Last year Network Rail obtained judgments against two companies whose drivers had, respectively, damaged overhead rail power cables and caused an accident on a railway bridge, which caused railway lines to be closed for significant periods. Liability for remedial works was accepted but the Court of Appeal, in hearing (and dismissing) the appeals, had to decide whether Network Rail could also recover the costs it had to pay to the train operating companies under their track access agreements because of the disruption. And that meant grappling with the thorny issue of recovery, in tort, for economic loss.

Lord Justice Jackson said that no single set of rules (defining the extent to which loss and damage caused by torts should be recoverable) is comprehensive or can be inflexibly applied but he suggested that case law provided four relevant principles. In summary:

  • economic loss flowing directly and foreseeably from physical damage to property may be recoverable, so long as the general nature of the claimant’s loss is foreseeable;
  • loss of income following damage to revenue generating property is a recognised category of recoverable economic loss;
  • loss of future business as a result of damage to property is a head of damage on the outer fringe of recoverability. Recovery depends on the circumstances of the case and the relationship between the parties;
  • in choosing the appropriate measure of damages, the court seeks to arrive at an assessment which is fair and reasonable as between claimant and defendant.

He considered the claim should be characterised as a simple claim for loss of income consequent upon damage to revenue earning property. It was not appropriate for the court to explore in detail the build-up of any loss of revenue; it was sufficient for the claimant to prove that the loss of revenue had occurred.

Conarken Group Ltd & Anor v Network Rail Infrastructure Ltd [2011] EWCA Civ 644