[2025] UKUT 289 (AAC)

Alexander v. Cambridge Credit Corporation Ltd. (1987) 9 NSWLR 310. In that case auditors had failed to notice certain aspects of the trading of a company which, had they noticed them, would have led to the appointment of a receiver over the company during the relevant period. The company made losses during that period which it sought to re-claim from the auditor on the basis that the auditor’s negligence had allowed the company to continue to trade, as a result of which losses were sustained. The Court of Appeal of New South Wales rejected the argument. Mahoney JA explained:

“In the present case, the company's loss resulted from the defendants' breach in the sense that the course of events vis-à-vis the company would have gone in a different direction had it not been for that breach. But that, I think, is not, or is not necessarily, sufficient. Thus, the breach allowed the company to continue in business. If its net worth had fallen because, for example, the main buildings it owned had been destroyed by an earthquake, I do not think that that loss would have been causally related to the breach which let the company continue in business ... It may sometimes be argued that a breach exposes the plaintiff to particular dangers and that if what happens subsequent to the breach is loss from a danger of that kind, the loss may be seen as a result of the breach: see, for example, the reference to arguments of this kind in the preface to the second edition of Hart & Honore [Causation in the Law, 2nd ed. (1985), p.lviii]. But, again, I do not think that this argument is open to the company. To allow the company to continue in existence is, in a sense, to expose it to all the dangers of being in existence. But allowing the company to remain in existence does not, without more, cause losses from anything which is, in that sense, a danger incident to existing. There are some dangers loss from which will raise causal considerations and some will not … But the basis of the plaintiffs' claim has been such that no inquiry is to be or has been pursued, for this purpose, into what in fact happened, why and the relationship of what happened to the breach. I do not think that that is enough to establish a causal relationship."