Milton Keynes Borough Council v Nulty & Ors

In a civil claim involving several possible causes of a fire, the claimant must prove the alleged cause on the balance of probabilities. The court is not required to choose between competing explanations if the evidence leaves it in doubt. Where only a limited number of causes are realistically available, the court may reject the substantially less probable alternatives and find the remaining cause proved, provided that cause is not itself improbable. It is impermissible simply to rank possibilities by percentage and select the highest.

Where an insured fails to notify a potentially serious claim promptly, the insurer must establish prejudice. Loss of the opportunity to investigate and defend the claim may be assessed as a loss of a chance. The court assessed the insurer’s lost opportunity at 15 per cent.

The Council owned a recycling centre operated by a contractor. Two substantial fires occurred on 2 and 3 April 2005, followed by a smaller fire on 8 April. The Council alleged that the first fire was caused by Mr Nulty, an electrical engineer, carelessly discarding a cigarette. The alternative causes were electrical arcing from a redundant live cable and deliberate ignition by an intruder.

The Council claimed damages against Mr Nulty. NIG, his liability insurer, brought related proceedings concerning late notification and alleged non-compliance with the policy. Mr Nulty died before trial and was not represented. The issues were the causes of the fires, Mr Nulty’s liability, and the effect of the late notification on NIG’s liability to indemnify him.

1. Liability for the fires. The Council bore the burden of proving the cause of the fires. The court rejected deliberate ignition by an intruder as extremely unlikely. It also found electrical arcing from the redundant small Boa cable to be a remote possibility. The evidence did not establish a credible mechanism by which the cable was damaged and later energised so as to cause the fire.
2. The court accepted that Mr Nulty was working close to the origin of the first fire during the relevant period and was a smoker. Although smoking in the building would have been reckless, a cigarette that was inadequately extinguished could have caused the fire. Applying [1985] 1 WLR 948, [2008] EWHC 2037 (TCC), [2008] EWCA Civ 424 and [2006] EWCA Civ 880, the court held that this was not false logic where the other possible causes were much less likely. The Council proved that Mr Nulty’s negligence caused the first fire.
3. The second fire was more probably a continuation or rekindling of the first than deliberate ignition by an intruder. Mr Nulty was therefore liable for damage caused by both fires.
4. Insurance cover. The policy required immediate notification of an incident capable of resulting in a claim, but that obligation was not a condition precedent. NIG therefore had to prove prejudice caused by the delay. Following [2005] 2 Lloyd's Rep 517, the court assessed the impaired opportunity to investigate and defend the claim as a loss of a chance.
5. NIG could not show that prompt notification would probably have produced a different result, but it had lost a material opportunity, particularly concerning the second fire. The prejudice was assessed at 15 per cent. NIG remained liable to indemnify Mr Nulty for 85 per cent of his liability, subject to the policy limit, assessed as £1.7 million. The Council’s counterclaim concerning interest failed for want of causation.