A recent case in the Scottish courts serves as a useful reminder about the contract law principle of remoteness of damage. In this case it was decided that a contractor who had been employed to construct a path leading to the top of some stairs on which the claimant fell was not liable for the loss suffered as a result of the fall.

In 2004 Greater Glasgow Health Board ("GGHB") entered into a series of agreements with Impreglio Parking (Glasgow) Limited ("IPGL") relating to the construction and operating of a multi-storey car park in the grounds of Glasgow Royal Infirmary. IPGL in turn contracted with Laing O'Rourke Scotland Limited ("LO'R") to construct a path in the surrounds of the car park. Under the terms of a warranty between GGHB and LO'R, LO'R undertook to GGHB to comply with the terms of its contract with IPGL.

Whilst the contractual drawings specified that the path should be constructed using asphalt, it was in fact surfaced with gravel. About 3 years after the path had been constructed, one of the Infirmary's employees fell down a flight of stairs. The cause of the fall was said to be that the transfer of stones from the adjoining gravel path had made the stairs slippery. The employee sued GGHB for her losses.

GGHB relied on the warranty and joined LO'R into the proceedings (having accepted that the employee had no direct right of action against LO'R in the absence of a contract between them). GGHB claimed that any damages would not have had to be paid to the employee but for LO'R's material breach of contract in not constructing the path properly. In defence, LO'R argued that on the facts the court could not draw the conclusion that the breach of contract caused the loss. It said that the loss was too remote. To be recoverable, damages have to be foreseeable at the time the contract was entered into (2004), rather than at the time of the breach (2007).

The court agreed with L'OR. In doing so, it said that it was wrong in principle to hold someone liable for risks for which people entering into such a contract in their particular market would not reasonably be considered to have undertaken (or have included in their price a provision for the risk of such). The court held that when entering into the contract to construct the path, it would not have been in the reasonable contemplation of the parties that LO'R would be exposed to liability for an accident caused by gravel getting onto the stairs 3 years later. This was reinforced by the acceptance by GGHB that the employee had no direct right of action against LO'R.

It is interesting to ponder how the court's decision may have been different had LO'R been employed on an ongoing basis (such as a PFI/PPP), rather than under a one-off arrangement. If this were the case, it is possible that a court would determine the losses suffered were reasonably foreseeable and that LO'R had priced for the risk of such. In any event, the issue of remoteness would not have arisen had the warranty between GGHB and LO'R contained specific indemnities against all losses that may be suffered as a result of LO'R's breaches of contract. Public liability insurance would, of course, also be relevant to any claim.

Reference: Donoghue v Greater Glasgow Health Board [2009] CSOH 115

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The original publication date for this article was 11/08/2009.