In this case, the Western Australian Court of Appeal looked at the rules of causation in contract law, and reinforced that a common sense approach must be taken to determine whether a contractual breach (particularly a breach by omission) has caused the damage in question.

Key learnings

Questions of causation in cases of a breach by omission can be complex, as assumptions will need to be made about what would have taken place but for the relevant omission. This means that it will be impossible to say with factual certainty that the damage would not have occurred if the contract had been performed properly. However, the Court’s decision in this case shows that a common sense approach should be adopted and that it is important to not over-complicate the process by pursuing technical arguments.

Case note

BGC, a builder, built a display home on the site of a new housing estate that was being developed by Fairwater, a property developer. The site was vulnerable to theft and vandalism and, accordingly, Fairwater made a contractual commitment to provide security at the site between the hours of 6pm and 6am each day. On one day, Fairwater’s security guard went home early at 5.30am and, shortly afterwards, BGC’s display home was fire bombed, sustaining considerable damage as a result. BGC argued that Fairwater’s failure to provide security between 5.30am and 6am on the relevant day was a breach of contract and that the breach caused the fire damage to BGC’s home.

The Court had little difficulty in finding that Fairwater had breached its contractual commitment to provide security at the relevant site. However, the more difficult question was whether this breach by omission could be said to have caused the fire damage to BGC’s home, particularly given that the direct cause of the damage was clearly the third party that actually threw the fire bomb.

Having reviewed relevant case law, the Court said that the relevant question was whether, on the balance of probabilities and applying a common sense approach, the relevant damage would not have occurred but for Fairwater’s breach. On one view, it was possible that the third party would have fire bombed BGC’s home whether or not Fairwater’s security guard was present. In other words, the security guard’s presence may not have been a failsafe deterrent. However, the Court said that, on a common sense approach, it was more probable that the presence of a security guard would in fact have deterred the attackers, who had clearly chosen to make their attack at a time when there were no witnesses. Accordingly, the Court found that Fairwater’s breach did in fact cause the damage to BGC’s home.

This decision illustrates the potential difficulties that can arise when seeking to apply the rules of causation to a particular factual circumstance. The task is especially difficult where the breach in question is a breach of omission, as it requires the Court to make some assumptions about what would have happened if the contract had been performed properly. This will inevitably introduce an element of uncertainty to the conclusions reached. However, the approach adopted by the Court in this case shows that it is important not to over-complicate matters and that common sense conclusions can carry legal weight.

To see the full judgment in this case, please click here.