Swindle v Harrison [1997] 4 All ER 705

Facts

• The case involved a solicitor-client relationship between Mr. Swindle (solicitor) and Mrs. Harrison (client).
• Mr. Swindle failed to disclose his financial interest and a conflict of interest while advising Mrs. Harrison on a mortgage transaction.
• Mrs. Harrison sought damages, alleging the breach of fiduciary duty caused her financial loss related to the mortgage.
• Mrs. Harrison had independently decided to proceed with the mortgage to secure funds for her business.
• The failure of Mrs. Harrison’s business contributed to her financial difficulties.

Issues

1. Whether Mr. Swindle's breach of fiduciary duty, by not disclosing his financial interest in the mortgage transaction, caused Mrs. Harrison’s loss.
2. Whether damages can be recovered if the loss was not a direct result of the solicitor’s breach but rather due to the claimant’s independent actions.
3. Whether the "but for" test applies in determining causation in breach of fiduciary duty claims.

Decision

• The court found that Mr. Swindle breached his fiduciary duty by failing to disclose his conflict of interest.
• The court held that Mrs. Harrison's loss was not caused by the breach but by her independent decision to proceed with the mortgage.
• The breach was not the proximate or effective cause of the loss.
• The loss was deemed too remote, as it stemmed from Mrs. Harrison’s business failure.
• Damages were not awarded because the breach did not directly cause the loss.

Legal Principles

• Fiduciaries owe duties of loyalty and good faith, including avoiding conflicts of interest and acting in the client’s best interests.
• Not every breach of fiduciary duty entitles a claimant to damages; causation must be proven.
• The "but for" test is used to ascertain whether the loss would have occurred had the breach not happened.
• Only losses that are direct and foreseeable consequences of the breach are compensable.
• The decision reaffirms that damages are compensatory, not punitive, and that there must be a direct causal link between the breach and the loss.

Conclusion

The Court of Appeal confirmed that for damages to be recoverable for breach of fiduciary duty, the breach must be the direct cause of the loss as established by the "but for" test; Mrs. Harrison’s independent actions broke the chain of causation, so no damages were awarded.