Kamilla Hans-Peter Eckhoff KG v AC Oerssleff's EFTF A/B

For contractual causation, the but for test establishes a necessary causal link but is not sufficient. The relevant question is whether the act or default was a proximate cause of the alleged damage, assessed with common sense. An unusual or unexpected consequence does not necessarily break the causal connection, particularly where the intervening event is not abnormal or unprecedented. Under the Inter-Club Agreement, damage is attributable to unseaworthiness where the unseaworthiness was a practical and effective cause. A separate inquiry into remoteness is not required where the arbitrators have rejected that objection on the facts.

The owners of the Kamilla appealed under the arbitration legislation against an award concerning the allocation of cargo claims under the incorporated Inter-Club Agreement. A small quantity of lentils was wetted because the vessel was unseaworthy. The Algerian authorities then prohibited discharge of the entire cargo, including sound cargo, causing substantial additional loss.

The arbitrators held that the loss was due to unseaworthiness because the unseaworthiness was a practical cause of the loss. The owners argued that the arbitrators had applied an impermissible but for test and had failed to consider proximate cause, remoteness and the unusual intervening conduct. The central issue was whether the loss claimed was damage due to unseaworthiness within the Inter-Club Agreement.

The appeal was dismissed.

1. The court held that the proper test of causation was whether the relevant act or default was a proximate cause of the alleged damage. The but for test was necessary to establish a causal link, but was not sufficient by itself.
2. The arbitrators had not applied an erroneous bare but for test. Their conclusion that unseaworthiness was, in a practical sense, a cause of the loss correctly addressed proximate causation. The use of the indefinite article was material: unseaworthiness need not be the sole or dominant cause.
3. Questions of causation should be approached with common sense. Following the reasoning of Lord Hoffmann in Environmental Agency (Formerly National Rivers Authority) v Empress Cars Co (Abertillery) Ltd [1999] 2 AC 22, foreseeability was not the criterion for deciding whether an event had been caused by the relevant act. A distinction could be drawn between normal and abnormal events.
4. The fact that the Algerian authorities rejected the entire cargo, although only a small quantity had been wetted, did not sever the causal connection. The arbitrators found that the events were not unprecedented and that the unseaworthiness and the prohibition were not mere coincidences.
5. The arbitrators were entitled to conclude that the claimed damage was due to unseaworthiness within the Inter-Club Agreement. It was unnecessary to decide generally whether damage too remote to be recoverable would fall within those words, because the arbitrators had rejected the owners’ remoteness arguments on the facts.

• High Court (Commercial Court): appeal from an arbitration award dismissed. The court upheld the arbitrators’ conclusion that the loss was due to unseaworthiness.