A woman guaranteed a developer’s debts to the NAB. In return she was to receive an indemnity and mortgage from the developer’s wife. Her solicitor was found negligent for not alerting her that the developer’s wife never signed the indemnity or mortgage. Another judge in a second trial then had to determine causation and damages.
The woman pleaded no transaction in relation to causation and damages. That is had the solicitor not been negligent she would not have entered into the guarantee with the NAB. Consequently she sought to recover the value of the security she lost to the NAB.
The woman claimed that the first judge had already determined causation and all that was required was to assess damages. The judge disagreed noting:
Causation for the purpose of attributing legal responsibility is a ‘question of historical fact as to how particular harm occurred’.
Therefore to determine causation one must, as a matter of logic, reason backward from the particular loss claimed. In other words, one cannot determine that a particular loss was occasioned, without knowing what that loss is said to be.
The court then noted that the “sliding doors test”, or “alternate universe test” applied:
When the plaintiff alleges a negligent omission, the causal link between the breach and the claimed damage can only be established by means of a counterfactual hypothesis.
The judge noted that only showing that removing the negligent ommission might have made a difference is not good enough. The plaintiff has to show that it was more probable than not that, but for the ommission the damage would not have occured. Unless that degree of connection is shown, on the balance of probabilities, the statutory test that the negligence was a necessary condition of the occurrence of the harm is not satisfied.
The judge held no causation was proved because absent the negligent ommission by the solcitor the woman would likely have given the guarantees anyway and/or that she would likely have lost her property anyway (even if she had not given the guarantee) because of the state of the rest of her affairs.