HumberOil Terminal Trustee Limited v The Owners of the Ship "Sivand"

Where negligence causes physical damage to property, the reasonable cost of repair or reinstatement is ordinarily the measure of loss. If the owner reasonably appoints competent contractors on standard terms, the tortfeasor remains liable for the resulting contractual payment, including remuneration for unforeseen conditions.

An unforeseen event during the work does not break causation merely because it was unforeseeable. The question is whether it was an independent intervening cause displacing the original negligence. Once causation is established, foreseeability concerns the kind of damage, not its precise extent. Reasonable repair costs remain recoverable where the need for repair and the type of expenditure were foreseeable.

A tanker negligently collided with and damaged the claimant’s harbour works. The claimant reasonably engaged competent contractors under the ICE Conditions to reinstate the terminal.

During the works, unforeseen seabed conditions caused a jack-up barge to capsize. The contractors were entitled under clause 12 to additional remuneration, which the claimant paid. An arbitrator’s award was upheld on appeal, and Longmore J upheld the claimant’s tort claim for the additional cost.

The shipowners appealed, arguing that the unforeseen collapse was an independent intervening event, that the additional payment was too remote, and alternatively that it was pure economic loss outside the scope of the duty of care. The central issue was whether the additional repair expenditure was legally attributable to the original collision.

Disposition

The appeal was dismissed with costs. Evans LJ, Hobhouse LJ and Pill LJ agreed that the claimant could recover the reasonable cost of repairing the damaged harbour works, including the additional contractual remuneration.

Causation and remoteness

1. Evans LJ treated causation as a mixed question of fact and law. The factual inquiry applies common sense to the material facts and distinguishes what caused the loss from what merely provided the occasion for it. An intervening act breaks causation only where it is an independent effective cause displacing the defendant’s negligence. Third-party negligence is not automatically decisive.
2. In tort, reasonable foreseeability operates after causation has been established and limits recovery by the kind or type of damage, rather than its precise extent. The need to repair property and the type of expenditure were foreseeable. The unusual seabed conditions increased the repair cost but did not constitute an independent supervening cause. The approach was consistent with The Wagon Mound and the thin-skull principle, including Smith v Leech Brain & Co. Ltd and The Wagon Mound (No.2).
3. The claimant acted reasonably in appointing reputable contractors on an appropriate standard form. The clause 12 payment arose within the ordinary scope of such a repair contract. It was not analogous to an earthquake, fresh collision or contractor insolvency. The additional cost was therefore recoverable in full.

Separate reasoning

Hobhouse LJ analysed the claim primarily as one for mitigation of loss. Once physical damage had been caused, the remaining issue was assessment of loss. Reasonable expenditure incurred in mitigation was recoverable, even if the mitigation was unsuccessful. The claim remained one for damage to property, not pure economic loss.

Pill LJ accepted Hobhouse LJ’s five-point analysis, subject to adding that the assessed loss had to be loss for which the defendants were responsible. He rejected the equation of unforeseeable ground conditions with legal unforeseeability. He also considered that, even without the defendants’ concession, the type of additional expense was foreseeable, although its extent and precise mechanism were not.

Evans LJ left undecided whether the thin-skull principle requires the relevant condition to pre-exist the negligence, observing that the seabed characteristics could in any event be regarded as a pre-existing state of affairs.

• Court of Appeal (Civil Division) In [1998] EWCA Civ 100, the appeal from Longmore J was dismissed with costs.
• High Court of Justice, Queen’s Bench Division, Admiralty Court Longmore J upheld the claimant’s claim for the additional repair expenditure.
• Arbitration and earlier appeal The contractors’ entitlement to additional remuneration under clause 12 of the ICE Conditions was determined by arbitration and upheld on appeal.