In the recent case of Tom Hoskins Plc v EMW Law the court clarified that it is still appropriate to apply loss of chance principles, even when the claimant can produce some evidence at trial to suggest how a third party would have acted.
Tom Hoskins Plc (the claimant) was a company that ran a brewery and a chain of pubs. It had found itself in financial difficulties and decided to sell off its properties. The claimant retained EMW Law (EMW) to act for it in the sale of the last of its remaining five pubs, four of which were owned leasehold, to Inn Spirit Ltd (ISL).
At trial Floyd J found that EMW had breached its duty of care to the claimant in the way it had handled the sale of the properties by:
- failing to obtain the landlord’s consent to assign in respect of the leasehold properties in time for the contract to be made unconditional; and
- allowing the contract to go forward in a form whereby the assignees could refuse to give directors’ guarantees or rent deposits.
In short, the consequence of all this was that the parties completed late, and under a second contract, but on terms relatively unfavourable to the claimant. The claimant submitted that if EMW had advised it initially about the requirement for guarantees, it would not have been put in this less advantageous position.
The claimant’s measure of loss arguments
The claimant claimed that loss of chance principles were not applicable in this case – they were able to prove, on the balance of probabilities, that had EMW advised it correctly, it would have taken a tougher negotiating stance (with respect to the guarantees). This was on the basis there was some evidence from the relevant parties that the terms more favourable to the claimant would have been agreed under the initial contract. The claimant argued that where the third party gives evidence, the court does not need to speculate about what that third party would or might have done – it is appropriate to assess the third party’s conduct on the balance of probabilities (see Stone Heritage Developments Ltd v Davis Blank Furniss).
EMW’s measure of loss arguments
EMW submitted that the claimant’s loss still depended on the hypothetical actions of third parties, and the principles laid down in Allied Maples Group Ltd v Simmons & Simmons should be applied. EMW argued:
- this was a loss of chance case and as such the judge should consider, on the balance of probabilities, how the claimant would have acted, and
- then should consider whether the claimant had shown that there was a real and substantial (as opposed to a speculative) chance that the third party would have acted so as to confer the benefit in question – namely agreeing to the contract in terms favourable to TH; and
- damages awarded should then be discounted accordingly so as to take in the chances of success.
The judge rejected the claimant’s argument. The loss alleged was the loss of a contract with different terms at an earlier date, which depended on the extent to which ISL would have been prepared to enter into that contract and at that time. Not all the evidence relevant to ISL’s decision to complete an alternative contract had been called, merely some of it. It was therefore appropriate to apply loss of chance principles. It was held that the application of loss of chance principles should depend on the nature of the loss claimed rather than on the evidence which could be called.
- The court was keen to uphold loss of chance principles if not all of the third party evidence had been called (4 Eng Ltd v Harper applied).
- A defendant needs to think carefully about whether it is advantageous to plead that a claim should rightly be for a loss of a chance – even a low percentage can result in a large award, and it may be better to argue from a balance of probabilities point if the causation evidence is compelling.
- The above case law shows that the principles laid down in Allied Maples can be relied on if there are evidential gaps as to how a third party may have behaved.