UK: Traditional causation principles affirmed: the Chester decision seen in context

Last Updated: 5 May 2005
Article by Ruth Sandberg

In Chester v Afshar, a gap was left open for claimants to argue that traditional causation principles should be by-passed in the interests of justice. In the case of Beary v Pall Mall Investments [2005] EWCA Civ 415, the Court of Appeal has virtually closed that gap. Professionals working in non-medical fields, along with their insurers, will breathe a sigh of relief at the decision. This does not mean, however, that the debate is closed.

While the application of Chester may have been narrowed, there remains scope for argument which claimants are bound to exploit if they fail to show that causation is established on normal grounds. The Court also touched on the correct way of assessing loss on equity-based investments. The full article summarises the current position on causation and addresses the implications of recent case law.

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Full Article

In Chester v Afshar, a gap was left open for claimants to argue that traditional causation principles should be by-passed in the interests of justice. In the case of Beary v Pall Mall Investments [2005] EWCA Civ 415, the Court of Appeal has virtually closed that gap. Professionals working in non-medical fields, along with their insurers, will breathe a sigh of relief at the decision. This does not mean, however, that the debate is closed. While the application of Chester may have been narrowed, there remains scope for argument which claimants are bound to exploit if they fail to show that causation is established on normal grounds. The Court also touched on the correct way of assessing loss on equity-based investments.

The case of Chester v Afshar (2005) 1 AC 134 amounted to a departure from established principles of causation which (it was accepted by the majority) was not justified except for policy reasons. Where a duty has been established and a breach of that duty shown, the traditional approach to causation requires a claimant to show that, but for a defendant's negligence, the claimant would not have suffered loss. In other words, if it can be shown that the claimant would have followed a certain path or taken a certain decision even if the defendant had not acted negligently, the negligence cannot be said to have caused the claimant's loss, and the case against the defendant will fail. Chester by-passed the traditional principle. That case was a medical negligence action. Miss Chester's surgeon failed to inform her of a small risk (no more than 1-2%) of a serious medical condition inherent in proposed surgery. That risk occurred and Miss Chester suffered permanent disablement as a result of the surgery. The Court accepted that, on normal causation principles, even though the surgeon had had a duty to warn Miss Chester of the risk and had failed to do so, Miss Chester would still have gone ahead with the operation. The only difference was that she would have postponed her decision and the operation would have taken place at a later time. However, the same risk would have been present during her operation, and it was not possible to say that the failure to warn created the risk. Despite the fact that the traditional causation test was not satisfied, Miss Chester's claim for damages was upheld by the House of Lords. The Court said that justice required the normal approach to causation to be modified. It decided that patient autonomy should be protected and that, on policy grounds, the causation test was satisfied.

The Chester decision left open the question of the extent to which, and the circumstances in which, a court will find a route around traditional causation principles. It caused concern for professionals (and their insurers) as it raised the issue of how widely the special policy considerations would be applied to other forms of professional negligence. The Court of Appeal has recently allayed some of those concerns. In the case of Beary v Pall Mall Investments [2005] EWCA Civ 415, the Court rejected an attempt to extend the policy considerations in Chester to financial services mis-selling cases. Mr Beary was advised by a financial services company, Pall Mall Investments, to transfer the assets he held in a small self-administered scheme (SSAS) into a private pension fund. He was advised to take a tax-free lump sum (and invest that in a bond) and a yearly drawdown income. The bond fell in value and Mr Beary brought an action in negligence against Pall Mall, alleging that, had he been properly advised, he would have purchased an annuity rather than the bond. The judge in the original trial found against Mr Beary, holding that, even if Pall Mall had explained the possibility of purchasing an annuity, Mr Beary would not have purchased one. Causation had therefore not been established.

Mr Beary appealed the judge's decision, arguing (among other things) that he should be entitled to recover loss on the basis of the reasoning in the Chester case. Mr Beary argued that there were policy considerations in favour of applying the Chester approach to cases of negligent financial advice. He submitted that pension advice is as important to an individual as medical advice is to a patient, since they both affect well-being (whether financial or physical). He also argued that the victim of negligent pension advice would find it more difficult to address causation issues than would the victim of negligent medical advice, because when trying to show what decision he would have taken had proper advice been given, he would be faced with a wide range of financial options as opposed to simply proving whether or not he would have gone ahead with an operation. On that basis, it was right to take the Chester approach and by-pass the traditional causation rules.

The Court of Appeal rejected Mr Beary's arguments. It found the analogy between breach of a doctor's duty of care and breach of a financial adviser's duty of care to be unconvincing. Indeed, Lord Justice Dyson found the suggestion that the established principles of causation should be rejected in all cases of negligent financial advice to be "breathtakingly ambitious, contrary to authority and, in my view, wrong."

The decision goes some way to endorsing the view held by many that the decision in Chester was specific to the special relationship between patient and doctor and made to uphold the principle of patient autonomy. It indicates that the special policy considerations in Chester are likely to be confined to medical negligence claims. Professionals working outside the medical field (along with their insurers) will be encouraged by the Beary decision. However, it is to be expected that the arguments run by Mr Beary will be used by claimants in other types of negligence actions where they are unable to establish that the traditional "but for" test is satisfied. It remains to be seen whether the courts will affirm in such cases the limited application of the Chester approach to medical negligence claims. Beary provides a considerable degree of comfort, but scope for further argument remains.

The Court also indicated that, where assessing loss on investments, it is appropriate to look at how the money would have been invested, had non-negligent advice been given and had that advice been followed. Where, as in Beary, an investor's money would have been (or remained) in an equity-based investment, the correct loss is any amount by which actual loss on the product invested (at the time the claim is resolved) exceeds what would have been the loss on the hypothetical investment on that same date. In that way, a defendant is protected against losses which stem purely from a falling market.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 05/05/2005.

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