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Case Note: The Recovery of Economic Loss for Negligence

Thursday, 24 May 2012

Network Rail Infrastructure Ltd v Conarken Group Ltd Network Rail Infrastructure Ltd v Farrell Transport Ltd [2011]

Pure economic loss, ie. loss which is not consequential upon some direct physical damage or injury, is not generally considered recoverable in claims for compensation relating to negligence. The basis of such claims is the law of tort in which courts seek to restore parties to a position had negligence not occurred.

Drawing a line at the junction between recoverable losses and pure economic losses is not always simple or clear cut. Two recent cases involving Network Rail appear to have extended the financial reach of negligence claims.


Network Rail issued claims against two different parties for two separate incidents of damage to their infrastructure. The claims both related to damage caused by drivers of road haulage companies, one to overhead power lines and one to a railway bridge. In each case the haulage companies admitted liability in negligence for the cost of repairs.

Network Rail also claimed recovery for losses it suffered due to payments made to rail operating companies for delays. The haulage companies disputed these parts of the claims on the basis they were pure economic losses and therefore not recoverable in a claim for negligence.

Delay Costs

The delay cost payments arose under contracts that existed between train operating companies and Network Rail. The contracts were designed specifically to deal with delay costs caused by problems with the rail infrastructure owned by Network Rail and featured two components.

The first element consisted of a charge for each minute of average lateness suffered by the train operating companies that would cause future losses as passengers were less likely to travel by train in future. The second element consisted of a charge suffered by train operating companies payable to the Department of Transport for poor performance. The underlying aim of the contract was to quantify the true cost of delays from temporary closures of railway lines.

The Court's Decision

The court found in favour of Network Rail. It held that the financial losses caused by physical damage to revenue generating property was reasonably foreseeable and arose as a direct consequence of that damage.

In respect of the quantification of delay costs under the contracts, it found that they were genuine and reasonable attempts to assess those losses. The defendants' lack of knowledge of those contracts or what they entailed was irrelevant.

If you need advice in respect of claims for negligence or otherwise, Rollingsons has experienced lawyers who can assist you; for more information please contact James Crighton on 0207 611 4848.