The recent
case of Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146
clarifies that when a claimant has concurrent causes of action for loss in both
tort and contract, the court will apply the more restrictive contractual test
for remoteness rather than the tortious test.
In tort
claims the test for remoteness is that any damage suffered must be ‘reasonably
foreseeable’. In contrast the test for remoteness in contract claims is that
loss incurred must come into the ‘reasonable contemplation’ of both parties.
The contractual test is generally seen as more restrictive because in some
circumstances loss can be reasonably foreseeable but may still not fall within
the reasonable contemplation of the parties.
In Wellesley, the Claimant required the Defendant to draft a partnership
agreement to provide an investor’s capital was to be untouched for a minimum of
42 months. However, the drafted agreement in fact allowed the investor to
withdraw capital within the first 41 months. The investor
subsequently withdrew a large sum of money which prevented the partnership from opening a
profitable Manhattan office.
The High
Court ruled that although this loss of profit was not recoverable under the
contractual test for remoteness, (as it was not within the reasonable
contemplation of both parties) the loss was still recoverable under the
tortious test as it was reasonably foreseeable. The Court stated that when
concurrent loss occurs, the Claimant has the option to use either test.
The Court of
Appeal held that when there are concurrent causes of action in both contract
and tort, it is the contractual test for remoteness that applies rather than
the tortious test. However, in this case the Court of Appeal found that the
loss of profit from the new office was in the reasonable contemplation of the
parties, as the solicitors had been aware of the companies US expansion plans.
Although the outcome remained the same in this particular case the appeal
raises some interesting issues. In future negligence cases, where a claimant
has a choice of potential defendants (such as a solicitor and a barrister)
based upon contractual and tortious duties respectively, the more attractive
route may be the tortious claim if all else is equal because of the potentially
wider test for remoteness.