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How to determine loss if a supervening event causes further damage

Did you know: Supervening events do not affect your recovery of damages!

Consider the following examples:

A person scratches a car, but before it is repaired the car is set on fire by another’s negligent act.

A homeowner who has a house built and after close examination discovers that it comprises of structural defects.  The house requires substantial repairs and during legal proceedings against the builder, an earthquake strikes, destroying the house along with neighbouring properties.

A ship that is negligently struck at sea by another, only to then be sunk by a wartime naval mine before repairs can be affected.

The Presumed Rule

 It was confirmed in Dimond v Lovell [2002] 1 AC 384, that the measure of loss is the expenditure required to put the subject property back into the same state as it was in before the accident. 

In the car example, the loss is suffered as soon as the car is damaged (the scratch).  If the car was destroyed by fire the next day by the negligence of another, the second wrongdoer would only have to pay damages equivalent to the reduced value of the scratched car.  The person who scratched the car remains liable for the estimated cost of repairing the damage they caused.

In the house example, the builder remains liable for the cost of rectifying the defects, and the owner is still entitled to recover the cost of rectifications from the builder, even if rectification work cannot be performed.

In the ship example, even though the ship is not recoverable and will never be repaired, the wrongdoer of the first incident is still liable for the damages they caused.  Therefore, the owner will still be able to claim the cost of repairs to the ship.

In summary, a subsequent event causing further damage or destruction to the property does not release the original wrongdoer of liability.

Is there an obligation to repair?

 Using the car example, the owner is entitled to recover the cost of repairs against the person who scratched the car.  The owner of the vehicle is not obligated to follow through with repairing the scratch.  The owner may repair the vehicle themselves.  The owner could choose to not have the vehicle repaired at all.  It may be given away or sold off for its post-accident value.

The law of damages does not interfere with the owner’s freedom of choice in this regard.

About me (Will Sas) – I act for insurance companies involved in liability, quantum and contract disputes.  I am an Associate in the William Roberts’ Queensland team, and responsible for Queensland, South Australia and Western Australia litigation.

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