Menu

Causation and loss of chance: claiming damages in professional negligence cases

Print publication

11/01/2016

In Harding Homes & Ors v Bircham Dyson Bell [1] the court considered arguments by a firm of solicitors that their negligence had not resulted in the claimant construction company losing a real and substantial chance to negotiate a more favourable resolution to a dispute that had arisen between it and its bank.

Background facts

The claimant (Harding) had borrowed £9.4 million to finance a residential development. Harding defaulted on the loan and the bank demanded that its shareholders pay the sum due (£5.9 million). Alongside the loan documentation was a guarantee, which should have been limited to interest shortfall and cost overruns. However, in breach of his duty of care to his client, the drafting solicitor had included an all-monies clause in the guarantee. Following a period of negotiation, the bank accepted £4.4 million in full and final settlement. Harding completed and sold the development to fund the settlement payment.

Harding asserted that it had lost the chance to obtain a more favourable settlement with the bank. The defendant solicitor (BDB), whom the court described in this judgment as being “sloppy” and as habitually cutting corners [2], admitted negligence but denied that the existence of the all-monies clause had any material effect on Harding’s negotiating position with the bank.

Legal issues

The High Court decided that damages were to be assessed on the basis of loss of chance as per the Court of Appeal case of Allied Maples Group Limited v Simmons & Simmons [3], stating that the causal link between a defendant’s negligence and a claimant’s alleged loss depends on:

  • what the claimant would have done in events which did not, in fact, happen; and
  • what the defendant would have done in events which did not, in fact, happen.

In this case (in short) this meant that Harding would only be entitled to succeed on its loss of chance claim if it could show that:

  • on the balance of probabilities, it would have acted differently had there been no all-monies clause in the guarantee (Harding argued that it would have agreed a settlement with the bank of £2 or £3 million); and
  • there was a real and substantial (as opposed to a ‘speculative’) chance that the bank would have acted differently – that is, that it would have agreed to settle for £2 or £3 million.

BDB relied on Mount v Barker Austin [4], which confirmed the following principles for proving loss:

  • The legal burden is on a claimant to prove he has lost something of value – that is, that a claim has real and substantial rather than a merely negligible prospect of success.
  • The evidential burden is upon a defendant to show that the claimant has not lost anything as a result of the its negligence – that is, that the defendant’s negligence did not, of itself, cause the claimant’s loss.
  • When assessing whether the claimant’s prospects of success are more than merely negligible the court should make a realistic assessment of what would otherwise have been the claimant’s prospects, and that assessment can tend towards a general assessment for the claimant, in light of the defendant’s negligence.

The court accepted this was the right approach and asked: “Would a better deal have been agreed by [Harding]…if there had been no breach of duty by [BDB]?” [5]. The judge concluded that, on the balance of probabilities, Harding would probably have acted differently in negotiations had the mistake by BDB not been made, as it would not have had the “spectre[6] of the all-monies clause hanging in the background, but that Harding had not demonstrated that it had lost a real and substantial chance that the bank would ever have accepted a lower settlement figure. The judge therefore awarded nominal damages on account of BDB’s breach of duty, but otherwise found for the solicitor because, for all practical purposes, the loss of chance claim failed.

WM Comment

This case will be of interest to potential claimants and professionals alike.  It reminds potential claimants to critically assess, before spending time and cost becoming embroiled in litigation, the really crucial question of whether in fact any alleged negligence is really causative of loss claimed. It also reminds defendants that the burden is on them to prove that negligent act(s) did not cause loss. In particular, however, the case highlights the really significant difficulty with loss of chance claims: although a party can give witness evidence to prove what it would have done in different circumstances, proving what another party may or may not have done can be extremely challenging. Factors affecting the mind-set of parties need to be considered and can be notoriously difficult to establish yet, without causation being proven, claimants will be entitled to recover only negligible damages.

This means that, even if negligence is a slam-dunk, where damage suffered is as a result of a loss of chance, claimants should be careful not to throw good money after bad by pursuing a claim where causation is not absolutely clear cut. Where, however, claimants have undertaken this assessment and still proceed confidently, defendants whose professional reputations could be at stake may be well advised to settle privately in the pre-action protocol period, rather than facing the burden of proof in open court proceedings.

____________________

[1] Harding Homes (East Street) Ltd (1) Jason Scott Harding (2) Mark Ronald Harding (3) Peter Leslie Williams (4) v Bircham Dyson Bell (A Firm) (1) Bircham Dyson Bell LLP (2) [2015] EWHC 3329 (Ch)
[2] Ibid. para 43
[3] [1995] 1 WLR 1602
[4] [1998] PNLR 493 and followed in Browning v. Brachers [20015] EWCA Civ 753
[5] Harding Homes & Ors v Bircham Dyson Bell para 125
[6] Ibid. para 164