COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
THE HON. MR JUSTICE TOMLINSON
2008 Folio 1320
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE GROSS
MR JUSTICE PETER SMITH
| (1) HAUGESUND KOMMUNE
(2) NARVIK KOMMUNE
|- and -
(1) DEPFA ACS BANK
- and -
(2) WIKBORG REIN & CO
Defendant / Respondent
Appellants / Part 20 Defendants
Mr David Railton QC and Mr Richard Power (instructed by SNR Denton UK LLP ) for the Respondent
Hearing dates : Tuesday 13, Wednesday 14 and Friday 16 July 2010
Crown Copyright ©
Lord Justice Rix :
"I have to tell you it never crossed my mind when I was preparing my judgment that this was a situation in which Depfa [the bank] could simply look to Wikborg Rein [the solicitor] for a full and immediate indemnity in respect of its loss without, if it chose, looking to the municipalities [the counterparty] to see what it could recover from them. Rightly or wrongly I saw it in terms of what one sometimes calls a claim over, ie to mop up what is left. You would say that I am wrong about that."
"The way the litigation started, of course, is a dispute between us and the municipalities, but we have our claim against Wikborg Rein. If, of course, the municipalities pay and pay quickly and willingly, then in practice the point does not arise. But as a matter of legal right, and indeed as we have pleaded, our loss is the loss that we suffer when we pay out. On the authorities, and for sensible reason we would suggest, we are entitled to recover in full against Wikborg Rein."
The background facts
"A claim against a Norwegian municipality cannot be enforced, no distress or seizure may be obtained of any of its assets and no bankruptcy or debt settlement proceedings may be initiated against it."
It was also common ground that Depfa bore the sole credit risk of the transaction. The Kommunes' obligation was in fact regarded as a form of sovereign debt. They were undoubtedly seen by Depfa as honourable, respectable and creditworthy counterparties.
The English litigation
"In short, the implication of this evidence was that the municipalities would honour a judgment of this court, and wished to know as soon as possible the basis upon which they must make their financial plans. That is plainly how Depfa understood the position…".
"Judge: The whole exercise is actually a pretty high risk exercise, isn't it? It's unsecured lending to a public authority subject to political control against whom you can't enforce a judgment. It's a pretty high risk exercise from the start…
Railton: In the context of public sector lending, these are very good risks. They are creditworthy. There has never been any default in respect of them. There won't be any default now. We have this debate, and it's expedited.
Judge: Do we know there won't be any default now?
Railton: Yes, my Lord. The whole question that's been put forward as to why you need to expedite it is because the municipalities intend to honour their obligations if they're found to have some. That's why the lights are going out and cuts are being made so that they can do so…
Judge: I don't think the municipalities have given any undertaking…
Railton: My Lord, my clients have absolutely no doubt that they will honour the judgment if one is given. There's no doubt about that."
"3. Throughout the trial I was under the impression, wrongly, that it was only to the extent that it could not recover, or recover in full, from the municipalities that Depfa claimed damages from Wikborg Rein…"
Similarly, on appeal from the first judgment to this court, Aikens LJ said  EWCA Civ 579,  1 All ER 190 at  that "Issues of damages between Depfa and WR were reserved for a further trial, if necessary".
"there are essentially no funds to meet the payment which is due to Depfa…There is little, if any, scope to increase the municipalities' income…To a limited extent the municipalities can cut their expenditure. However, the major parts of the municipal expenses are statutory…I understand that it is unlikely that the municipalities would be permitted under Norwegian law to raise a loan to pay off the sums in question. However, even if they were, it is not clear what, if any, loans would be forthcoming…For the time being it is not possible to make any assumption as to whether, and if so how, the Ministry will give assistance to the municipalities, beyond the appointment of a supervisory board…It is not clear at this stage, how the shortfalls can be met. That in turn gives rise to an additional problem. Both municipalities have other substantial loans outstanding. In the case of Narvik the total is MNOK 863 [ie NOK 863 million]. In the case of Haugesund, the total is MNOK 1,245. Some of these loans (at least the majority in value for Haugesund) include cross-default clauses…Given the problems outlined above, the municipalities will ask for a stay of execution pending appeal on change of position."
"5.2…The second [point] relates to the theoretical possibility that the judgment debt goes unpaid. Depfa has proceeded throughout on the basis that the municipalities would respect the outcome of these proceedings. Indeed, every indication has been that it would be unthinkable for a municipality or for the Norwegian government itself to allow an English High Court judgment to go unpaid, including in circumstances where the debt arises in connection with invalid commercial agreements.
5.3 Depfa continues to believe that this remains the case and that the judgment sums will be paid. However, if they are not, Depfa will seek to recover the shortfall from Wikborg Rein…Whether or not this will become a practical issue is likely to be known in good time before January 2010, and if it is, it is a matter which Depfa will seek to pursue then against Wikborg Rein."
" My conclusions on the "public policy" issue are therefore as follows: first, the judge did not misunderstand what Lord Goff stated in WLG at p 688. Moreover, what Lord Goff there stated accords with the effect of the majority decision to depart from the decision in Sinclair v Brougham on the relevant point. Secondly, the way that Mr Milligan now puts the case on public policy is not as it was put before the judge. It is therefore unjust to complain that the judge's decision was wrong in principle. In any event, it is not. Thirdly, the judge's decision is not contrary to authority. The truth is that there is no authority directly in point. Fourthly, the judge has not made findings of fact on whether the express or implied effect of the 1992 Act is to bar any claim to recover money paid under an invalid contract with the Kommunes or that such a recovery would be contrary to the statutory intent. It appears to me that he was not invited to do so; I am confident that if he had been, he would have taken care to record his conclusions.
 Lastly, this is not an unjust result. The judge concluded, at 141 that Depfa acted in good faith in purporting to enter the "swaps" contracts. He also found that Depfa did not take the risk that the "swaps" contracts were invalid or that they intended that the Kommunes should keep the sums advanced if it should turn out that Depfa was mistaken as to the validity of the contracts: see 143 to 153 of the judgment. If the Kommunes were entitled not to repay what Depfa had advanced to them then, subject to the defence of "change of position", they would indeed have been enriched and, I would say, unjustly so."
" This case is concerned with the second of the two situations I have identified. The Kommunes understood when they took the money from Depfa that they had to repay it…Admittedly those agreements were always void, but that cannot change the understanding on which the Kommunes received the money. At no stage did they think they had received a gift that would never have to be repaid. Furthermore, if the "swaps" contracts were void, then the cause of action for the claim in restitution for a consideration that had wholly failed must have arisen at the moment the money was paid over to the Kommunes.
 I would accept that the Kommunes would not have made the investments via Terra that they did "but for" the receipt of the sums from Depfa. I also accept that the Kommunes acted in good faith in making the investments and that any question of negligence or other criticism of those investments is irrelevant to this defence. But the Kommunes made those investments without any involvement by Depfa and the Kommunes made them on the understanding, at that stage in the history, that they had to repay the principal and interest to Depfa whatever happened to the investments…
 So, it seems to me that the question here is: where lies the justice of the case; in favour of the party that received the money and took the risk (in good faith) that the investments might go down rather than up; or in favour of the party that paid over the money and had nothing to do with it thereafter, but thinking it was to be repaid in due course. Like the judge, I think the answer to this question is obvious. The scales fall heavily in favour of Depfa recovering the full amount that it paid over to the Kommunes."
"18. The starting point of the enquiry is in my view that Depfa would not have advanced the money to the municipalities had it been advised by Wikborg Rein that there was any material risk that the swaps were prohibited loans giving rise to no contractual obligation on the part of the municipalities. The money so advanced was in fact irrecoverable as a contractual debt in accordance with the agreed but unenforceable terms. The money was paid over in circumstances where no legal relationship subsisted or came into effect between the payer and the payee. Depfa could recover the money only to the extent that it could demonstrate that the municipalities had by its receipt been unjustly enriched at its expense. That is an uncertain remedy, often difficult of valuation, for as pointed out by Goff and Jones, The Law of Restitution, 7th Edition at paragraph 14-002, a restitutionary claim is not one for damages for loss suffered. In my judgment this is one of those perhaps rare cases where it is possible and appropriate to say that the bank had lost the money advanced the moment it had paid it over. It acquired in return no right to its recovery. Indeed it acquired nothing in return.
19. Mr Pollock sought to characterise "the restitutionary right" as "an integral part of the (alleged) loss-making transaction". I do not consider that this is appropriate. It is true that Depfa's mistake as to the validity of the transaction is one of the factors which gives rise to the liability of the municipalities to make restitution. However in no sense can it be said that Depfa acquired valuable rights under the transaction. There was no transaction in the sense in which that word is in this context normally used. There was no contract. That is the essence of Depfa's complaint against Wikborg Rein. In these circumstances, the approach which I derive from the authorities, even if they do not necessarily compel it, is that Depfa is to be treated as having suffered loss when it paid away pursuant to a non-existent transaction and that the measure of that loss is the whole amount advanced together with the cost of funding. Further losses might be incurred and its loss might in fact be reduced, but the situation is one in which the law permits recovery in full of the outstanding loss, that loss being assessed independently of the possibility of further recoveries. That is at least in part because the transaction itself was worthless to Depfa, and Depfa would nor have advanced the money had it been advised that it would have no contractual right to its recovery."
The principle in The Liverpool
"Let it be conceded that if the board had recovered the £10,000 from the Ousel under its statutory power that would have been satisfaction pro tanto of the damages; still the fact is that the board has not recovered this sum, and, in our judgment, there is no duty upon it to do so…even if the board had obtained judgment against the Ousel there would have been no duty upon it to proceed to execution in alleviation of the Liverpool, which is a tortfeasor…[T]his case, in our judgment, has nothing to do with the duty to mitigate damages. It concerns the board's legal rights, and no duty rests on it at the demand of a tortfeasor to satisfy part of the damages by resorting to another tortfeasor; still less by resorting to an innocent party made liable merely by statute."
"The position simply is that, assuming, as I will, that there is a right of action against the debtors, a plaintiff who has two causes of action cannot be met when he makes a claim against one defendant by the answer: "Oh, no; you've suffered nothing by my tort because you have a cause of action against somebody else." That clearly cannot be right."
There again, however, the loss caused by the conversion of the cheques, a strict liability, was not in doubt. The essential position was the same in Standard Chartered Bank v. Pakistan National Shipping Corp  CLC 825 (CA), where fraud had caused the claimant's loss: see at para 52, where The Liverpool was invoked.
" Having reviewed these authorities, we can now express our conclusion on this issue. We can see no reason in policy or principle which requires us to hold that a claimant who wishes to opt for self-funding and damages in preference to reliance on the statutory obligations of a public authority should not be entitled to do so as a matter of right. The claimant has suffered loss which has been caused by the wrongdoing of the defendants. She is entitled to have that loss made good, so far as this is possible, by the provision of accommodation and care. There is no dispute what that should be and the council currently arranges for its provision at The Spinnies. The only issue is whether the defendant wrongdoers or the council and the PCT should pay for it in the future."
The scope of Wikborg Rein's duty: the Saamco principle
"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 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 either as an implied term of a contract or as a tortious duty arising from the relationship between them.
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 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."
"When, then, does the lender first sustain measurable, relevant loss? The first step in answering this question is to identify the relevant measure of loss. It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position…Thus, typically in the case of a negligent valuation, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower's covenant and the true value of the overvalued property.
However, for the reasons spelled out by my noble and learned friend, Lord Hoffmann, in the substantive judgments in this case  AC 191, 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 the 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. As to this, the basic comparison remains in point, as the means of identifying whether the lender has suffered any loss in consequence of entering into the transaction. If he has not, then currently he has no cause of action against the valuer. The deficiency in security has, in practice, caused him no damage. However, if the basic comparison throws up a loss, then it is necessary to inquire further and see what part of the loss is the consequence of the deficiency in the security…
The basic comparison gives rise to issues of fact. The moment at which the comparison first reveals a loss will depend on the facts of each case. Such difficulties as there may be are evidential and practical, not difficulties in principle.
Ascribing a value to the borrower's covenant should not be unduly troublesome. A comparable exercise regarding lessees' covenants is a routine matter when valuing property. Sometimes the comparison will reveal a loss from the inception of the loan transaction. The borrower may be a company with no other assets, its sole business may comprise redeveloping and reselling the property, and for repayment the lender may be looking solely to this security. In such a case, if the property is worth less than the amount of the loan, relevant and measureable loss will be sustained at once. In other cases the borrower's covenant may have value, and until there is default the lender may presently sustain no loss even though the security is worth less than the amount of the loan. Conversely, in some cases there may be no loss even when the borrower defaults. A borrower may default after a while but when he does so, despite the overvaluation, the security may still be adequate…
Indeed, for the cause of action to arise only when the lender realises his security would be a highly unattractive proposition. It would mean that, however obvious it may be that the lender will not recover his money, he cannot start proceedings. He must wait until he manages to sell the property, a process that may be protracted. This would be a surprising stance for the law to take. It would be all the more surprising when one has in mind that a lender's cause of action against his negligent valuer for breach of contract, as distinct from a claim in tort, arises when the negligent valuation is given. If disaster were evident and the lender were to sue his valuer for breach of contract without waiting until he had realised his security, it is inconceivable that the court would award only nominal damages. The court would do its best to assess the loss…As Mr Briggs submitted, no accountant or prospective buyer, viewing the loan book of a commercial lender, would say that the shortfall in security against outstanding loans to defaulting borrowers did not represent a loss to the lender merely because the securities had yet to be sold. Realisation of the security does not create the lender's loss, nor does it convert a potential loss into an actual loss. Rather it crystallises the amount of the present loss, which hitherto had been open to be aggravated or diminished by movements in the property market.
I can see no necessity for the law to travel the commercially unrealistic road. The amount of a plaintiff's loss frequently becomes clearer after court proceedings have been started and awaiting trial. This is an everyday experience. There is no reason to think that the approach I have spelled out will give rise to any insuperable difficulties in practice. In their practical conduct of litigation the courts are well able to ensure that assessments of damages are made in a sensible way. It is not necessary, in order to achieve a sensible and fair result, to go as far as asserting that the plaintiff has no cause of action, and hence may not issue a writ, until the assessment can be made with the degree of precision that accompanies the realisation of the security. Further, within the bounds of sense and reasonableness the policy of the law should be to advance, rather than retard, the accrual of a cause of action. This is especially so if the law provides parallel causes of action in contract and in tort in respect of the same conduct. The disparity between the time when these parallel causes of action arise should be smaller, rather than greater.
An alternative, less extreme possibility is that the cause of action does not arise until the lender becomes entitled to have recourse to the security. I am not attracted by this as a proposition of law. This suggestion involves the proposition that until then, as a matter of law, the lender can never suffer loss, and the lender can never issue his writ, whatever the circumstances. That does not seem right to me. This proposition, like the date of realisation submission, loses sight of the starting-point: that the lender would not have entered into the transaction had the valuer given the proper advice. If the basic comparison shows a loss at an earlier stage, why should the lender have to wait until the borrower defaults…?
I recognise that the basic comparison may well not reveal a loss so long as the borrower's covenant is performing satisfactorily. For this reason there is little risk of a lender finding his action statute-barred before he needs to resort to the deficient security. But it would be unwise to elevate this practical consideration into a rigid proposition of law."
"The principle approved by the House was that the valuer owes no duty of care to the lender in respect of his entering into the transaction as such and that it is therefore insufficient, for the purpose of establishing liability on the part of the valuer, to prove that the lender is worse off than he would have been if he had not lent the money at all. What he must show is that he is worse off as a lender than he would have been if the security had been worth what the valuer said. It is of course also the case that the lender cannot recover if he is, on balance, in a better or no worse position than if he had not entered into the transaction at all. He will have suffered no loss. The valuer does not warrant the accuracy of his valuation and the lender cannot therefore complain that he would have made more profit if the valuation had been correct. But in order to establish a cause of action in negligence he must show that his loss is attributable to the overvaluation, that is, that he is worse off than he would have been if it had been correct.
It is important to emphasise that it is a consequence of the limited way in which the House defined the valuer's duty of care and has nothing to do with questions of causation or any limit or "cap" imposed upon damages which would otherwise be recoverable. It was accepted that the whole loss suffered by reason of the fall in the market was, as a matter of causation, properly attributable to the lender having entered into the transaction and that, but for the negligent valuation, he would not have done so. It was not suggested that the fall in the market was unforeseeable or that there was any other factor which negatived the causal connection between lending and losing the money…The essence of the decision was that this is not where one starts and that the valuer is responsible only for the consequences of the lender having too little security.
…It follows that in the present case such loss will be suffered when the lender can show that he is worse off than he would have been if the security had been worth the sum advised by the valuer. The comparison is between the lender's actual position and what it would have been if the valuation had been correct.
There may be cases in which it is possible to demonstrate that such loss is suffered immediately upon the loan being made. The lender may be able to show that the rights which he has acquired as lender are worth less in the open market than they would have been if the security had not been overvalued. But I think that this would be difficult to prove in a case in which the lender's personal covenant still appears good and interest payments are being duly made. On the other hand, loss will easily be demonstrable if the borrower has defaulted, so that the lender's recovery has become dependent upon the realisation of his security and that security is inadequate. On the other hand, I do not accept Mr Berry's submission that no loss can be shown until the security has actually been realised. Relevant loss is suffered when the lender is financially worse off by reason of a breach of the duty of care than he would otherwise have been."
"12. What was new and important in SAAMCO was the application of the principle to valuers, so as to exclude their liability for loss due to a fall in the market: see Platform Home Loans Ltd. v. Oyston Shipways Ltd.,  2 AC 190 at p. 209 per Lord Hobhouse. Thus in the case of valuers, and their like, that is to say those who undertake to provide specific information, the SAAMCO principle gave rise to a sub-rule, that valuers are not generally liable (the word is that of Lord Hoffmann, at p. 214) for all the foreseeable consequences of their negligence, but only for the consequences of their valuation being wrong. It follows that the damages will usually, though not always, be limited to the difference between their valuation and the correct value…
13. In par. 12 of their printed case the brokers state this sub-rule as if it were a rule of general application in the law of contract:
The question is not what would have happened if a correct report had been made, but what would have happened if the report actually made had been correct.
But that is not what the House decided. So much is clear from the immediately following paragraph of Lord Hoffmann's speech, at p. 214 in which he draws a contrast between a duty to provide specific information and a duty to advise generally…The Superhulls Cover case represents the ordinary rule, whereby brokers (and others) are liable in contract for the foreseeable consequences of their negligence, including the adverse consequences of entering into a transaction with a third party, provided such consequences can fairly be held to fall within the scope of the defendant's duty of care. SAAMCO is an example of a special class of case – typically that of a valuer, but not confined to valuers – where a scope of the defendant's duty is confined to the giving of specific information."
"16. It is to those facts that I now turn. Was the duty of the brokers confined to the obtaining of excess of loss protection for Aneco, and informing Aneco that they had done so? If so, I would sympathize with Lord Justice Aldous' conclusion…But I am quite unable to accept that the duty of the brokers was so narrowly confined. At the very least they owed a duty to inform Aneco whether or not reinsurance was available…"
"41. The contrary reasoning of Lord Justice Aldous, and the arguments of Counsel for the brokers, are in my view based on the artificial and unrealistic distinction between reporting on the availability of reinsurance in the market and reporting on the assessment of the market on the risks inherent in the Bullen treaty. These are two sides of the same thing: they are inextricably intertwined."
"Longmore J. was correct to follow the reasoning of Chadwick J. [in Bristol and West] in the application of the SAAMCO principle and has the effect that where a negligent solicitor fails to provide information which shows that the transaction is not viable or which tends to reveal an actual or potential fraud on the part of the borrowers, the lender is entitled to recover the whole of its loss. In other words, the whole of the loss suffered by the lender is within the scope of the solicitor's duty and is properly recoverable."
"It cannot be the case, merely because a valuer can require a claimant, who brings an action for damages against him, to bring into account the value of a borrower's covenant to repay a debt, that therefore any party liable to a claimant for professional negligence can require the claimant to bring into account the value of his claim against any other contractor for breach of warranty. This is due to the essential difference between a claim for repayment of a debt (to which there can ordinarily be no substantive defence and in respect of which a claimant does not have to prove a loss) and a claim for damages for breach of contract (to which there may be many defences and in respect of which the claimant must prove his loss)."
" The inspection certificate was one of the keys to the funds represented by the letter of credit. Possession of it enabled Milestone [the seller] to present conforming documents and thereby (on the face of it) trigger Bank Sepah's obligation to make payment. The fact that Bank Sepah failed to honour its obligation promptly helped to bring about a situation in which CAI felt it necessary to realise its security, but it did not itself cause the loss to Niru. That arose when Bank Sepah made payment against false documents, having debited Niru's account a little earlier in respect of the funds. Bank Sepah's failure to pay promptly merely delayed the loss. It was no more than one element in a combination of circumstances which ensured that the incipient loss was not averted. Since the bill of lading was in fact worthless Niru was bound to suffer loss once apparently conforming documents had been presented to it under the letter of credit, unless something subsequently intervened to prevent it. Mr Mahdavi had hoped and intended that the payment of the price and the release of the goods by CAI would intervene to make good the position, but in the event they did not. The loss thus flowed from the original cause, namely, the presentation of worthless documents. Similarly, the prompt return of the money by CAI would no doubt have made good the loss, but the loss itself occurred as soon as the funds were transferred to CAI."
"93. As the Judge put it, although there were other causes of the loss, the inspection certificate was one of the keys to the funds represented by the letter of credit and the loss flowed from the original cause, namely the presentation of worthless documents. Miss Andrews did not challenge this part of the Judge's reasoning but, in any event, I see no reason to disagree with it."
The nature of the restitutionary claim
The latest information
"whether the municipalities, under their public law obligations, are under a duty to address and seek clarification of the question whether the Norwegian local government act allows them to restitute money received, and later lost, before abiding by the judgment of the Commercial Court."
"In my view therefore, the issue of whether restitution is excluded under the Norwegian local government act has not been decided in a legally binding way by the English courts in this case. This is a legal issue that is independent of the terms of the agreement between the parties, because the municipalities cannot by contract limit the scope or effects of the provisions of the local government act. A provision stating that the loan agreement shall be governed by English law and determined by English courts cannot, and does not extend the powers of the municipalities conferred on them under the local government act, and cannot in any way moderate or determine the legal consequences of violating the provisions of this act."
Lord Justice Gross :
i) Wikborg Rein's advice to Depfa that a claim against a Norwegian municipality cannot be enforced;
ii) It was common ground that Depfa bore the sole credit risk of the transaction.
To me, these considerations – in my judgment serving to limit Wikborg Rein's sphere of responsibility – are key to the disposal of this appeal.
i) First, I am unable to accept that the Depfa claim in restitution is very close or akin to a claim in contract; to my mind it is very different both in commercial terms and as a matter of legal analysis. Commercially and as it was colloquially put in argument before us, Depfa would have "run a mile" if told that there was a risk of the contract with the Kommunes being void; Depfa's interest was in lending money, not in buying litigation. In legal terms, the contractual claim for repayment arose under a valid and subsisting contract; the restitutionary claim arises only because the contract was void.
ii) Secondly, I think that Depfa did suffer substantial loss on the transfer of the sum to the counterparty (the Kommunes). In agreement with Rix LJ, I think such loss was ample to found a cause of action whether in contract or tort. It is unnecessary to decide whether the whole of Depfa's loss was then suffered or not.
iii) Thirdly, I see much force in the argument of Mr. Railton QC (for Depfa) that Depfa, in advancing its claim against Wikborg Rein, is not obliged to give credit for its restitutionary claim against the Kommunes. As it seems to me, such a "remedial cause of action" (as Mr. Railton put it) is far removed from the "borrower's covenant", discussed by Lord Nicholls of Birkenhead in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No. 2)  1 WLR 1627, at pp. 1631D and following. My only hesitation in this regard is the inflexibility in Mr. Railton's approach, something best avoided in dealing with questions of damages.
" It is only if the Kommunes are prevented from repaying what they owe to Depfa by something which arises from their legal incapacity to enter into the swap contracts that it could be said that the loss of a contractual right to repayment had established the loss in question. But is there any evidence at all that that is the case? If there is, it was not before Tomlinson J at either the first or the second trial."
Mr Justice Peter Smith :