .....
	
	see what you can do to improve"

Mr Forster in fact had obtained quotes for two further lines but he had not included these in his first letter.  He reported these by telex on 6 December, adding two lines which increased the cover to $8,000,000 excess of $200,000, with a total deposit premium of $690,000, or 51% of EPI.  On the same day he sent a summary of revised quotations obtained from Mr King and added the following:-

	"Notes
	......
	
	(3) We will contact Bullen tomorrow and get some idea of aggregate exposure from business written & first Jan.  this will give us a more accurate idea as to how much protection you should purchase at this time with a view to perhaps buying more as and when aggregates increased throughout the year.
	
	Trust these revised costings are more to your liking."

51.	Mr Crawley replied:-
	"Many thanks your revised terms for XOL protections which although somewhat more palatable now depend upon premium income generated in order to make commercial sense ....."

On 7 December the following exchange of telexes took place:-
	(Forster to Crawley)
	“Further to todays telcon and our recent exchange of telexes.  Would confirm that following todays conversation with Norman Bullen he has maximum of 3 units available for you.  He is very confident that premium per unit will be at least USD 450,000 providing market follows current trends .....
	
	As advised although maximum exposure will not occur until at least mid-way through the year we would recommend you buy up to the USD 8,000,000 coverage we have quoted now as feel retro market is likely to contract even further during the year and may mean if we stagger placements there will not be any capacity available at a later date.
	
	Also as discussed I will proceed to place protections on your behalf on terms as advised in our fax 6 December and will endeavour to obtain payment terms .....
	
	I would like to take this opportunity in thanking you both for your support in Bullen’s contract and your kind orders."

	(Crawley to Forster)
	"Many thanks for your telex and we confirm our acceptance of three units and we also confirm your firm order to place 7,800,000 excess of 200,000 per your fax of yesterday, except that ....."

52.	Mr Forster then presented the reinsurance slips which he had prepared on behalf of Aneco and they were scratched (accepted) by King (15%) and Mr Green, whom he had also approached, on 8 December, and by Mr Adams on the following day, as to 40% on the first layer and between 20 and 35% on the other five layers.  The remaining sixty per cent was underwritten by Lloyds and Company underwriters on various dates in January 1989, following two approaches to the overseas market.  The situation on 30 December was explained in a telex to Mr Crawley, showing that 100 per cent was placed on each of the first three layers and between 73 and 91 per cent on the remaining three layers.  On this basis he signed the slip evidencing Aneco’s participation as to 3 units in the Bullen Treaty.

53.	The judge found that “at the meeting on 30 November 1988 Mr Crawley made it clear to Mr Bullen and to Mr Forster that if Aneco were to participate on the lines discussed, such participation would be subject to J & H being able to obtain satisfactory excess of loss protection for Aneco”.  The appellants rely upon this finding, which is not challenged, and upon further evidence which makes it clear that Mr Crawley would not have entered into the Bullen Treaty unless satisfactory reinsurance was arranged, as the following extracts of Mr Forster’s evidence show:-

	"Q.	On the basic proposition that it made it clear that he would only consider taking units on the Bullen Treaty if you could find satisfactory excess of loss protection: you would agree with that?
	
	A.	As he wanted in the past, if he was to participate in any marine business, he wanted excess of loss protection”
	
	A.	Yes, for him to have an involvement in any marine treaty, he wanted excess of loss protection for that, absolutely."

54. 	Having said in evidence at the arbitration hearing “It was dependent on placing reinsurance coverage for Aneco, yes”,  Mr Forster was asked at the trial whether “the inwards cover and the outwards protection were dependent one on the other, and went hand in hand” and he answered, “yes, they were” and he agreed that they were, in the judge’s words, back-to-back”.  He was then asked:-
	"Q.	You knew, did you not, that if you had said to Mr Crawley that excess of loss reinsurance protection was not available or was not available at an affordable premium, then he would not have written the inwards business?
	
	A.	The whole thing would have collapsed, yes."

Similarly, Mr Crawley in his Affidavit:-
	"Paul Forster knew that my intention to write the Bullen Treaty was entirely dependent upon his ability to procure sufficient marine excess of loss protection for Aneco’s exposure to Bullen, and to any other treaties of a similar nature which might, in the future, be accepted by Aneco" (para. 20).

Alternative Security

55.	The judge made his findings on this issue in the section of his judgment dealing with the damages recoverable for J & H’s breach (p.91 onwards).  He asked the hypothetical question:-
	"....whether alternative security would (or would not) probably have been available at a broadly similar price if there had been a fair presentation of the risk?"(page 94).

He analysed the evidence in 17 numbered paragraphs (pages 94-99 of the judgment) and expressed his conclusion as follows -
	"16.  A considerable amount of evidence was devoted to an attempted examination of whether alternative leaders might have been available.  It is common ground that a number of candidates who were discussed would not have led the risk.  I do not propose to review this evidence.  The plaintiffs made inroads on the list put forward by the defendants.  But the exercise was inevitably somewhat artificial.  Suffice it to say that although it would undoubtedly have been  difficult to find a leader following a fair presentation of the risk, I find that on a balance of  probabilities a leader would have been found in that market at that time if approached about the time that Mr King was approached.  I suspect that some amendments or adjustments would probably have been required by the new leader.  Following such adjustments and amendments I consider that a leader would have been found at broadly similar rates acceptable to Mr Crawley.  In my view Mr Crawley would probably have been rather more flexible in his approach than he indicated when giving evidence.  I do not consider that the broking to the following market would have been easy.  J & H would have had to exert themselves and employ all available (proper) broking techniques and would probably have had to draw on the services of a more senior broker.  But subject to the above I consider that J & H would probably have been able to complete the placement albeit with difficulty at a broadly similar rate but using a markedly different list of following underwriters, with much more extensive use of the London Companies and overseas markets.  I emphasis that in reaching these conclusions I have sought to focus on the state of the market in December 1988.  Hurricane Hugo, Exxon Valdez and Phillips Petroleum were yet to come as were the judgments of this court in Gooda Walker, Feltrim, Rose Thomson Young and Bromley."

56.	In paragraph 17 he emphasised that he sought to focus on the state of the market as it was in December 1988. This reflected what he had said in paragraphs 1 and 2, namely, that it was “vitally important .... to put on December 1988 spectacles” and necessary to “put aside what is now known with the benefit of hindsight”.  This is common ground and Mr Hunter does not suggest that the judge was wrong to place much emphasis on this factor.  In practical terms, it means that rates had increased after the Piper Alpha disaster, and they might increase further, and that the risk of another serious disaster following so made those rates attractive, to some insurers at least.  In paragraph 3, the judge referred to Mr Crawley’s perception of the risk, which made him want to enter the market in late 1988, and to his evidence that “the likelihood of another Piper Alpha in 1989, or for the next 10 years, was remote”.

57.	We can concentrate, therefore, on the judge’s findings nos. 4-15.  Broadly, the appellants contended that the difficulty which Mr Forster experienced in placing the reinsurances, even when material facts (which by definition were likely to influence insurers) were not disclosed, demonstrated that with full disclosure the placing would not have been achieved.  They relied also on J & H’s records of the placing of the Bullen and Mander treaties at about the same time (known as the placement sheets); on the evidence of underwriters which was directed to the materiality issue i.e. they were asked what their reaction would have been if the fac/oblig nature of the Bullen Treaty had been disclosed to them; on the evidence of expert witnesses on that issue; and on evidence as to the state of the XL on XL market, which was described as tight and contracting even at that time

58.	The respondents contended that the records of the actual placing, and of the Mander placing, were of limited value, for a number of reasons.  Individual underwriters might decline to follow where they would be prepared to lead.  Some would be prepared to accept a line to “oblige” the broker, hoping to be offered a line by him on some more attractive business,.  Much depends on the relationship between individual underwriters and the brokers, and on the latter’s knowledge of the Lloyd’s and Company Markets, in London and overseas.  Underwriters might change their position from day to day or over a period.  In short, a competent broker was able to place the reinsurances on behalf of Aneco, even with full disclosure, on terms closely resembling those achieved by J & H and which would have been acceptable to Mr Crawley.  It was impossible to say that a risk of this sort could not be placed in the home and overseas markets, and they relied in particular on the agreed outcome of a meeting between two of the expert witnesses:-
	"We see what each other is saying and neither can be certain regarding placement or otherwise"

vis. the possibility of placement cannot be excluded.

59.	I have already referred to the legal issue regarding burden of proof and expressed the view that the issue does not arise in this case.  I approach the matter on the basis that the appellants have the burden of proving that alternative security was not available, and that the standard of proof is the balance of probabilities.  The question therefore was accurately formulated by the judge (“would (or would not) probably have been available”) with attention focused on the negative proposition which the appellants have to prove.

60.	Paragraph 4 of the judge’s findings requires some amplification.  It reads -
	"I have held that the brokers failed to make a fair presentation of the risk.  Understandably a number of witnesses who gave evidence have strong views about the way the risk was broked.  It is (understandably) particularly difficult for such witnesses to provide balanced assistance to the court on the subject of alternative security.  Attitudes (understandably) have probably hardened in some cases."

The witnesses referred to had expressed their views on the issues of non-disclosure and materiality.  Those who supported the appellants said, in broad outline, that the fac/oblig nature of the Bullen treaty was unpopular with underwriters, which of course was disputed by those called for the respondents.  Hence the judge’s observation that it was difficult for them to provide balanced assistance on the subject of alternative security vis,. whether there were insurers willing to accept the risk if full disclosure had been made.  The burden of the respondents’ expert evidence was that the fac/oblig nature of the Bullen treaty was not material because the XL on XL cover was remote from the underlying insurances, and they described it as “opaque”.  The judge rejected that evidence in his findings on materiality.  It follows that the question whether alternative security was available has to be approached on the basis that the fac/oblig nature of the Bullen treaty was material for underwriters to know.

61.	The factual background is set out in the judge’s paragraph 6 - “there were about 200-250 marine syndicates at Lloyds in December 1988 of which a “major percentage” wrote excess of loss including XL on XL”.  He does not specify the number who were willing to write XL on XL, but they can be further identified from the respondents’ placement sheets.  These show that about 90 Lloyd’s underwriters were approached on the Aneco and Mander slips before the layers were fully subscribed.  It is unlikely that there were others who were not approached, given the strenuous efforts which the respondents made over a lengthy period to place the Aneco cover.  In addition, there were 111 ILU companies and 15 other companies in the London market, of whom 44 were approached, and the same comment applies.

62.	As for the overseas market, 20 companies were approached and the judge referred to evidence from Mr Wood, the respondent’s expert witness, that he had placed two comparable treaties with twenty overseas companies in seven European countries.  The judge’s finding was -
	"Mr Wood accepted that most of the relevant Lloyd’s market (potential leaders and followers) appeared in the marketing sheets (along with some members of the London companies market) but it is necessary to consider all potential sources of reinsurers."

Before us, the issue was further refined which makes it more manageable in practical terms.  The respondents accepted (1) that it was necessary to identify a potential leading underwriter and one or two others who would support his lead, as Mr Adams and Mr Green did for Mr King, each of them signing for a significant (10/15 per cent) share; and (2) that the leader, whether a Lloyd’s underwriter or a company, had to be found in the London market, rather than overseas; and (3) that leaders would be unlikely to accept on an “oblige” basis.  Bearing in mind that the burden of proof is on the appellants, the question becomes whether two or three leading underwriters, Lloyd’s or companies, in the London market can be identified who would not have been averse to reinsuring Aneco on substantially the same terms as were in fact obtained from Mr King, assuming that full disclosure was made.  The judge accepted that Mr King would not have led the risk (para.15).

63.	The judge referred to the expert evidence on this issue in paragraph 5 of his findings -
	"5.  Nor is this an easy question for the experts.  There is a limit to the extent to which they can speak as to the likely attitude of other syndicates/companies (whether in the London market or overseas) in December 1988."

He added that the experts’ agreed comment that they could not be “certain” was “revealing”.  There were four expert witnesses.  Mr Berry (underwriter) and Mr Knight (broker) were called by the appellants.  The judge described Mr Berry as “a thoroughly practical underwriter” and said “I was particularly impressed by Mr Berry’s evidence”.  He was also “particularly impressed by Mr Knight’s evidence as to what was required from a broker in the present case to ensure a fair presentation of the risk”, evidence which was “logical and consistent and made commercial sense”.  It included “The experienced broker would know exactly how underwriters in the London market perceived fac/oblig contracts”.  The judge, however, added this qualification -
	"Mr Knight was not a specialist in XL on XL on whole account business and this should be borne in mind in considering his evidence as to alternative security."

Mr Wood (underwriter) and Mr Beer (broker) were called for J & H.  Mr Wood had limited experience in the Lloyd’s market and had never been a marine underwriter there.  The judge had “marked reservations” about his evidence on the liability issues and criticised him specifically for failing to follow the principles which should guide expert witnesses set out in The Ikarian Reefer [1993] 2 Lloyd’s Rep. 68 at 81.  But he also said this “I found Mr Wood’s evidence as to alternative security generally sensible”, and his express findings include references to Mr Wood in connection with other treaties placed in the overseas markets (referred to above) and in relation to underwriters “who say one thing to one broker and something else to another” and who may accept “oblige” lines (para.7) and who may declare a policy not to lead XL on XL risks but nevertheless depart from that policy on occasions (para.10).  The judge was also critical of Mr Beer’s evidence on the liability issues; his report “went beyond what was justified in an attempt to defend the placing information to the overseas underwriters” and his evidence demonstrated that “at times he was prepared to go beyond what was reasonable and sensible to seek to defend J & H.”  Mr Beer had limited experience of “actually doing the broking” after 1980 and of the marine market.  Despite his “marked reservations”, however, the judge “found Mr Beer’s evidence as to alternative security generally sensible”.  He quoted what he called a “telling answer” -
	"Q.	The reality is that there is nobody that could have led this slip, is there?
		
	A.	I do not accept that.  I do not think there is any way we can sit here and go back to the market at the time.  I believe that a broker, or most brokers, would have been able to place most of the business they had” (para.11)."

64.	Mr Hunter pointed to the disparity between the judge’s rejection of Mr Wood’s and Mr Beer’s evidence on the liability issues, including his “marked reservations” and his comments about them, and his apparent acceptance of their evidence as to the availability of alternative security, particularly when the two issues were closely interlinked.  In my judgment, however, the judge was entitled to accept their evidence to the extent that he did, and it becomes necessary to consider what that evidence was.  So far as the express findings are concerned, it was limited to what may fairly be called the generalities which I have referred to and quoted above.  Apart from these, the judge did not identify the evidence which he relied upon, and in relation to the “attempted examination of whether alternative leaders might have been available” he found that “the exercise was inevitably somewhat artificial” and he did not review the evidence relating to it (para.16, quoted above).

65.	We have had the benefit of further analyses of the placement sheets for both the Aneco and the Mander placings and we have been referred to the evidence of the four expert witnesses, in their reports and at the trial.  Mr Berry and Mr Knight for the appellants both considered the question of alternative security in their reports, and both expressed clear views, Mr Knight said that only one potential leader could be identified and the placing therefore was “impossible”, Mr Berry stating that any alternative security “would not have been available at the same or similar rates” and that any possible underwriters would have been looking for “substantially more premium than that paid by Aneco”.

66.	Mr Wood and Mr Beer did not deal specifically with alternative security in their original reports.  In their supplemental reports, however, they challenged the views expressed by the appellants’ witnesses.  Mr Beer emphasised the hindsight argument, and Mr Wood asserted that there were alternative markets and that the premium required would have been similar to the pricing led by King.  Neither of them analysed the placement sheets for the Aneco and Mander contracts.

67.	All four experts gave oral evidence and were extensively cross- and re-examined.  At a relatively late stage, Mr Beer produced a list of potential leaders, and the position of each was considered in some detail.  In the result, only one was identified, the company Charter Re.  In the result, the witnesses all maintained their the general views they had expressed in their reports, with the added agreement between the underwriters (Mr Berry and Mr Wood) that “neither could be certain regarding placement, or otherwise”, which clearly influenced the judge.

68.	The placement sheets record in many cases what the underwriter’s reaction was when presented with the Mander slip, which identified the fac/oblig cover, and with the Aneco slip when underwriters were aware what it involved,.  There are numerous examples of general objections - “no fac/oblig” “no more XL on XL” “not on my line of country”) and some more specific or colourful (“must be potty” “need like a hole in the head”), but there were others who accepted a line, knowing or suspecting what its true nature was.  Other factors were the Aneco’s Bermudan origin and Mr Bullen’s and Mr Mander’s respective status in the market. 

69. 	I should refer, finally, to the evidence of Mr Forster and Mr Crawley.  As regards the former, the judge gave as one of his reasons his finding that J & H could have brought extra resources to bear on the marketing (para.12).  This appears to be based on Mr Beer’s evidence that “nine years ago Mr Forster was a rather younger broker”.  Mr Hunter submits that this was an insufficient basis for the finding, and I agree with him.  Mr Forster was an associate director of some years’ standing and about to become a full director.  He was assisted throughout by Mr Yardley and there was no suggestion that their efforts or the resources available to them were inadequate.  Moreover, Mr Beer’s suggestion was made late, on the last day of the hearing.  I note that J & H’s managing director attended the meeting on 30 December.  If the matter had been investigated, therefore, it may have emerged that he was involved at least in a supervisory role throughout.  This was significant business for J & H (as the judge acknowledged - (para.13) and it would be surprising if he was not.  In my judgment, therefore, the judge was not entitled to make this specific finding and to rely upon it in reaching his conclusions (para.16).

70. 	The judge referred also to Mr Crawley’s “flexible approach” (paras. 13-15).  If this means that Aneco/Mr Crawley were willing to contemplate major changes in the proposed cover, sufficient to overcome the market’s distaste for fac/oblig treaties, then again it seems to me that the evidence does not support the finding.  But if it means merely that they were prepared to accommodate minor changes, or a small increase in the premium, then it does not impact on the question in issue, which is whether reinsurance was available for the underlying fac/oblig risk at a price not significantly different from that which Aneco agreed to pay (51% of ENP).  There was evidence from Mr Crawley and from contemporaneous documents that this was effectively the maximum that Aneco could be expected to pay their reinsurers, and doubtless for this reason no clear suggestion was made before us, or at the trial, that reinsurance was available at a significantly higher cost.  Essentially, the question is whether it was available at all.

Conclusion

71. 	In my judgment, the evidence is clearly sufficient to discharge the burden of proving that on the balance of probabilities “alternative security.” meaning reinsurance cover of the kind which Aneco required (XL on XL for the Bullen fac/oblig treaty) could not have been found in the London market in December 1988, at rates which could be regarded as commercially sensible for Aneco to pay.  The judge reached the opposite conclusion and the question therefore is whether the was entitled to do so.  The reasons he gives are primarily the generalised assertions made by Mr Wood and Mr Beer.  He does not give his reasons for rejecting the clear evidence of Mr Berry and Mr Knight on this issue, and the fact that he did reject it is surprising in view of his comments on them as witnesses in relation to the liability issues.  Nor does he deal with the contemporary evidence contained in the placement sheets.  These record the actual reactions of underwriters to specific proposals at the relevant time, and effectively they cover the whole of the London market where reinsurance of this sort might be placed.  Analysis of these records and the oral evidence of the expert witnesses shows that only one potential leader can be identified, and it is agreed that two or three leaders signing between them for about 40% of the risk had to be found.  The evidence in support of the appellants’ contention is specific, positive and clear, and in my judgment Mr Beer’s and Mr Wood’s assertions as to what might have been done do not outweigh it.  The agreement between two of the expert witnesses who acknowledged that neither could be “certain” that the other was wrong does not affect significantly, in my view, the balance of probabilities on which the evidence must be weighed.

72. 	I therefore would allow the appeal on the factual issue.  My finding would be that alternative security was not available for Aneco in the London market, if full disclosure had been made by the respondents in December 1988.

Damages - scope of duty/correct measure

73. 	I come to the central issue, therefore, on the basis that the respondents, had they made full disclosure of material facts and not misrepresented the nature of the Bullen treaty, would have found that XL on XL reinsurance cover was not available in the London market, and they would have reported this to the appellants.  This leaves no room for doubt that the appellants would have declined the offer to take lines on the treaty, and they would not have incurred the losses under the treaty which they did.

74. 	No question of unforseeability or remoteness arises.  The losses would not have been incurred, if the respondents had acted with reasonable skill and care.  But under the BBL principle, the respondents are not liable for the whole of the loss, but only that part of it which was the consequence of the information which the respondents gave the appellants being wrong, namely, that reinsurance cover worth in the event (say) $10 million had been obtained.

75. 	That was the judge’s view.  He set out the two different measures of loss which were respectively Aneco’s primary and secondary case, then made his finding on alternative security (para.16, quoted above).  He treated this as conclusive of the issue as to measure of loss - 
	"It follows from my findings of fact set out above that Aneco’s alternative case represents the correct measure of damages”."

Nevertheless, he added his conclusions on the legal arguments.  These were -
	"For what kind of loss is Aneco entitled to compensation?  What consequences are attributable to that which made the act wrongful?  There is no allegation of fraud in the present case.  The nature of J & H’s engagement is reflected in the contemporary documents quoted above.  J & H did not assume a duty to advise Aneco as to whether to enter the marine market in 1989 and in particular as to whether to subscribe to three units of the Bullen treaty.  J & H are responsible for Aneco’s losses measured by reference to the extent to which Aneco are unable to recover under the excess of loss reinsurance (i.e. Aneco’s alternative case).  But Aneco suffered consequences well beyond this measure of loss.  Although Mr Crawley took the view that it was statistically unlikely that something similar to Piper Alpha would occur in 1989, subsequent events proved this underwriting judgment wrong.  Aneco suffered extremely heavy losses because of Hurricane Hugo, Exxon Valdez and Phillips Petroleum.  These additional consequences were not attributable to any wrongful act on the part of J & H .  J & H are not responsible for these additional consequences."

	We now have to consider the legal issue in the light of our finding that alternative security was not available.

76. 	The passage from Lord Hoffmann’s speech in BBL upon which the appellants rely recognises that damages for the consequences of entering into a transaction may be recovered, fraud apart, when the defendant undertook the responsibility of advising the claimant what course of action he should take.  The circumstances must be such that the adviser was under a duty to “take reasonable care to consider all the potential consequences of that course of action” (BBL at 214F).  The reference to all potential consequences is crucial, because, without that qualification, the doctor could be held liable for the climbing accident, assuming only that the patient informed him that he wanted medical advice in order to decide whether he should go on the expedition, or not.

77. 	It seems to me that on any view of the matter the respondents’ duty towards the appellants went beyond obtaining reinsurance cover and informing them that it had been obtained.  Nor were they merely in the position of brokers who were instructed by an insured to obtain insurance cover, or by insurers to obtain reinsurance cover on “best available” terms.  They took the initiative in first approaching  Mr Bullen, knowing of Aneco’s possible interest in the reinsurance, and then offering participation in  the Bullen treaty to Aneco.  In doing this they were acting as agents to place the reinsurance for Mr Bullen, but Mr Forster recognised from the start that Mr Crawley would require reinsurance (retrocession) protection for Aneco before he would contemplate accepting lines under the Bullen treaty.  Unprompted, in his letter dated 18 November he advised what reinsurance cover Mr Crawley should obtain (“(4) Would suggest you buy XL protection ....”).  After the 30 November meeting he advised “In the current Marine Excess of Loss or Excess of Loss Market we feel that paying 42% of income is not unreasonable ...” and, significantly, he withheld from Mr Crawley the quotes he had obtained for the top two layers.  He did his, as his statement makes clear, in order to make the offered terms more palatable for Mr Crawley.

78. 	It seems to me highly artificial to derive from the evidence any suggestion that Mr Forster was not advising Mr Crawley what course to take.  He clearly was doing his best (on behalf of Bullen) to persuade him to accept the Bullen treaty and, so that this result would be achieved, to accept the reinsurance cover that was on offer after his inquiries (on behalf of Aneco) to Mr King.  He knew that Mr Crawley was relying on him to obtain the best available reinsurance cover and that without it, to the extent sufficient to satisfy Mr Crawley’s minimum requirements, Mr Crawley would not accept the Bullen treaty.  He knew also that Mr Crawley was relying, at least in part, on the advice that he gave him regarding the reinsurance requirement.

79. 	Against this, Mr Crawley took the decision on behalf of Aneco, and this made it necessary for him to form his own view of the prospects for business of the kind represented by the Bullen treaty.  The availability of sufficient reinsurance (retrocession) cover was a major factor, but there were others, and Mr Forster was not concerned with them.  There is some analogy with the BBL lender, who takes account of many factors when deciding whether or not to enter into the loan transaction.  Only one of those is the current market value of the property, which he relies upon a professional valuer to establish for him.

80. 	But there are significant differences also.  I would identify three.  First, the valuer makes no attempt to influence the lender’s commercial decision.  His role is limited to providing information in the form of his professional view as to the property’s value.  Mr Forster, representing J & H, on the other hand was seeking to put a deal together between Bullen, Aneco and their reinsurers, and as well as taking the initiative he took it upon himself to advise Mr Crawley as to the proper scope and availability of reinsurance, which he knew to be crucial to his chances of success.

81. 	Secondly, he was inquiring on Aneco’s behalf into the current market assessment of the risks involved in business such as the Bullen treaty.  That was the basic issue for the underwriters whom Mr Forster approached, though not the only one.  It was also the risk which Mr Crawley had to assess for Aneco.  If Mr Forster had reported to him that insufficient underwriters could be found to reinsure this kind of business, he would necessarily have re-considered his own view of the risk involved in signing the Bullen treaty.  The subject-matter of Mr Forster’s advice and of his own decision was the same.

82. 	Thirdly, the fact that no reinsurance cover was available in the market is important, because it introduces an additional head of breach of duty by J & H.  They are liable not merely for failing to obtain effective cover on the terms which they reported to Aneco, but also for failing to report that no cover could be obtained.

83. 	The last factor in particular means in my judgment that the BBL principle - compensating the claimant only for the consequences of the advice or information being wrong - fails to provide proper compensation in the present case.  Aneco is also reasonably entitled to compensation for J & H’s failure to report correctly the current market assessment of the reinsurance risks which Aneco was proposing to undertake.  Those risks were central to Aneco’s decision and Mr Forster took it upon himself to advise Mr Crawley with regard to them.  This is far removed from the lender/valuer relationship and even from the client/professional adviser relationship to which the BBL applies, and even more so from the doctor and mountaineer.

84. 	I therefore would hold that Aneco is entitled to recover damages for the whole of the losses which it suffered in consequence of entering into the Bullen treaty, acting on J & H’s advice with regard to the availability of reinsurance (retrocession) and therefore on the current market assessment of the risk.  This result is consistent with the judgment in Superhulls (No.2 which I would not hold was wrongly decided, in the light of B.B.L.

	I would allow the appeal.

LORD JUSTICE ALDOUS: 
	At a trial before Cresswell J Aneco Reinsurance Underwriting Ltd succeeded in their claim for negligence and breach of contract against their brokers Johnson & Higgins Ltd.  They contended that the negligence and breach of contract of Johnson & Higgins had caused them damages of around $30 million, alternatively around $10 million.  The judge rejected the claim to the $30 million and ordered Johnson & Higgins to pay about $10 million plus interest.  Against that judgment Aneco appealed.  The sole issue argued before this Court was whether the damages should be the sum ordered or the claimed sum of around $30 million.  That depends upon an issue of fact and an issue of law.  
	I have read in draft the judgment of Evans LJ and I agree with his conclusion on the issue of fact, namely that on the balance of probabilities reinsurance of the kind required by Aneco could not have been found in December 1998.  I will therefore confine my judgment to the issue of law.  
	In view of the comprehensive recitation of the facts and the submissions of the parties by Evans LJ, I will only set out the basic facts as an introduction to the law and its application.

The Background Facts
	Mr Bullen was the underwriter of syndicates 255, 258, 259 and 668.  In the autumn of 1988 he discussed with Mr Forster of Johnson & Higgins the idea of reinsurance of Mr Bullen's excess marine loss account (the Bullen Treaty).  The proposed reinsurance was of a type known as fac/oblig.  Mr Forster wrote to Mr Crawley of Aneco on 15th November 1988 offering Aneco a share in the Bullen Treaty.  That was followed by a fax dated 30th November 1988 in which Mr Forster suggested that Aneco would consider taking up to four units and should also buy excess loss protection for up to ten times income with comprehensive protection being available between 30% and 40% of net premium income.  Mr Crawley was interested in the proposal and a meeting took place in the Captain's Room at Lloyd's on 30th November 1988 to discuss the matter.  It was attended by Mr Bullen, Mr Crawley and Mr Forster.  The result was recorded in notes as:
	"Crawley has agreed to write 3-3½ units on basis PI $400/- to $450/- ...
	Quotes for XL prots [protections] to be developed."	
Mr Crawley confirmed his understanding of what was agreed in a telex dated 5th December 1988:
	"This is merely to confirm that we will do up to 3.50 PCT lines part of ten lines of which the reassured will retain not less than two lines.  
	
	The business will be limited to contracts having rate on lines of between 2 PCT to 20 PCT and the treaty will be per the slip which you sent us except that the overrider will be 3 per cent on net.  
	
	Our participation must be subject to your obtaining satisfactory XOL terms for our net account excess of hopefully not more than $100,000." 
	On 5th December 1988 Mr Forster set about obtaining XOL insurance for Aneco.  He approached Mr King, a lead underwriter, who provided a quotation.  The rates quoted were relayed to Mr Crawley who telexed Mr Forster on 6th December 1988 stating that they were exorbitant.  Mr Forster went back to Mr King who changed the structure of the layers and the rates.  These were faxed by Mr Forster to Mr Crawley on 6th December 1988.  Mr Crawley accepted that the revised terms were more palatable, but indicated that a greater premium income under the Bullen Treaty would make more commercial sense.  Mr Forster talked to Mr Bullen who told him that the premium income would be at least $450,000 providing the market followed current trends.  That was relayed to Mr Crawley on 7th December together with a recommendation that Aneco would buy up to $8 million coverage.  By telex dated 7th December Mr Crawley agreed to write three units of the Bullen Treaty and confirmed acceptance of "Your firm offer to place to place 7.8 million excess of 200,000 per your fax of yesterday."
	Mr Forster returned to Mr King, who, as lead underwriter, subscribed to all six contracts.  Mr Forster and his assistant then broked the six contracts to the following market.  By 30th December 1988 the placing of the six contracts was nearly completed and Johnson & Higgins informed Aneco of the position.  On that day Aneco signed the slip for the three units of the Bullen Treaty.  By 19th January 1989 all six contracts were fully subscribed.  
	In January 1989 Aneco subscribed to two units of excess of loss reinsurance in respect of syndicates underwritten by Mr Bohling.  These were also protected by the six excess of loss contracts.  
	1989/1990 was a year of disasters which lead to huge claims having to be met by Lloyds' syndicates.  When claims were made in respect of the Bullen and Bohling Treaties, substantially all the Lloyds' syndicates who had written the six contracts sought to avoid them because they alleged that Johnson & Higgins had misbroked the contracts.  They alleged that they had been induced to write the contracts by material misrepresentation and non-disclosure.  That allegation was upheld in arbitration proceedings between Aneco and the underwriters.  J & H were not parties to the arbitration, but in the present proceedings they were sued for negligence and breach of contract in the placing of the six excess of loss contracts.  The judge held that J & H had misbroked the six contracts and in doing so they had made a material misrepresentation that the Bullen Treaty was a quota share treaty when in fact it was a fac/oblig treaty.  That also constituted a material non-disclosure.  That finding of the judge was not appealed.  The judge went on to hold that the underwriters were entitled to avoid the contracts.  It followed that, subject to a few exceptions, Aneco was left without reinsurance.  By the end of the first quarter of 1997 their liability exceeded $30 million.  As it could not recover under the six contracts, Aneco looked to recover from Johnson & Higgins.  Their primary claim was for damages equal to their liabilities, namely over $30 million.  Alternatively they claimed damages equal to the net recovery which they would have made under the six contracts, namely a sum of about $10 million.  The judge rejected the primary claim and gave judgement for the alternative claim.
	
The Appeal
	The judge held that Johnson & Higgins were in breach of their obligation owed to Aneco to exercise skill and care in the placement of the excess of loss reinsurance.  That was not disputed in this Court.  On the appeal, Aneco contended that Johnson & Higgins were also under a duty to advise Aneco with skill and care as to whether satisfactory reinsurance was obtainable in the market in respect of their proposed writing of units under the Bullen Treaty and to inform Aneco if satisfactory reinsurance was not available.  Johnson & Higgins failed in that duty in that they failed to advise Aneco that no reinsurance was available at appropriate rates.  But for that breach, Aneco would never have written any part of the Bullen or Bohling Treaties and would not have incurred the loss, around $30 million, that resulted from writing those treaties.
	Mr Hunter QC who appeared for Aneco submitted that the real loss suffered by Aneco had nothing to do with the negligence of Johnson & Higgins in placing of the risk.  The relevant act of negligence occurred at a stage earlier when Aneco instructed Johnson & Higgins to go ahead and place the XOL reinsurance.  That instruction was given because Johnson & Higgins negligently failed to advise Aneco that appropriate reinsurance cover was not available.  The proper measure of damages for that act of negligence was the full loss incurred by Aneco.  	
	In my view Mr Hunter seeks to place a gloss on the events that happened.  Mr Crawley made it clear that Aneco would not take part in the Bullen Treaty until satisfactory reinsurance was in place.  It was information that it was in effect in place which resulted in Aneco taking three units on 30th December 1988.  The cause of action arose occurred on that date.  
	Mr Clarke QC, who appeared for Johnson & Higgins, submitted that the recovery of damages depended upon the scope of the duty.  In the present case, Johnson & Higgins acted as brokers for Aneco and therefore were under a duty to provide appropriate information, namely that the reinsurance was in place.  Thus the recovery was the loss flowing from the inaccurate information, not that which flowed from Aneco doing that which Aneco would not otherwise have done, if the true position had been explained to them.  
	The relevant principles to be applied are in my view contained in the speech of Lord Hoffmann in Bank Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 and I do not believe it right to rely upon the judgment in Youell & ors v Bland Welch & Co Ltd & ors [1990] 2 Lloyds Reports 431 as it was decided prior to those principles being stated and appears to be inconsistent with them.  
	Before coming to those parts of Lord Hoffmann's speech which are relevant to this case, it is appropriate to note that the information provided by the valuer in that case formed part of the material which was to be used by the lender to decide whether to lend, and if so, how much he would lend.  Further if the lender had known the true value of the property, he would not have lent (see pp. 210C, and 211D and 223 E), as the security acceptable to the lender was not available as the correct advice would have revealed.  Similarly, in the present case Aneco would not have taken three units in the Bullen Treaty if they had been advised that the appropriate reinsurance was not available.
	Lord Hoffmann came at page 212 to consider how the relevant duty was to be determined.
	"How is the scope of the duty determined?  In the case of a statutory duty, the question is answered by deducing the purpose of the duty from the language and context of the statute: Gorris v Scott (1874) LR 9 Ex. 125.  In the case of tort, it will similarly depend upon the purpose of the rule imposing the duty.  Most of the judgments in the Caparo case are occupied in examining the Companies Act 1985 to ascertain the purpose of the auditor's duty to take care that the statutory accounts comply with the Act.  In the case of an implied contractual duty, the nature and extent of the liability is defined by the term which the law applies.  As in the case of any implied term, the process is one of construction of the agreement as a whole in its commercial setting.  The contractual duty to provide a valuation and the known purpose of that valuation compel the conclusion that the contract includes a duty of care.  The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking."		
	In the present case, Johnson & Higgins were acting in two capacities.  First they acted for Mr Bullen in placing the reinsurance of the Bullen Treaty and in so doing owed Mr Bullen a duty to act with reasonable care.  Second they acted for Aneco in advising them on reinsurance and obtaining the cover required.  It is that second obligation which is the obligation to which the law must give effect in this case. 
	The Court of Appeal in BBL had concluded that the valuer was liable for the loss which would not have been occurred if the valuer had given the correct advice.  That decision appears to me to reflect the submission of Aneco, albeit refined so as to try to impose upon Johnson & Higgins a duty derived from their actions as brokers for Mr Bullen.  However, Lord Hoffmann commented:
	"Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy.  Normally the law limits liability to those consequences which are attributable to that which made the act wrongful.  In the case of liability in negligence for providing inaccurate information, this would mean liability for the consequences of the information being inaccurate."
Lord Hoffmann went on to consider the difference between the normal limit imposed by the law and the conclusion reached by the Court of Appeal using an example of a mountaineer who went to see a doctor who gave him negligent advice as to the fitness of his knee.  If he had been told the truth, the mountaineer would never have gone on the expedition and would not have suffered the damage that resulted, not from his knee but from a foreseeable consequence of going on the expedition.  At page 214C he said:
	"The doctor was asked for information on only one of the considerations which might affect the safety of the mountaineer on the expedition.  There seems no reason of policy which requires that the negligence of the doctor should require the transfer to him of all the foreseeable risks of the expedition.
		I think that one can to some extent generalise the principle upon which this response depends.  It is that a person under a duty to take reasonable care to provide information on which someone else will decide upon 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 of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties.  It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them."
	In the present case Johnson & Higgins wrongly informed Aneco that reinsurance was in place and by implication that it was available, which it was not.  They were under a duty of care to provide accurate information which Aneco would use to decide whether or not to enter into the Bullen Treaty.  That being so, it would seem that Johnson & Higgins are liable for the losses which occurred by reason of the information being wrong, not those which would have occurred even if the information supplied had been correct.  
	Lord Hoffmann continued at 214E:
	"The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take.  If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action.  If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken.  If his duty is only to supply information, he must take responsible care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.  
		I think that this principle is implicit in the decision of this House in Banque Keyser Ullmann SA v Skandia (UK) Insurance Co. Ltd [1991] 2 AC 249.  Some banks had lent a large sum of money on the security of, first, property which the borrower had represented to be valuable, and, secondly, insurance policies against any shortfall on the realisation of the property.  When the borrower turned out to be a swindler and the property worthless, the insurers relied upon a fraud exception in the policies to repudiate liability.  The banks discovered that the agent of their broker who had placed the insurance had, by an altogether separate fraud, issued cover notes in respect of non-existent policies for part of the risk.  This had come to the knowledge of one of the insurers before a substantial part of the advances had been made.  The banks claimed that the insurers were under a duty of good faith to disclose this information and that, if they had done so, the banks would have so distrusted the brokers that they would have made no advance and therefore suffered no loss.
		Lord Templemann (with whom all the other members of the House agreed) dealt with the matter in terms of causation.  He said that assuming a duty to disclose the information existed, the breach of duty did not cause the loss.  The failure to inform the lenders of the broker's fraud had induced them to think that valid policies were in place.  But even if this had been true, the loss would still have happened.  The insurers would still have been entitled to repudiate the policies under the fraud exception.  
		Lord Templemann could only have dealt with the case in this way if he thought it went without saying that the insurers' duty to provide information made them liable, not for all loss which would not have been suffered if the information had been given, but only for loss caused by the lender having lent on a false basis, namely, in the belief that insurance policies had been effected.  If that had not been the principle which the House was applying, the discussion of whether the non-existence of the policies had caused the loss would have been irrelevant.  I respectfully think that the underlying principle was right and that it is decisive of this case.  The Court of Appeal distinguished Skandia on the ground that the insurers could not have foreseen the borrower's fraud.  No doubt this is true: it shows that the rule that damages are limited to what was within the reasonable contemplation of the parties can sometimes make arguments over the scope of the duty academic.  But I do not think it was the way the House actually decided the case.  Lord Templemann's speech puts the matter firmly on the ground of causation and the analysis makes sense only on the footing that he was concerned with the consequences to the lenders having lent without knowing the true facts rather than with what would have been the consequences of disclosure."  
	In the present case it cannot be doubted that, but for the negligence of Johnson & Higgins, Aneco would not have taken three units of the Bullen Treaty.  However the duty of Johnson & Higgins was to provide information and to place the reinsurance.  That information was to be provided for the purposes of enabling Aneco to decide whether to take units in the Bullen Treaty and, if so, how many.  Johnson & Higgins were not under a duty to advise Aneco whether to take units in the Bullen Treaty.  That was a decision taken by Mr Crawley who no doubt took into account the expected income, the perceived risk and the reinsurance that he was told that he had.  It follows that Johnson & Higgins were under a duty to take reasonable care to ensure that the information they supplied, namely that they had obtained reinsurance was correct and they are responsible for all the foreseeable consequences of that information being wrong.  
	At page 222 Lord Hoffmann considered the cases before the House.  As to the Nykredit case he said:
	"The reason why the valuation was wrong was that the valuers had over-estimated the demand for the property and underestimated the costs of the development.  Thus the information which the report provided under each of the heads I have quoted was also wrong.  The lenders say that if the valuers had not been negligent they would have appreciated that the proposed development was not viable.  As the borrower was a single-asset company, a default was virtually inevitable.  The prospect of some other lender refinancing the project was zero: the lenders were likely to be locked into the loan for an indefinite period and therefore exposed to market fluctuations for longer than they had reason to expect.  
		The main thrust of these submissions is also concerned with what would have happened if the valuer had provided accurate information.  This, as I have said, is not the basis of the valuer's liability.  In any case the comments requested in the bank's standard letter were not in my opinion, as a matter of construction of the contract between the bank and valuer, independent terms of information on which the bank was entitled to place reliance separately from the open market valuation.  They amounted to an exposure of the valuer's calculation, so as to enable the bank to form a view as to how accurate they were likely to be.  But the valuer would not in my view have incurred any liability if one or more of his comments had been wrong but (perhaps on account of a compensating error) the valuation was correct.  The contract did not therefore impose a different liability from those in other cases."			
	Again, Lord Hoffmann pointed out that the basis of the valuer's liability did not depend upon what would have happened if accurate information had been provided.  Similarly Johnson & Higgins' liability does not depend upon the fact that if Aneco had been told that appropriate reinsurance was not available, they would not have taken three units in the Bullen Treaty.  Their liability is confined to the loss due, on the assumption that the appropriate reinsurance was available.  They had a duty to provide accurate information and are only liable for the inaccuracy of that information.  It follows that the judge came to the correct conclusion and I would therefore dismiss this appeal.
LORD JUSTICE WARD: 
I have read in draft the judgments of Evans and Aldous L.JJ. I agree with Evans L.J. that the appeal should be allowed. I shall, however, state my own reasons, albeit shortly.
	The relevant question is whether the defendant was under a duty to safeguard the plaintiff against the loss suffered. How, then, do we ascertain the scope of the duty undertaken by or imposed upon the brokers? Lord Hoffmann addressed the question in Banque Bruxelles Lambert S.A. -v- Eagle Star [1997] A.C. 191 at p. 212. He asked:-
	"How is the scope of the duty determined? ... The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking."
The nub of his opinion is expressed at p. 214D:-
	"A duty of care which imposes upon the informant responsibility for losses which would have occurred” (through falling property prices due to the collapse of the market) “even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of the contract or as a tortious duty arising from the relationship between them."
Lord Nicholls of Birkenhead explained that decision in Nykredit Plc -v- Edward Erdman Ltd [1997] 1 W.L.R. 1627, 1631 in these terms:-

	"...a defendant valuer is not liable for all the consequences which flow from the lender entering into the transaction. He is not even liable for all the foreseeable consequences. He is not liable for consequences which would have arisen even if the advice had been correct. He is not liable for these because they are consequences of risks the lender would have taken upon himself if the valuation advice had been sound. As such they are not within the scope of the duty owed to the lender by the valuer."
Lord Hoffmann explained at p. 1638:-
	"The principle approved by the House was that the valuer owed no duty of care to the lender in respect of his entering into the transaction as such...”
In the Summer Lecture to the Chancery Bar Association on “Common Sense and Causing Loss”, Lord Hoffmann concluded with these observations:-
	"But these are questions of remedial justice and economic policy which cannot be submerged under an appeal to common sense. ... ... the answer does indeed depend upon theory; not abstract or metaphysical, but concrete, economic and political; the theory which the judge holds about the proper scope of tort or criminal liability."
	Thus it seems to me that the scope of the duty, just like the question of whether there is a duty at all, is ultimately bound up with what is just, fair and reasonable in the circumstances of the particular case. Thus the proper approach is to ask for what consequences it is just, fair and reasonable between the parties that the brokers should be held responsible. The answer is those consequences which best give effect to the obligations assumed by them. The nature and extent of those obligations will depend upon the express and implied terms of the contract. This contract was entered into on terms made clear by the fax message of 5th December 1988 in which Aneco stipulated that:-
	"Our participation must be subject to your obtaining satisfactory XOL terms on our net account excess..."
The effect of a contract of that kind may be characterised as one where A says to B, “I will not do X unless you do Y.” That is to be contrasted with a contract the effect of which is that A says, “I will do X but on the basis that you (B) have done Y.” In the former case the responsibility assumed by B in undertaking to do Y is the responsibility for the consequences of A doing X. In the latter case the responsibility assumed by B is the responsibility for putting A in the position he would have been in had Y in fact been done. The latter is a Banque Bruxelles type of case. The former, the case before us, is not. 
	Here the express obligation assumed by the brokers was to obtain satisfactory reinsurance. The implied obligation was to tell Aneco if it was not available. Mr Clarke conceded (see pp. 115 and 116 of the transcript of June 25th) that his clients were under a duty to report that no such reinsurance was available or that none was available on acceptable terms. For reasons given by Evans L.J., with which I agree, the fact properly to be found on the evidence was that such reinsurance was not available at all, or certainly was not available on terms acceptable to Aneco. Therefore, in order to discharge their duty, the brokers should have told Aneco that the market would not cover the risk. They knew Aneco would not accept the risk without the comfort of others being prepared to share it. They knew that the availability of satisfactory reinsurance was a precondition to Aneco entering into the Bullen Treaty. They accepted the responsibility of there being no contract without cover. In my judgment that imposed upon the brokers a duty of care to Aneco in respect of their entering into the transaction as such. Their duty was to protect Aneco from the very risk they knew Aneco would not accept if no satisfactory reinsurance was available. To hold them responsible for the full loss that has arisen does not impose upon them a liability greater than they could reasonably have thought they were undertaking. It would be unfair on Aneco to saddle them with liabilities they expressly stipulated to the brokers they were not prepared to accept. Justice is done by declaring that it was within the scope of the duty imposed on the brokers to safeguard Aneco from the total loss they have suffered.
	I would allow the appeal accordingly.
		ORDER:  Appeal allowed with costs. Permission to appeal to the House of Lords refused. Counsel to lodge an agreed minute of order.
	(Order not part of approved judgment)
	________________________________________