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The Court of Appeal has held that the intervention of third-party fraudsters broke the chain of causation between a seller's assumed breach of a contractual confidentiality clause and a buyer's loss: Logix Aero Ireland Ltd v Siam Aero Repair Company Ltd [2026] EWCA Civ 510.
The decision illustrates that, ordinarily, a third party's fraudulent acts will break the chain of causation between a defendant's breach and a claimant's loss. The exception is where the defendant owes a duty to protect the claimant against the very type of fraud committed – meaning that the loss was effectively caused by the breach, fell within the scope of the duty assumed by the defendant, and was a foreseeable consequence of the defendant's breach. In those circumstances, the fraudulent acts will not break the chain.
This decision is particularly relevant given the growing prevalence of business email compromise fraud, where fraudsters intercept commercial email correspondence to divert payments or obtain sensitive data. Parties who suffer loss from such fraud and seek to recover from their commercial counterparty face a significant causation hurdle: unless the contract or relationship imposes a specific duty to protect against the very fraud that occurred, the fraudsters' intervention will normally break the chain of causation. The Court of Appeal's decision shows that a commercial confidentiality clause will not typically impose such a duty.
For further details, see this post on our Civil Fraud and Asset Tracing Notes blog.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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