Remoteness and loss: reasonable forseeablility or reasonable comtemplation?

18 November, 2015
by: Cripps Pemberton Greenish

The recent case of Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 clarifies that when a claimant has concurrent causes of action for loss in both tort and contract, the court will apply the more restrictive contractual test for remoteness rather than the tortious test. 

 

In tort claims the test for remoteness is that any damage suffered must be ‘reasonably foreseeable’. In contrast the test for remoteness in contract claims is that loss incurred must come into the ‘reasonable contemplation’ of both parties. The contractual test is generally seen as more restrictive because in some circumstances loss can be reasonably foreseeable but may still not fall within the reasonable contemplation of the parties.

In Wellesley, the Claimant required the Defendant to draft a partnership agreement to provide an investor’s capital was to be untouched for a minimum of 42 months. However, the drafted agreement in fact allowed the investor to withdraw capital within the first 41 months.  The investor subsequently withdrew a large sum of money which prevented the partnership from opening a profitable Manhattan office.   

 

The High Court ruled that although this loss of profit was not recoverable under the contractual test for remoteness, (as it was not within the reasonable contemplation of both parties) the loss was still recoverable under the tortious test as it was reasonably foreseeable. The Court stated that when concurrent loss occurs, the Claimant has the option to use either test.  

 

The Court of Appeal held that when there are concurrent causes of action in both contract and tort, it is the contractual test for remoteness that applies rather than the tortious test. However, in this case the Court of Appeal found that the loss of profit from the new office was in the reasonable contemplation of the parties, as the solicitors had been aware of the companies US expansion plans.

Although the outcome remained the same in this particular case the appeal raises some interesting issues. In future negligence cases, where a claimant has a choice of potential defendants (such as a solicitor and a barrister) based upon contractual and tortious duties respectively, the more attractive route may be the tortious claim if all else is equal because of the potentially wider test for remoteness.