Network Rail Infrastructure Ltd v Handy

Loss of revenue payable under a contractual performance regime may be recoverable as consequential loss where physical damage to revenue-generating property causes the property to become unavailable. The claimant must prove duty, causation, scope of duty, reasonable foreseeability, remoteness and a proper measure of loss. A third-party agreement does not automatically determine the tortfeasor’s liability, but the court should generally adopt a broad assessment. Detailed scrutiny is warranted only where there are exceptional circumstances or obviously unreasonable features. A formula may be used for a single disruptive incident if it represents a genuine and reasonable attempt to assess the resulting revenue loss. Unidentified delay is recoverable only to the extent causation is proved.

Network Rail brought five claims against drivers and an employer following admitted negligent road-on-rail incidents which damaged or obstructed railway infrastructure and disrupted train services. Network Rail claimed repair costs and revenue losses represented by payments made to train operating companies under Schedule 8 to the Track Access Agreements.

The defendants challenged the use of Schedule 8 for individual incidents, the reasonableness of its lateness multipliers and delay-attribution mechanisms, and the recoverability of losses arising under contracts with third parties. They also raised issues concerning trespass and unidentified delay. The central questions were whether the losses were caused by, foreseeable from, and sufficiently consequential upon the physical damage and whether the Schedule 8 methodology provided a proper measure of loss.

1. Recoverability in negligence and trespass. Physical property damage may include the deposition of physical things which, more than de minimis, prevents use or enjoyment of the property. Loss of revenue from the resulting unavailability of revenue-generating property is in principle recoverable. Loss of revenue may also be recovered for trespass to land without physical damage or fouling.
2. Schedule 8 losses. The payments to the train operating companies represented Network Rail’s loss of revenue or loss of use of the railway infrastructure. They were directly caused by the defendants’ negligence and trespass, reasonably foreseeable, not too remote, and within the scope of the duty. The court had to assess Network Rail’s loss, not the losses which the train operating companies might themselves have recovered.
3. Contractual formulae. The Track Access Agreements did not dictate the extent of tortious liability. Nevertheless, Schedule 8 was responsibly drafted, approved and reviewed, and represented a genuine and reasonable attempt to estimate revenue loss. In the absence of exceptional circumstances or obviously unreasonable features, detailed scrutiny of the formula and its components was inappropriate.
4. Single incidents and delay multipliers. Schedule 8 could reasonably be used to assess loss caused by a single disruptive incident. The absence of perfect evidence of each passenger’s response did not establish that no loss occurred. The use of stated-preference research, lateness multipliers and lag periods was reasonable and realistic on the evidence.
5. Attribution and causation. The higher-delay principle was a reasonable method of attributing reactionary delay. However, the second 50 per cent of unidentified delay under Schedule 8 had not been proved to have been caused by the defendants’ negligence. Only the pro rata share of the first 50 per cent was recoverable.
6. Disposition. Judgment was entered for Network Rail in each case, subject to deductions for the unproved unidentified minutes.

The judgment referred to earlier related proceedings in Network Rail Infrastructure Ltd v Conarken Group Ltd and Network Rail Infrastructure Ltd v Farrell Transport Ltd, including the first-instance decision and its dismissal on appeal. Those decisions concerned related Schedule 8 loss issues but were not decisions in the present litigation.