Conarken v Network Rail
Conarken Group Limited and Farrell Transport Limited v. Network Rail Infrastructure Limited
English Court of Appeal; Pill, Moore-Bick, and Jackson LJJ;  EWCA Civ 644, 27 May 2011
Andrew Bartlett QC, Jonathan Hough and James Purnell (instructed by Greenwoods Solicitors) for the Appellants/Defendants, Conarken Group Limited and Farrell Transport Limited
Jeffery Onions QC, David Drake and Alexander Polley (instructed by Hay & Kilner Solicitors) for the Respondents/Plaintiffs, Network Rail Infrastructure Limited
TORT: DAMAGES: SUMS PAYABLE UNDER VICTIM’S CONTRACTS WITH THIRD PARTIES: FORESEEABILITY AND REMOTENESS: REASONABLENESS OF CALCULATIONS
The Defendants caused physical damage to Network Rail’s railway lines and, in consequence, disruptions in service resulted. Both the High Court and the Court of Appeal found the Defendants liable in tort for the physical damage and economic loss arising as a result. The contested portion of the economic loss claim arose from Network Rail’s resulting contractual liability to train operators. This largely comprised an estimate of future reductions in the train operators’ income arising from the service disruptions. The Court held that Network Rail’s contractual liability to train operators was not too remote to claim in tort.
This case note has been contributed by Justin Gan Boon Eng, LLB (Hons) (NUS), an advocate and solicitor of the Singapore Bar
The Defendants’ employees damaged railway property by negligent vehicle driving. In the one case, in July 2002, the negligence of Conarken 's driver caused damage to the parapet walls of a railway bridge and rubble was strewn on the railway tracks. The line was closed for five days while repairs were carried out. On 10 May 2003, the negligence of Farrell's driver resulted in the detachment of overhead electric cables which affected the use of the East Coast Main Line for about seven hours. The Plaintiffs, a government-owned company which had been established to own the railway infrastructure, owned the damaged property. Under the arrangements made for the privatization of British Rail in 1996, a number of train operating companies had been appointed authorised franchisees to run the train services. As a result of the incidents, the Plaintiffs paid the train operating companies sums calculated on the basis of formulae set out in the Track Access Agreements between them. The Plaintiffs claimed repair costs, and more importantly, the sums paid to the train operating companies. A large proportion of the contractual sums paid sought to compensate the train operating companies for (i) the estimated effect on their present and future revenue for each minute of lateness, and (ii) sums the train operating companies would have to pay the franchising authority for service disruptions.
The Plaintiffs claimed that they were merely claiming their foreseeable losses arising from the incidents, and that it was irrelevant how their contractual liabilities were calculated. The Defendants averred that these losses were too remote/unforeseeable, and that in any case a contractual quantification of losses could not bind them as third-party tortfeasors. It was not disputed that the contractual quantification of loss was a reasonable estimate.
Akenhead J. at first instance found for Network Rail.
The Defendants’ appeal was dismissed.
The Court of Appeal agreed that Network Rail’s loss, being economic loss consequent upon physical damage, was loss of a recoverable kind.
Pill and Moore-Bick LJJ emphasised that the fact that a given type of loss was recoverable would not automatically mean that all damages claimed would be recoverable. Damages would continue to be limited by remoteness and foreseeability - concepts which express the policy concern that although innocent parties should be compensated, the wrongdoer should not have to compensate for losses too far removed from his breach of duty.
Pill LJ was quick to caution that the estimate of loss between contracting parties cannot dictate the liability of a third-party tortfeasor. Such contractual estimates would be analysed to determine if the various heads of claim and the manner in which the loss was calculated fell within those claimable by reference to the established principles of remoteness and foreseeability. As (i) the Defendants did not dispute that the contractual estimate was reasonable and (ii) the evidence as to the research and analysis underlying the contractual analysis had been adduced and found acceptable, Network Rail’s claim was allowed.
Similarly, Moore-Bick LJ stated that it was not relevant to dissect the precise nature of the losses incurred because it was accepted that Network Rail’s contractual figures were a genuine estimate of the loss. He further expressly rejected the Defendants’ contention that there was an independent and overriding principle that damages should be reasonable as between claimant and defendant. Instead, that concept of reasonableness underlay various legal principles - including remoteness - restricting the type and amount of damages recoverable from wrongdoers.
Jackson LJ’s approach was far less circumspect. Quite simply, he characterized the claim as one for loss of income consequent upon physical damage to property (an established category of recoverable economic loss in tort). As there was nothing exceptional or obviously unreasonable about Network Rail’s calculations, he suggested that it would be sufficient for Network Rail to prove that the loss fell within an established category of recoverable loss without having to go into the details of the loss and how it was calculated.
This case should not be simply taken as authority that a contractual determination of damages will fix the amount of damages payable by a third-party tortfeasor.
As may be seen from the above, the members of the Court of Appeal approached the matter with varying degrees of caution. It is suggested that Jackson LJ’s approach is unacceptable because it refused to consider whether the loss claimed was actually foreseeable and not too remote unless the Defendants showed that the contractual estimate of loss was exceptional or obviously unreasonable. Moore-Bick LJ may similarly appear to have focused solely on the categorisation of the kind of loss, but a closer reading of his judgment shows that it was on the basis that Network Rail’s contractual estimates were accepted by the parties as reasonable.
Pill LJ’s approach appropriately cautions contracting parties that the courts will not hesitate to review their contractual estimates of loss. Although such an inquiry would inevitably lead to increased litigation time and cost, it is submitted that it is necessary that the court do so because the plaintiff has to prove his loss arising from the tort and cannot be relieved of that burden simply by adducing a contractual estimate of loss without submitting the basis of its estimate for the court’s review.
It may well be that the only thing that is clear from the copious citation of authority and legal principle in the case is that it is futile to attempt to fashion a rule restricting the amount of damages claimable which is appropriate in all cases. In this regard, Pill and Moore-Bick LJJ’s approach seems to be the correct one – that is, analyzing the facts and applying the relevant legal principles (namely, remoteness, foreseeability, causation, etc.) but keeping in mind that these principles are based on reasonableness.