“Loss of a Chance” claims; what happens when the “Chance” is a distant one?
A recent Court of Appeal case has given useful guidance on “loss of a chance” claims. Such claims typically arise where, say, a client sues a professional adviser for failing to warn of a particular issue or risk during the course of a negotiated transaction, that issue subsequently arises and causes the client loss as a result.
Generally in such claims the court will consider what the chance was that, if the issue had been raised during the negotiation, the opposing party would have agreed to re-negotiate the term in question. If, for instance, the client has suffered £1m in losses, but there was only a 35% chance the renegotiation would have been successful, the client will only be able to recover £350,000 i.e. 35% of its losses.
This can produce some unusual results; in the above scenario even though on balance of probabilities the negotiation would not have been successful – and it could therefore be argued there is an insufficient causal link between the negligence and the losses as they would have arisen in any event – the client would still recover some of its losses.
The decision in Timothy Wright –v- Lewis Silkin LLP makes interesting reading and tackles this, and other issues, head on.
The Background Facts
There is much complicated (and interesting!) background to this case concerning the workings of franchises in the Indian Premier League, a Twenty20 cricket league run in India during April each year.
For the purposes of this note however, what is relevant is that:
- The Defendant, a firm of solicitors, was engaged by the Claimant to advise on his potential employment by an Indian company who ran a franchise in the Indian Premier League;
- The Claimant was to be entitled to a severance payment of £10million in the event he was dismissed for any reason;
- The parties agreed that English Law was to apply to the agreement, but they were silent as to whether or not the courts of England & Wales would have exclusive jurisdiction on any disputes arising therefrom.
Almost inevitably, the Claimant was subsequently dismissed but failed to receive his severance payment or any part of it. Proceedings were therefore issued against the Indian company and the Claimant obtained judgment for his severance payment, in full.
The company however refused to satisfy the judgment; by that time the company was already in a dire financial situation and was facing losing its franchise in the Indian Premier League as a result of, amongst other matters, a failure to pay its staff and players.
The Claimant attempted to enforce the judgment in India but it soon became apparent this was going to be a futile exercise; the Indian company’s finances had taken a severe downturn and there was no motivation and little ability on the part of the company to satisfy the judgment.
As a result, the Claimant commenced a professional negligence claim against its former solicitors.
The Allegations of Negligence
The Claimant was able to satisfy the judge at first instance that;
(a) He (wrongly) understood the clause about English laws to cover the issue of jurisdiction as well;
(b) He had specifically taken advise from somebody with good knowledge of the court system in India and that, as a result, he would have been insistent, had he understood the difference, that there was also a clause giving exclusive jurisdiction to the courts of England & Wales; and
(c) The Defendant had not given him any advice on the issue of jurisdiction.
As a result, the Claimant was successful, to a degree, in his initial claim. The judge at trial found that had he attempted to re-negotiate the agreement with the Indian company there was a 20% chance that he would have ultimately recovered his severance payment; this took into account both the likelihood that a jurisdiction clause would have been agreed and the probability that the Indian company would have paid the judgment had it been awarded earlier (which it would have been but for the challenges about jurisdiction which delayed matters) when the company was in a better financial position.
The Defendant appealed on three points. Two of these were dismissed, but the third point – whether the damages awarded were too “remote” - was decided in favour of the Defendant.
The fact that the “chance” was only a 20% chance was considered too low and the cause of the loss was outside of the parties expectations at the time. Accordingly it was held that the loss was indeed too remote to be recoverable by the Claimant, applying long standing principles about recoverability of damages ranging all the way back to Hadley v Baxendale, a prominent case from the mid 19th century.
In reaching its judgment the court approved the judgment in Wellesley Partners LLP v Withers LLP where it was held that where concurrent tortious and contractual duties are owed the test for recoverability of damages will be the stricter contractual test, not the more wide ranging tortious one.
This case illustrates the importance of considering all relevant legal principles during a case; damages that are simply too remote will not be recoverable, even on a “loss of a chance” claim.
For any advice in relation to such matters please contact Daniel Edwards or a member of our Professional Services Sector team, who have significant experience in bringing and defending professional negligence claims for and against a wide range of professionals.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.