The Court of Appeal has considered the principles of remoteness and causation in cases of concurrent liability in contract and tort in this case. The defendants, Withers, were solicitors who were sued for professional negligence after drafting a limited liability partnership agreement and providing advice concerning exercise of an option under the agreement.
At first instance, the court found the drafting had been negligent, but did not make any other findings of negligence in relation to the advice given. Wellesley's claim was essentially a claim for loss of profits, and the judge had applied the principle of remoteness (was the loss reasonably foreseeable?) based on the wider duty of care owed in tort, not on a contractual basis. He commented however that the loss would have been too remote to be recovered in contract as it would not have been in contemplation of the parties at the time of the contract.
On appeal the Court of Appeal decided that, in cases of concurrent liability in contract and tort, the correct test to apply when assessing the remoteness of damages is the more limited contractual test, not the wider tortious test. It also reversed one of the findings on negligence, concluding that Withers had been negligent when advising on exercise of an option under the agreement.
The Court in particular noted that in cases of concurrent liability in contract and in tort, the test for the recoverability of damage for economic loss should be the same and it should be the contractual one i.e. it should be limited to losses that were in the contemplation of the parties. In cases where the concurrent liability arose because the party in breach had assumed responsibility towards the innocent party under a contract, it would be anomalous if the innocent party could assert that the party in breach had assumed a responsibility (in tort) for a wider range of damage than what it would be taken to have assumed under the contract. This decision clarifies the position in relation to concurrent liability, and means that professionals are less likely to be liable for unusual but foreseeable losses.
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