Pleading the Counterfactual
As observed by Mason CJ in March v E & M H Stramare Pty Ltd in the often cited passage as to the process of consideration of causation being undertaken by way of ‘common sense analysis’, the issue of causation in law is different to that in philosophy or science. In the latter, causation is explained by the relationship between conditions and occurrences. For example, a cricket ball impacting on and then shattering a window.
In law the question of causation looks first to the whether the conditions resulted either in or contributed to the occurrence (causation in fact) and once determined whether any legal responsibility or liability should be apportioned to those who caused the ball to be thrown (causation in law). Such issues may include the age and legal capacity of the person who threw or hit the ball, the owner of the window, the owner of the ball and the likelihood of the damage resulting from the act. Causation in law also includes issues of foreseeability and remoteness and is determined once factual causation is determined on the balance of probabilities.
This article will focus on the first issue, that of factual causation and the obligation to plead a counterfactual, or allegation contrary to fact, being that conduct which a party asserts should have occurred in relation to an event in order to avoid a breach of duty or contract and the subsequent damages that they assert flowed from it. For the example above, this may be the reasonableness of setting up a bowling machine in the hallway of a house and what steps should or could have been taken to avoid the ensuing damage. Those steps, that could or should have been undertaken, form the counterfactual.
In Delaforce v Simpson-Cook, in the context of establishing the loss of chance arising from a parties attempt to depart from its prior representation and to which estoppel is claimed, Allsop P described a counterfactual as “..an alternative, complex and now hypothetical body of human conduct”. In ACCC v Metcash Trading Ltd, Emmet J described a counterfactual or “counterfactual analysis” as the process of examination of different outcomes as between scenarios of a “future with” where the event occurred and a “future without” where the event did not occur and where the hypothetical body of human conduct is considered.
It is the latter, “future without” counterfactual, used to establish liability and/or loss, which is the focus of this article. Each counterfactual may be alleged to commence at a different time or place or be the result of some other condition such that it differs from other hypothetical courses and each is required to be pleaded as alternatives to the other.
Identification of Risk
The first issue that arises in the consideration of whether a proposed defendant caused or contributed to the damage suffered by the plaintiff is the identification by the pleader of the ‘risk’ of injury that the defendant was duty or contractually bound to exercise reasonable care to avoid as opposed to the avoidance of harm to which there is no such obligation. A similar process is engaged in analysis of acceptance of risk and remoteness in relation to damage under the first and second limb of Hadley v Baxendale.
It seems clear from the High Court decision in Roads and Traffic Authority of New South Wales v Dederer (Dederer) that the determination of the risk is critical to advancing a matter as all propositions are derived from it. The correct identification of the risk, even by the most learned, can be equally elusive.
In that case the respondent, Mr Dederer, was 14 at the time he when he was badly injured while jumping off a public bridge into water. The Full Court found that the ‘risk’ was the possibility of someone jumping from the bridge which the RTA had erected. The High Court found that the ‘risk’ was not the jumping from the bridge, but the impact of Mr Dederer landing in shallow water which was compounded by the shifting sands of the estuary causing the depth of water to vary.
As to the identification of risk, Gummow J observed that “It is only through the correct identification of the risk that one can assess what a reasonable response to that risk would be.”. This was followed by Gotterson JA in Boon v Summs of Qld Pty Ltd  where his Honour went further at  stating that “The guidance given by Gummow J in Dederer requires a precise identification here of what it was that exposed the appellant to risk of injury…”
In that case, Mr Boon had received a cut to three of his fingers from a Leatherman multi-tool, the knife of which had been used to peel an orange, the learned trial judge had identified the risk as being that “… of a person coming into contact with the knife as Summerfeldt was using it to peel an orange or had just used it to peel an orange during a meal break”. The Court of Appeal found that the risk “ … was the conduct of Mr Summerfeldt in rising from a crouched position with a knife in his hand, the knife having a long, sharp blade which was unsheathed. The risk of injury to the appellant arose because, as Mr Summerfeldt was moving to an upright stance, the blade might have struck a passer-by such as the appellant.”
The importance of identifying the risk cannot be overstated. It is difficult to see how a counterfactual can be established if it doesn’t respond to the cause of the breach or loss to which the ‘risk’ is directed. The asserted risk will drive the conduct of the case and evidence to be sought, including that of experts. Once the risk is identified, normally as a result of substantial conversations with chamber-mates as to cause and effect at various points along the factual timeline, the next task is committing our hypothesis to paper in the form of a pleading.
The obligation on pleaders to articulate their case is required by operation of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) including rules 149, 150, 155, and 158 and other legislation including the Civil Liability Act 2003 (Qld) (CLA). As to the operation of the CLA, as observed by Fraser JA in Meandarra Aerial Spraying Pty Ltd v GEJ & MA Geldard Pty Ltd, it is required to be applied in all cases in which it is applicable. For those unfamiliar, this is not restricted to matters of personal injury but includes circumstances where the loss is purely limited to property damage.
Pleading of a duty or contractual obligation and its alleged breach, with nothing further, will not satisfy the pleading obligations of the UCPR if a counterfactual is required to be pleaded. It is not sufficient to broadly open the issue at trial, with a view to drawing out an arguable counterfactual through cross examination. As was found in Oztech Pty Ltd v Public Trustee of Queensland (No 15) (Oztech) the failure to expressly plead the counterfactual will result in the issue not being alive on the pleadings and evidence not being admitted in relation to it.
The full court in Oztech had reason to consider a line of questioning as to the receipt of an ASIC notification by the Public Trustee which sought to examine the reasonableness of the Public Trustee’s response in failing to read it or take other action. The issue was that “…no part of the appellants case involved a failure to read the 6 June notification.” The appellant alleged that the respondent had breached a duty owed to it, however the failure to act on the ASIC notification was not pleaded or particularised on the pleadings although understood to have been raised in an expert report tendered at the hearing. The line of questioning was objected to and disallowed by the trial judge.
In considering the appeal, the court had reason to review the general principles of the role and requirements of pleadings at  –  and at  and  observed that:
There should be no doubt about whether any particular cause of action is relied upon. At a minimum, the pleading should be pellucidly clear about the causes of action, or claims, relied upon by the applicant, including any claims made upon an alternative hypothesis…
Clarity in pleading is by no means an unattainable objective, even in the most complex litigation. Often the elements of a cause of action require careful and precise identification to ensure that the relevant integer is properly characterised having regard to the context in which the claim arose. The pleading should always be a bespoke articulation of the dispute between the parties, even though the warp and the weft of its fabric may be the same as other claims based upon the same, or a similar, cause of action.
The obligation to clearly and unambiguously plead a causation hypothesis, whether singular or as alternatives, was considered by Bond J (as Bond JA then was) in Sanrus Pty Ltd & Ors v Monto Coal 2 Pty Ltd & Ors (No 7) at where his honour extracted an earlier judicial observation he made in Lee v Abedian:
The defendants are entitled to have the plaintiff pinned down to a causation hypothesis which is not characterised by imprecision and ambiguity and which, at least arguably, establishes the requisite causal connection between the implementation of the conspiracy and the suffering of loss. If there is more than one causation hypothesis, then the statement just made must apply to each one. The pleading device of merely cross-referring back to events alleged to have happened is unlikely to be a satisfactory way of addressing a proper plea of causation. There must be a direct and unambiguous identification of the material facts relied on to establish the causal link which the law requires. And it must be something which makes narrative sense. The defendants should not be required to cherry pick through the pleading to work out what the case is that they have to meet in this regard.
His honour, adopting the judgment of the Full Court of the Federal Court in Oztech summarised the authorities at :
The result is that where a party’s causation hypothesis depends on establishing a particular counterfactual scenario to establish the alleged causal link between breaches of contract and the loss which it is said would have eventuated if the conduct which the party impugns had not occurred, that counterfactual scenario must be pleaded and particularised in accordance with the rules of pleading. This should be done with the degree of clarity referred to in Oztech Pty Ltd v Public Trustee of Queensland. The pleading so framed must at least arguably establish a reasonable inference that the impugned conduct and the claimed loss stand to each other in the relation of cause and effect.
The function of pleadings is to state with sufficient clarity the case that must be met” and thereby to “ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and … to define the issues for decision”; Banque Commerciale SA (En liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286. A plaintiff should be expected to plead all material facts on which the plaintiff relies to constitute the [pleaded] cause of action, including any counterfactual on which that plaintiff relies to establish the requisite causal link between identified loss or damage and identified misleading or deceptive conduct. In the same way, a defendant resisting the [pleaded] action should be expected to plead any different counterfactual on which that party might rely to deny the causal link. Unless and to the extent that the parties choose to depart from the pleadings in the way they go on to conduct the trial (Banque Commerciale at 287), choice between the competing pleaded counterfactuals on the balance of probabilities should then exhaust the fact-finding that is required to be undertaken by the court on the issue of causation.
It is clear from the authorities above and the nature of litigation governed by the UCPR that a party’s case is required to be stated in a clear and unambiguous manner on the face of the pleadings including any counterfactual alleged. This process is best undertaken once the ‘risk’ is properly considered and identified.
The pleading of the counterfactual must place the other party squarely on notice as to the conduct that it is said to have been open to them and which they should have undertaken in order to either avoid the breach or limit the loss.  Where there are alternative counterfactuals, each is required to pleaded with clarity and precision or risk the exclusion such evidence at trial.
 March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 509
 Delaforce v Simpson-Cook  78 NSWLR 483 at 486 ; recently considered in Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2021) 396 ALR 27 as to the issue of whether evidence of a counterfactual is required in maters where loss of chance arising from a representation and claim in estoppel see McKerracher and Colvin JJ at  –
 ACCC v Metcash Trading Ltd (2011) 282 ALR 464 at 
 Roads and Traffic Authority of New South Wales v Dederer (2007) 234 CLR 330 at 348 
 (1854) 9 Exch 341 at 354
 See f/n 4 above
 At 351 
 with whom Holmes CJ and Applegarth J agreed
 Boon v Summs of Qld Pty Ltd  QCA 38
 Ibid at  extracting paragraph  of the original judgement
 Ibid at 
 Oztech Pty Ltd v Public Trustee of Queensland No 15 (2019) 269 FCR 349, Middleton, Perram and Anastassiou JJ
 C/f with Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 f/n 3
 Oztech f/n 13 at 
 The obligation to establish the facts contained in an expert report falls outside of the scope of this paper.
 The Court at  extracting the judgement of Allsop J in White v Overland (2001) 67 ALD 731;  FCA 1333 at  and at  the judgement of Mason CJ and Gaudron J in Banque Commerciale S.A., En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 at 286-287
 Sanrus Pty Ltd & Ors v Monto Coal 2 Pty Ltd & Ors (No 7)  QSC 241
 Gageler and Edelman JJ
 (1920) 381 ALR 427
 See the judgment of Derrington J in Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd  FCA 1018 at  where his Honour speculates as to a counterfactual arising on the facts and its use in assessing damages before stating the requirement that such allegation be expressly pleaded.