In Law Debenture Trust Corporation PLC v Elektrim SA [2010] EWCA Civ 1142, the Court of Appeal has suggested that the courts should not be too ready to apply the "loss of a chance" approach to assessing damages in a commercial case.

Key points

  • This decision is likely to mean that the courts will be more cautious in approaching commercial claims on a "loss of a chance" basis.
  • Where a claimant's loss depends on the valuation of a concrete asset, the court will do its best to estimate that value rather than deciding it is a matter of chance.
  • Where the court does have to assess the value of a lost chance, it is unlikely to approach the question by assessing the prospects of a wide range of outcomes and valuing each.
  • The question of whether a "loss of a chance" approach favours claimant or defendant varies depending on the facts of a particular case, but this judgment could have the effect of reigning in large claims based on a small chance of achieving an extreme result.


Where a claimant's loss depends on the hypothetical actions of a third party, the claimant is not generally required to prove, on the balance of probabilities, what the third party would have done. So long as the claimant can prove that (absent the defendant's breach) there was a real or substantial chance that the third party would have acted to confer a benefit on the claimant, the court can award damages based on the claimant's "lost chance" of achieving the benefit in question.

This approach has been adopted in cases involving such varied matters as the lost chance to participate in a beauty contest (in Chaplin v Hicks [1911] 2 KB 786) and the lost chance to negotiate better terms in a property transaction (in the leading case of Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602).

In the present case, the claim was for breach of a condition attached to bonds guaranteed by Elektrim, under which the bondholders were entitled to a contingent payment calculated according to a formula based on the "fair market value" of Elektrim's assets as determined by two leading investment banks (one chosen by Elektrim and one by Law Debenture Trust, as Trustee for the bondholders).

High Court decision

The judge held that Elektrim was in breach of the relevant condition and was liable to pay damages assessed by reference to the lost chance of what the bondholders might have received by way of a contingent payment, had the contractual machinery been operated and investment banks been appointed to conduct the relevant valuation. He awarded damages of close to €154 million (before interest and costs) on this basis.

A key element in the valuation of Elektrim's assets, and therefore the relevant damages calculation, was the value of its shareholding in a Polish company, the ownership of which had been the subject of a long running dispute. The judge held that the approach taken by the notional investment bankers in valuing the shareholding would have depended critically on the legal advice they had received. He proceeded to make findings as to what that advice would have said and the assessment the bankers would probably have reached.

The Trustee had submitted that in considering this element of the case, the judge should: (a) calculate the value of the shareholding based on four different approaches the notional investment bankers might have adopted; (b) determine the chance of each of these eventualities occurring; (c) apply the relevant percentages and total the results. On the facts, one of the four suggested approaches would have resulted in such a large valuation figure that even a very small chance of achieving that result would have greatly increased the Trustee's damages award.

The judge did not consider that to be an appropriate method of assessing damages in the present case. The bankers' approach to the valuation would have depended critically on the legal advice received, and the judge had assessed what the sensible and appropriate notional legal advice would have been. He did not think the value of the Trustee's loss of a chance claim should be valued "by reference to the possibility that some legal adviser might have given advice which, on the view I have formed, would have been less than sensible and inappropriate".

The judge said that the situation was analogous to cases where a claim is struck out as a result of negligence on the part of defendant solicitors. In such cases, the judge said, the court normally makes a single broad assessment of the lost opportunity, assessing the legal merits for itself and allowing an appropriate discount to take account of contingencies which might have affected the prospects at trial. "It does not usually try to assess a range of different possible judgments on the legal merits which might have been given by the notional trial court, and then produce a table of probabilities in respect of the possibilities in that range and aggregate the resulting values."

Court of Appeal judgment

The Court of Appeal endorsed the judge's approach, commenting that where the court has to assess what a third party would be likely to have done, it does not necessarily follow that it has to regard the case as a "loss of a chance" case and award a percentage of damages. The court described the present case as quite different from cases that depended significantly on non-legal factors such as the outcome of a beauty contest (as in Chaplin v Hicks) or commercial negotiations (as in Allied Maples). Here the court had to assess what a banker would have concluded as to the valuation of certain shares. Where something of value has been lost, "the court must do its best to estimate that value and should not too readily decide that it is a matter of chance what the true value of something as concrete as a share is likely to be".

The court was also critical of the Trustee's submission that, in valuing a lost chance, the court should consider each possible alternative and assess the chance of each. In the court's view, such an approach is "over-complicated and no more likely to achieve an accurate (or even predicatable) result". The authorities relied upon in support of the Trustee's submission should be "approached with caution" especially in valuation cases where the permutations may be almost infinite. The court did however accept that such an approach might be appropriate where the ultimate outcome depends on further negotiations, or decisions to be reached by a number of bodies on what might not be a strictly legal basis.


Following this decision, the courts are likely to be more hesitant in approaching a commercial claim as a "loss of a chance", particularly where the loss depends on the valuation of a concrete asset such as a company shareholding.

In one sense, the value of an asset always depends on the hypothetical actions of a third party – i.e. what someone would have paid for it. In some cases, what the hypothetical "someone" would have paid is obvious, eg. a cargo of sugar with an accepted market value, or a shareholding in a listed company. In other cases, the value is more difficult to assess and may (as here) depend on the operation of particular contractual machinery. However, as the Court of Appeal commented in this case, the court must still do its best to estimate that value rather than deciding it is "a matter of chance".

The judgment leaves open the possibility of valuing a commercial claim on a "loss of a chance" basis in an appropriate case, but the bounds of what might be an appropriate case are by no means clear following this case.

Further, where the court decides that a "loss of a chance" approach is appropriate, this decision is likely to mean that the courts will think twice before taking into account numerous possible outcomes and valuing the chance of each, unless that approach seems clearly justified on the facts. On the court's reasoning in this case, such an approach is unlikely to be justified (inter alia) where the outcomes are dependent on legal factors, on which the court can reach a fairly clear view.

The question of whether a "loss of a chance" approach favours claimant or defendant varies depending on the facts of a particular case. However, it can sometimes (as in this case) be used by claimants to argue for a very large damages award based on a relatively small chance of achieving an extreme result. This judgment is likely to have the effect of reigning in such claims.