Eurasian Natural Resources Corporation Limited v Dechert LLP & Anor

Where multiple concurrent or cumulative wrongs contribute to an overall financial loss, factual causation need not be established by applying the “but for” test to each individual breach or item of loss. The court may assess the combined effect of the wrongs using common sense, and apportion responsibility between defendants by contribution proceedings.

Inducement to breach of contract requires a causal connection between the inducement and the breach. This is distinct from causation of the loss resulting from the breach. The ordinary reasonable-foreseeability requirement applies to the tort of inducement.

Where precise quantification is impracticable, damages may be assessed broadly and pragmatically, while allowing for evidential uncertainty.

ENRC brought two linked actions arising from investigations conducted by Dechert and from the Serious Fraud Office’s dealings with Dechert during an attempted self-reporting process. The claims concerned unnecessary legal and third-party costs, wasted management time, and losses allegedly resulting from the SFO’s later criminal investigation.

Following an earlier judgment determining substantial breaches of duty, the present trial addressed causation, remoteness, mitigation, quantum, contribution and exemplary damages. The central questions were whether the defendants’ cumulative wrongdoing caused the claimed losses, whether the SFO would have commenced the criminal investigation absent its wrongdoing, and how liability should be apportioned.

1. Disposition. ENRC established that the SFO’s wrongdoing was an effective cause of the losses comprising Unnecessary Work, Unnecessary Costs and wasted management time. The SFO’s wrongdoing also caused the commencement of the Criminal Investigation. The detailed sums were to be worked out, with further assessment required for losses flowing from that investigation.
2. Factual causation. The breaches were numerous, consecutive and concurrent. It was not realistic to identify which individual breach caused each item of financial loss. The proper approach was to assess the overall effect of the wrongdoing on the expansion of the investigation. The “but for” test was therefore not appropriate as the exclusive test for the SFO’s breaches.
3. Inducement and remoteness. The SFO’s inducements had a causal connection with Dechert’s breaches. The question whether the inducement caused the breach was distinct from whether the breach caused loss. The losses were reasonably foreseeable in type. The fact that the SFO could not foresee each individual workstream or invoice was immaterial.
4. Counterfactual and quantum. In the counterfactual, the Kazakhstan investigation should generally have ended by 31 October 2011, subject to limited work on stripping and Ms Zaurbekova. The Africa investigation should have been narrower and proportionate. The court used a common-sense, broad-brush approach to assess necessary and unnecessary work and costs.
5. Criminal Investigation. DC23 and DC24, viewed in the context of the prior IDCs, were effective causes of the SFO’s decision to commence the Criminal Investigation. The Kazakhstan material was subsidiary; the principal reasons concerned new information suggesting serious African wrongdoing, lack of frankness and the need to secure evidence.
6. Contribution and exemplary damages. Dechert and Mr Gerrard were jointly and severally responsible for the Unnecessary Work damages. Responsibility for Unnecessary Costs and wasted management time was apportioned 75% to Dechert and Mr Gerrard and 25% to the SFO. The high threshold for exemplary damages was not met. The earlier judgment would not be reopened in relation to the March 2013 leak.