England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBADF 96/l443/B

IN THE COURT OF APPEAL (CIVIL DIVISION )

(MR JUSTICE LONGMORE )

Royal Courts of Justice

Strand

London W2A 2LL

Thursday 29th January l998

B e f o r e

LORD JUSTICE EVANS

LORD JUSTICE HOBHOUSE

LORD JUSTICE PILL

HUMBER OIL TERMINAL TRUSTEE LIMITED Respondent

v.

THE OWNERS OF THE SHIP "SIVAND " Appellant

(Handed down transcript of

Smith Bernal Reporting Limited, l8O Fleet Street

London EC4A 2HD Tel: Ol7l 42l 4O4O

Official Shorthand Writers to the Court)

MR MARK CRAN QC and MR NEIL CALVER (instructed by Messrs Ince & Co, London EC3R 5EN) appeared on behalf of the Appellant (Defendant).

MR NICHOLAS HAMBLEN QC (instructed by Messrs Sinclair Roche & Temperley, London EC2V 7LE) appeared on behalf of the Respondent (Plaintiff).

J U D G M E N T

(As approved by the court)

©Crown Copyright

LORD JUSTICE EVANS: The facts of this case are straightforward. They could even come from a text book. The appellant's vessel "Sivand" damaged harbour installations owned by the respondents, as the result of negligent handling. The respondents engaged contractors to carry out the repairs under a standard form of contract on ICE Conditions. An unforeseen event occurred in the course of the works. The contractors used a jack-up barge, meaning a barge which is supported when in position by extending legs which rest on the sea bed. The correct procedures were carried out, but the sea-bed and its sub-soil proved unable to support the weight of one of the legs. The barge capsized and became a total loss. The contractors claimed and recovered an extra payment under clause l2 of the ICE conditions for the consequences of this unforeseen event. The Respondents now seek to recover that extra amount from the appellants. There is no dispute as to the cost of repairs apart from this item, and those costs have already been paid.

The appellants say that the sum in question became due to the contractors only because of this untoward and unforeseen event. This means in law, they submit, that the extra loss suffered by the respondents cannot properly be regarded as having been caused by the negligent handling of their ship. Alternatively, they submit, if it was so caused, then it is too remote a consequence of the negligence to enable the respondents to recover damages. This, they say, follows, perhaps inevitably, from the fact that the collapse of the barge and therefore the increased cost of the repairs which resulted from it was not due to negligence and was not reasonably foreseeable or foreseen. In lawyer's language, there was an intervening event which broke the chain of causation flowing from the negligence for which they are responsible, and consequences which are not reasonably foreseeable, even if directly caused, are by definition too remote to give rise to a right to recover compensation in law: The Wagon Mound (No.l ) [l96l] A.C. 388.

The respondents on the other hand submit that they are entitled to recover as damages the reasonable cost of repairs to their property which was damaged. They acted reasonably in employing reputable contractors on appropriate standard terms. The fact that the total cost includes a sum which became due under clause l2, even as the result of an unforeseen event, does not deprive them of their right to recover the actual, reasonable, cost. Causation is a matter of common sense. No sensible person could doubt but that the whole of the cost they incurred was the measure of the loss caused to them by the negligently handling of the ship.

The contractors' claim under clause l2 of the I.C.E. Conditions was referred to arbitration in December l987. The arbitrator is John Uff Q.C. By his first Interim Award dated 3rd November l989 he made detailed findings of fact as to how the collapse of the barge occurred. These include:-

"5.7 ....... It is also common ground that, for these two legs to have punched through the soil below the seabed, there must have been a failure in shear of the soil below the bottom of the leg. In this sense, the immediate cause of the failure was the ground conditions. However, the underlying question was why the soil below spud leg 2 and/or l came to be in a condition where failure was possible, having regard to the previous preloading sequence.

5.8 What was the effective cause of the failure? was it due to something which falls within the term "conditions" within the meaning of Clause l2 of the ICE Conditions? (pp. 99-lOO).

"6.l6 If the continuing settlement cannot be explained by instability or by the theory set out on page 99 of the expert's bundle, what was the cause? In my opinion, the cause must be taken to be the reaction of the ground to spud leg number 2 being such that its bearing capacity decreased as penetration and titling of the barge occurred. (p.ll8).

Issue E [What, broadly, was the cause of collapse?]

6.l7 There are many matters which could be said to be a cause of the collapse. including the fact that the Claimant was using the barge to lift a comparatively heavy piece of concrete. However, the legal test of causation excludes matters which would not of themselves rank as a cause. In my opinion, the collapse was caused by whatever phenomenon was responsible for the barge moving from the initial small settlement of around 5 cms to a substantially larger settlement, perhaps 2O or 3O cms, at which point the instability of the barge was such that further and progressive collapse was irresistible and inevitable. In my opinion, and I so find, that cause was as set out under Issue D. (p.ll9).

Issue F

6.l9 Does the cause that I have found rank as a "physical condition ... which ... could not reasonably have been foreseen by an experienced contractor" within the meaning of Clause l2 of the ICE Conditions? In order to answer this question it is necessary to be precise as to whether the cause of collapse is a physical condition, and if so its nature. The Respondent has argued with great force and skill that the only relevant physical condition is a layer of harder material into which the relevant spud leg was driven, which (on Professor Hanna's theory) is underlain by softer material which permitted the leg to penetrate. This, it is argued, was entirely foreseeable and indeed foreseen ..... (p.l2O).

6.22 In my opinion, taking into account particularly the unprecedented nature of this collapse, there must have been a very unusual combination of soil strength and applied stresses around the base of leg number 2 just before failure occurred. It is not possible to calculate or precisely to predict these strengths and stresses, but they must have existed for failure to have occurred, having regard to the findings that I have already made. Was this a physical condition? In my opinion it was. Clause l2 contains no limitation on the meaning of "physical condition" and I can see no reason why a combination of strength and stress should not fall within the term. The "condition" was thus a transient combination, the elements of which existed at the time the contract was made but which came together only near the point of failure. I do not regard this as placing the condition outside the wording of Clause l2 : See Holland Dredging v.Dredging & Construction 37BLR, at p.35. (pp.l22-l23).

"6.23 Put more simply, I do not believe that the condition which led to the collapse of Stevin 73 could have been foreseen. Of a certainty it was not foreseen by anyone." (p. l23).

Clause l2 reads as follows:-

"(l) If during the execution of the Works the Contractor shall encounter physical conditions (other) than weather conditions or conditions due to weather conditions) or artificial obstructions which conditions or obstructions he considers could not reasonably have been foreseen by an experienced contractor and the Contractor is of opinion that additional cost will be incurred which would not have been incurred if the physical conditions or artificial obstructions had not been encountered he shall if he intends to make any claim for additional payment give notice to the Engineer pursuant to Clause 52(4) ....

(3) To the extent that the Engineer shall decide that the whole or some part of the said physical conditions or artifial obstructions could not reasonably have been foreseen by an experienced contractor the Engineer shall take any delay suffered by the Contractor as a result of such conditions or obstructions into account in determining any extension of time to which the Contractor is entitled under Clause 44 and the Contractor shall subject to Clause 52(4) (notwithstanding that the Engineer may not have given any instructions or orders pursuant to sub-clause (2) of this Clause) be paid in accordance with Clause 6O such sum as represents the reasonable cost of carrying out any additional work done and additional Construction Plant used ...... "

The respondents appealed, with leave, first to His Honour Judge Fox Andrews Q.C. and then to the Court of Appeal. The arbitrator's award was upheld.

The first question of law raised on the appeals was:-

"(l) Whether on the facts as found by the learned Arbitrator Harbour and General Works (Stevin) Limited, the respondents to this application and the claimants in the arbitration (whom I shall call ´the contractors'), have encountered physical conditions which they could not reasonably have foreseen so as to entitle them to claims under clause l2 of the ICE conditions."(p.l94).

Parker L.J. giving the leading judgment said this:-

"Mr Dyson submits that the physical condition of the soil, which was found by the arbitrator to be foreseeable, really concludes the matter and that applied stress is not and cannot be any part of the physical condition.

Attractive as his argument appears to be at first sight, I cannot accept it, The Arbitrator was in my view saying that the general soil conditions were foreseeable and well able to stand the applied loads and stresses. There was however here a peculiar characteristic which could not have been reasonably foreseen, namely a liability to sheer at a much lower loading than had already been withstood.

The matter may perhaps be put in this way. General soil conditions were known and were foreseeable and foreseen. Such soil conditions would not have resulted in a sheer failure." (pp.l96-l97).

Nourse L.J. put the matter as follows:-

".... . Accordingly, the first question which we have to decide is whether this very unusual combination of soil strength and applied stresses was, as both the Arbitrator and Judge Fox-Andrews have held, a physical condition encountered by the Contractors within clause l2(l) of the ICE Conditions.

.... Secondly, while I would agree that an applied stress is not of itself a physical condition, we are not concerned with such a thing in isolation, but with a combination of soil and applied stress. (pp.2OO)

.... In other words, for the purposes of clause l2(l), you cannot dissociate the nature of the ground from an actual or notional application of some degree of stress. Without such an application you cannot predict how the ground will behave. In the present case I would say that the condition encountered by the Contractors was soil which behaved in an unforeseeable manner under the stress which was applied to it, and that that was a physical condition within clause l2(l)." (p.2Ol).

The respondents then brought these proceedings in the Commercial Court. Longmore J. upheld the claim. He dealt successively with the issues of causation and foreseeability of damage (remoteness) and with further issues (economic loss and "extravagance") which have not been pursued before us. His conclusions were these:-

"Nevertheless, the question is whether the accident was a new cause "which can be described as unreasonable or extraneous or extrinsic." I do not think it can be so described. The accident only happened and H.O.T.T.'s exposure to pay extra compensation only arose because there were "physical conditions" in and around the damaged dolphin which could not be foreseen by a reasonable contractor. These physical conditions and their consequences seem to me to be intrinsic to the original damage negligently caused and not extraneous to it. The analogous cases relied on by Mr Cooke are, therefore, inapt and H.O.T.T., in my judgment, have established the necessary causal link between the original negligence of the Defendants and the loss which they now claim."(p.78).

(The authorities relied on were Carslogie v. Royal Norwegian Government [l952] A.C. 292 Hart and Honore Causation in the Law (l985 2nd ed.) pp. l64-5 and Hogan v. Bentinck CoLlieries [l949] l All E.R. 588 at 6Ol per Lord McDermott. Longmore J. commented "These were all cases where the original negligence of the defendant merely provided the occasion for a subsequent unforeseeable event with consequent loss", and counsel for the shipowners submitted that the present case was exactly the same.)

On foreseeability, he did not accept Mr Cran Q.C.'s submission that the only question is whether it was reasonably foreseeable that repairs were undertaken. The price payable to the contractors could be fixed or adjusted in a number of ways to take account of unexpected or unforeseeable contingencies. His conclusion was:-

".... Any such contract would, in my view, have been reasonably foreseeable by a tortfeasor; the mere fact that the arbitrator has found that there were unforeseeable physical conditions entitling the contractor to further remuneration does not conclude the question whether the payment of extra compensation for the presence of such conditions is itself reasonably foreseeable. In my view it was eminently foreseeable within the principles of Wagon Mound (No.l) [l96l] A.C. 388." (P.8O).

The question of causation arises whenever a plaintiff claims compensation for or an indemnity against a loss which he has suffered. The question is whether the loss was caused by a legal wrong (tort) or breach of contract for which the defendant is liable, or by an event against the consequences of which the defendant has undertaken or is liable to indemnify the plaintiff.

In each of these different contexts, causation is a mixed question of fact and law : per Devlin J. in Royal Greek Government v. Minister of Transport (l95O) 83 Lloyd's Rep. 228 at 236.

The factual question is answered by applying the test of commonsense : Galoo Ltd v. Bright Grahame Murray [l994] l W.L.R. l36O, Alexander v. Cambridge Credit Corporation Ltd (l987) 9 NSWLR 3lO and Leyland Shipping Co. Ltd. v. Norwich Union [l9l8] A.C. 35O.

The legal aspect varies, depending on whether the claim is for damages in tort, which in the absence of a contractual relationship between the parties must be governed by the general law, or for damages for breach of contract or for an indemnity, in which case the contractual terms (or other legal obligation) must be relevant also.

For this reason, in my judgment, the many authorities on the linked questions of causation and remoteness of damage can usefully be separated into a number of different categories, primarily (l) those concerned with the factual element, (2) those governed by the general law (claims in tort), and (3) those where there was also a contract between the parties.

(l) Causation - the factual element

The same question - was the loss caused by the defendant's conduct or by an event for which he has undertaken liability? - has arisen in cases where the plaintiff's claim was for damages in tort ( City of Lincoln [l89O] P.l5) or for breach of contract (Monarch S.S. Co. v. Karlshamns Oljefabriker [l949] A.C. l96) or for an indemnity under an insurance policy ( Leyland Shipping Co. Ltd. v. Norwich Union [l9l8] A.C. 35O) or for damages for negligence which could give rise to liability both in tort and for breach of contract ( Galoo Ltd . [l994] l W.L.R. l36O). A short summary of the facts of each case will suffice.

The City of Lincoln : The defendant's vessel negligently collided with and caused damage to the plaintiff's vessel, whose master attempted to reach port in safety. But the vessel grounded accidentally before he did so, and was lost, In the absence of negligence by the master, the defendants were liable not merely for the collision damage but for the subsequent loss.

Monarch S.S. Co. v. Karlshamns : The plaintiff's vessel shipped goods in Manchuria for carriage to a Swedish port. She was delayed in commencing the voyage by unseaworthiness for which they were liable under the bill of lading terms. Being late, she was prevented from proceeding to the Swedish port by an Admiralty restriction published on the outbreak of war. This was foreseeable when the goods were loaded. The plaintiff's failure to deliver the goods in Sweden was held by the House of Lords to have been caused by the unseaworthiness.

Leyland Shipping Co. Ltd. v. Norwich Union : The plaintiff's vessel was torpedoed then taken to Le Havre where she was moored off the port and sank through the operation of what were, in themselves, perils of the seas. Nevertheless, as a matter of common sense (per Vt. Haldane at 36l "common sense of mankind" and Lord Dunedin at 362 "common sense principles") the loss was caused by the operation of war risks, in other words by the torpedoing. Thereafter, the ship was "all the time in the grip of [that] casualty" (page 37l).

Galoo Ltd. v. Bright Grahame Murray : The plaintiff companies alleged that the defendants had audited their accounts negligently and that carefully prepared accounts would have shown that they were insolvent : if they had known this, they would not have continued trading, incurring further losses, as they did. Adopting two Australian judgments, Alexander v. Cambridge Credit Corporation Ltd. (l987) 9 N.S.W.L.R. 3lO and March v. E. & M.H. Stranmore Pty Ltd. (l99l) l7l C.L.R. 5O6, the Court of Appeal held that a common sense test should be applied to the facts of each case (per Glidewell L.J. at l374H). The alleged negligence had not caused the subsequent trading losses, though it had provided the opportunity for them to occur. The result therefore was the converse of the decision in Monarch S.S. Co. v. Karlshamns though the same test was applied.

I would add this. The reference to common sense must be accompanied by a reminder that this is not a subjective test, which would be an unreliable guide. It implies a full knowledge of the material facts and that the question is answered in accordance with the thinking processes of a normal person. The reference to ´material' facts means that some mental process of selection is required. It is not enough, in my judgment, to specify "common sense" standards without identifying the reasoning involved. Lord Wright recognised this in The Oropessa [l943] p.32. He said (at p.36) that causation was essentially a question of fact, but he amplified this as follows:-

"To break the chain of causation it must be shown that there is something which I will call ultroneous, something unwarrantable, a new cause which disturbs the sequence of events, something which can be described as either unreasonable or extraneous or extrinsic. I doubt whether the law can be stated more precisely than that." (page 39).

So Lord Wright found it necessary to go outside the dictionary, or at least to explore its furthest corners, in order to identify the kind of circumstances in which the defendant might cease to be liable for what could otherwise be regarded as the consequences of his act.

(2) Legal aspects - tort

The first and earliest rule of the common law was that the defendant is liable for damage which "in the ordinary course of things would flow from" his wrongful act (per Lindley L.J. in the City of Lincoln quoting from Mayne on Damages at p.l8). It was also recognised, however, that the law is concerned with what are called direct, rather than remote, consequences, for otherwise the defendant could be held liable for increasingly remote consequences stretching indefinitely into the future. As Lord Wright said in Liesbosch Dredger v. S.S. Edison [l933] A.C. 449:-

"The law cannot take account of everything that follows a wrongful act : it regards some subsequent matters as outside the scope of its selection, because "it were infinite for the law to judge the cause of causes", or consequences of consequences" (page 46O).

I would regard this as the first limit placed by law on the defendant's liability for the consequences of his wrongful act. But it was wrong to hold that the defendant is liable for all consequences which can be described as "direct and natural", as the Court of Appeal did in Re Polemnis [l92l] 3 K.B. 55O. This was established by the judgment of the Privy Council in The Wagon Mound No.l [l96l] A.C. 388 where Re Polemnis was disapproved. The "sovereign principle" is that liability does not "depend solely on the damage being the "direct" or "natural" consequence of the precedent act .... . thus foreseeability becomes the effective test" (per Vt. Simmonds at 426). So the second rule of law, which is usually described as remoteness rather than causation, but which can be described as either, is that the defendant is not liable for damage of a kind which he could not reasonably have foreseen as a consequence of his wrongful act.

The reference to "a kind of" damage is important, because The Wagon Mound judgment was followed rapidly by Smith v. Leech Brain & Co. Ltd. [l962] 2 Q.B. 4O5 where Lord Parker C.J. re-asserted the common law rule that the defendant takes the plaintiff "as he finds him". This is exemplified by "thin-skull" cases. Lord Parker explained the Wagon Mound judgment as follows:-

"The Judicial Committee were not, I think, saying that a man is only liable for the extent of damage which he could anticipate, always assuming the type of injury could have been anticipated" (p.4l5).

This approach was approved by the Court of Appeal in Robinson v. Post Office [l974] l W.L.R. ll76 and it has not been questioned since l962. Indeed, it was implicitly adopted by the Judicial Committee itself in a further appeal arising out of the Wagon Mound incident. The shipowners were held liable for damage caused by a fire for which they were liable, even though the scale and extent of the fire were not reasonably foreseeable, because the trial judge's findings in that case showed "that some risk of fire would have been present to the mind of a reasonable man in the shoes of the ship's chief engineer" ( The Wagon Mound (No.2) [l967] A.C. 6l7 per Lord Reid at 64l).

A feature of "thin-skull " cases is that the plaintiff's physical characteristics, which have the effect of increasing the scale or extent of physical damage caused to him by the defendant's negligence, are already in existence when the negligence occurs. It has therefore been suggested that there is a rule of law to the effect that pre-existing factors of this sort have to be disregarded when determining what are the consequences of the defendants' act : see for example McGregor on Damages (l6th ed.) paras.2OO et seq. Staughton L.J. considered this matter obiter in The Eurus ( Total Transport Corporation v. Arcadia Petroleum Ltd (C.A.) l8 November l997) where he said:-

"It is common to refer to a chain of causation between the wrongful act and the plaintiff's loss, and to an intervening act which may or may not break the chain. If that is always the appropriate metaphor, of course it must follow that an event occurring before the wrongful act cannot break the chain. It is as simple as that. But I for my part do not accept that the chain metaphor is an appropriate one for causation in contract. Instead one has to ask whether in common sense the wrongful act was a cause of the plaintiff's loss, or whether something else was."(p.25)

I respectfully agree, though as will appear below the issue does not need to be decided, in my judgment, in the present case.

A further matter for inquiry, when considering what rules of law, if any, impinge on the basic proposition that the defendant is liable for the direct and natural, and reasonably foreseeable, consequences of his wrongful act, is whether an act of negligence, either by the plaintiff or those for whom he is responsible or by a third party, necessarily has the effect of "breaking the chain of causation", or, as I would prefer to put it, relieves the defendant from liability for damage which can otherwise be attributed to the negligent act. The judgment of Lindley L.J. in The City of Lincoln (above) shows that the absence of negligence by the master of the plaintiffs' damaged vessel was crucial to the decision that the subsequent loss by grounding was a "natural and ordinary consequence" of the negligent navigation of the defendant's ship. He said:-

"So far as I can see my way to any definite proposition. I should say that the ordinary course of things does not exclude all human conduct, but includes at least the reasonable conduct of those who have sustained the damage, and who are seeking to save further loss" (p.l8).

Non-negligent conduct, therefore, by the person having charge of the plaintiff's ship, does not prevent the defendant from being liable for the consequences of his own negligence. It does not follow, however, that intervening negligence must always have this effect. There may be such a rule where the plaintiff or those for whom he is responsible are negligent, in the sense referred to by Lindley L.J., because their negligence creates a breach of the plaintiff's duty to take reasonable steps to mitigate his loss. If that is correct, then this can be said to be a legal qualification of the general rule that the defendant is liable for the consequences of his act. As regards negligence by third parties, however, I would not be prepared to hold that there is any rule of this sort. Putting aside the so-called rescue cases, where separate considerations apply, it seems to me that intervening negligence by a third party could well have the effect of relieving the defendant from liability for subsequent damage, but that it should not necessarily do so. To hold that negligence of a third party invariably does break the chain of causation would, it seems to me, be inconsistent with the basic rule that causation is question of fact, subject only to the restrictions referred to above (direct and natural consequences, and reasonably foreseeable).

This approach is consistent, in my judgment, with three authorities upon which much emphasis was placed in argument, and with a fourth ( Liesbosch Dredger v. S.S. Edison [l933] A.C. 499) to which we were also referred. I shall consider these in turn.

The Metagama [l928] SC 2l : The House of Lords approved and adopted the same approach as Lindley L.J. in The City of Lincoln . The defenders admitted liability for a collision in which the pursuers' vessel was damaged, but they alleged that the damage was increased by the improper handling of the vessel by those in charge of her after the collision had taken place. Viscount Dunedin, with whom Viscount Haldane agreed, stated the issue as follows:-

"But it is always the duty of the person who is damaged to do his best to minimise his loss. This is really the same thing as to say that, if he might reasonably have avoided any part of the damage he has suffered, to that extent the damage is not such as arises directly from the act complained of. In many cases the question is stated as to whether, after the original fault which started matters, there has been a novus actus interveniens which was the direct cause of the final damage. Novus actus interveniens may be the act of a third party, so that in this case I think the best way of stating the question is, was the pursuer guilty of such negligence after the collision as to make that negligence the direct cause of the final damage?"(p.27).

It was held by the majority that those responsible for the damaged vessel were not guilty of negligence, and it followed that the defenders were liable for the whole of the damages claimed. The language was that of causation ("novus actus interveniens") and the judgments are authority for the propositions (l) that reasonable human conduct is part of the ordinary course of things, for the purposes of the underlying common law rule (cf. The City of Lincoln ), and (2) that the defendant is not liable for damage, or increased damage, caused by negligence of the claimant or those for whom the claimant is responsible. The second proposition is substantially equivalent to the rule that the plaintiff is in breach of duty if he and those for whom he is responsible fail to take reasonable steps to mitigate the loss he has suffered by reason of the defendant's wrongdoing.

Viscount Dunedin referred to the act of a third party as another possible type of novus actus interveniens . It is not necessary, in my judgment, that the third party's act must have been negligent for it to have this effect, although if it is negligent then it may be more likely to do so. I would hold that when the independent act of a third party is properly regarded as the effective cause of damage, to the exclusion of negligence for which the defendant is responsible, then that is because the intervening act was independent, not because it was or may have been negligent. This therefore is a question of fact, to be answered on a common sense basis for the reasons suggested above, although considerations both of negligence and reasonable foreseeability may be relevant to it.

In The Oropesa [l943] p.32 the Court of Appeal presided over by Lord Wright adopted the same approach. Two vessels came into collision. The master of one them launched a lifeboat so that he and some others could go across to the other vessel to confer with her master, despite the rough weather conditions. The lifeboat capsized and some of the crew members were drowned, including the sixth engineer, whose parents claimed damages from the owners of the other vessel, which was partly responsible for the collision. They alleged that the master's act was novus actus interveniens . This was rejected. The master's actions were reasonable. The "hand of the casualty lay heavily on [his vessel] and the conduct of the master and of the deceased was directly caused by and flowed from it" (page 37). The case involved the same principle as The City of Lincoln (pages 37-38) and "The question is not whether there was new negligence, but whether there was a new cause" (page 39). Lord Wright then made the general observations already quoted above.

Similarly, Carslogie Steamship Co. Ltd. v. Royal Norwegian Government [l952] A.C. 292 was treated by the House of Lords, reversing the Court of Appeal, as a straightforward issue of causation, dealt with as a question of fact. The plaintiff's vessel was damaged in a collision, underwent temporary repairs at Port Glasgow and was certified as authorised "to be confirmed in her present class without fresh record of survey, subject to certain permanent repairs at the owner's convenience" (page 293). She then sailed for New York on what appears to have been a trading voyage, whether or not she was in ballast, and during the Atlantic crossing she sustained heavy weather damage which necessitated 3O days of repair time in New York. During lO days of that period the repairs to the collision damage were also carried out. The claim for loss of use during that lO day period failed. The vessel was "incapable of gainful use during the lO days necessary to complete her collision repairs" (page 3O7). Viscount Jowitt was willing to assume that the collision was a cause of her detention in New York, but she would have been detained for that period in any event (pages 3Ol and 3O6).

In Liesbosch Dredger v. S.S. Edison [l933] A.C. 499 the owners of the dredger which sank after a collision for which the owners of the ´Edison' were liable were unable to afford the purchase of a replacement dredger. They hired a substitute and their overall losses were increased. They did not act unreasonably, given their limited means, but their claim for the additional losses failed. Using the language both of causation (fact) and of remoteness (law) Lord Wright said:-

"..... if the appellants' financial embarrassment is to be regarded as a consequence of the respondents' tort, I think it is too remote, but I prefer to regard it as an independent cause, though its operative effect was conditioned by the loss of the dredger" (page 46O).

I should also quote a later passage which was prescient of the issues raised in the "thin skull" cases after The Wagon Mound (No.l ):-

"The case of In re Polemis and Furness, Withy & Co. (2), a case in tort and negligence, was cited as illustrating the wide scope possible in damages for tort; that case, however, was concerned with the immediate physical consequences of the negligent act, and not with the co-operation of an extraneous matter such as the plaintiff's want of means. I think, therefore, that it is not material further to consider that case here. Nor is the appellants' financial disability to be compared with that physical delicacy or weakness which may aggravate the damage in the case of personal injuries, or with the possibility that the injured man in such a case may be either a poor labourer or a highly paid professional man. The former class of circumstances goes to the extent of actual physical damage and the latter consideration goes to interference with profit-earning capacity ; whereas the appellants' want of means was, as already stated, extrinsic." (p.46l).

The case therefore provides a further example of what Lord Wright was later to describe as an "ultroneous" cause, notwithstanding that it was an attribute of the claimant himself and not involving any inquiry into whether he was negligent or not.

For these reasons, I would hold that the defendant to a claim in tort is liable for what the law regards as the consequence of his wrongful act, identifying its consequences on a common sense basis and distinguishing in particular between what has caused rather than provided the occasion for the plaintiff's loss ( Galoo), subject to reasonable foreseeability of the particular kind of loss ( The Wagon Mound (Nos.l and 2 ), and subject also to loss which results from negligence of the plaintiff or those for whom he is responsible, in breach of duty to mitigate his loss. When it is alleged that the loss has been caused by the intervening act of a third party, or other novus actus interveniens , then the inquiry is whether there was such an independent cause, not limited to whether the third party's act was negligent or not.

These two situations have in common what a claim in tort does not, namely, a pre-existing legal relationship, almost invariably contractual, between the parties. It must follow, therefore, that the legal aspects of causation and remoteness must depend upon that legal relationship also. For example, the basic rule that the wrongdoer is liable for the "direct and natural" consequences of his act is applied by reference to a person situated as the contracting parties were when the contract was made, rather than to a reasonable man at the time of the wrongdoing. The same considerations arise, in my judgment, in relation to the questions whether the liability of the wrongdoer is affected by negligence of the other party (the same duty to mitigate damage arises) or of a third party. In the indemnity cases, such negligence, far from breaking the "chain of causation", may be the very event against which the promise to indemnify was given (cf. The Island Archon [l994] 2 Lloyd's Rep. 227 at 234-6)). The present case resting solely in tort, it is unnecessary for present purposes to consider these questions further.

The material facts in my judgment are these:-

(l) The appellants, as owners of the negligent vessel, are liable for the cost of repairing the respondents' damaged property.

(2) The respondents cannot be said to have acted otherwise than in the ordinary course of things or to have failed in their duty to mitigate their loss. They employed reputable and competent contractors to carry out the repairs, upon the terms of a well-known, standard and appropriate form of contract.

(3) The additional cost, liability for which is disputed, became due to the contractors in circumstances which were within clause l2. This was confirmed by the Court of Appeal. Essentially, the contractors were not negligent and the circumstances which gave rise to the accident to the barge could not reasonably have been foreseen by them.

(4) It is not suggested that the additional costs were unreasonable in amount.

Applying the law to these facts:-

(A) I would be prepared to hold that the appellants are liable for the additional costs on the simple ground that the respondents are entitled to recover the reasonable cost of repairs, as the appropriate measure of damages for the damage to their property, and that the sum which became due under the repair contract establishes that amount.

(B) That assumes, however, that no part of the total cost resulted from some other factor, which should properly be regarded as a novus actus interveniens - an independent, supervening event. That would be the case, as the respondents concede, if the repairs were disrupted by some unexpected natural event, such as an earthquake. A separate example is suggested by the Liesbosch Dredger case; suppose the contractors became bankrupt and others had to be employed to complete the works. Nothing of that sort arises here. Clause l2 operated in the kind of circumstances for which it was designed. The occurrence of such circumstances was within the ordinary scope of such a contract, notwithstanding that the precise circumstances were not reasonably forseeable or foreseen. Implicitly, it seems to me, the conclusion must be that no extraneous or "ultroneous" cause arose, such as to prevent the total cost from being the proper measure of the respondent's loss.

(C) The appellants submit alternatively that the additional cost, even if it is properly regarded as a consequence of their vessel's negligence, nevertheless was too remote a consequence for damages to be recoverable at law. They rely on the "reasonably foreseeability" test propounded in The Wagon Mound (No.l) . This submission exposes, in my judgment, an underlying tension between two propositions. The intervening event was not reasonably foreseeable, and no intervening negligence was involved. Therefore, it is said, the consequences must be too remote. But in the context of causation, the fact that there was no negligence makes it more likely, rather than less, that the loss occurred "in the ordinary course of things" and therefore that causation can be established as a question of fact. It is only when causation is established that the test of reasonable forseeability is applied, in order to limit the damages to those kinds which were not too remote. As Salmon L.J. said in Quinn v. Burch Bros. (Builders) Ltd [l966] 2 Q.B. 37O:-

"... Although the foreseeability test is a handmaiden of the law, it is by no means a maid-of-all-work. To my mind, it cannot serve as the true criterion when the question is, how was the damage caused?" (page 394).

In my judgment, therefore, the answer to the submission is that causation is established in the present case ((B) above) and that "reasonable foreseeability" does not limit the extent of damages when the kind or type of damage could be reasonably foreseen. This is, in effect, for the purposes of legal analysis a "thin skull" type of case. The factor which increased the cost of repairs and therefore the amount of damages cannot be regarded as an independent, supervening cause. It follows that the reasonable cost is recoverable in full.

(D) The appellants' final submission is that the rule or principle underlying the "thin skull" case applies only when the relevant factor is a pre-existing state of affairs. Like Staughton L.J. in The Euros (above), I do not find it necessary to decide this issue of law in the present case. It seems to me that the reason for the collapse of the barge and therefore for the additional cost of repairs was the nature of the sub-soil of the sea-bed. Either this was constant, but its inability to support the jack-up legs of the barge was not discovered by what are generally regarded as sufficient tests, or it changed when on previous experience it ought to have remained constant. In either case, the failure was due to the characteristics of the sub-soil, coupled with the contractor's non-negligent failure to discover what those characteristics were. That seems to me to constitute a pre-existing state of affairs, even if the rule is subject to the qualification for which the appellants contend.

For these reasons, which substantially are those given by Longmore J., I would dismiss the appeal.

LORD JUSTICE HOBHOUSE: This appeal raises a question of the assessment of damages resulting from a collision between the Defendants' tanker and the Plaintiffs' harbour works. In my judgment the case properly analysed is one which presents no legal difficulty. As is often the case, once the question to be answered has been correctly identified, the answer to be given to that question is straightforward.

The relevant facts are not in dispute and can be stated as follows.

(l) The Plaintiffs were and are the leasehold owners and operators of a marine oil terminal at Immingham in the Humber estuary.

(2) On 28th September l983 the Defendants' tanker, whilst being negligently navigated by the Defendants' servants, collided with and damaged parts of the Plaintiffs' harbour works consisting of three mooring dolphins which were effectively demolished and the berthing dolphin which was severely damaged, putting the terminal out of operation.

(3) The damage to the harbour works had to be made good as a matter of urgency, reinstating the relevant structures so that the Plaintiffs' terminal could be restored to commercial use.

(4) In order to effect the necessary reinstatement the Plaintiffs reasonably employed contractors, Harbour & General plc, to do the necessary work.

(5) The Plaintiffs reasonably contracted with the Contractors on the terms of the ICE Contract 5th Edition (revised in l979) which is one of the standard contract forms used in the industry for this type of work.

(6) On account of the strong tidal currents in the Humber, the Contractors tendered on the basis that it would be more economical and efficient to use a jack-up barge on site rather than using floating barges.

(7) On 3rd April l984 whilst carrying out the work of reconstructing one of the dolphins, the Contractors encountered unforeseen conditions in the soil strata of the seabed; this caused the legs of the jack-up barge, which was at the time being used as a platform from which to transfer a concrete soffit onto one of the dolphins, to sink into the seabed and capsize the barge.

(8) The condition of the seabed was unforeseen and could not reasonably have been foreseen by an experienced contractor.

(9) As a result of encountering this condition, the work of the Contractors was disrupted and delayed and they had to carry out additional work and use additional plant in order to complete the contract.

(lO) The ICE contract form provides for the tender price to be subject to variation in certain circumstances, among which is the contractor's encountering physical conditions which could not have been reasonably foreseen. Thus the Contractors were entitled under clause l2(3) of the ICE contract to be paid by the Plaintiffs additional remuneration for performing the contract.

(ll) Pursuant to the award of the arbitrator appointed under the terms of the contract (upheld by the Court of Appeal), the Plaintiffs have paid to the Contractors the additional sum of £l78,35O.47. This sum was made up of a number of items including the hire of plant for longer periods, additional labour costs and the costs of alternative arrangements for the delivery of concrete piles which could not be delivered direct to the site.

The Defendants accept that no fault of any person was involved in what occurred on 3rd April l984. The Judge held, and it has not been disputed before us, that the Plaintiffs acted reasonably in choosing to employ the Contractors to do the work and that they acted reasonably in employing them on the ICE Terms. It was also the uncontradicted evidence given by a witness called by the Defendants that whilst it would be possible for an employer to insure against the risk of added cost under clause l2 arising from unforeseen conditions, "no employer would think of taking out insurance" to cover that risk. It was therefore not unreasonable of the Plaintiffs to contract on the ICE terms without taking out such additional insurance. (If they had reasonably chosen to take out such insurance, thereby protecting themselves against the additional cost which is the subject matter of the present proceedings, the Plaintiffs' payment of that premium would ordinarily have been allowable as an item of expenditure in the assessment of their loss.)

It must be observed that this was not a case where the later event (the collapse of the strata) caused any physical damage to the Plaintiffs' property. Therefore it is not a case which raises the question of how the costs of repair should be apportioned as between two successive occurrences each causing physical damage to the same chattel. Nor is this a case where the Plaintiffs have incurred any liability to any third party in respect of damage to the third party's property. The jack-up barge was damaged in the accident but that gave rise to no right on the part of the Contractors to add to the remuneration payable under the contract or any other form of indemnity or contribution from the Plaintiffs. Indeed, the cost to the Contractors of hiring a substitute jack-up barge was specifically disallowed by the arbitrator as justifying any increase in the remuneration to which the Contractors were entitled under clause l2, or any other provision of the contract.

The Defendants' argument before us and before the Judge is based upon the fact that the condition and collapse of the strata of the seabed was unforeseeable and unforeseen. It is argued that this breaks the chain of causation between the Defendants' tort and the element of additional remuneration which the Plaintiffs were liable to pay under the ICE Contract by virtue of clause l2. Alternatively, the Defendants argue that it was an element of economic loss which, because of its unforeseeability, was implicitly outside the scope of the duty of care owed by the Defendants to the Plaintiffs. They submit that there was an intervening extraneous cause, the collapse of the strata, between the original tortious act and the economic loss suffered.

The legal analysis of this case can be concisely summarized under five heads.

(l) The Defendants negligently and in breach of the duty of care which they owed to the Plaintiffs, damaged the Plaintiffs' property (the harbour works including the dolphins) thereby causing the Plaintiffs loss.

(2) The Plaintiffs' cause of action was then complete and the sole remaining question was the assessment of the Plaintiffs' loss.

(3) The Plaintiffs were under a duty to mitigate their loss and in reasonable mitigation chose to employ the Contractors on the ICE terms to carry out the necessary repair work.

(4) The cost of this mitigation was the sums which the Plaintiffs became liable to pay to the Contractors for the carrying out of the repair work under the ICE Contract. This cost included the sum of £l78,35O.47.

(5) The Defendants' liability in damages to the Plaintiffs includes the expenditure which the Plaintiffs have thus incurred in the reasonable mitigation of their loss. There is no allegation that the steps which the Plaintiffs took increased rather than mitigated their loss but, even if they had, this would have made no difference to the Defendants' liability provided that the Plaintiffs had acted reasonably.

This is a claim for damages for the negligent damaging of the Plaintiffs' property. Once the causation of physical damage to the Plaintiffs' property is complete, the only remaining question is the assessment of that damage in monetary terms, prima facie the difference between the value of the undamaged property and the value of the damaged property quantified as the cost of repair or reinstatement. Where the Plaintiff acts in mitigation of his loss the sole relevant criterion is the reasonableness of the steps which he took in mitigation. Provided he has acted reasonably, he is entitled to recover the cost of that mitigation (even if unsuccessful) as the correct measure of his loss. Questions of foreseeability are not relevant, save so far as they may enter into the question of the reasonableness of what the Plaintiff did in mitigation. There is also the principle, rightly not relied on in the present case, of disregarding collateral consequences. ( British Westinghouse v Underground Rly [l9l2] AC 673 and The World Beauty [l97O] P l44)

Accordingly, the citation by the Defendants of cases on successive accidents and upon remoteness of damages do not assist. One is however conscious that on occasions it has been said that questions of scope of duty of care, contributory negligence, causation and mitigation are all part of the same overall scheme and have no clear divisions between them. Such arguments do not assist the Defendants in the present case. The Defendants cannot, and do not, deny that they owed the Plaintiffs a duty of care not to damage their property. It was further at all times reasonably foreseeable that if they did so the damage might need to be repaired and that contractors might be engaged to do the necessary work on an ICE form of contract. The Defendants have not made out any case that the overall expenditure of the Plaintiffs upon the reinstatement of their property exceeded what was reasonable or what was foreseeable by them (if that be relevant, which it is not). If the Contractors had been required to tender on a basis which excluded any provision for the adjustment of their remuneration should they encounter unforeseen conditions, their tender would doubtless have been higher.

The Judge touched upon these aspects in the course of his judgment under the heading 'Foreseeability'. In so far as he appears to have accepted the submission of Mr Cooke QC then appearing for the Defendants that the Plaintiffs' loss "was purely economic", I consider that the Judge was wrong. The Plaintiffs' claim was, and remained, for damage to their property. Mitigation does not alter the essential nature of the claim. Nor does the fact that the courts can only assess and award damages in monetary terms, unless the majority speeches in Marc Rich v Bishop Rock [l996] AC 2ll are to be interpreted as necessitating this conclusion and the abandonment of all distinction between economic loss and personal injury or damage to property, which is not my view nor the submission of the Defendants. The Judge should have accepted the submission of Mr Cran QC for the Plaintiffs that

"Since the shipowners had accepted that it was reasonable for HOTT to contract on ICE terms, that was the end of the matter."

However the Judge was right to find that it was foreseeable that the cost of repair might include the payment of remuneration which covered the risk of the relevant contractor encountering unforeseen physical conditions which added to the cost of the work and that all this was within the risk created by the Defendants' negligence.

In my judgment this case involves a simple application of the doctrine of the mitigation of loss. The complications sought to be introduced by the Defendants are both inappropriate and mistaken. This appeal should be dismissed.

LORD JUSTICE PILL: I agree with Evans LJ that on the facts of this case the plaintiffs are entitled to recover the reasonable cost of repairs and that the sum due under the repair contract establishes that amount. I also agree with Hobhouse LJ that the answer to the legal question in this case is straightforward but in my view to categorise the case as he does as one involving a simple application of the doctrine of mitigation of loss may give insufficient credit to the defendants’ central submissions. As it is that point I attempt to consider, it is Hobhouse LJ’s statement of relevant facts which I gratefully adopt. I also accept his five-point legal analysis of the case save that there should in my view be added to point 2, which provides that the “remaining question was the assessment of the plaintiffs loss”, the words “for which the defendants are responsible”.

The question involves a consideration not only of mitigation of loss, as to which I agree with Hobhouse LJ’s reasoning, but another question put in the defendants’ written submissions in this way: “the collision of the vessel with the pier merely provided the occasion for a subsequent fortuitous and unforeseeable combination of circumstances which led to an unforeseeable accident with consequent loss. The defendant's act could not be said to be the immediate cause of the loss. It was merely a condition of the loss, part of the history of events which led up to the fresh accident, the collapse of the barge but having no causative potency”.

In whatever form the question is posed, the essential submission is that the defendants are not in law responsible for the damage which occurred (not at this stage because of any failure to mitigate) but because, whether the point is expressed in terms of foreseeability or causativeness, the law places limits on a tortfeaseor’s liability for damage to his victim. The defendants submit that, because the soil conditions on the seabed which led to the additional expenditure were unforeseeable, they are not liable for them.

In their written submissions, the plaintiffs accept that the question needs to be addressed. They state: “if the plaintiffs’ loss in this case had been aggravated by an unexpected storm, earthquake or fresh collision, this would have been due to an external cause which had nothing to do with the effecting of the repairs”. They go on to contend that the unforeseen damage in this case was not “extraneous or extrinsic”.

Having stated the defendants’ submission, however, I agree with Evans LJ that it is not a sound one upon the facts in this case. The arbitrator found that the cause of the collapse of the barge was “a very unusual combination of soil strength and applied stresses around the base of leg No 2 just before failure occurred”. There was a “transient combination ... which came together only near the point of failure”. He found that “everyone involved in the operation was taken by complete surprise by the collapse”. The condition which led to the collapse and the collapse itself were neither foreseen nor foreseeable.

The fallacy in the defendants’ argument is in my view in equating the foreseeability or otherwise of the difficult ground conditions with the legal concept of foreseeability as a test of liability for particular damage. It does not follow from the fact that competent and experienced contractors did not and could not reasonably foresee the exceptional conditions which were in the event encountered that the defendants can escape liability for the additional expense resulting from those conditions.

In Robinson v Post Office [l974] l W.L.R. ll76, an employee of the Post Office sustained a wound on his shin as a result of their negligence. It was reasonably foreseeable that an anti-tetanus prophylactic would be administered. The Post Office could not have known that the victim was allergic to anti-tetanus serum. Other issues arose in the case but, on the foreseeability issue, Orr LJ giving the judgment of the Court, stated at p ll9lH:

“In our judgment the principle that a defendant must take the plaintiff as he finds him involves that if a wrongdoer ought reasonably to foresee that as a result of his wrongful act the victim may require medical treatment he is, subject to the principle of novus actus interveniens , liable for the consequences of the treatment applied although he could not reasonably foresee those consequences or that they could be serious.”

The defendants in this case could not reasonably foresee the consequences of the remedial work reasonably undertaken but are nevertheless liable for them.

The defendants accept that the damage to the harbour works caused by their vessel had to be made good and that it was reasonable for the plaintiffs to contract with contractors who would do the work on the terms of the ICE contract. Clause l2 of the conditions of the relevant contract provides an entitlement to additional remuneration for the contractor who encounters physical conditions which could not reasonably have been foreseen by an experienced contractor. Having conceded that it was reasonable for the victim of the tort to accept a condition involving a contractual liability for unforeseen physical conditions, the defendants seek to argue that they are not liable for the contractual liability upon the plaintiffs held to result from the operation of the clause.

I do not accept as a general principle that the extent of a wrongdoer’s liability to his victim can be determined by the terms of the victim’s contract with a third party. I am not however surprised at the defendants’ concession in this case that it was reasonable for the plaintiffs to contract with the repairers on ICE terms including Clause l2. They are in common use for such contracts and the possibility that they would be used could have been foreseen by all parties. Having made the concession, the defendants’ cannot escape liability on the basis they claim. It was, as Hobhouse LJ puts it by reference to counsel’s submission, “the end of the matter”.

However I also consider that the same result would follow even if there had been no such concession. In the present contract, the victim’s right to contract on Clause l2 terms no more than reflects the extent of the tortfeasor’s potential liability to him. Given the vagaries of the seabed and the limitations of technology, it was foreseeable that ground conditions might be encountered which competent contractors could not be expected to foresee. It was the defendants’ misfortune that the damage their vessel caused was caused to a structure located at a point above the seabed where a combination of difficult ground conditions was liable to and did occur. The liability of the defendants is founded on one aspect of the principle that a tortfeasor takes his victim as he finds him. The conditions encountered cannot in my judgment be equated with an earthquake or freak storm.

I agree with Hobhouse LJ that the damage claimed was within the risk created by the defendants’ negligence. When the vessel struck the harbour works, it was foreseeable that the support of the seabed might be required in the course of remedial works. It was foreseeable that adverse ground conditions might be encountered, or might arise, which a competent contractor could not discover in advance and that additional expense might result from that encounter. That type of expense could reasonably have been foreseen even though its extent and manner of arising could not have been foreseen.

I too would dismiss this appeal.

Order: Appeal dismissed with costs.