On 25th June 2015, the Court of Appeal handed down judgment in Lowick Rose LLP (in liquidation) v Swynson Ltd  EWCA Civ 629, and in doing so in a majority decision concluded that a refinancing exercise conducted by the owner of the company did not act to release or reduce the liability of a negligent professional.
The claimant lender had advanced a loan of £15 million to facilitate a management buyout in reliance on a due diligence report conducted by the defendant accountants. The due diligence report turned out to be negligent, with the borrower suffering from a severe shortfall in its working capital and, despite further loans (of £4.75m), it eventually collapsed. In order to prevent unfavourable tax treatment, the owner of the claimant lent sums to the borrower to allow it to repay the majority of its indebtedness to the claimant. This, the defendant argued, operated to reduce the claimant’s loss to £3 million.
Instructed by Michelle Di Gioia of Gardner Leader (Newbury), Hugh Sims QC and James Wibberley successfully argued that the first instance judge (Rose J) had been correct to disregard the effect of the refinancing exercise as res inter alia acta. As the borrower’s repayment had not been made in the ordinary course of business, the sums repaid by the borrower were collateral and did not reduce the compensation recoverable. The claimant could therefore recover the money lent notwithstanding that most of it had been repaid.
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