ABSTRACT
Remoteness of damage is beyond doubt a question of law. In The Heron II, Koufos v C Czarnikow Ltd, the House of Lords said that, in remoteness of damage, there is a difference between contract and tort. In the case of a breach of contract, the court has to consider whether the consequences were of such a kind that a reasonable man, at the time of making the contract, would contemplate them as being of a very substantial degree of probability. (In the House of Lords, various expressions were used to describe this degree of probability, such as: not merely ‘on the cards’ because that may be too low, but as being ‘not unlikely to occur’; or ‘likely to result or at least not unlikely to result’; or ‘liable to result’; or that there was a ‘real danger’ or ‘serious possibility’ of them occurring.)
In the case of a tort, the court has to consider whether the consequences were of such a kind that a reasonable man, at the time of the tort committed, would foresee them as being of a much lower degree of probability. (In the House of Lords, various expressions were used to describe this, such as: it is sufficient if the consequences are ‘liable to happen in the most unusual case’; or in a ‘very improbable’ case; or that ‘they may happen as a result of the breach however unlikely it may be, unless it can be brushed aside as far fetched’.)
I find it difficult to apply those principles universally to all cases of contract or to all cases of tort, and to draw a distinction between what a man ‘contemplates’ and what he ‘foresees’. I soon begin to get out of my depth. I cannot swim in this sea of semantic exercises – to say nothing of the different degrees of probability – especially when the cause of action can be laid either in contract or in tort. I am swept under by the conflicting currents. I go back with relief to the distinction drawn in legal theory by Professors Hart and Honoré in their book Causation in the Law. They distinguish between those cases in contract in which a man has suffered no damage to person or property, but only economic loss, such as loss of profit or loss of opportunities for gain in some future transaction: and those in which he claims damages for an injury actually done to his person or damage actually done to his property (including his livestock) or for ensuing expense (damnum emergens) to which he has actually been put. In the law of tort, there is emerging a distinction between economic loss and physical damage: see Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd. It underlies the words of Lord Wilberforce in Anns v London Borough of Merton recently, where he classified the recoverable damage as ‘material, physical damage’. It has been much considered by the Supreme Court of Canada in Rivtow Marine Ltd v Washington Iron Works and by
the High Court in Australia in Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad.
