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News | Sun 15th Nov, 2015
The test for remoteness in tort is damage that is reasonably foreseeable. However the test for remoteness in contract is damage that ought to be in the reasonable contemplation of the parties. There are differences between the two. Damage can be reasonably foreseeable (in which case it satisfies the remoteness test in tort) but also highly unusual or unlikely, such as a particularly lucrative contract (in which case it does not satisfy the remoteness test in contract). So where there are two concurrent causes of action, such when a professional is sued, which test should be applied to the damages claimed?
In Wellesley Partners LLP v Withers LLP  EWCA Civ 1146 a three-judge Court of Appeal has held that, where the claimant has concurrent causes of action in both negligence and breach of contract against the defendant, it is the more restrictive contractual test for remoteness that will apply to any losses.
The facts concerned negligence in the drafting of a partnership agreement. The Defendant was supposed to draw up the agreement to provide for the investors’ capital to be locked in to the partnership for at least 42 months, to give the partnership time to work. In fact the agreement provided that investors could withdraw capital at any time during the first 42 months. An important investor withdrew a large sum of money during that time. The claim was that but for the negligence that allowed the investor to withdraw capital, there would have been enough money to enable the partnership to open a New York trading office which would have generated lucrative profits. At first instance, Nugee J held that the losses claimed were not recoverable under the contractual test for remoteness but were recoverable under the more generous tortious test, and that the Claimant was entitled to choose which test to apply when bringing the claim. Accordingly the claim succeeded. The Court of Appeal upheld the judgment but on different grounds. It held that when there are concurrent causes of action in contract and in tort, the contractual test for remoteness applies and the tortious test does not. However it also found that on the facts, the losses claimed ought to have been within the reasonable contemplation of the parties and so were recoverable notwithstanding that the more generous test of remoteness did not apply.
The Court recognised that the decision might throw up some anomalies. It may give a client who receives free legal advice from a solicitor (who therefore does not have a contract with the solicitor) a more generous right to damages than someone who does have a contract. It may also mean that a client who sues a solicitor and a barrister for negligence may have a more generous claim against the barrister (with whom he does not have a contract) than he does against the solicitor (with whom he does have a contract). Roth J stated that he imagined that in such a situation, the contractual test for remoteness would apply but that this would have to be left to another case to be decided.
In any event the case is a welcome clarification of the law.
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