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What really caused the investor's loss?

21 September 2012

The English Court of Appeal has overturned a High Court decision, which awarded only nominal damages to a customer who had relied on negligent investment advice on the ground that the loss in question was not caused by the bank's negligence but by unprecedented market turmoil, which was not foreseeable and therefore too remote.

On appeal, the Court found that it was the bank's negligence that had caused the loss and awarded damages for the actual loss suffered. In this case, but for the erroneous investment advice, the customer would not have made the investment in question. Accordingly the High Court's findings on the issue of foreseeability and remoteness were erroneous.

The type of risk was found to be foreseeable even though the extent of the loss was unprecedented.

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