The Court of Appeal in a recent case, Conarken Group Ltd and another v Network Rail Infrastructure Ltd [2011] EWCA Civ 644 gave a useful restatement of the laws on the foreseeability and remoteness of economic loss arising from negligent property damage.

The defendants in the case, Conarken Group Ltd and Farrel Transport Ltd, caused damage to property owned by Network Rail resulting in temporary track closures. As a consequence of the track closures, Network Rail was obliged to pay compensation to train operators under the terms of its relevant Track Access Agreements. These payments included compensation for two elements, known as the marginal revenue effect and the societal rate, which provide for compensation for: (i) the train operator’s estimated loss of revenue, including future loss of income; and (ii) for sums payable by the train operator to the Department of Transport for disruptions.

The defendants accepted that the property damage had been negligently caused but did not accept that the types of loss claimed by Network Rail were reasonably foreseeable and not too remote.  

The Court confirmed that even though Network Rail and the train operators had an agreed compensation mechanism the extent of the defendants’ liability was still to be determined by ordinary tortious principles including the reasonable foreseeability of the damages, taking into account the scope of the defendant’s duty and the remoteness of damages claimed.  

The Court held that the losses were a direct consequence of the defendant’s actions and that the losses were reasonably foreseeable. It was clearly foreseeable to the Court that, if Network Rail’s property was damaged, the train operators’ services, and their value to the public, would be diminished and that the franchising authority would penalise the operators for the disruption.