Professional negligence – Loss of chance – Damages – Defendant solicitors admitting breach of duty to claimants in relation to guarantee concerning property development – Claimants seeking damages for loss of opportunity – Whether causal link being established between negligence and loss – Whether claimants having real and substantial prospect of success – Claim dismissed
The second to fourth claimants were builders who were liable under a guarantee for the first claimant company’s liabilities to a bank (GMAC), in relation to a property development in Colchester. The defendants were solicitors responsible to the claimant for the guarantee who admitted breach of duty. By mistake, they had included an all monies clause in the guarantee, which should have been limited to interest shortfall and cost overruns. They admitted that they owed duties to all the claimants.
The claimants argued that they had lost the opportunity to obtain a more favourable outcome from their negotiations with GMAC, both as to the sum to buy GMAC out and as to the profit on the development. They submitted that they would have agreed a full and final settlement with GMAC at a price of £2 million (alternatively not more than £3 million) by using finance from various sources. They would then have sold the completed properties at the rate of two or three at a time. Alternatively, they would have negotiated a moratorium with GMAC, enabling them to complete the development. There was a real and substantial, rather than a speculative, chance that GMAC would have acted differently, by agreeing to sell the site to the claimants who had discovered that GMAC wished to leave the UK and would have been willing to accept only £2 million to walk away from the development. Moreover, there was a real and substantial, rather than a speculative, chance that the claimants would have obtained funding to enable such an agreement to be made.
The defendants denied that the existence of the all monies element of the guarantee had any material effect on the claimants’ negotiating position or on the profits earned from the development.
Held: The claim was dismissed.
(1) The only issue was whether the defendants were liable to the claimants in damages and, if so, the quantum of such damages which fell to be assessed on the basis of loss of a chance expounded by the Court of Appeal in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602. The causal link between the defendants’ negligence and the claimants’ alleged loss depended on what the claimants and GMAC would have done in events which had not in fact happened. The claimants would succeed if they could show that, had there been no breach of duty, on the balance of probabilities, they would have acted differently.
(2) The evidential burden was on the defendants to prove that there was no causal link between the negligence and the loss. The legal burden was on the plaintiff to prove that, in losing the opportunity to pursue his claim, he has lost something of value i.e. that his claim had a real and substantial rather than a merely negligible prospect of success. The court had to look at the chances of the various contingencies happening in the round, rather than mechanically applying percentage upon percentage: Mount v Barker Austin [1998] EWCA Civ 277 applied. Browning v Brachers [2005] EWCA Civ 753, Dixon v Clement Jones Solicitors [2004] EWCA 1005 and Levicom International Holdings BV v Linklaters [2010] EWCA Civ 494 and Tom Hoskins plc v EMW (a firm) [2010] EWHC 479 (Ch) considered.
(3) In the present case, although on the balance of probabilities the claimants would have acted differently if the error had not been made, they had not succeeded in demonstrating that they had lost a real and substantial chance to negotiate a different resolution with GMAC which would have resulted in more profit for the claimants. If the court found the prospects were nil or negligible then it should disregard them and there was no need to assess them further. If the prospects were 10 per cent or less, they should be regarded as negligible. In law, such an enhancement of the prospects of success was negligible and was disregarded for the purposes of awarding damages. The prospects of success were negligible and causation was not therefore made out: Thomas v Albutt [2015] EWHC 2817 (Ch) considered.
(4) In all the circumstances, the claimants were entitled to judgment and nominal damages on account of the defendants’ breach of duty. Otherwise the court found for the defendants.
Justin Fenwick QC and Benjamin Wood (instructed by Shakespeare Martineau LLP) appeared for the claimants; William Flenley and Niamh O’Reilly (instructed by Reynolds Porter Chamberlain LLP) appeared for the defendants.
Eileen O’Grady, barrister