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CONSTRUCTION LAW:
TIME FOR A RE-STATEMENT?
David Sawtell
July 2021
229
www.scl.org.uk
CAUSATION IN ENGLISH
CONSTRUCTION LAW:
TIME FOR A RE-STATEMENT?
David Sawtell
This was not a one-off, off the cuff, observation. Lord Wright noted in
Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker:
‘Causation is a mental concept, generally based on inference or
induction from uniformity of sequence as between two events that there
is a causal connection between them … The common law, however, is
1
The author would like to thank Paul Darling QC for his many thought provoking
conversations and discussions about the role that causation plays in construction
disputes.
2
Alphacell Ltd v Woodward [1972] AC 824 (HL), [1972] 2 WLR 1320, page 847. For
example, Sir Leonard Hoffmann (writing extra-judicially) quotes this passage in his
article, ‘Causation’ (2005) 121 Law Quarterly Review 592. It still has rhetorical bite: in
the mesothelioma case of Bannister v Freemans plc [2020] EWHC 1256 (QB), counsel
for the Claimant cited it. Geoffrey Tattersall QC (sitting as a deputy judge of the High
Court) held at para [166], however, that ‘causation cannot just be an issue of fact but
must … be one of mixed fact and law’.
1
not concerned with philosophic speculation, but is only concerned with
ordinary everyday life and thoughts and expressions …’3
In a lecture to the Chancery Bar Association, Lord Hoffmann noted that the
phrase ‘it is a matter of common sense’ was a candidate for one of those
judicial phrases that conceal an absence of reasoning.4 It is more widely
accepted that a common sense of cause and effect forms the foundational
principle underpinning the doctrinal rule sets as to causation, rather than being
both the start and the finish of the inquiry. ‘Common sense’ notions of
causation are the focus of HLA Hart and Tony Honoré’s foundational study,
Causation in the Law. Their work looked to formulate the general rules
expressing a common sense concept of causation, especially where different
principles are at work beyond the ‘but for’ test for factual causation. In their
analysis, ‘there is more to be said about the actual price of courts than [a]
blend of sine qua non and policy’.5 Instead, they looked to ordinary notions of
causation (the ‘common sense’ referred to in the case law) as the basis of the
law, rather than policy or legal realism:
‘the clarification of the structure of ordinary causal statements was and
is an indispensable first step towards understanding the use of causal
notions in the law.’6
There are problems with this approach, many of which the authors themselves
dealt with in their preface to the second edition. ‘Common sense’ notions of
causation may not be self-evident at all. In borderline cases, the inquiry as to
what are the rules, or at least the general precepts, of ‘common sense’ can
obscure the actual reasoning of the decision maker. Further, Hart and Honoré
did not cite any psychological research as to what the ‘ordinary’ person might
consider to be causality.7 Notwithstanding these points, Hart and Honoré’s
book has become the standard approach to causation in English law.
Twenty-two years later, it is more readily accepted that ‘common sense’ alone
(as opposed to the legal principles derived from ordinary notions of causation)
is not the only test: instead, causation is a mixed question of fact and law.
‘One cannot separate questions of liability from questions of causation.
They are inextricably connected. One is never simply liable; one is
always liable for something and the rules which determine what one is
liable for are as much part of the substantive law as the rules which
determine which acts give rise to liability. It is often said that causation
is a question of fact. So it is, but so is the question of liability. Liability
involves applying the rules which determine whether an act is tortious to
the facts of the case. Likewise, the question of causation is decided by
3
Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196 (HL
Scotland), [1949] 1 All ER 1, page 228.
4
Lord Hoffmann, ‘Common Sense and Causing Loss’, Lecture to the Chancery Bar
Association, 15 June 1999.
5
HLA Hart and Tony Honoré, Causation in the Law (2nd edition, OUP 1985) 130.
6
Causation in the Law, note 5, page xxxiv.
7
Jane Stapleton, ‘Law, Causation and Common Sense’ (1988) Oxford Journal of Legal
Studies 8(1) 111, 123–5.
2
applying the rules which lay down the causal requirements for that form
of liability to the facts of the case.’8
Thesis question
This paper will consider the extent to which setting out and hence re-stating
the principles of causation insofar as they operate in construction law is
possible. In so doing, it will consider whether those principles which are
identified:
(1) are formally and readily ascertainable;
(2) are either commonly accepted or controversial as positivist statements
(as opposed to economic or social policy); and
(3) form part of the more general corpus of English contract, and
commercial, law or represent rule sets that are typical to construction
law contracts. This paper will not compare construction contracts to
other contracts with similar mechanisms (such as shipbuilding, off-shore
engineering, software development or energy contracts).
Structure
This paper will be divided into the following parts.
(1) The first substantive part of the paper will consider how the Restatement
programme carried out by the American Law Institute has influenced a
similar exercise, led by Andrew Burrows (now Lord Burrows) in
8
Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC
883, para [128] (Lord Hoffmann). Although this was stated in the context of the tort of
conversion, there is no reason to think why there is any difference in respect of
contractual liability.
3
England and Wales. The advantages and disadvantages of a formal
Restatement will be considered.
(2) The second part will analyse the recent decision of the TCC in Beattie
Passive Norse Ltd v Canham Consulting Ltd.9 The case is chosen as a
case study as it illustrates a number of the ways in which causation
operates in a construction dispute, outside of the arena of time and
money obligations and entitlements under a contract.
(3) The third part draws from the discussion of Andrew Burrows’ A
Restatement of the English Law of Contract in the first part to proffer a
tentative suggestion of what the outlines of a re-statement of the law of
causation in construction law might resemble.10 It will be divided into
three sections. The first part describes a number of basic principles. The
second part provides a framework for breach of contract. The third part
is in respect of claims for an entitlement under the contract.
(4) In the conclusion, the paper addresses the question: is now the time for a
re-statement? This question will be answered in the affirmative, in light
of the pressures facing construction law both in 2021 and in the years
ahead. It will then draw together the strands from the first three
substantive parts of the paper to consider the question latent in the first
part of the title of this paper. Is there such a thing as causation in English
construction law that is distinct from English contract, or commercial,
law?
The Restatement process has not been without controversy. The first ALI
Restatement of the Law of Contracts was greeted with scepticism by the
English lawyer Frederick Pollock on account of the way that conflicting
opinions are not exhibited in the text itself (although the commentary to each
9
Beattie Passive Norse Ltd v Canham Consulting Ltd [2021] EWHC 1116 (TCC).
10
Andrew Burrows, A Restatement of the English Law of Contract (2nd edition, OUP
2020).
11
American Law Institute, Restatement of the Law, Contracts (1932) vii–xiv.
12
In particular, the Restatement of the Law, Restitution in 1937 was especially influential
in the law of restitution and unjust enrichment. It was welcomed with especial warmth by
Lord Wright in his review in the Harvard Law Review ((1937) 51(2) 369).
13
Kit Barker, ‘Centripetal Force: the Law of Unjust Enrichment Restated in England and
Wales’ (2014) Oxford Journal of Legal Studies 34(1) 155.
4
part goes some way to addressing this criticism).14 A Restatement can have a
normative as well as a purely descriptive function: in the process of setting out
the law notwithstanding these jurisdictional differences, it has been noted that
they suggest what the law should be, as opposed to limiting themselves to only
stating what the law is. Notwithstanding this, the Restatements provide an
important overview of doctrinal law within the context of a federal system.
Burrows has been a central figure in the adoption of the Restatement mode of
analysis in English jurisprudence. The first Restatement, A Restatement of the
English Law of Unjust Enrichment, was published in 2012.15 The reaction to
this project was positive:
‘A comprehensive account of the flesh of the law will always be
necessary but it increasingly needs to be complemented by a clear
identification of the bones of the subject.’16
14
Frederick Pollock, ‘Restatement of the Law of Contracts’ (1933) 47 Harvard Law
Review 363.
15
Andrew Burrows, A Restatement of the English Law of Unjust Enrichment (OUP 2012).
16
FD Rose, A Restatement of the English Law of Unjust Enrichment (2013) 129 Law
Quarterly Review 639, 641.
17
Restatement: Contract, note 10, page 43.
18
Restatement: Contract, note 10, page 124.
19
Restatement: Contract, note 10, page 125.
5
– which is usually referred to as ‘legal causation’ – and this is dealt with
in s 21(1)(b).’20
20
Restatement: Contract, note 10, page 125.
21
Restatement: Contract, note 10, page 134.
22
Restatement: Contract, note 10, page 137.
23
Citing Stansbie v Troman [1948] 2 KB 48 (CA), [1948] 1 All ER 599.
24
Quinn v Burch Bros (Builders) Ltd [1966] 2 QB 370 (CA), [1966] 2 WLR 1017, [1966]
2 All ER 283.
25
Quinn v Burch Bros, note 24, pages 394–5. The Restatement contrasts this case with
Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm), [2011] 1 Lloyd’s Rep
482, discussed below in Part II.
6
Most of section 21, however, is concerned with the English rules as to
remoteness26 as the commentary reflects,
‘The remoteness restriction is based on the view that it is unfair to a
defendant, and imposes an unwarranted burden, to hold the defendant
responsible for losses however unusual and however far removed from
the breach of contract.’27
He noted, with approval, that Burrows positioned his contract Restatement ‘at
the descriptive end of the spectrum’ and ‘steered for the mainstream’.30
Instead, any wider discussion was reserved for the commentary on each
section.
26
See, in particular, Hadley v Baxendale (1854) 9 Exch 341; Victoria Laundry (Windsor)
Ltd v Newman Industries Ltd [1949] 2 KB 528 (CA); Koufos v Czarnikow Ltd, The
Heron II [1969] 1 AC 350; Parsons v Uttley Ingham & Co Ltd [1978] QB 791; Brown v
KMR Services Ltd [1995] 4 All ER 598. An addition to this list of causes is Transfield
Shipping Inc v Mercator Shipping Inc, The Achilleas [2008] UKHL 48, [2009] 1 AC 61,
and Lord Hoffmann’s focus on whether the defendant had assumed responsibility for the
loss. This approach was subsequently adopted in the construction case of Supershield Ltd
v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7, [2010] 1 Lloyd’s Rep
349, para [40] (Toulson LJ): ‘The law on remoteness of damage in relation to claims for
breach of contract is grounded on the policy that the loss recoverable by the victim
should be limited to loss from which the party in breach may reasonably be taken to have
assumed a responsibility to protect the victim. It follows that the question of remoteness
cannot be isolated from consideration of the purpose of the contract and the scope of the
contractual obligation.’ It is reflected in Burrows’ Contract: Restatement (note 10) at
section 21(3) (page 134), and the Supershield v Siemens case was used as an illustration
of the ‘assumption of responsibility’ limitation on compensatory damages at page 136.
27
Restatement: Contract, note 10, page 135.
28
Sir George Leggatt, ‘A Restatement of the English Law of Contract’ (2017) 133 Law
Quarterly Review 521.
29
Kansas v Nebraska 135 S.Ct. 1042, 1064 (2015). The case concerned the availability of
disgorgement as a remedy for breach of contract.
30
Leggatt, note 28, page 522.
7
Law Institute’s Restatement of the law loses some of its force. Burrows’
Restatements are shorter and more conceptual. Further to this, English contract
law already boasts excellent textbooks in the form of Chitty31 and Treitel32 that
take on much of the role of a US-style Restatement by consolidating doctrinal
law and hence creating a framework of reference for its application.33 Neil
Andrews, working alone, also arrived at a re-statement of the general rules of
English contract law.34 In the specific field of construction law, we are of
course greatly assisted by successive editions of practitioner works such as
Hudson,35 Keating,36 and Wilmot-Smith:37 to take one example, Hudson has
run in successive editions since the late nineteenth century. Construction
disputes provide a number of the examples of causation at work in the English
law of contract. There are, however, powerful reasons why a Restatement in
the American Law Institute or Burrows’ mould is not workable. Construction
law is defined by reference to its subject matter and the rights and obligations
that this necessarily entails: a classic Restatement is not ordered by reference
to its subject matter context but by its doctrinal content.38
31
Hugh Beale, Chitty on Contracts (33rd edition, Sweet & Maxwell 2020).
32
Edwin Peel, Treitel on the Law of Contract (15th edition, Sweet & Maxwell 2020).
33
Leggatt, note 28, page 521; Paula Giliker, ‘Codification, consolidation, restatement?
How best to systemise the modern law of tort’ (2021) 70(2) International and
Comparative Law Quarterly 271, 298. Similarly, it is arguable that this form of legal
treatise alleviates the need for formal codification: see A Rodger, ‘The Codification of
Commercial Law in Victorian England’ (1992) 108 Law Quarterly Review 570, 589.
34
Neil Andrews, Contract Rules: Decoding English Law (Intersentia 2016).
35
Robert Clay and Nicholas Dennys QC, Hudson’s Building and Engineering Contracts
(14th edition and 1st Supplement, Sweet & Maxwell 2021).
36
Stephen Furst and Sir Vivian Ramsey, Keating on Construction Contracts (11th edition,
Sweet & Maxwell 2020).
37
Richard Wilmot-Smith QC and Paul Darling QC, Wilmot-Smith on Construction
Contracts (4th edition, OUP 2021).
38
Barker, note 13, page 171.
8
Where causation in construction law more generally has been explored, the
difficulties that Burrows identified in the absence of clear rules have been
highlighted. Nicholas Baatz QC noted, for example, that, ‘Consideration of
causation in hard cases carries with it a danger of explanations that use
formulas to apply undefined values.’39 Vincent Moran QC identified that a
consensus has developed in respect of concurrent delay and causation, but
noted that ‘this summary marks a number of remaining questions.’40 In
particular, his paper identified an inconsistency between the prevailing test of
effective cause and propounded, ‘The recognition of a more comprehensible
approach to causation and concurrency in construction law’.41 The particular
difficulties in applying causation rules in a construction law context will be
considered in Part III of this paper. Before we get to that point, we shall
consider a particular case example in Part II, where the causation rules in play
were set out clearly.
The claim was brought by Beattie Passive Norse Ltd (‘BPN’) and NPS
Property Consultants Ltd (‘NPS’). The defendant was a practice of consulting
engineers called Canham Consulting Ltd (‘Canham’).
The dispute arose out of the design of foundations for a site in Burwash in
Sussex. The project involved the construction of two blocks, each containing a
small number of terraced houses, called ‘PassivHaus’ blocks. The site in
Burwash was in an area of Wadhurst clay with a shallow layer of topsoil.
Canham designed the foundation for each block. Beattie Passive Construction
Ltd (‘Beattie’) was engaged to perform the construction works themselves.
The foundation works were carried out by a sub-contractor, Foxdown
Engineering Ltd (‘Foxdown’).
The claim against Canham for the second claimant, NPS, was put purely on
the basis of a tortious duty of care. Fraser J rejected the argument that Canham
owed a duty of care to NPS.42 The focus of the case was, therefore, on BPN’s
claim for breach of contract.
The engineers accepted that the design of the foundations was negligent in
certain limited respects: in particular, the lack of connections between the pads
39
Nicholas Baatz QC, ‘“Factual” and “Legal” Causation in Construction and Infrastructure
Law: A Thorny Subject’ SCL Paper 202 (November 2016) page 24: www.scl.org.uk.
40
Vincent Moran QC, ‘Causation in Construction Law: the Demise of the “Dominant
Cause” test?’ SCL Paper 190 (November 2014) page 2, para [3]: www.scl.org.uk.
41
Moran, note 40, page 21, para [93].
42
BPN v Canham, note 9, paras [26]–[37], referring to Multiplex Construction Europe Ltd
v Bathgate Realisations Civil Engineering Ltd [2021] EWHC 590 (TCC).
9
and beams of the foundations was identified as the most relevant failure.43 As
Fraser J noted:
‘It is accepted by their own expert structural engineer that they did [fall
below the required standard] in certain respects, a conclusion with which
I am in agreement. It is the legal consequences of that failure, or those
failures, that are important.’44
Following the discovery that the foundations were defective, both blocks were
entirely demolished and re-built. But this was not the only material fact.
(1) Canham issued a Revision A version of the drawings for construction.
They then issued a Revision B version. It was the Revision A version,
however, that BPN issued to Foxdown for construction, and the
Revision B drawings were not used. Fraser J found that this was because
the Revision B drawings had not been issued to Foxdown.45
(2) The works that were carried out by Beattie themselves were defective:
the overwhelming majority of these defects could not have been, and
were not, Canham’s fault.46 The contract with Beattie was terminated
when the works were incomplete and another contractor was engaged to
complete the unfinished works.
(3) In May 2016, it was decided to demolish the first block. Remedial works
were already underway to demolish the second block; before they were
completed, it was decided to demolish that block as well.
The claimants’ case was that it was the failures by Canham that led to the
decision to demolish the blocks or, at the very least, were effective causes of
that need.47 Canham put up two lines of defence. Firstly, while it accepted that
its design was, to a degree, negligent, in fact the foundations had not been
constructed in accordance with the design it had prepared, but rather the
earlier Revision A design. Secondly, Canham argued that the two blocks were
so woefully constructed that they would have been demolished in any event.
Causation, therefore, was very much put in issue.
43
BPN v Canham, note 9, para [94].
44
BPN v Canham, note 9, para [92].
45
BPN v Canham, note 9, para [57].
46
BPN v Canham, note 9, para [58].
47
BPN v Canham, note 9, para [100].
48
County Ltd v Girozentrale Securities [1996] 3 All ER 834 (CA).
49
BPN v Canham, note 9, paras [106]–[107].
10
element of fault will not without more be treated as a cause in law… It is
often said that legal causation is a matter of fact and common sense.
Causation involves taking account of recognised legal principle but, that
having been done, it is a question of fact in each case.”’
Immediately after this quotation, he put the question as this: ‘Was the breach
of contract by Canham an effective cause of the loss suffered by BPN?’50
50
BPN v Canham, note 9, para [109].
51
Note 26.
52
Supershield v Siemens, note 26, paras [32]–[33] (Toulson LJ).
53
Board of Governors of the Hospital for Sick Children v McLaughlin & Harvey plc
(1987) 19 Construction Law Reports 25, 96.
54
BPN v Canham, note 9, para [114].
55
BPN v Canham, note 9, para [115].
56
BPN v Canham, note 9, para [127].
11
assessed the measure of loss for the remedial works actually carried out to be
£2,000.57
BPN therefore failed to demonstrate both (i) that the demolition was required
as a result of the negligent design of the foundation, and (ii) that the decision
to demolish was reasonable.58 The negligence of Canham was not an effective
cause of the damage suffered by BPN: it was no cause at all of the
demolition.59 If he was wrong on this, and there was a chain of causation, then
Canham had discharged the burden in establishing that it was broken.60
57
BPN v Canham, note 9, para [133].
58
BPN v Canham, note 9, para [116].
59
BPN v Canham, note 9, para [123].
60
BPN v Canham, note 9, para [123].
61
Details of the Scheme are available at https://pnba.co.uk/pnba-adjudication-scheme/.
62
BPN v Canham, note 9, para [152].
63
BPN v Canham, note 9, para [3].
64
BPN v Canham, note 9, para [95].
65
At BPN v Canham, note 9, para [133] Fraser J made it clear that he was doing ‘broad
justice’ and applying ‘common sense’ when determining the figure of £2,000, when
assessing damages based on an agreed figure that the whole of the remediation works to
the second block would cost £4,000.
12
Part III: the outline of a re-statement of causation in English
construction law
In this part, a possible outline of an informal re-statement of how causation
operates in English construction law is set out. At the conclusion to this part,
the completeness and the level of success of this exercise will be considered.
There are two aspects to causation: factual causation and legal causation.
When it comes to factual causation, it is normally necessary, but not sufficient,
to establish the ‘but for’ test.67 The qualification to this assertion is considered
below.
66
See also Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd
[1996] UKHL 3, [1997] AC 254, page 284G (Lord Steyn).
67
Orient-Express Hotels Ltd v Assicurazioni General SpA [2010] EWHC 1186 (Comm),
[2011] Bus LR D7, para [21]. Moran, note 40, page 3, para 8.
68
Baatz, note 39, pages 2–3.
69
Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32, para
[54], cited by Baatz, note 39, pages 21–2. Hoffmann set out a similar proposition in his
LQR article at page 595, citing his own speech in Kuwait Airways Corp v Iraqi Airways
Co (note 8) at para [128], where he also stated that, ‘There is therefore no uniform causal
requirement for liability in tort. Instead, there are varying causal requirements,
depending upon the basis and purpose of liability. One cannot separate questions of
liability from questions of causation. They are inextricably connected.’
70
Hoffmann: note 2. Causation in the Law: note 5.
13
often based on moral notions, not only as to the kind of conduct which
should make one liable to pay compensation but also of the extent of the
harm for [which] a person who has been guilty of such conduct should
be responsible.’71
The cause alleged must precede the effect, and therefore the loss.
This principle has an important role to play in construction law. In the case of
a delay analysis, if an event takes place that would have the effect of delaying
the works beyond the completion date, but another event is already having that
effect, the second event in time has no effect on the completion date.72
Causation must therefore run through the event constituting the breach of
contract and into the remedy claimed as a consequence.
71
Hoffmann, note 2, page 594.
72
See, for example, Royal Brompton Hospital NHS Trust v Hammond (No 7) [2001]
EWCA Civ 206, (2001) 76 Con LR 149.
73
The Haversham Grange [1905] P 307 (CA).
74
Baatz, note 39, pages 5–7.
75
Carslogie Steamship v Royal Norwegian Government [1952] AC 292 (HL), [1952] 1 All
ER 20.
76
Carslogie Steamship, note 75, page 301.
14
The cause must be an effective cause of the loss and not just the occasion
of the loss, but it need not be the ‘dominant’ or ‘proximate’ cause.
It is now established that a cause need only be an effective cause of the loss. If
there are two (or more) causes, it is not necessary to choose which is the
dominant or more effective.77
The question of causation was therefore tied up with the correct interpretation
of this clause. Lord Sumption analysed this point as follows.
‘Secondly, [the clause] itself limits the indemnity to losses which were
caused by complying with the charterers’ orders. Like all questions of
causation, this one is sensitive to the legal context in which it arises. It
depends on the intended scope of the indemnity as a matter of
construction, which is necessarily informed by its purpose. We are not
77
Heskell v Continental Express Ltd [1950] 1 All ER 1033 (KB); Banque Keyser Ullmann
SA v Skandia (UK) Insurance Co [1990] 1 QB 665 (CA); County Ltd v Girozentrale
Securities: note 48.
78
Note 48.
79
Petroleo Brasileiro SA v ENE Kos 1 Ltd [2012] UKSC 17, [2012] 2 AC 164.
80
Petroleo Brasileiro, note 79, para [8].
15
therefore concerned with questions of remoteness and foreseeability of
the kind which would arise in the law of damages, where the object is to
limit the range of consequences for which a wrongdoer may be said to
have assumed responsibility in the eyes of the law. Indeed, as Sir Donald
Nicholls V-C pointed out in Triad Shipping Co v Stellar Chartering &
Brokerage Inc (The Island Archon) [1994] 2 Lloyd’s Rep 227, 238, the
more foreseeable the owners’ loss, the more likely it is to be an ordinary
incident of the chartered service and therefore outside the scope of the
indemnity. The real question is whether the charterers’ order was an
effective cause of the owner having to bear a risk or cost of a kind which
he had not contractually agreed to bear. I use the expression “effective
cause” in contrast to a mere “but for” cause which does no more than
provide the occasion for some other factor unrelated to the charterers’
order to operate. If the charterers’ order was an effective cause in this
sense, it does not matter whether it was the only one.’81
Lord Clarke echoed Lord Sumption’s use of the term ‘effective cause’ and was
disinclined to use other adjectives (such as ‘proximate’ or ‘dominant’). These
tend to suggest that the cause must either be the most proximate in time, or
that the search is for the sole cause. Depending on the circumstances, there
may be more than one effective cause.82 He cited Wayne Tank and Pump Co
Ltd v Employers Liability Assurance Corp Ltd as an example of where two
effective causes can, in principle, exist.83
There is, as well, a limit to the ‘but for’ test: some factual causes of a loss
merely provide the occasion or opportunity for it, rather than being legally
causative. In Galoo Ltd v Bright Grahame Murray, the claimant brought
claims against a number of defendants for negligence and breach of
contractual duty arising out of the preparation of their accounts.84 It was
argued that the accounts showed the companies to be more profitable than they
actually were; if the accounts had been prepared properly, the companies
would not have accepted further loans. It was held by the Court of Appeal that
the mere acceptance of a loan could not amount to a loss causing damage, and
the acceptance by the claimants of loans in reliance on the defendants’
statements therefore gave rise to no cause of action. A breach of contract
would sound in damages only if it were the dominant or effective cause of the
plaintiff’s loss, and not if it had merely given the opportunity for the loss to be
sustained. In determining whether a breach was the cause of a loss or merely
the occasion of it, the court would apply ‘common sense’ to the facts of each
case. In that case, the only effective cause of the claimants’ loss was the
company’s decision to continue to trade when insolvent.
81
Petroleo Brasileiro, note 79, para [12]. This principle was further discussed in Financial
Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1, [2021] 2 WLR 123 at
paras [171]–[174] by Lord Hamblen and Lord Leggatt JJSC.
82
Petroleo Brasileiro, note 79, para [62].
83
Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] QB 57
(CA), [1973] 3 WLR 483. In that case, there were two causes which were equal or nearly
equal in their efficiency in causing the fire damage to the plastic factory: Cairns LJ
described both of them as effective causes of the loss at 68–9.
84
Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 (CA), [1995] 1 All ER 16.
16
Glidewell LJ cited Mahoney JA’s judgment in the New South Wales case of
Alexander v Cambridge Credit Corporation Ltd:85
‘In the broadest sense, that loss was a result of the defendants’ breach. If
a defendant promises to direct me where I should go and, at a cross-
roads, directs me to the left road rather than the right road, what happens
to me on the left road is, in a sense, the result of what the defendant has
done. If I slip on that road, if it collapses under me, or if, because I am
there, a car driving down that road and not down the right road strikes
me, my loss is, in a sense, the result of the fact that I have been directed
to the left road and not the right road. But, in my opinion, it is not
everything which is a result in this broad sense which is accepted as a
result for this purpose in the law. Thus, if, being on the left road, I slip
and fall, the fact alone that it was the defendant’s direction, in breach of
contract, which put me there will not, without more, make the defendant
liable for my broken leg. I say “without more:” if there be added to the
breach the fact that, for example, the left road was known to be
dangerous in that respect I may, of course, be liable. But, in relation to
losses of that kind, the fact that the breach has initiated one train of
events rather than another is not, or at least may not, be sufficient in
itself. It is necessary, to determine whether there is a causal relationship,
to look more closely at the breach and what (to use a neutral term)
flowed from it.’
It is the distinction drawn between factual causation (the ‘but for’ test) and
legal causation (which impose limits on the causal relationship) that causes the
most difficulty conceptually. The difficulty with the case is that it reverts to
‘common sense’ notions of causation, instead of formally expressed rules.
Treitel suggests that decisions such as this are reached on grounds of legal
policy, going beyond a question of fact.86
Lord Bingham explained this in the negligence case of Corr v IBC Vehicles
Ltd:
‘The rationale of the principle that a novus actus interveniens [Latin for
new intervening act] breaks the chain of causation is fairness. It is not
fair to hold a tortfeasor liable, however gross his breach of duty may be,
for damage caused to the claimant not by the tortfeasor’s breach of duty
but by some independent, supervening cause (which may or may not be
tortious) for which the tortfeasor is not responsible.’87
85
Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310.
86
Treitel, note 32, para 20-100.
87
Corr v IBC Vehicles Ltd [2008] 1 AC 884 (HL), para [15].
17
Whether or not there has been a breach in the chain of causation is a matter of
fact and degree: ‘the question of whether there has been a break in the chain of
causation is fact sensitive … “it is almost impossible to generalise”.’88 Rix LJ
discussed this principle in BHP Billiton Petroleum Ltd v Dalmine SpA.89 The
defendant supplied a non-compliant pipe for use in the construction of a
pipeline. The defendant contended that the claimant’s welding procedure was
so defective that the pipeline would have failed anyway. Rix LJ discussed that,
in such circumstances, the claimant would have failed to have proven that the
loss was the pipeline and not the welding.90
88
Borealis v Geogas Trading, note 25, para [47] (Gross LJ).
89
BHP Billiton Petroleum Ltd v Dalmine SpA [2003] EWCA Civ 170, [2003] BLR 271.
90
BHP Billiton, note 89, para [32].
91
R v White [1910] 2 KB 124 (CA).
92
The defendant was, however, convicted of attempted murder.
93
Note 25.
94
Borealis v Geogas Trading, note 25, para [43].
95
Borealis v Geogas Trading, note 25, para [44].
18
contract on the part of the Defendant; if the breach of contract by the
Defendant and the Claimant’s subsequent conduct are concurrent causes,
it must be unlikely that the chain of causation will be broken.96
(4) In circumstances where the Defendant’s breach of contract remains an
effective cause of the loss, at least ordinarily, the chain of causation will
not be broken.97
(5) It is difficult to conceive that anything less than unreasonable conduct on
the part of the Claimant would be capable of breaking the chain of
causation. It is, however, also plain that mere unreasonable conduct on a
Claimant’s part will not necessarily do so.98
(6) The Claimant’s state of knowledge at the time of and following the
Defendant’s breach of contract is likely to be a factor of very great
significance. The more the Claimant has actual knowledge of the breach,
of the dangerousness of the situation which has thus arisen and of the
need to take appropriate remedial measures, the greater the likelihood
that the chain of causation will be broken. Conversely, the less the
Claimant knows the more likely it is that only recklessness will suffice
to break the chain of causation.99
(7) The question of whether there has been a break in the chain of causation
is fact-sensitive, involving as it does a practical inquiry into the
circumstances of the Defendant’s breach of contract and the Claimant’s
subsequent conduct.100
What we are left with, therefore, is a list of indicative tests that point to
whether or not the chain of causation has been broken. This tallies with
Burrows’ refusal at section 21(1)(b) of the Restatement to provide a more
definitive statement of what constitutes an intervening action that breaks the
chain of causation between the breach and the loss, and the identification of
the fact that no clear legal test has emerged. This does not mean, however, that
the appropriate test should wholly or simply be one of common sense. Instead,
the tribunal must direct itself appropriately by reference to the recognised
indicators identified above.
96
Borealis v Geogas Trading: note 25.
97
Borealis v Geogas Trading, note 25, citing County Ltd v Girozentrale Securities, note 48,
pages 849b–v (Beldam LJ) and 857f–g and 858b–c (Hobhouse LJ as he then was).
98
Borealis v Geogas Trading, note 25, para [45].
99
Borealis v Geogas Trading, note 25, para [45]. This was illustrated by reference to
Lambert v Lewis [1982] AC 225.
100
Borealis v Geogas Trading, note 25, para [47].
101
Barings plc v Coopers & Lybrand [2003] EWHC 1319 (Ch), page 838.
19
Gross LJ’s analysis has been adopted in a number of subsequent cases,
including construction disputes. It has not proved to be a precise lodestar,
however, with disagreement arising as to how it should be applied to particular
fact sets. It was applied by Judge David Grant (sitting as a judge of the High
Court) in Harrison v Technical Sign Co Ltd.102 In that case, it was held that
Maison Blanc did not know of the details of the breach of contract or
appreciate the dangerousness of the situation.103 The decision was overturned
on a different point in the Court of Appeal, but Moore-Bick accepted that there
was force in the argument that Maison Blanc in fact took the very steps it
argued the defendant should have taken:
‘there are strong arguments for holding that such negligence as there
may have been on Cluttons’ part was not the cause of the unfortunate
injuries to the claimants or of the loss suffered by Maison Blanc.’104
The analysis in Borealis v Geogas was also cited both at first instance and on
appeal in Flanagan v Greenbanks Ltd (t/a Lazenby Insulation).105 In that case,
a surveyor and a contractor agreed that the surveyor would assess the
suitability of homes for cavity wall insulation that the contractor would
subsequently install. The surveyor failed to check two homes were suitable;
the contractor also failed to check before installation. The contractor settled
with the homeowners and sought an indemnity or contribution from the
surveyor. At first instance, it was held that the failure by the contractor to
check the homes did not break the chain of causation, so that the surveyor was
liable for his breach of contract. Rafferty LJ noted that the law was not in
dispute and, like the first instance judge, referred to Borealis v Geogas. She
accepted that the contractor’s conduct, ‘undoubtedly and admittedly
negligent’, did not come near to recklessness.106 She summarised the situation
at [40]:
‘[40] Unforeseeable events combining with the breach to cause loss does
not mean that those events supersede the breach as the cause of loss. The
effects of a breach may continue to combine with other events to
produce the final result: County Ltd v Girozentrale [1996] 3 All ER 834.
Even were Lazenby’s default an effective and concurrent cause it would
not obliterate Mr Cross’s earlier breach. Both events combined to cause
loss.’
Macur LJ disagreed with Rafferty LJ’s reasoning and conclusion. She cited
Gross LJ’s observation that there is no ‘all embracing test’ for breaking the
chain of causation.107 The primary breach of contract by the surveyor was
superseded by the subsequent negligence of the contractor to all practical
effects: it was no longer an effective cause of loss.108 Maurice Kay, V-P,
disagreed with Macur LJ’s characterisation of the contractor’s negligence as
102
Harrison v Technical Sign Co Ltd [2012] EWHC 2887 (TCC).
103
Harrison v Technical Sign Co Ltd, note 102, para [62].
104
Harrison v Technical Sign Co Ltd [2013] EWCA Civ 1569, paras [21]–[22].
105
Flanagan v Greenbanks Ltd (t/a Lazenby Insulation) [2013] EWCA Civ 1702; 151 Con
LR 98.
106
Flanagan v Greenbanks, note 105, para [38].
107
Flanagan v Greenbanks, note 105, para [49].
108
Flanagan v Greenbanks, note 105, para [53].
20
‘gross’ negligence. He accepted that it was a ‘close run thing’,109 but held that
the surveyor’s negligence remained an effective cause of the loss.
What these cases show is that the law as to whether or not there has been a
break in the chain of causation does not always provide a clear steer as to how
to approach the facts. Phrases such as ‘obliterated’, ‘no all embracing test’ and
even ‘chain of causation’ or ‘effective cause’ are impressionistic rather than
precise.110
What these cases also show is that there is no clear distinction between
‘factual causation’ and ‘legal causation’ when considering whether or not
there has been a break in the chain of causation. It is instead better to avoid
cluttering the analysis with these terms which are, at best, redundant. It is
clearer to consider whether a cause remains an effective cause of the loss, or
whether the alleged intervening event means that it has ceased to be an
effective cause, ie the causative potency of the first event has been obliterated
by reference to the indicative tests set out above.
In claims for breach of contract, a claimant generally (but not always) has
to demonstrate that but for the defendant’s breach of contract it would
not have suffered the loss. This test is modified where there are two
concurrent independent causes of the loss, each of one which could
separately cause the loss.
The ‘but for’ test is likely to lead to injustice where there are multiple
sufficient causes, and each cause by itself would have been sufficient.111
Where there are two separate contract-breakers, both may be the effective
cause of the same damage. A strict application of the ‘but for’ test would
absolve both defendants: take one away, and the damage would still have been
caused. The claimant is not required to prove that they would not have
suffered the damage but for the defendant’s breach, otherwise they would be
left without a remedy (being unable to prove the case against either contract-
breaker).112 In the Orient-Express case, Hamblen J stated at [33]:
‘… As a general rule the “but for” test is a necessary condition for
establishing causation in fact. However, there may be cases in which
fairness and reasonableness require that it [the “but for” test] should not
be a necessary condition. This is most likely to be in the context of
negligence or conversion claims, but I would accept that in principle it is
not limited to tort or to particular torts. I would also accept that a case in
which there are two concurrent independent causes of a loss, with the
consequence that the application of the “but for” test would mean that
there is no cause of the loss, is potentially an example of a case in which
fairness and reasonableness would require that the “but for” test should
109
Flanagan v Greenbanks, note 105, para [59].
110
‘Contract: breach and causation of damage’ (2014) 30(2) Construction Law Journal T37–
38.
111
Daniel P O’Gorman, ‘Contracts, Causation, and Clarity’ (2017) 78 University of
Pittsburgh Law Review 273, 288.
112
Heskell v Continental Express Ltd [1950] 1 All ER 1033 (KBD), page 1047A. This was
applied in Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181
(TCC), 99 Con LR 45, paras [314]–[316].
21
not be a necessary condition of causation, particularly where two
wrongdoers are involved.’113
In the event, however, Hamblen J held that the tribunal in that case had not
erred in applying the ‘but for’ test.
The claim was made against the ME sub-contractors and the designer of the
mechanical services, who in turn passed claims down the line until a claim
was made against the labour-only mechanical sub-sub-sub-contractor. There
were two defective valves, and the failure of either valve was sufficient to
prevent a surge protector from working. Both breaches, therefore, were
independently sufficient to have caused the loss. On a ‘but for’ analysis,
therefore, if one but not the other had been defective, the loss would have been
suffered in any event. This was, therefore, the kind of case where it would be
inappropriate to apply the ‘but for’ test.
113
Orient-Express, note 67, citing IF P & C Insurance Ltd v Silversea Cruises Ltd [2003]
EWHC 473 (Comm); [2004] Lloyd’s Rep IR 217, but noting at para [32] that ‘it does not
address the specific issue of two concurrent independent causes, nor the applicability of
the “but for” causation test in such a case.’ The approach to the interpretation of the
‘trends clause’ in the Orient Express case was overruled by the Supreme Court in the
FCA v Arch Insurance test case (note 81). The Supreme Court recognised, however, that
there are scenarios where the ‘but for’ test is inadequate, excluding some cases where
one event could or would be regarded as a cause of another event even though the test is
not satisfied: see [181]–[185] (Lord Hamblen and Lord Leggatt JJSC).
114
Greenwich Millennium Village Ltd v Essex Services Group Ltd [2013] EWHC 3059
(TCC), 151 Con LR 1, para [176].
115
Greenwich Millennium Village v Essex Services, note 114, para [176].
22
the headnote of the Construction Law Reports.116 This is a distinction that will
be picked up on later in this part.
This approach is usually considered to have been laid down in Henry Boot
Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd,119 although
Edwards-Stuart J did not cite this case in De Beers. Edwards-Stuart J gave the
following rationale for the ‘general rule’:
‘… In the case of the former, this is because the rule where delay is
caused by the employer is that not only must the contractor complete
within a reasonable time but also the contractor must have a reasonable
time within which to complete. It therefore does not matter if the
contractor would have been unable to complete by the contractual
completion date if there had been no breaches of contract by the
employer (or other events which entitled the contractor to an extension
116
Greenwich Millennium Village v Essex Services, at page 5 in the Report.
117
See, for example, John Marrin QC, ‘Concurrent Delay Revisited’ SCL Paper 179
(February 2013) page 3: ‘In this context, there is one truth which can scarcely be over-
emphasised. The answers to these questions will depend on the terms of the construction
contract agreed between the parties.’ www.scl.org.uk.
118
De Beers UK Ltd v ATOS Origin IT Services UK Ltd [2010] EWHC 3276 (TCC), 134
Con LR 151, cited by Coulson J (as he then was) in Greenwich Millennium Village Ltd v
Essex Services Group Ltd: note 114.
119
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con
LR 32 (TCC).
23
of time), because he is entitled to have the time within which to
complete which the contract allows or which the employer’s conduct has
made reasonably necessary.
[178] By contrast, the contractor cannot recover damages for delay in
circumstances where he would have suffered exactly the same loss as a
result of causes within his control or for which he is contractually
responsible.’
120
This is subject, however, to the question of whether the contractor reduced the pace of its
works on account of the fact that the employer was in delay, so as to avoid ‘hurrying up
and waiting’. Such ‘pacing delays’ create their own evidential and causation problems
which have not yet been decisively reviewed by the TCC. See James G Zack Jr, ‘Pacing
Delays – the Practical Effect’ (2000) 42(7) Cost Engineering 23.
121
Mischa Balen, ‘Concurrent Delay, Over-determination and the Problem of Default
Rules’ (2016) 32(3) Construction Law Journal 269.
24
for example, the implication of such a term into the agreement).122 As a matter
of English law, it is conventionally accepted that a period of concurrent delay
will give rise to an entitlement to additional time to complete the works. This
can be expressed to be a matter of fairness under the terms of the contract, or
simply as a matter of causation and the interpretation of the contract. As John
Marrin QC reflected in his seminal 2002 paper, ‘it is not to be thought that the
Malmaison approach is new. Indeed, in the 1970s, few would have contended
for any other approach.’123 As, however, Akenhead J noted at [370] in Walter
Lilly v Mackay, firstly, this is still a matter of two effective causes, and
secondly, this is a matter of contractual interpretation.124
The analysis set out above ties into more recent decisions about the prevention
principle, mediating it through contractual interpretation and the implication of
terms into a construction contract rather than treating it as a juridically free-
standing source of rights and obligations. The Court of Appeal in North
Midland Building Ltd v Cyden Homes Ltd came down strongly in favour of the
view that the risk of concurrent delay could be contractually allocated by the
parties.125 The prevention principle was not an overriding rule of public or
legal policy. The contract in that case incorporated the JCT Design and Build
2005 Standard Terms and Conditions, albeit subject to numerous amendments.
Coulson LJ traced the development of the English construction law approach
that it is wrong in principle for an employer to hold a contractor to a
completion date (and hence pay liquidated damages) in circumstances where
at least a part of the subsequent delay was caused by the employer. He held
that there was nothing to stop the parties agreeing whether or not an extension
of time would be granted in respect of a period where there is concurrent
delay. The decision of Akenhead J in Walter Lilly126 was treated as purely a
matter of ‘straight contractual interpretation’.127
Sir Peter Coulson, speaking and writing extra-judicially after this decision on
the question of the prevention principle and its operation, again stressed how
the decisions in cases such as De Beers v ATOS and Walter Lilly v Mackay
turned on the precise wording of the extension of time provision.128 He
observed that the dilemma created by concurrent delay arises from causation:
‘A contractor cannot prove, but for the employer’s delay, he would have
completed the work on time. The employer cannot prove, but for the
122
For implication of standard default rules into particular forms of contracts, see Lord
Steyn’s discussion in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 458-
9. For a similar discussion in relation to remoteness, see Ivan Sin, ‘Back to Basics:
Remoteness Revisited’ (2021) 137 Law Quarterly Review 201.
123
John Marrin QC, ‘Concurrent Delay’ SCL Paper 100 (February 2002) page 15:
www.scl.org.uk.
124
Walter Lilly v Mackay [2012] EWHC 1773 (TCC), (2012) 143 Con LR 79.
125
North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744, 180 Con LR
1.
126
Walter Lilly, note 124, para [37].
127
Walter Lilly, note 124, para [370].
128
Peter Coulson ‘Prevention or Cure? Delay Claims and the Rise of Concurrency Clauses’
SCL Paper 218 (June 2019) para [22]: www.scl.org.uk.
25
contractor’s delay, the work would have been completed on time. What
is the answer?’129
The general approach has been to take the lead from Henry Boot v Malmaison
(although as Sir Peter Coulson noted, the point was not argued before the
judge).130 Subsequent decisions ‘can be explained by reference to the
construction of the standard form extension of time provisions’.131
The focus of most case law, and of most commentators, has been on claims
under the contract for time and money and the question of concurrency, as
opposed to claims for breach of contract that have a consequential effect on
time obligations.132 The conventional answer is that in a claim for damages for
breach of contract, the contractor’s claim would fail the ‘but for’ test in a
concurrent delay situation as it cannot satisfy the ‘but for’ test. On one
interpretation, this is not appropriate applying the current effective cause test
for causation: both the employer’s breach of contract and the contractor’s own
failings are effective causes of the loss that is the subject of the claim. As set
out above, the ‘but for’ test is relaxed in cases where there are two contract-
breakers. Marrin’s view is that it is not appropriate to relax the ‘but for’ test
where the two parties responsible for the loss are the contractor and the
employer:
‘there is no authority – and, it is suggested, no compelling reason – for
relaxing the but-for test where the two parties responsible for the
damage are, respectively, the claimant and the defendant.’133
The conventional view is that this is correct: the claim for damages for breach
of contract would fail.134 There is no clear statement of authority to support
this proposition, however. What this contrast between a claim for damages for
breach of contract and a claim for an entitlement to money under the contract
in a concurrent delay situation does show is that ‘common sense’ does not
afford a meaningful lodestone through all factual situations.
129
Coulson, note 128, para [29].
130
Coulson, note 128, para [30].
131
Coulson, note 128, para [31].
132
See, for example, Marrin, note 117, page 1.
133
Marrin, note 117, pages 18–19.
134
See Keating, note 36, para 9-106.
26
What the construction law cases do illustrate is the difficulties in actually
applying those principles. The borderline between an ‘effective cause’ and the
‘occasion of a loss’ is not always clear. The run of cases considering a ‘break’
in the chain of causation demonstrate the difficulty in establishing whether a
defendant’s breach of contract has continued as an effective cause of the loss,
or whether its causative effect has been ‘obliterated’.
On the other hand, claims for an entitlement under the construction contract
(such as for time or money) can best be analysed as an exercise in contractual
interpretation. This is, by itself, not the whole answer. The way in which
standard form contracts have come to be interpreted is now generally
accepted, particularly when it comes to claims for an entitlement arising out of
a period of the project that is in ‘concurrent delay’. The way in which similar
contractual terms have been interpreted can, on one analysis, be usefully
considered to be a default rule-set that the parties can (subject to other
doctrinal rule sets, such as the prevention principle) modify or contract out of.
Finally, as set out in the Introduction, this is a ‘first attempt’. As noted in Part
I, it is not the product of a team of contributors working over a number of
years. What this Part III has shown is that it is possible, to a substantial extent,
to re-state more general principles of causation in construction law. What it
has also shown is that Andrew Burrows was correct: both as a matter of
English law more generally, and construction law specifically, there are
substantial areas of the law of causation which are not capable of being set out
definitively in precise rules (without, perhaps, beginning to assert a normative
interpretation of the law, as opposed to a descriptive one).
27
greater specialisation, increased collaboration between project participants in
the pre-construction and the construction phase, and the greater use of
technology both as part of the design and construction process but also in the
fabric of the built environment itself (through smart buildings and the internet
of things), causation arguments will become more complicated and
sophisticated. It is possible that English contract law in general, and English
construction law in particular, will develop new doctrinal responses to new
factual circumstances. It can do no harm to re-state causation principles as
they stand now, without attempting to fix them for all time in the form of a
code.
The challenge of attempting to set out in one place how causation operates in
construction law in a doctrinal positivist analysis throws into contrast a
number of the distinctive features of construction law.
(1) There are very large parts of the way in which causation operates in
respect of breach of contract which are common to English commercial,
and contract, law as a whole.
(2) The way in which a break in the chain of causation is analysed creates
difficulties in its application. This difficulty is common to both English
contract law and English construction law more specifically.
(3) Where construction law diverges from English contract law more
generally is the way in which it approaches claims for an entitlement
arising out of the contract, as opposed to damages for breach of contract.
The question of an entitlement under the contract is treated as a matter of
contractual interpretation. Under a number of standard form construction
contracts, a contractor who brings a claim for both an extension of time
and prolongation costs in respect of a period where the project is in
delay on account of both an employer’s relevant event and their own
default and these factors are of equal causative potency (ie a period of
concurrent delay) is generally accepted to be entitled to an extension of
time but not the associated costs as a matter of contractual interpretation.
It is also conventionally accepted that the contractor’s claim for damages
for breach of contract in such circumstances would fail as well. While
this is a matter of contractual interpretation, English construction law
contains ‘default rules’ as to how an extension of time clause will
operate compared to a loss and expense clause providing for time-related
costs, absent the agreement of the parties.
The views expressed by the author in this paper are theirs alone, and do not
necessarily represent the views of the Society of Construction Law or the editor.
Neither the author, the Society, nor the editor can accept any liability in respect of
any use to which this paper or any information or views expressed in it may be put,
whether arising through negligence or otherwise.
28
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