Flanagan & Anor v Greenbanks Ltd (t/a Lazenby Insulation) & Anor

Whether later conduct breaks the chain of contractual causation is a fact-sensitive question. The claimant must show that the later conduct obliterated the earlier breach as an effective cause of loss. Concurrent causes do not ordinarily break the chain. Mere negligence or unreasonable conduct will usually be insufficient, particularly where the claimant lacked specific knowledge of the earlier breach. Recklessness may suffice, but there is no universal threshold. The court must assess the practical circumstances, including knowledge, the nature of each breach and the causal sequence.

Householders brought proceedings against Greenbanks Ltd, trading as Lazenby Insulation, after unsuitable cavity wall insulation was installed in timber-framed homes. Greenbanks settled the householders’ claim and sought an indemnity or contribution from Mr Cross, whose employee had surveyed the properties and failed to identify the timber frames.

HHJ Harris QC held that Mr Cross had breached an implied contractual term to ascertain suitability, that Greenbanks’ subsequent failure to check before installation did not break the chain of causation, and that Mr Cross was liable for a 75 per cent contribution. Mr Cross appealed, relying in part on newly admitted contractual terms and arguing that Greenbanks’ negligence superseded his breach.

1. Appeal dismissed by a majority. Rafferty LJ held that Mr Cross had to establish that Greenbanks’ negligence obliterated his own breach. Greenbanks’ failure to check suitability was negligent, but it remained a concurrent and effective cause rather than superseding the earlier breach.
2. The applicable principles were those in Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm). Causation is fact-sensitive. The claimant bears the legal burden, while an evidential burden may arise on a novus actus argument. Later conduct must have sufficient impact to obliterate the earlier wrongdoing. Mere unreasonable conduct does not necessarily suffice, and the claimant’s knowledge of the breach, the danger and the need for remedial action is significant.
3. Rafferty LJ rejected the suggestion that Greenbanks’ conduct was reckless or close to recklessness. General knowledge of earlier survey failures did not establish knowledge of the particular defect or risk in these properties. Even if Greenbanks’ breach was an effective concurrent cause, both breaches combined to produce the loss.
4. Macur LJ dissented. She considered the later negligence sufficiently serious, in light of Greenbanks’ knowledge of previous erroneous surveys, the simple inspection required and the delay between survey and installation, to supersede Mr Cross’s breach in practical terms. She would have allowed the appeal and rejected the alternative 75 per cent contribution finding.
5. Maurice Kay LJ agreed with dismissal. He considered the case close, but found no basis for treating Greenbanks’ error as gross negligence or recklessness. The unusual reliance of one incompetent party on another did not break causation. The alternative issue under the Civil Liability (Contribution) Act 1978 did not need to be decided.

• Court of Appeal (Civil Division): Appeal from the order of HHJ Harris QC in Oxford County Court dated 22 June 2012. By a majority, the appeal was dismissed.
• Oxford County Court: HHJ Harris QC held that Mr Cross was liable for breach of contract and that Greenbanks’ later failure to inspect did not break the chain of causation. A 75 per cent contribution was ordered in the alternative.