Remoteness of Damages

MEANING AND CONCEPT

It is quite simple, once the damage is caused by a wrong, there have to be liabilities (conditional to some

exceptions). The question remains how much liability can be fixed, and what factor determines it. The

doctrine of the remoteness of damages is one such principle.

An event constituting a wrong can constitute of single consequence or may constitute of consequences of

consequences i.e. series of acts/wrongs.

The principles of damages are well-settled and the damages must bear proximity to the breach. In

Karsandas H. Thacker v. The Saran Engineering Co. Ltd., AIR 1965 SC 1981, while examining the issue

of remoteness of damages, it was held that remote and indirect loss or damage sustained by reason of

breach will not entitle the party to any compensation.18. In fact, the principles in respect of such breach

laid down in the well-known case of Hadley v. Baxendale, 156 ER 145, find incorporation in section 73

of the contract act. The rule has been succinctly set out by the Division Bench of the Kerala High Court

in State of Kerala v. K. Bhaskaran's case (supra). Thus, the respondent is only liable for the natural and

proximate consequences of breach. The arbitrator has taken the consequences of what would happen if

caustic soda was sold in the market and what profits the respondent would have earned.

Remoteness of damage relates to the requirement that the damage must be of a foreseeable type. In

negligence claims, once the claimant has established that the defendant owes them a duty of care and is in

breach of that duty which has caused damage, they must also demonstrate that the damage was not too

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remote. Remoteness of damage must also be applied to claims under the Occupiers Liability Acts and also

to nuisance claims.

Should a defendant be liable for all the consequences of his or her actions, no matter how unlikely or

unpredictable it is that those consequences manifested themselves? Remoteness is a legal principle that

serves to limit the potential liability of a tortfeasor in practice (Elliot and Quinn, (2007), p104 et seq). The

issue of remoteness arises on consideration of the fundamental question of legal causation, which involves

an analysis of the operative cause of the harm suffered by the claimant in law. As Horsey and Rackley

comment:

‘When a court asks whether a harm was too ‘remote’ a consequence of the defendant’s negligence (breach

of duty), what is essentially being asked is whether the consequences of the negligent action were so far

removed from it as to have been unforeseeable by the defendant’ (Horsey and Rackley, (2009), p247).

In this context the foresight and perspicacity of the defendant is judged on the basis of the objective

standard of the notional ‘reasonable person’ at the moment that the tortious act or omission occurred

(Cooke, (2007), p177 et seq). It is submitted that the leading case in this field is Overseas Tankship (UK)

v Morts Dock & Engineering Co Ltd, The Wagon Mound No.1 [1961] 1 All ER 404, which is the case

featured in the title to this work. Here, furnace oil spilled into the water at a wharf as a result of the

negligence of the defendants. The oil spread into a thin film on the surface of the water. The oil film drifted

to a nearby wharf where welding work was being carried out on a ship. Several days after the original spill

welding sparks ignited the oil and it caught on fire, damaging the wharf and proximate vessels. The Privy

Council held that contamination damage caused by the oil was reasonably foreseeable, but that damage

caused by fire was not foreseeable to a reasonable person given that evidence was produced indicating

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that it is difficult to ignite such oil when floating on water. It was found that the damage was thus too

remote for recovery (Steele, (2007), p182 et seq).

Before this decision in The Wagon Mound No.1 defendants were held responsible to compensate for all

the direct consequences of their negligence, a rule clarified by the decision in Re Polemis and Furness,

Withy & Co Ltd [1921] 3 KB 560. The Polemis test imposed liability on defendants for any and all damage

resulting from their negligence regardless of whether the damage in question was foreseeable, regardless

of any compounded seriousness and regardless of the fact that the eventual damage may have been entirely

different from that which a reasonable person may have anticipated on the basis of the original state of

affairs. It is this principle that Viscount Simmonds criticised in the quote featured in the title from the

Wagon Mound No.1 decision. It is submitted that the Wagon Mound No.1 ruling effectively curtailed the

practical range of liability that had previously been established in Re Polemis and that Wagon Mound

essentially overruled Re Polemis. This development clearly favoured defendants by placing a

foreseeability limitation on the extent of their potential liability.

As Horsey and Rackley state:

“the question to be asked in order to establish whether the claimant’s harm is too remote is this: ‘Was the

kind of damage suffered by the claimant reasonably foreseeable at the time the breach occurred?’" (Horsey

and Rackley, (2009), p248).

This test, as Horsey and Rackley go on to observe, did indeed ultimately become the sovereign principle

in this field on the question of remoteness of damage in the tort of negligence. It is argued that it is a

testament to its perceived utility and fairness that it has also been adopted in other legal fields and contexts,

including for example in regards to actions under the rule in Rylands v Fletcher [1868] LR 3 HL 330, as

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illustrated by decisions including Cambridge Water v Eastern Counties Leather plc [1994] 2 AC 264 and

confirmed in House of Lords rulings including Transco v Stockport Metropolitan Borough Council [2004]

1 All ER 589, HL. It should also be noted, just for the sake of clarity, that there was a second case in the

Wagon Mound litigation, Wagon Mound No.2 [1967] 1 AC 617, and that this case was decided differently

on the basis of further evidence (the presence of flammable debris floating in the water which became

impregnated with the oil made ignition more likely). However, it is very important to stress that the

decision in Wagon Mound No.2 did not vary or impact on the general test established in Wagon Mound

No.1 in any substantive fashion.

Once the existence of liability for the tort of negligence is established, the extent of liability i.e. whether

a particular damage is recoverable is to be decided. Damages to be recoverable, should not be remote. The

test to determine remoteness of damage, especially RFA(OS)75/2011 Page 69 when the question is one

of unintended consequences of a wrongful act, was established in Overseas Tankship Ltd. v. Morts Dock

and Engineering Co. Ltd., "The Wagon Mound" case, [1961] A.C. 388. It was held that damage is not too

remote if it was a reasonably foreseeable consequence of the negligent act. The Wagon Mound in holding

thus, overruled the test laid down in in Re Polemis. [1964] 2 QB 292 for determining remoteness of

damage i.e. whether the damage was a direct or natural consequence of the negligent act, so as to avoid

the "never-ending and insoluble problems of causation". In doing so, Wagon Mound also effectively

renders the tests for existence of liability and extent of liability the same

The damage may be proximate or might be remote, or too remote.

A few elaborations of cases would perhaps make it more clear.

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1. Scott v. Shepherd: A threw a lighted squib into a crowd, it fell upon X. X, in order to prevent injury

to himself, did the same thing and it fell upon Y and Y in his turn did the same thing and it then fell on B,

as a result of which B lost one of his eyes. A was held liable to B. His act was the proximate cause of

damage even though his act was farthest from the damage in so far as the acts X and Y had intervened in

between.

2. Haynes v. Harwood: The defendant’s servants negligently left a house van unattended in a crowded

street. The throwing of stones at the horses by a child, made them bolt and a policeman was injured in an

attempt to stop them with a view to rescuing the woman and children on the road.

One of the defenses pleaded by the defendant was novus actus interviniens, or remoteness of consequences

i.e. the mischief of the child was the proximate cause and the negligence of the servants was a remote

cause.

 Or let take a more general illustration (CASE X)

A person is going driving on a road, he hits a girl on the footpath, the girl tumbles on a bicycle breaks her

finger , the bicycle man loses his balance and gets in front of a fuel tanker , the tanker to save the man on

the bicycle steers left but unfortunately hits the railing to a river bridge and falls into it , the lock of the

fuel tank breaks and the oil spills into the river , the driver with the truck drowns.

In the above case:

 the girl being hit is the direct damage and it is the direct damage caused by the act of A

 the damage caused to the cyclist is proximately caused by the falling of the girl and is remote to

the act of A

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  the damage caused to the truck driver and the loss of material(fuel and fuel tank) is remote to the

act of A and proximate to the act of the cyclist

And it is to be noted that the accountability to negligence is made on the assumption that the person is

aware of the fact that rash driving can lead to fatalities (though the expected and the actual results might

not be the same).

Now, the starting point of any rule of the remoteness of damage is the familiar notion that a line must be

drawn somewhere, it would be unacceptably harsh for every tortfeasor to be responsible for all the

consequences which he has caused.

Certainly, the question of where to draw the line on recover-ability of consequential losses cannot be

answered by a mathematically precise formula. Judges have used their discretion from time to time, and

in that process, two formulas have been highlighted:

1. The test of reasonable foresight

2. The test of directness

THE TEST OF REASONABLE FORESIGHT

According to this test, if the consequences of a wrongful act could have been foreseen by a reasonable

man, they are not too remote. If on the other hand, a reasonable man could not have foreseen the

consequences, they are too remote. And, a person shall be liable only for the consequences which are not

too remote i.e. which could be foreseen.

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THE TEST OF DIRECTNESS

According to the test of directness, a person is liable for all the direct consequences of his wrongful act,

whether he could have foreseen them or not; because consequences which directly follow a wrongful act

are not too remote.

The only question which has to be answered in such any case whether the defendant’s act is wrongful or

not, i.e., could he foresee some damage? If the answer to this question is in the affirmative, i.e., if he could

any damage to the plaintiff, then he is liable not only for those consequences which he could have foreseen

but for all the direct consequences of his wrongful act.

THE CONTENTION (Waxing and Waning )

The test of reasonable foresight was, for the first time, laid down by Pollock, C.B., in his separate opinions

rendered in two cases of the Court of Exchequer in 1850, the cases being Rigby v. Hewittand Greenland

v. Chaplin. This was rejected expressly in the case by the court of appeal in Re Polemis and

Furness, Withy and Co. Ltd. in favor of the test of directness.

Though the first authority for the view if advocating the directness test is the case of Smith v. London &

South Western Railway Company where Channel B. said: where there is no direct evidence of

negligence, the question what reasonable man might foresee is of importance in considering the question

whether there is evidence for the jury of negligence or not…. but when it has been once determined there

is evidence of negligence, the person guilty of it is equally liable for its consequences, whether he could

have foreseen them or not. What the defendant might reasonably anticipate is only material with reference

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to the question, whether the defendants were negligent or not, and cannot alter their liability if they were

guilty of negligence.

Smith v. London and South Western Railway Co.

FACTS – The railway company was negligent in allowing a heap of trimmings of hedges and grass near

a railway line during dry weather. A spark from the railway engine set fire to the material. Due to high

wind, the fire was carried to the plaintiff’s cottage which was burnt.

The defendants were held liable even though they could not have foreseen the loss to the cottage.

Re Polemis and Furness, Withy & Co.

FACTS – The defendants chartered a ship. The cargo to be carried by them included a quantity of Benzene

and/or petrol in tins. Due to leakage in those tins, some of their contents collected in the hold of the ship.

Owing to the negligence of the defendants’ servants, a plank fell into the hold, a spark was caused.

Consequently, the owners of the ship were held entitled to recover the loss – nearly 200,000 pounds, being

the direct consequence of the wrongful act although such a loss could not have been reasonably foreseen.

The interpretation of ‘direct cause’ by House of Lords in Liesbosch Dredger v. S.S. Edison had the

effect of limiting the scope of Re Polemis.

Liesbosch Dredger v. S.S. Edison

FACTS – Owing to the negligence of Edison, the dredger Liesbosch was sunk. The owners of Liesbosch

required it for the performance of a contract with a third party, but since they were too poor to purchase a

new one, they hired one at an exorbitant rate.

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They sued the owners of Edison for negligence and their claim for compensation included: (1) the price

of the dredger; and (2) the hire charges which they had to pay from the date of the sinking to the date they

could actually purchase a new dredger.

The House of Lords accepted their claim under the first head and allowed compensation equal to the

market price of the dredger comparable to Liesbosch. As regards the second head of claim, the

compensation allowed was for loss suffered in carrying out the contract with the third party from the date

of the sinking of Liesbosch to the date when another dredger could reasonably have been put to work.

Thus, the claim after the time when a new dredger could have been reasonably purchased and put to work

was rejected. The reason why a new dredger could not be purchased by the plaintiffs was their poverty

and the House considered the additional loss being due to the extraneous cause of poverty and as such too

remote.

And then in the case of Overseas Tankship (U.K.) Ltd. v. Morts Dock and Engg. Co. Ltd. (Wagon

Mound Case) the test of directness was rejected by the Judicial Committee of the Privy Council and

it was held that the test of reasonable foresight is the better test.

THE WAGON MOUND CASE

In this case, the appellants’ vessel was taking oil in Sydney Harbor at the Caltex wharf. Through the

carelessness of their servants, a large quantity of oil was allowed to spill into the harbor. The escaped oil

was carried by wind and tide beneath a wharf owned by the respondents, who were ship-builders and ship-

repairers. They were refitting a vessel and for that purpose, their employees were using welding

equipment. The distance between respondent’s wharf and the Caltex wharf was 600 feet.

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When the respondents’ manager became aware of the conditions in the vicinity of the wharf, he instructed

the workmen that no welding or burning operations were to be carried on until further orders. He enquired

from the manager of Caltex Co. whether they could safely carry on the welding operations and the result

of the inquiry, coupled with his own belief as to inflammability of the furnace oil on water in the open led

him to think that he could safely carry on the operations. He gave instructions accordingly but directed

that all safety precautions should be taken to prevent inflammable material falling into the oil.

On the third day, there was an outbreak of fire. The exact cause of the fire is unknown, but the most

probable explanation which the Court accepted was that underneath the wharf was floating a piece of

debris with some smoldering cotton waste or rag on it. It was set on fire by the molten metal falling from

the wharf. Thus, floating oil was set a fire and the wharf was severely damaged.

The trial as well as the Supreme Court followed the Polemis rule and held the defendant liable, with the

reason that any reasonable man could form the chain of events deduce that the negligence of the defendant

was the direct cause for the fire.

However, the Privy council ruled in favor of the Overseas Tankship Ltd. holding that the Re Polemis was

no longer valid law. Since a reasonable man could not foresee the damage caused, the appellants were

held not liable, even though the negligence of the servants was the direct cause of the injury.

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The test of reasonable foresight has been applied to many other cases thereafter.

Hughes v. Lord Advocate

In this case, the post office employees opened a manhole for the purpose of maintaining underground

telephone equipment. The manhole was covered with a tent. One evening it was left surrounded by paraffin

lamps but otherwise unguarded. A child of eight years entered the tent and started playing with one of the

lamps. The lamp fell into the manhole and caused a violent explosion resulting in the fall of the boy in the

hole and severe burns thereof.

It was held that since the kind of damage was foreseeable although the extent was not, the defendants were

liable.

Doughty v. Turner Manufacturing Co. Ltd.

The plaintiff was employed by the defendants. Some other workmen of the defendants let an asbestos

cement coverslip into a cauldron of hot molten liquid. It resulted in an explosion and the liquid thereby

erupted, causing injuries to the plaintiff. The cover has been purchased from a very reputed manufacturer

and nobody could foresee that any serious consequences could follow by the falling of the cover into the

cauldron.

Held, that the damage resulting from the explosion was not of the kind as could have been foreseen, and,

therefore, the defendants were not liable.

Some other cases for reference are Lampert v. Eastern National Omnibus Co.; S.C.M.(United

Kingdom) v. W.J.Whittall & Sons; Shaikh Gafoor v. State of Maharastra.

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CONCLUSION

The test of reasonable foresight seems to be well established and widely accepted by now to determine

the question of the remoteness of damage, the facts of the case and the evidence present shall always be

the priority determining factors for the fate of any case.

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