Cases - Galoo Ltd v Bright Grahame Murray
Record details
- Name
- Galoo Ltd v Bright Grahame Murray
- Date
- [1994]
- Citation
- 1 WLR 1360, CA
- Legislation
- Keywords
- Negligence – duty - causation – dominant cause - foreseeability – audit - consequential loss – whether negligence causative of consequential loss
- Summary
-
The defendants in this case were the auditors of the claimants. The audited accounts suggested that the claimants were profitable and had substantial assets. It was alleged by the claimants that a competent audit would have revealed that the 2 companies were unprofitable and worthless. The claimants argued that by reason of the auditor's breach of contract, they had suffered loss, because they continued to trade after they otherwise would have done. Glidewell LJ treated the claimants' argument on causation as an invitation to apply the 'but for' test. He rejected that test and in so doing, applied the dominant or effective cause approach. He said:
'The passages which I have cited....make it clear that if a breach of contract by a defendant is to be held to entitle the plaintiff to damages, it must first be held to have been an 'effective' or 'dominant' cause of his loss. How does the court decide whether the breach of duty was the cause of the loss or merely the occasion for the loss?
The answer in my judgment is supplied by the Australian decisions to which I have referred, which I hold to represent the law of England as well as Australia, in relation to a breach of duty imposed on a defendant whether by contract or by tort in a situation analogous to a breach of contract. The answer in the end is "By the application of the court's common sense".'