Sometimes there is no hiding from the truth.
So, I begin this note with two confessions. First: for this humble hack at least, the law of damages is the trickiest and most challenging of all legal conundrums. I am writing this with a definite case of the jitters.
Second: I think Freedman J’s decision in Moda International Brands Ltd v Gateley LLP and another [2019] EWHC 1326 (QB) is trickier and more challenging than the norm, because it deals with a legal principle which had completely passed me by during my 20-plus years of legal hackery. Until reading the judgment, I had never heard of loss of chance damages in professional negligence cases. I have now.
Damages on the balance of probabilities
In civil cases (including those for professional negligence), damages for breach of contract or in tort are normally recoverable where the claimant has proved its case on the balance of probabilities. If the claimant can show that its case has a greater than 50% chance of succeeding, it wins. And, if it wins, then it is compensated by 100% of the damages that flow from the contractual or tortious breach complained of.
Damages for a lost chance or opportunity
The position is different in cases where the claimant argues that the damages to which it is entitled are caused by a lost opportunity or chance. In these cases, the innocent party can recover a percentage of its likely loss.
The damages are set at the percentage established for the lost chance. If the claimant can prove a 30% chance, it gets 30% of the damages. Unlike cases assessed on the balance of probabilities, that same principle applies where it can show a chance in excess of 50%. If a claimant can show a 65% loss of chance, it gets 65% of the damages – not 100%.
When are lost chance or opportunity damages recoverable?
Loss of chance cases tend to focus on the hypothetical conduct of a third party to the litigation.
A claimant will be unable to show with any certainty that it would have suffered loss but for the defendant’s breach of contract or duty. This is because it will be difficult to show that, on the balance of probabilities, the third party would have acted so as to confer the benefit to, or avoid the risk for, the claimant. Therefore, the claimant only needs to prove that there was a real or substantial chance that the third party would have acted in a particular way.
In Allied Maples Group Ltd v Simmons and Simmons [1995] 4 All ER 907 (approved by the Supreme Court in Perry v Raleys Solicitors [2019] UKSC 5), the Court of Appeal held that once a claimant has established that the defendant’s breach of duty deprived it of that real or substantial chance, valuation is a question of quantum (and not causation) and can therefore be assessed on a percentage basis.
This distinction is perhaps best summarised by Lord Briggs, who gave the leading judgment in Perry. If the court is assessing what the defendant would have done, the balance of probabilities test is applied. Where the court is considering what a third party to the litigation would have done, the loss of chance test is used.
This is important in cases where the claimant is looking to establish a loss of chance of less than 50%. This is easier to prove than establishing a case on the balance of probabilities.
The quirk in Moda
Moda was a dispute arising out of a joint venture property development in Nottingham between the claimant (C) and Monk Estates (ME). It was initially agreed that C would share 35% of the profits arising out of a unit known as Angel Row.
During the negotiations, ME insisted that it would not share any of the profits from Angel Row. The defendant solicitors failed to tell C of this change. C sued for the loss of profit it would have made from Angel Row. The court had no difficulty in finding that this failure breached the solicitors’ contractual and tortious duties of care to C.
The court then had to decide the consequences of that breach. Would C have insisted that its solicitors renegotiate the position in relation to Angel Row had it been told about the lost profit share (Freedman J accepted that it would have done so), and would ME have changed its position as a result? Because this involved the hypothetical actions of a third party, it seemed to fall squarely into the loss of chance line of cases.
However, in this instance, a director of the third party – ME – actually gave evidence in court. The defendant, wanting C to prove the case on the more onerous balance of probabilities test, argued that it should not be a loss of chance because the court knew what ME would have done. Freedman J rejected that argument.
Notwithstanding the evidence from ME’s director, it was not a party to the dispute (and had therefore not had its evidence and arguments subject to the full rigours of civil litigation, including disclosure), and there was no distinction in Allied Maples and Perry arising out of whether the third party had given evidence. The judge felt it would be unfair for the application of the loss of chance principle to depend on the availability of third party witnesses.
On the facts, he awarded Moda damages assessed on a 22.75% loss of chance, which came to a damages award against the solicitors of just over £200,000.
Key point
- The High Court has held that a third party giving evidence does not affect a claimant’s ability to claim loss of chance damages
Stuart Pemble is a partner at Mills & Reeve
