In Whatley v Phillips3 the Privy Council ruled on the correct calculation of damages in a claim for lost opportunity, to reflect the possible outcomes of various uncertainties in the original litigation.
Whatley v Phillips
In August 1994 Mr Whatley (W) suffered an accident whilst at work. His efforts to sue the company responsible (which he owned with his wife) came to nothing because his solicitors (P) failed to issue proceedings within the relevant time limit. W therefore sued P for the lost opportunity of suing and recovering damages in respect of his accident.
The first issue was that of W’s prospects of success in his original claim on the merits. The Gibraltar Court of Appeal had found that W had an excellent case on the facts and had put his prospects of success at 100%. However, the Privy Council ruled that the Court of Appeal were in error in this respect. W would have had to face strong allegations of contributory negligence in failing to wear a hard hat on site when the accident occurred. A reduction in the 100% figure was therefore appropriate and the Privy Council substituted a figure of 70%.
The second issue concerned W’s prospects of actually recovering any money. The company concerned was wound up in November 1999 with debts of over £500k. Its accounts showed it to be a typical small building contractor with few fixed assets, little cash and modest current assets consisting of debtors and work in progress. The Privy Council accepted that W would have had very little prospect of recovering from the company itself.
Therefore the only way in which W could have made a recovery was by taking advantage of the company’s employers’ liability insurance policy with AG.
There were a number of difficulties facing W in this respect. The first was that the policy contained a condition precedent to liability that immediate notice be given to insurers of the event giving rise to the claim. However, through no fault of P, no notice was given of W’s accident until some nine months after it took place. The insurer’s representative gave evidence that this issue of late notification would have formed part of the insurer’s defence to any claim under the policy.
The second difficulty was that the company would have had to fund a claim against insurers under the policy, and it was far from clear that funds existed to put to this exercise. The company’s financial position was known to be poor.
Third, there was the fact that (as presented to the Gibraltar Court of Appeal) any recovery by the company under the insurance policy would have had to be distributed amongst all the company’s creditors, rather than being preserved for W’s benefit. However, the Privy Council’s attention was drawn to a piece of legislation which arguably ring fenced any recovery for the benefit of W, but the position was not clear.
Taking into account those uncertainties, the Privy Council assessed W’s prospects of securing a recovery at 40%. It followed that W’s overall prospects were assessed at 28% (70% x 40%).
It is often the case in lost opportunity claims, as here, that a claimant may be successful in bringing his claim and recovering damages, when his prospects of success in the original action were relatively low. This approach may be the subject of judicial review in the future.