An open goal: the Court of Appeal reviews the 'loss of chance' doctrine

The assessment of damages in professional negligence claims often involves a tricky balancing act. Analysis of loss becomes particularly complex when the court is asked to speculate on what would have occurred had a professional properly discharged his duty of care.  If the answer is to be found in what a third party would have done, damages are assessed on the basis of a loss of chance.

The recent Court of Appeal decision in McGill v The Sports and Entertainment Media Group [2016] EWCA Civ 1063 provides a useful review of the authorities on the doctrine of lost opportunity and demonstrates that the circumstances in which the court will apply a loss of chance analysis are a work in progress.

Background

In April 2007 the claimant entered into an oral contract with Gavin McCann, a professional footballer contracted with Aston Villa, to act exclusively as Mr McCann's agent in negotiating a transfer to Bolton Wanderers. The contract was not reduced to writing and, under relevant Football Association Regulations, would have been unenforceable. The claimant argued that, on a balance of probabilities, the oral agreement would have been reduced to writing by the close of the transfer deal.

Shortly before the transfer the defendant persuaded Mr McCann to breach his contract with the claimant and complete the transfer using the defendant's agency. The transfer agreement was on similar terms to those negotiated by the claimant and the defendant received £300,000 in commission from Bolton.

The claimant subsequently issued proceedings against Mr McCann for breach of contract and the claim was settled in the sum of £50,000. However, the claimant viewed the defendant (and others involved) as the main perpetrators of his loss and subsequently sued various parties.

The main allegation against the defendant was inducement of breach of contract. Whilst the Judge at first instance was satisfied on the issue of breach, the claim was dismissed. The Judge found on a balance of probabilities that Mr McCann would not have signed a written agreement.

The Court of Appeal took a different approach in analysing causation and loss.

The Court of Appeal decision

On appeal it was argued that the Judge erred when he found it was necessary for the claimant to prove on a balance of probabilities that Mr McCann would have signed a written contract by the close of the transfer deal.

The claimant argued that the case was one of a kind where the loss was properly analysed as the loss of a chance to obtain a pecuniary advantage which depended on the future actions of a third party (ie either Bolton who would pay commission or Mr McCann who would pay a fee in the event Bolton refused to pay). Either way the claimant's ultimate entitlement to payment of a fee would depend on the future actions of Mr McCann and Bolton and on the final terms of a transfer deal. Accordingly, the correct analysis was that the claimant lost the opportunity of being paid a commission.

The Court of Appeal accepted this analysis and, in so doing, revisited the authorities on loss of chance.

Loss of chance revisited

A common feature of professional negligence litigation is that the court must determine the course events would have taken had a professional properly discharged his duty. Where the question centres on what the claimant would have done, the issue is determined on a balance of probabilities. Damages are then assessed on that hypothesis without any discount to reflect the possibility that the claimant might have acted differently.

Where the crux of the question is what a third party would have done, damages are assessed on a loss of chance basis. The Court of Appeal in McGill v The Sports and Entertainment Media Group summarised the key principles underlying this doctrine as referred to in leading authorities such as Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 102 and Wellesley Partners LLP v Withers LLP [2016] 2 WLR 1351. In summary, in undertaking a loss of chance analysis, the following issues should be borne in mind:

• Where the claimant's loss depends on the hypothetical acts of a third party, the claimant will need to prove (on a balance of probabilities) that there was a real and substantial (rather than negligible) chance that the third party would have acted so as to confer the benefit in question. This establishes causation.
• If causation is proven, the evaluation of loss of chance is a matter of quantification of damages in percentage terms.
• The measure of damages is the sum which would have been recovered if the hypothesis had been fulfilled multiplied by the percentage chance of it being fulfilled. Therefore, if a claimant would have recovered £1m in total in the underlying matter and he has lost a 60% chance of making that recovery, the damages assessed by the court would be £600,000.

Comment

The loss of chance doctrine is an exception to the usual principle that issues of fact in civil cases should be decided on a balance of probabilities. In defending professional negligence actions it is not enough to demonstrate that the claim in the underlying action would have failed on a balance of probabilities.

Another issue to consider is the following reality: the application of this doctrine often means that a claimant with poor prospects of success in an underlying claim may have a better chance of recovery in a subsequent negligence action than would have been the case had his professional advisor done the job competently in the first place. Equally, however, arguing that the prospects of lost opportunity are limited can be a useful tool in reducing quantum and may help to redress the balance in the context of negotiated settlements. An equalizer for professionals and their insurers – well, almost.