Stacey (t/a the New Gailey Caravan/Motorhomes Cnentre) v Autosleeper Group Ltd

In a claim for breach of a contractual warranty, a claimant’s negligent failure to discover the breach will not ordinarily break the chain of causation where nothing alerted the claimant to the possibility of breach and reliance on the warranty was reasonable. The breach remains an effective cause unless subsequent conduct is sufficiently culpable, ordinarily reckless, to displace it as the true cause of loss. Whether causation is broken is fact-sensitive. A trial judge may award litigation costs, including an ATE premium, where evidence shows that those costs would still have been incurred had the claimant acted reasonably. An appellate court should not interfere with that assessment without proper grounds.

Autosleeper sold Stacey a motor home described as having a maximum gross weight of 3,500kg. Its actual maximum gross weight was 3,300kg. Stacey later sold it on, and the subsequent purchaser brought proceedings involving Stacey and others. Those proceedings were settled, with Stacey agreeing to provide a replacement vehicle and meet the parties’ costs, including an ATE premium and uplift.

The Stoke-on-Trent County Court found a breach of contract and awarded Stacey £54,563.95 in damages. Autosleeper appealed, arguing that Stacey’s negligent failure to identify the misdescription broke the chain of causation and that the ATE costs were irrecoverable. The central issues were causation and the proper assessment of the consequential litigation costs.

Lord Justice Floyd gave the judgment of the court. Lords Justices Patten and Elias agreed.

1. Appeal dismissed. The finding of breach was not challenged. The appeal failed on both causation and quantum.
2. Causation. The court accepted the principles summarised in Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm); [2011] 1 Lloyd’s LR 482. The claimant bears the legal burden of proving that the breach caused the loss, while a defendant alleging an interruption bears an evidential burden. Intervening conduct must have such an impact that it obliterates the defendant’s wrongdoing as a cause. Unreasonable conduct may be insufficient, and recklessness ordinarily breaks the chain, although no rigid rule confines the issue to reckless conduct. The question remains fact-sensitive and may depend on the cumulative effect of several factors.
3. Stacey’s failure to check the vehicle’s weight was negligent, but it was not reckless. He had acquired the vehicle with a warranty as to its maximum weight and was entitled to rely on that warranty. Nothing alerted him to a possible breach. The warranty was strict and did not depend on his taking reasonable care to investigate the represented fact. Lambert v Lewis [1982] AC 225 was distinguishable because the purchaser there knew that the coupling had become damaged. The reasoning in County Limited v Girozentrale Securities [1996] 3 All ER 834 supported the conclusion that negligent investigation, without knowledge of the earlier breach, did not interrupt causation. Autosleeper’s breach therefore remained an effective cause of the loss.
4. Quantum. The trial judge was entitled to assess which costs resulted from Stacey’s unreasonable conduct and which would have been incurred in any event. There was evidence supporting the finding that an agreement with the subsequent purchaser would still have required solicitor involvement, an ATE premium and an uplift, even if Stacey had acted reasonably. The Court of Appeal found no proper basis to interfere with that assessment.

1. Court of Appeal (Civil Division) dismissed Autosleeper Group Ltd’s appeal on causation and quantum.
2. Stoke-on-Trent County Court, HHJ P.R. Main QC, on 24 April 2014, found a breach of contract and awarded damages of £54,563.95, representing consequential litigation costs.