We have a death, an explosion and some suspect information. Thank the House of Lords for making it easier to prove whodunnit
Three recent cases show that the courts are prepared to take a more flexible and pragmatic approach to questions of causation and proof of loss than in the past. This trend will assist claimants, in that they will no longer always have to prove the causes of their loss as precisely as they used to. It will work in defendants' favour, too, as they will be able to narrow the extent of the loss for which they would have been traditionally liable. This trend will be welcome in an industry that has in recent years been trying to simplify claims recovery and reduce the cost and risk of claims.

The deadly job
The most significant of these cases is Fairchild vs Glenhaven Funeral Services, a case concerned with the horrid but widely prevalent mesothelioma caused by inhaling asbestos fibres, usually in a working environment. The late Mr Fairchild's claim was typical of this type of case. He had worked for two separate employers in environments that had exposed him to the risk of inhaling asbestos fibres, which, had this occurred, would have involved actionable breaches of health and safety regulations. It is not possible to identify the date or period of exposure to asbestos fibres in such cases since mesothelioma can be caused by one fibre or by repeated exposure, depending on circumstances. Thus, Mr Fairchild's estate could not have proved to the traditional standard of proof which of his former employers had caused his fatal disease; he could only prove that both had exposed him to an enhanced risk of contracting that disease.

The House of Lords allowed him to recover from one of the two former employers, chosen as the sole defendant since it was the only one that was still solvent and trading. This decision was reached by the House of Lords because, as Lord Bingham explained, in an appropriate case it is sufficient for a claimant to prove causation and loss against one or both of two possible defendants merely by showing that it is "just and in accordance with common sense to treat the conduct of A and B in exposing C [to] a condition against which it was the duty of A and B to protect him". Admittedly, this ability to recover only arose where both were in breach of a duty owed to C, the disease was life-threatening and not capable of being caused by any alternative and non-actionable cause, and where medical science could not provide any more accurate means of identifying the cause of the disease.
The case is, nonetheless, groundbreaking. Authorities and legal principles from many different jurisdictions in both common law and civil law systems were considered. These supported the conclusion that, on appropriate occasions dictated by justice and fairness, the traditional basis of recovery involving proof of actual damage could be replaced by one based on an increase in the risk of damage.

The extent to which this new basis of recovery will be possible will need working through on a future case-by-case basis, like many developments in the law of contract and negligence. However, wherever there are two or more potential causes of loss resulting from the successive involvement of two or more negligent individuals or contract breakers, this new relaxation of traditional rules of causation might, in the future, be available to a claimant. Just think of the number of construction cases involving joint contract breakers and concurrent causes of loss or delay.

The exploding chemicals
The next case to consider is also a recent House of Lords case, Albright & Wilson UK vs Biachem (see Tony Bingham, 8 November 2002, page 56). Here, a disastrous explosion occurred in the claimant's fluid plant caused by a horrendous mistake, the mixing of sodium chlorite with phosphates. This mistake occurred because the same transport company had been contracted to transport consignments of two different chemicals by two different suppliers to two different divisions of the same works 鈥� at roughly the same time. The sodium chlorite was intended for the fluids division but, by a mistake in the documents, was misdescribed and was delivered as if it were the epichlorohydrin (EPI) due to be delivered at the same time to the phosphates division. On arrival at the wrong division, it was mixed with the store of EPI, creating a lethal explosion.

The plant owner brought the action against the two suppliers of the chemicals for breach of contract only, so as to avoid any defence of contributory negligence. This tactic gave rise to the conceptual puzzle confronting the court: which supplier was liable? And which contract had been broken? Was it the supplier of the sodium chlorite, who, in breach of contract, had failed to describe the chemical correctly? Or was it the supplier of the EPI, who had failed to deliver the correct chemical? Or was it both, since each had met its respective contract in part correctly 鈥� in supplying chemicals and documents 鈥� and in part incorrectly by, in one case, supplying the wrong chemical and, in the other, the wrong documents?

The judge and the Court of Appeal found against both defendants on the intellectually inelegant ground that the acts of each defendant constituted simultaneously a proper performance of part of its contract and an improper performance of another part of the same contract. Not so, held the House of Lords. There was only one guilty party, the supplier of sodium chlorite, who, in breach of contract, supplied the chemical with the wrong documents.

The puzzle of who was liable had to be answered in a pragmatic way by deciding what the essential contractual performance was that caused the damage. From the plant owners' point of view, it wanted correctly described sodium chlorite for its fluids plant but, because of a misdescription of that chemical on the delivery ticket, the sodium chlorite was delivered to the phosphate division instead. This erroneous performance of the sodium chlorite contract therefore caused the explosion.

Why did the House of Lords decide the case in this way? The answer was that it seemed both unjust and contrary to common sense to hold both suppliers liable since the loss had been caused by the sodium chlorite and only one of the suppliers had clearly fallen short of its contractual obligation to provide an accurately labelled consignment of that particular chemical. However, the only way of reaching that just result was by pragmatic and not logical reasoning. As Lord Hoffmann put it: "One has to decide what was the substance of the contract and what was ancillary. Was this a contract for the delivery of chemicals with the appropriate papers? Or was it a contract for the delivery of papers with the appropriate chemicals? It seems to me it was the former." Thus, the contract was for the sale of goods not documents. So the sodium chlorite suppliers were held liable.

The suspect information
Finally, I turn to the not-so-new decision of the House of Lords in South Australia Asset Management Co vs York Montague. Here, the House of Lords held valuers liable for negligent overvaluations but not for the further loss resulting from the 1991 property crash. The principles in this case were originally thought to be confined to claims against valuers. In fact, it now seems that the relevant principles can extend in appropriate circumstances to any action against a professional or to any breach of a professional duty by a contractor. The South Australia case decides that where a professional has a duty that is confined to providing information, he is only liable for such losses as fall within the ambit of that particular duty and his potential liability does not extend to all foreseeable losses.

The ambit of the South Australia principles is still somewhat unclear. At the very least, however, it can be seen from three subsequent cases, Nykredit vs Edward Erdman; Petersen vs Rivlin and HOK vs Aintree Racecourse, that they are applicable where:

  • A professional is engaged to provide information for a specific transaction or project
  • The client is to decide whether or not to proceed with that transaction or project
  • The information to be supplied is to be relied on by the client as part of the information to be used in that decision-making process
  • The relevant decision as to whether to proceed with that project or transaction is neither to be participated in by the professional nor is dependent on the advice of that professional.

These cases are of considerable interest to professionals sued for breach of professional duty. This is because they provide the basis, in the common situation where that professional's duty is to provide information, for the professional's potential liability to be confined to cases where the loss being claimed relates directly to the nature of the information being asked for and does not extend to losses or to information or advice falling outside the duty contracted for.

The denouement
Overall, these three decisions show that the common law, even without assistance from statutes, protocols, codes of practice or standard forms of contract, is in the process of rapid adaptation to modern conditions. Causation, scope of duty and loss are now considered with two basic tools working hand in hand: justice and common sense. Loss, risk and liability may now more fairly be dealt with.