BHP Billiton Petroleum Ltd. & Ors v Dalmine SpA

In a causation dispute, the claimant ordinarily bears the burden of proving that the defendant’s wrongdoing caused the loss. Where the claimant shows that the actual failure occurred only at locations containing a non-compliant component supplied through the wrongdoing, causation is established on that evidence. If the defendant contends that a compliant replacement or hypothetical system would have failed in any event, the defendant bears the burden of proving that counterfactual case on the balance of probabilities.

The but-for test is principally an exclusionary tool for identifying irrelevant causes. It does not itself require the claimant to disprove every hypothetical alternative raised by the defendant, nor does a mere possibility of later failure suffice.

The claim arose from the failure of a subsea gas reinjection pipeline. Dalmine manufactured pipes whose carbon equivalent values exceeded the specified maximum, but fraudulently certified them as compliant. BHP relied on the certification and incorporated the pipes into the pipeline. The pipeline failed at six leak sites, each involving at least one non-compliant pipe.

At trial, Cresswell J entered judgment for BHP in deceit on liability, finding that the non-compliant pipes caused the failure and that the pipeline would not have failed anyway. Dalmine appealed. It ultimately conceded that it could not prove that a hypothetical pipeline made solely of compliant pipes would have failed. The remaining issue was which party bore that burden.

1. Appeal dismissed. Lord Justice Rix delivered the judgment of the court, with Lord Justices Aldous and Kay. Dalmine was ordered to pay the costs of the appeal, subject to detailed assessment on the standard basis, and to make an interim payment of £100,000 on account.
2. The general rule is that the claimant bears the burden of proving causation. The pleadings are ordinarily a useful guide to the allocation of that burden, although they are not conclusive: a party cannot create or remove a legal burden merely by the way it pleads its case. [1942] AC 154 was treated as supporting the ordinary principle that the burden depends on the circumstances in which the claim arises.
3. The court held that the but-for test should not be given an exaggerated role. Its principal function is to exclude irrelevant causes. It does not mean that the claimant bears the burden of disproving a defendant’s separately pleaded hypothetical case that the loss would have occurred in any event.
4. BHP had shown that the pipeline failed only at welded joints where one or both adjoining pipes were non-compliant, and nowhere else. In those circumstances, BHP had proved that the pipeline failed when it did because of the non-compliant pipes. If Dalmine wished to establish that a hypothetical pipeline made solely of compliant pipes would have failed later in any event, it had to prove that proposition on the balance of probabilities. A mere possibility was insufficient.
5. The court explained that proof of the hypothetical case could, depending on the circumstances, lead either to a conclusion that another factor was the effective cause of the loss or to an adjustment of damages to reflect the inevitable later failure. That did not transfer the burden to BHP. The reasoning was consistent with Chester v Afshar and with the recognition in Fairchild and Kuwait Airways that the but-for test is not universally applicable, although no departure from its ordinary operation in deceit was argued.

• Court of Appeal (Civil Division): Appeal dismissed. The court upheld the liability judgment in favour of BHP and made consequential costs and interim-payment orders.
• Queen’s Bench Division, Commercial Court: Cresswell J entered judgment against Dalmine on liability in deceit, with damages to be assessed: [2002] EWHC 970 (Comm).