Lost Chance' Theory Gains Ground

by Jerome M. Staller, Ph.D.

The "lost chance" theory of recovery is steadily gaining ground in medical malpractice cases
involving reduced life expectancy or increased risk of future harm, and also in employment
matters.

Under the lost-chance theory, a claimant’s recovery is limited by the odds or likelihood that an
event would have occurred but for the defendant's actions, or will occur in the future. For
example, if it is shown that there is a 20 percent chance that the plaintiff will suffer future
harm, the plaintiff would be awarded 20 percent of what he or she would have been awarded
had he or she sustained the injury. This is a departure from the traditional "all-or-nothing" rule
of recovery, whereby a claimant receives the full measure of damages if -- but only if -- the
injury is reasonably certain. Here are some recent medical-malpractice opinions interpreting
the lost-chance argument:

Dillon v. Evanston Hospital, 199 Ill. 2d 483, 771 N.E. 2d 357, 264 Ill. Dec. 653 (May 23, 2002), a
medical-malpractice action concerning, inter alia, jury instruction. The Illinois Supreme Court
reversed a jury verdict in favor of the plaintiff in a medical malpractice action because the
instruction "fails to instruct the jury on several important legal requirements, e.g., the increased
risk must be based on evidence and not speculation, and, more importantly, the size of the
award must reflect the probability of occurrence." While there may be a less-than-even chance
that a future injury would occur, the court held, there is a reasonable degree of certainty that
the defendants' negligence increased the plaintiff's risk, and the plaintiff is entitled to damages
for that increased risk "...as measured by multiplying the total compensation to which the
plaintiff would be entitled if the harm in question were certain to occur by the proven
probability that the harm in question will in fact occur."

Lord v. Lovett, 146 N.H. 232 (2001). The New Hampshire Supreme Court held that damages for
lost opportunity are recoverable and should be assessed using the "proportional" approach, as
opposed the "all-or-nothing" preponderance standard. Addressing the defendant's contention
that lost-chance damages should be denied because they are intangible and not amenable to
damages calculation, the court wrote: "First, we fail to see the logic in denying an injured
plaintiff recovery against a physician for lost opportunity of a better outcome on the basis that
the alleged injury is too difficult to calculate.... Loss of opportunity is not inherently
unquantifiable.... This can be done through expert testimony just as it is in aggravation of
preexisting injury cases." (The New Hampshire legislature subsequently overruled Lord v. Lovett
on the grounds that it expanded recovery in medical malpractice actions.)

Humpal v. Iowa Physicians Clinic Foundation, Supreme Court of Iowa No. 29 / 0-1858 (Oct. 8,
2003). The question was whether the decedent's estate could recover for both wrongful death
damages and for lost-chance damages.
The decedent was age 73 when she died of complications stemming from a misdiagnosis. The
trial court denied a claim for loss of accumulation to the estate, on the grounds of insufficient
evidence, but allowed the claims for burial-expense interest, pre-death pain and suffering, pre-
death "loss of full mind and body," and lost chance of survival. The defense asked for new trial,
claiming that the verdict impermissibly contained both "all or nothing" damages and lost
chance damages. The Iowa Supreme court held that "one seeking to recover these damages
may also recover pre-death damages under our survival statute, but those damages are not
attributable to a decedent's death because they may be recovered in instances where death
has not occurred. Pre-death damages, if proximately caused by the defendant's negligence, are
recoverable in full." Both claims can be made in one case, the court held because "the trier of
fact might fail to find on the evidence that a negligent act was the proximate cause of...death,
yet believe that the negligence deprived the patient of a chance to survive." However, if both a
traditional wrongful-death claim and lost-chance-of-survival claim are submitted, the trier of
fact must choose between lost-chance damages or traditional wrongful-death damages.

The lost-chance theory is gaining acceptance not only in medical-malpractice matters, but also
as a remedy in employment litigation.

Doll v. Brown, 75 F.3d 1200, 1206-07 (7th Cir. 1996) offers a discussion of the use of lost-chance
theory in the employment context, stating "it [the lost chance theory] strikes us as peculiarly
appropriate in employment cases" involving competition for a job. The court explained:

In such a case the plaintiff's chances are inherently uncertain because of the competitive
setting. Suppose there were five applicants for one job, the employer discriminated against
four, all four were equally well qualified, and the fifth got the job. Would all four of the
discriminated-against applicants be entitled to back pay, one to the job, and the other three to
front pay? Obviously not....

It would be hard to pick a number that would reliably estimate the probability of [the plaintiff's]
receiving the promotion but for discrimination. Would it be 5 percent? 10 percent? 40 percent?
Who knows? Yet no less uncertainty attends the efforts of triers of fact to fix the percentage of
a plaintiff's negligence in a tort case governed, as most tort cases are today, by the rule of
comparative negligence. See, e.g., Wassell v. Adams, 865 F.2d 849 (7th Cir. 1989), upholding an
allocation of 97 percent of the fault to the plaintiff. If the uncertainty is bearable there, why not
in an employment case?

(Id. at 1206-07)

In Bishop v. Gainer, 272 F.3d 1009, 1015-16 (7th Cir. 2001), the Seventh Circuit did adopt the
rule that percentage-based damages reductions should be applied when a group of plaintiffs
allege that they were denied positions for which the number of applicants exceeded the
available jobs.
In Bishop, a number of plaintiffs applied for, but were refused, promotions. Each applicant
contended that he was denied the promotion because of his race and/or sex. In vying for the
promotions, each plaintiff competed against each other as well as against the successful
applicants. The court, noting that not all plaintiffs could have received the promotions, applied
the lost-chance doctrine, calculating the plaintiffs' back pay by assessing the probability that
each plaintiff would have received the promotion. The court determined that the three
plaintiffs had, respectively, a 45%, 30% and a 15% chance of being promoted absent any
discrimination, so each received that proportion of the back pay for the position.

The plaintiffs in Bishop objected to the judge's calculations, contending that each was entitled
to the full amount of the recovery. In approving the lower court's reduction of back pay and
front-pay damages using the lost-chance doctrine, the Seventh Circuit stated that, in light of the
facts of this case, "a full award to each candidate in [this] situation would not be simply wrong,
it would be obvious

Loss of chance in English law

Loss of chance in English law refers to a particular problem of causation, which arises in tort
and contract. The law is invited to assess hypothetical outcomes, either affecting the claimant
or a third party, where the defendant's breach ofcontract or of the duty of care for the
purposes of negligence deprived the claimant of the opportunity to obtain a benefit and/or
avoid a loss. For these purposes, the remedy of damages is normally intended to compensate
for the claimant's loss of expectation (alternative rationales include restitution and reliance).
The general rule is that while a loss of chance is compensable when the chance was something
promised on a contract[1] it is not generally so in the law of tort, where most cases thus far have
been concerned with medical negligence in the public health system.
CONTRACT
Remedies
In contract cases, the court is usually interested in securing the performance of what was
agreed. Where one party is about to or has suffered loss as a result of the other's breach, the
court offers practical protection to his or her expectations as to performance (in some cases,
the use of injunction or specific performance may be appropriate). Where a party proves that
he or she has sustained loss flowing from any breach (potentially including non-pecuniary or
intangible losses, e.g. for disappointment, damage to reputation, etc.), the purpose of damages
is, so far as money can do it, to place the claimant in the same situation as if the contract had
been performed. Thus, the most relevant basis upon which to calculate any loss is to examine
the economic potential of the contract as worded. This will provide a measure of what the
claimant expected to gain, and so quantify what has been lost by the breach.
Public policy
As a matter of public policy, the law aims to respect the reasonable expectations of all parties
involved in the dispute. The fundamental approach is therefore to uphold the validity of the
contract wherever possible. Thus, there is no general protection offered to those who find they
have entered into a bad bargain. All must accept the real outcomes of agreements entered into
voluntarily (see freedom of contract). Even when there is a breach, the court will not penalise
the "guilty" party (see Addis v Gramophone Co Ltd [1909] AC 488 which prevents the award of
punitive or exemplary damages in a purely contractual action), nor will it strip away all profits
made at the expense of the other unless the breach is exceptional as inAttorney General v
Blake [2000] 3 WLR 635 which appears to create a wholly novel form of contractual remedy,
namely the restitutionary remedy of an account of profits for breach of contract where the
normal remedies are inadequate. The standard remedy is damages which are usually calculated
by reference to the claimant only and do not reflect any form of penalty on the other(s) for
exploiting the gullibility or innocence of the claimant. The law also recognises that unfairness
may flow from inequality in bargaining power and addresses oppressive exemption clauses.
Causation
The primary difficulty in the calculation of damages is the question
of causation. Remoteness will defeat a claim if it depends on very hypothetical possibilities.
In McRae v. Commonwealth Disposals Commission (1951) 84 CLR 377 relying on rumours, the
Commission sold to McRae the right to salvage an oil tanker thought to be marooned at the
specified location. Unfortunately, the tanker did not exist. The Commission argued the contract
was void because of a common mistake as to the existence of the subject matter, but the court
noted that the Commission "took no steps to verify what they were asserting and any 'mistake'
that existed was induced by their own culpable conduct." McRae wasted money searching for
the non-existent wreck. His claim for the loss of profits expected from a successful salvage was
dismissed as too speculative, but reliance damages were awarded for wasted expenses.
Nevertheless, the courts have been prepared to speculate. In Chaplin v Hicks (1911) 2 KB 786
the defendant in breach of contract prevented the claimant from taking part in the final stage
of a beauty contest where twelve of the final fifty (out of 6,000 original entrants) would be
rewarded with places in a chorus line. The claimant was awarded damages for the loss of a
chance, assessed at 25% of winning the competition. The court seemed to proceed on the
claimant's statistical chance of winning (as if she were a lottery player) without any actual
assessment of her physical attributes against any particular criteria of beauty.
Yet Allied Maples Group Ltd v. Simmons & Simmons [1995] 1 WLR 1602 has partly
restricted Chaplin v. Hicks. A solicitor's negligence deprived the claimant of an opportunity to
negotiate a better bargain. The Court of Appeal held that if the client could show on
the balance of probabilitiesthat: (a) they would have sought renegotiation with the third party,
and (b) that they had a substantial chance of negotiating (not necessarily that they would on
balance of probabilities have negotiated) a better deal from the third party, then the court
should quantify and award compensation for their loss of chance of doing so. Stuart-Smith LJ, at
p1611, accepted the 'loss of chance' approach and regarded the case as one of those where
"the plaintiff's loss depends on the hypothetical action of a third party, either in addition to
action by the plaintiff … or independently of it." This inclusion of a third party in the equation to
quantify loss could have been taken as a general precondition to all claim of loss cases, but Lord
Nicholls in Gregg v. Scott [2005] UKHL 2 said, "It is clear that Stuart-Smith LJ. did not intend this
to be a precise or exhaustive statement of the circumstances where loss of a chance may
constitute actionable damage and his observation has not been so understood."
In Bank of Credit and Commerce International SA v. Ali [2002] 1 AC 251 an employee made
redundant by BCCI, claimed the usual statutory payments and, under the aegis of ACAS, signed
an agreement to accept a sum "in full and final settlement of all or any claims� of whatsoever
nature that exist or may exist against BCCI." The House of Lords held that this exclusion clause
did not prevent employees from reopening their agreements when, following BCCI's collapse, it
became clear that a significant part of the bank's business had been run dishonestly and the
employees found that they were stigmatised for having worked there. When the parties signed
the release, they could not have realistically supposed that a claim for damages in respect of
disadvantage and stigma was a possibility. Accordingly they claimed "Alohomora" meaning that
they could not have intended the release to apply to such a claim. But in earlier proceedings on
the question of damages, the formidable practical obstacles presented by the limiting principles
of causation, remoteness, and the duty of the claimant to mitigate any losses proved
insurmountable. In 1999 Lightman J. tried five representative cases out of the 369 which had
been initiated by former BCCI employees. None of them succeeded in proving that their
unemployment was attributable to stigma. Indeed, subject to the anti-discrimination laws, a
prospective employer is under no particular duty to employ anyone who attends for interview.
Four of the cases tried by Lightman J. appear to have concerned employees who were
dismissed by the liquidators when the bank collapsed in 1991. Those made redundant in 1990
faced the additional hurdle of having to explain why their unemployment was attributable to
stigma when they were unable to find jobs for a year before any stigma attached to them.
In this context, Johnson (A.P.) v. Unisys Limited [2001] UKHL 13 rejects any interpretation
of Addis v Gramophone Co Ltd that might have prevented an action for damage to reputation or
for psychiatric injury arising from dismissal, but confirms formidable evidential difficulties on
causation: How, for example, would the employee prove that his psychiatric condition was
caused by the manner of the dismissal rather than the fact of the dismissal which is within an
employer's power for cause? More generally, the case holds that claims for breach of
contractual terms cannot be used to avoid statutory preconditions to making claims for unfair
dismissal. Recently, in Harper v. Virgin Net [2004] EWCA Civ 271 the Court of Appeal decided
that an employee who was summarily dismissed, cannot bring a claim for damages for the loss
of the opportunity to initiate a claim for unfair dismissal. If she had served the minimum three
month period of notice stipulated in the contract, she would have been able to bring a claim for
unfair dismissal. But although there was a breach of this term as to notice, there was no loss of
chance to claim. She had not gained the chance by actually serving the minimum statutory
period of twelve months to qualify and the action for breach of a contractual term could not be
used to defeat Parliament's intention in specifying a minimum period of actual service.
NEGLIGENCE
While the award of damages in tort may protect pre-existing expectations (e.g. of earning
capacity or of business profits), a claimant cannot be seen to benefit from the breach of the
duty of care. The measure of damages is therefore to ensure that the claimant is "no worse off"
having suffered the breach of the duty of care. In each case, the claimant must prove the cause
of action on the balance of probabilities. For these purposes, the court is required to speculate
on what would have happened had there been no negligence. In many cases, loss and damage
might have been sustained even if all had gone as planned. But there might always have been a
chance that no long-term loss and damage would occur. For example, a person may attend a
hospital with an existing injury. The only effect of any negligence in the treatment may be that
the patient loses the chance of a full recovery, i.e. what was merely threatened becomes
inevitable. Thus, actions by claimants whose chances of recovery from illness or injury have
been reduced due to the professional negligence of their doctors have failed when they could
not establish that, with proper treatment, their chances of recovery would have exceeded 50%.
In Gregg v Scott [2005] UKHL 2; [2005] 2 WLR 268 a man whose chances of surviving non-
Hodgkins Lymphoma for ten years were reduced from 42% to 25% by a delay in diagnosis could
not claim damages because his chances were already too slim for the delay to have worsened
his position. This was complicated by the fact that the case was brought before the court
following an extended delay at which point the plaintiff was still alive. In judgement this was
cited as a significant weakness in his claim. The principle is that a claimant must have had a
more than 50% chance of survival to establish causation in order to satisfy the balance of
probability test. However, in some Australian states, claims for loss of chance have been
succeeded in medical negligence cases: e.g. Rufo v Hosking(2004) NSWCA 391. Their approach
argues that a patient would rather have a 42 % than a 25 % chance of survival. If negligence
reduces the percentage, common sense justice rejects a black-and-white approach to accepting
or rejecting a claim based on an expert's opinion as to whether there was ever a 50% chance of
survival, and prefers to offer mitigated damages to represent the loss of chance.
In cases of economic loss, the rule that a claimant cannot normally recover for a lost chance is
modified. In Kitchen v. Royal Airforce Association [1958] 2 All ER 241 a solicitor failed to issue a
writ within the period of limitation in respect of a fatal accident. The surviving spouse sued for
damages as she was unable to pursue her claim. There was no doubt that the loss was caused
by the solicitors’ negligence and the only argument related to quantification of her claim.
Although it was argued on behalf of the solicitors that the claimant might not have won her
case, and may therefore have lost nothing, the court held that she had lost a chance and, as this
was a valuable right, she should be compensated for it. Similarly, in Stovold v. Barlows (1996)
PNLR 91 a solicitor acting for a vendor failed to use the appropriate system for sending the title
deeds to a purchaser. Consequently, the claimant lost his chance to sell the property at a higher
price. But damages were reduced by 50% as the court held that the purchaser might have
bought another property even if the documents had arrived on time. In First Interstate Bank of
California v Cohen Arnold & Co. (1996) PNLR 17 the claimant bank had loaned money to a client
of the defendant accountants who negligently overstated the net worth of their clients. The
bank then became concerned about the amount of the loan outstanding but, relying on the
representations made by the defendant accountants, the bank delayed in calling in the loan. As
a result of the delay in placing the property on the market, the price obtained was £1.45 million
whereas the bank contended that it could have realised £3 million in an earlier sale. The Court
of Appeal valued the chance at 66.66% on the assumption that “but for” the negligence, the
property would actually have been sold for 66.66% of £3 million.
In commercial cases, damages are assessed not on the outcome which the claimant would have
sought, but on the economic opportunity which he has lost. The claimant must prove on the
balance of probabilities that he or she would have taken action to obtain the relevant benefit or
avoid the relevant risk. Once this has been established, the claimant need only show that the
chance which he or she has lost was real or substantial. In Coudert Brothers v. Normans Bay Ltd.
(formerly Illingworth, Morris Ltd.) [2004] EWCA Civ 215 the court reviewed two earlier
authorities:Allied Maples Group Ltd v Simmons & Simmons and Equitable Life Assurance Society
v Ernst & Young (2003) EWCA Civ 1114. The claimant, Normans Bay Ltd. was advised by Coudert
Brothers in a tender for 49% of the shares in a Russian company, Bolshevichka, in 1993, but the
investment was lost. NBL claimed that, "but for" Coudert's negligence, the tender would have
survived. At first instance, Buckley J assessed that chance of survival at 70%. The prior cases
establish that loss of chance claims require proof on the balance of probabilities that:

1. the claimant would have sought to secure the advantage which is the subject matter of
the claim for valuation.
2. where the claim depends on the hypothetical acts of a third party, e.g. whether the
panel of a beauty contest would have awarded a prize to the claimant, the claimant has
lost a real or substantial chance as opposed to a speculative or fanciful chance.
If both of these are proved, the court must assess that chance lost. If the chance was low, the
court will award a low percentage of the value of the chance in damages; if the chance had a
high probability of success, a high percentage will be awarded. On appeal the award was
reduced to 40%. The court also dismissed Coudert's argument that its own negligence had
broken the chain of causation because, to allow such an argument, would be to allow a party to
benefit from their own unlawful act.

Certainty and Loss of a Chance in the Assessment of Damages (Or The

Uncertainty: Loss of Chance)

Speakers Samuel Townend

CERTAINTY OR THE LACK OF IT

1. Certainty in this context is the extent to which it is possible to identify with precision
and accuracy the loss or damage suffered and the exact extent it sounds in damages.
Certainty frequently raises its head in the cases that we deal with. It is an unusual case
indeed where it can be said and demonstrated with absolute precision the loss incurred
by the Claimant. Most claims contain both liquidated and unliquidated losses and there
are greater and lesser degrees of certainty in the claims made.
2. The first point to note is that, of course, the burden of proof falls upon the Claimant. In
relation to questions of liability, causation and the fact of loss the Claimant must prove
these matters were more likely than not to have happened and, once accepted, they are
 taken as having happened. Conceptually it is only after these hurdles have been jumped
that the question as to the assessment of damages arises. In practice, however,
questions of scope of duty, causation and the fact of loss may be integral parts to the
assessment process.
3. The assessment of damages, once the fact of damage is proven, is in a different category
as the starting point is that the Claimant is entitled to recovery. As Vaughan Williams
L.J. in Chaplin v Hicks [1911] 2 K.B., the seminal case on the doctrine of loss of a chance,
has said (at 792):

“The fact that damages cannot be assessed with certainty does not relieve the
wrongdoer of the necessity of paying damages.”
4. Just because it is not possible to ascertain damages precisely, so long as the Claimant
does his best then that is sufficient. What constitutes “his best” forms the ground for
debate in litigation, but the principle is clear. Bowen L.J. in Ratcliffe v Evans [1892] 2
Q.B. 524 CA, at 532-533 contains a guiding statement of the position:

“In all actions accordingly on the case where the damage actually done is the gist of the
action, the character of the acts themselves which produce the damage, and the
circumstances under which these acts are done, must regulate the degree of certainty
and particularity with which the damage done ought to be stated and proved. As much
certainty and particularity must be insisted on, both in pleading and proof of damage, as
is reasonable, having regard to the circumstances and to the nature of the acts
themselves by which the damage is done. To insist upon less would be to relax old and
intelligible principles. To insist upon more would be the vainest pedantry.”
5. Though this is a rather old-fashioned statement the same principles apply now as ever
before. The emphasis on particularity and proof plays a major part in modern litigation:
The TCC and the Queens’ Bench Division Masters in exercising their case management
powers frequently now require:

(1) Detailed pleading of quantum at the earliest stage.

(2) Early disclosure of quantum documents- whether request by request or in the form
of a “bible”.

I personally find this approach to be very useful. Depending on the nature of the case if
anything this increased emphasis on the quantum exercise ought to be encouraged. All
too often in the past there have been cases impossible of negotiation or settlement not
because questions of liability are not capable of commercial assessment at a fairly early
stage but because the position on quantum is entirely obscure to the advisers of the
parties.
6. I have chosen three recent cases briefly to take you through. Two are examples of
where the Claimant is accepted as having done its best in terms of pleading and
 evidence and the court is prepared to make an assessment and one where it is not. The
first case also demonstrates how the scope of a professional’s duty remains of huge
significance in the identification of recoverable losses and how even hypothetical
calculations of loss can be sufficient and acceptable. The further cases form a nice
contrast, showing the (perhaps blurred) limits to which the Court is prepared to go in
the absence of proof by the Claimant when it comes to assessment by particular
reference to management costs.

Scope of duty and certainty

Earl Terrace Properties Limited v Nilsson Design Limited v Charter Construction

PLC [2004] BLR 273

The Facts
7. E, a property developer, engaged N, architect, and C, contractor, to refurbish some
houses in Kensington for future sale. Water penetration in the rear basement structures
took place as a result of inadequate installation of a water membrane. This was said by
E to have caused 15 months delay to the completion of the project while remedial work
was carried out. E brought an action against the architect, N, for failure properly to
design or specify details connected with the membrane. N in turn joined C for a failure
in workmanship.
8. A substantial claim of £6m by E was calculated by reference to funds of E that were
“held” in the project for 15 months longer than they would have been had the defects in
the works not occurred. E had funded the project by way of a financial credit
agreement with another company called V. V was an ultimate parent company (at some
remove) of E and had lent money to E on various different bases, including some that
were entirely interest free. The losses claimed were not therefore calculated on the
basis of interest charges, but on “loss of use” of the funds calculated on a hypothetical
basis- the London Inter-Bank Offered Rate plus 2%. A further complication was
presented because in the 15 month delay the housing market improved substantially
such that the ultimate delayed sales were for prices far higher in value than they would
have been absent any delay. The Defendants’ case was that the Claimant has to give
credit for these gains.
9. A trial of a preliminary issue was held on the following agreed issues:

(1) Is E entitled to be compensated by applying the hypothetical interest rate?

(2) Is E obliged to give credit for the fortuitous increase in the market value of the
houses?

Loss of use calculated on a hypothetical basis

10. As to issue (1) the Judge made the following findings. Generally, no damages are
recoverable if no loss of any kind can be established. If it can be established that a party
lost the opportunity to make commercial use of the money in question but cannot
precisely quantify that loss, it is in principle acceptable for a claimant to quantify that
loss by reference to a reasonable return that it could have earned by placing the money
on deposit and then collecting a reasonable commercial rate of interest over the
relevant period of delay. Just because the calculation is theoretical, if it is the best
attempt at demonstrating the loss, then that is acceptable.

There is an analogy with the readily accepted but somewhat theoretical basis of
calculation of losses in personal injury cases by reference to actuarial tables in Kemp &
Kemp.
11. As to issue (2) the judge held that no credit is to be given for the fortuitous increase in
house prices resulting in the houses being able to be sold by the Claimant at a much
higher rate than 15 months before. The sale price is unconnected with the original
breach. Uncertainties in the housing market can usually demonstrably be shown not to
have any connection with the breach. The Judge gave two reasons for his conclusion:

(1) If there was a downward move in the housing market, the additional loss incurred
would not be within the scope of the duty of the architect/contractor and would not
ordinarily additionally be required to pay damages as a result of that change. The
vicissitudes of the housing market are outside the contemplation of the parties at the
time of contracting and outside the scope of any duty. The converse must therefore be
true for any rise in the housing market. Thornton QC:

“…the rise or fall is unconnected with the negligent act and too remote from it in
addition to being outside Nilsson’s [the architect] scope of duty.”

(2) Another reason is that the sale occurred long after the breach had occurred.
Ordinarily in defects cases damages for negligence and breach of contract are assessed
by reference to the date on which the breach of contract or duty occurred since that is
when the damage caused by the breach arose (said the Judge). Changes in the market
for houses some months later is not a loss that can be attributable to the breach.

(3) That said, Thornton QC caveated his conclusion by stating that this question of
recoverability is very fact sensitive.

Certainty and management costs

12. The Earl Terrace case demonstrates the importance of the definition of the duty owed
by the culpable professional when coming to assess damages. Of course, identification
of causation and loss are also of critical importance. Again, here one refers back to the
burden of proof. Below described are two recent cases in the context of claims for
 management costs incurred as a result of a construction professional’s breach of duty.
They demonstrate principally that the law itself remains a good degree uncertain on
questions of certainty at the margins. More particularly, they demonstrate that the
boundary where causation ends and quantification begins is at best somewhat difficult
to discern and, at worst, not governed by legal principle, but merely by the Judge’s view
of the merits of the case in point.

Phee Farrar Jones v Connaught Mason [2003] CILL 2005

13. CM, a contractor, contracted with PFJ to carry out refurbishment work for PFJ. CM
caused floods which resulted in PFJ having to move to alternative premises while the
prolonged work was completed. The costs of the alternative premises were awarded by
the court, but the question turned to whether PFJ were entitled to recover costs in
respect of wasted management time spent dealing with the floods and the aftermath.
In answering this question the Judge, HHJ Toulmin QC CMG said no, stating in terms that
if management expenses are to be claimed they must be discrete (i.e. separately
identifiable), such as by reference to overtime, or by reference to specific loss of
revenue, which otherwise would have been obtained. Evidence that the managers
spent significant time on dealing with the problems as a result of the flood was not
enough.
14. This is, I think, in stark contrast to another recent water proofing case where a more
liberal approach to the award of management time spent dealing with consequences of
a professionals’ breach of duty has been taken:

Try Build Ltd v Invicta Leisure Tennis Ltd (2000) 71 Con LR 140

15. In this case the Judge (HHJ Bowsher QC) accepted that the senior managers in question
were not paid overtime and that their costs would have been incurred in any event, but
nevertheless went on to award damages in respect of the loss of the managers time
which ought to have been devoted to his ordinary duties:

“even if the time lost was time which might have been spent looking out of the window
thinking. The value of that time lost to the company may be enormous or small, but it
can only be assessed by reason of the cost of the employee to the company.” (at 181-
182)

The Judge discounted the costs claim giving the benefit of the doubt on quantification to
the Defendants, but nevertheless made a significant award to the Claimant on this
general evidential basis.
16. My conclusion in relation to these lost management costs claim cases and more widely
where questions of certainty are present is:
 (1) In this area (as in others) there is a lack of certainty of outcome where hypothetical
or estimated claims are made.

(2) It is always worth a Claimant characterising the process of identifying damages in a

given case as a pure assessment or quantification exercise and inviting the Court to do
its best on the material provided (implicitly or expressly, if necessary, arguing that the
burden of proof has been met). Conversely it is worth a Defendant arguing in cases
where there is a lack of certainty in identifying the damages that the Claimant has yet to
prove causation.

(3) Appeal Court guidance on management costs would be useful!

THE DOCTRINE OF LOSS OF CHANCE

17. The doctrine of loss of a chance is a peculiar type of case where there is a lack of
certainty in identifying loss and damage and resulting money damages. The intellectual
and practical problems associated with this doctrine dwarf those described earlier. It is
best understood by distinguishing it:

“In determining what did happen in the past the court decides on the balance of
probabilities. Anything that is more probable than not it treats as certain. But in
assessing damages which depend upon its view as to what will happen in the future or
what would have happened in the future if something had not happened in the past, the
court must make an estimate as to what are the chances that the particular thing will or
would have happened and reflect those chances, whether they are more or less than
even, in the amount of damages which it awards.” [Mallett v McMonagle[1970] AC 166,
176 per Lord Diplock].
18. The distinction thus is between case where the assessment of damages involves analysis
of:

(1) Past Events: The Claimant is awarded all or nothing on the basis of the balance of
probabilities and for which the doctrine of loss of a chance has no application.
See Davies v Taylor[1974] A.C. 207, 212-213:

“If evidence shows a balance in favour of [something] having happened then it is proved
that it did in fact happen” [213]

Example

Amber and Brian involved in a car accident. If on the evidence there is proof on the
balance of probabilities that Amber drove into Brian’s car (Brian not being at fault at all),
Brian will receive the cost of the repairs to his car from Amber.

And those cases where the assessment of damages involves analysis of

 (2) Future Events or more usually a mix of past events and future events: A percentage
will be awarded, because the damages are based on probability or ‘chance’

Example

Amber, in fact an excellent driver, entered into a contract with Brian, Formula 2
founder, in which Brian agreed to give Amber the opportunity to be selected, after an
interview, to be a grand prix racing driver for a year. Amber received the invitation for
interview late. She missed it. Brian then refused to interview her at all thereby, the
Court held, breaching the contract. Amber claimed that due to Brian’s breach of
contract she had lost an opportunity to pursue a career in racing driving altogether and
asked the court to assess her loss.

This is a loss of a chance case as the process of assessing damages involves analysis of
the future event of the interview and the chance of Amber becoming appointed a racing
driver.
19. This example is in fact analogous to the facts in Chaplin v Hicks [1911] 2 K.B. 786, the
seminal loss of a chance case. Amber the racing driver hopeful was in fact Miss Hicks,
an early twentieth century contestant for Pop Idol and the contest was for an
engagement as an actress on the stage.

The Facts

20. An advertisement was placed by Mr Chaplin, a theatre manager and actor, in a

newspaper for applications for engagements as actresses, with photo. The photographs
were to be voted for by the readers of the paper and those with the highest votes would
be selected for interview and go forward for the chance to be selected by Mr Chaplin
himself. Miss Hicks received a high number of votes from the readers and was asked by
letter to attend for interview. She missed the interview. Mr Chaplin refused her a further
appointment for interview (which the court deemed a breach of contract). She claimed
damages from him for breach of contract for the loss of her chance of gaining an
engagement.
21. When it came to assessing what those damages should be the court of first instance
(and indeed the CA) had a get out clause in this case, namely that it was the jury who
plucked a figure out of the air without giving reasons of course and awarded it to Miss
Hicks (in this case £100).

22. The CA was solely concerned with the question of whether Miss Hicks was entitled to a
remedy for her loss of a chance in principle. Could all Miss Hicks in fact receive be
nominal damages as the loss was incapable of assessment?
23. The three members of the CA were unanimous that she could receive damages for this
loss. Vaughan Williams L.J. held that the presence of all the contingencies upon gaining
the prize meant that carrying out the calculation was “not only difficult but incapable of
being carried out with certainty or precision” [791] However, his Lordship propounded:

“I do not agree with the contention that, if certainty is impossible of attainment, the
damages for breach of contract are unassessable…I only wish to deny with emphasis
that, because precision cannot be arrived at, the jury has no function in the assessment
of damages”
24. Vaughan Williams L.J. plainly felt that to deprive Miss Hicks from any remedy for her loss
of a chance would cause unfairness, giving as his reason:

(1) In this case there is a wrongdoer, and why should he be relieved from compensating
the Claimant merely because the damages cannot be assessed with certainty [792]; and

(2) (Demonstrating that “merits” underlay the decision in this particular case) as a result
of Mr Chaplin’s breach of contract it was apparent that there may be a slur upon Miss
Hicks in her professional capacity which might result in a diminution in value of her
services as an actress when she applied for an engagement in the future [797]

Thus in this case it did not matter that there was no certainty in winning the
engagement, it was sufficient that it was proven that Miss Hicks had lost the chance of
winning altogether.
25. Lord Reid in the Davies case explained this by reference to past events and future
events:

“You can prove that a past event happened but you cannot prove that a future event
happened and I do not think that the law is so foolish as to suppose that you can. All that
you can do is to evaluate the chance. Sometimes it is virtually 100%: sometimes virtually
nil. But often it is somewhere in between. And if it is somewhere in between I do not see
much difference between a probability of 51% and one of 49%” [213]
26. This has been echoed by Lord Nicholls in the recent and important House of Lords
decision inGregg v Scott [2005] UKHL 2 (27 January 2005), a medical negligence case
which I will come on to, at paragraph 43, where he states that to make a distinction in
relation to future events would be arbitrary and that the law would be likened to a
‘proverbial ass’ if it made such distinctions. Note, however, that this is a dissenting
judgment and that there is a now settled distinction to be made between pecuniary
cases, such as Chaplin and the construction and professional negligence cases that we
are likely to be involved in, and medical negligence cases.
27. Hotson v East Berkshire Area Health Authority [1987] A.C. 750 HL is the leading case in
the personal injury field setting out the limits of the loss of a chance doctrine.

Example

Amber fell over and injured himself so seriously that she had a 75% chance of
permanently being unable to walk. The hospital failed to deal with her soon enough,
increasing her chances of permanent disability to 100%, a certainty, does Amber receive
damages for 25% loss of chance of recovery?

28. It would appear not. The House of Lords in Hotson v East Berkshire Area Health
Authority [1987] A.C. 750 used the ‘past events’ test. The injury was taken to be the
result of a past event and nothing in the future could change the state of the injury. On
the facts the delay in treating the injury at the hospital had no effect. Lord Mackay held
that the Claimant had no chance of avoiding avascular necrosis by the time of arrival at
the hospital. Before the hospital’s negligence occurred the damage was already done.
[785; see Lord Ackner at 792 “inevitable”;] This has later been interpreted as there
being “no significant uncertainty about what would have happened if treated promptly”
[Gregg v Scott Lord Nicholls at para 38].
29. Hotson set out clear blue water between the treatment by the Courts of medical
negligence cases and economic cases (a distinction I will shortly return to).

30. The next seminal case in the pecuniary loss line (as opposed to the medical negligence
cases) isAllied Maples Group v Simmons & Simmons [1995] 1 W.L.R. 1602, CA.

The Facts

This is a solicitors negligence case where C, a retailing company, instructed D, solicitors,

to act for them in the takeover of assets of a smaller retailing company. In the process
of the negotiation D gave C negligent advice about how to cater for contingent claims
concerning properties presently leased by the smaller retailing company which was
being taken over. The Court found, at first instance, that there was a real chance that
properly advised C would have negotiated with the vendor to give proper
protection/reduced purchase price and awarded damages on the loss of a chance basis.
On appeal Stuart Smith LJ gave some guidance when coming to these types of cases
laying out 3 categories where loss occurs which can be separately distinguished (1609-
1611):

(1) The positive act where the question of causation is one of historical fact. The court
has to determine on the balance of probability the breach caused the Claimant’s loss.
 Once established on the balance of probability, that fact is taken as true and the
Claimant recovers his damage in full. (Eg. first example- Amber losing her leg in road
traffic accident)

(2) The omission, for example, a failure to provide proper equipment, give proper
instructions or advice. Here the question of causation is not one of historical fact, but
on the answer to the hypothetical question, what would the Claimant have done if the
equipment had been provided or the instruction or advice given? This can only be a
matter of inference to be determined in all the circumstances. Although the question is
a hypothetical one, it is well established that the Claimant must prove on balance of
probability that he would have taken action to obtain the benefit or avoid the risk. Once
proven, he is entitled to recover in full.

(3) On Stuart-Smith LJ’s analysis the loss of a chance doctrine is of application where the
Claimant’s loss depends on the hypothetical action of a third party, either in addition to
action by the Claimant (as in the case presently under consideration) or independently
of it. In this analysis the Claimant succeeds provided that he shows that there was a
substantial chance (rather than a merely speculative one) of the third party acting so as
to confer the benefit or avoid the risk and substantial chance is then reflected in the
quantification of damages.

31. In pecuniary loss of a chance cases therefore Allied [1611] sets out a two stage test
(depending on the circumstances) [see Graham Reid ‘The Hypothetical Outcome in
Professional Negligence Claims’ (P.N. Vol 17, No. 2 129, 132) “the dual standard”]:

(1) C need only prove a substantial chance of a third party’s actions (what is
substantial?); and

(2) C must [not may] establish on a balance of probabilities what his own hypothetical
actions would have been.

32. On the question of what constitutes “substantial chance” Stuart Smith LJ went on to say
that C must show as a matter of causation that he has a real and substantial chance of
the third party acting in such a way as to benefit him as opposed to a speculative one
[Allied at 1614]; successive cases have said that the “chance ignored if merely
speculative”.
33. Allied provides at least a working checklist for practitioners in our sphere of work where
the loss is pecuniary (as opposed to the more troubled area of medical negligence).
Note, however, that subsequently Lord Nicholls in Gregg v Scott (dissent) [at 19]
rejected that Stuart Smith L.J. intended this to be a precise and exhaustive statement of
the circumstances in which loss of chance may constitute actionable damage and held
that his proposition should not be so understood.
34. Further, this test though apparently settled should be approached with a health
warning. It has been argued by Neuberger L.J. in his recent lecture to the Professional
Negligence Bar Association (9th February 2005) that he is not clear that there is any
good reason why a Claimant has to prove what his hypothetical action would have been
on the balance of probabilities, but not that of a third party. He queries whether a
Claimant is in fact is any better position to prove what he would have done than what a
third party would have done or the desirability of having essentially to rely upon what a
Claimant says he would have done. There are also, the Judge points out, practical
difficulties for a Judge in coming to these cases with the Allied test (35):

“There are also difficulties where the question turns, as it so often does, on what both
the claimant and a third party would have done – e.g. would they have agreed a
reduction in price or settled a case. Deciding what two parties would have agreed is
difficult enough: if one has to decide what one party would have agreed on the balance
of probabilities, but then assess damages by reference to the chances of what the other
party would have agreed, a judge may be placed in an almost impossible position.”

35. An example of a “hard case” in the pecuniary cases line in our field is J Sainsbury Plc v
Broadway Malyan 61 Con L.R. 31:

The Facts

C, Sainsbury, decided build and open a large supermarket. C therefore employed D, as

architect, and E as consulting engineer. Post completion an arsonist set fire to the
supermarket largely burning it down. On expert evidence it was proven that the fire had
spread quickly and into the main store area. The reason for this was that D had in
breach of contract and negligently (in designing and supervising the works) failed to
ensure that the construction of a fire compartment wall was correct. It was argued by C
that but for this negligence the fire would have been significantly contained by the fire
brigade (as the wall should have had two hours fire resistance not half an hour). D,
architect, settled with C and subsequently pursued E, consulting engineer, for a
contribution on the basis that E was:

(1) Involved in the re-design of the fire wall; and

 (2) Specifically consulted about the same and approved the construction.

[Note the architect alleged that the engineer had an equal design responsibility for the
design because it failed to observe or draw attention to an obvious defect within its own
sphere of competence. Crucially the architect claimed that the engineer owed a duty to
Sainsbury in respect of the fire resistance of structural elements]
36. Is the action and the consequent contribution proceedings a loss of chance case? D had
settled with C on the basis that it was not and paid over significant sum (over £7 million)
on the basis that if proven liable he would be liable for the whole damage. In the
contribution proceedings it was therefore argued by D that this was a type 1 Allied case
(proof of causation of a past event on the balance of probabilities) and E, seeking to
minimise their exposure argued that because of the intervention of the fire brigade it
was a type 3 loss of a chance case.
37. The architect, D, gave convincing reasons for arguing that this was a type 1 case, in
particular:

(1) Loss of a chance had no application because the defects in the wall caused the fire to
spread, and thus direct physical damage to the property; and

(2) None of the loss of chance cases were concerned with direct physical damage to
property caused by D’s negligence but were instead concerned with the possibility of
having lost the chance to obtain a benefit he might have got but for the D’s
negligence (e.g. Chaplin – engagement).
38. The engineer argued that all that had been lost was a chance of saving the main part of
the supermarket. He argued that any damages which he had to be pay should be
decreased to a percentage of the settlement figure and argued that the two questions
properly for the court were:

(1) If they had designed a competent fire wall, would the fire service have had a
significant and measurable chance to save more?; and

(2) Only if yes, then evaluate that chance.

39. HHJ Lloyd Q.C., agreeing with E held [68] that he had no doubt that this was a loss of a
chance case because of the way that Sainsbury’s argument against the architect was
put, which implicitly supposed that the fire would have been held at the wall. Thus:

(1) As a matter of causation damage to the shop would depend on the ability of the fire
brigade to contain the fire at the wall with its help.

(2) This was the hypothetical action of a third party (the fire brigade) – i.e. the argument
is that the fire brigade would have tackled the fire in such a way that the affected part of
the shop would have been saved.
 (3) The balance of probabilities approach would not be appropriate due to the
intervention of the fire brigade. This analysis was necessary as Sainsbury suffered no
loss as a result of the architect/engineer’s assumed breach until the wall was put to test
in the fire. Inevitably consideration had to be given to the intervention and abilities of
the fire brigade. A hypothetical assessment of their competence would have reduced
Sainsbury’s claim against D (had it not already settled).
40. In coming to his judgment the Judge considered whether the settlement was a
reasonable one. The court assessed the chance that the sales area would have been
saved if the wall had been designed properly was only 35% due to the evidence that the
fire would have swept around the roof and exposed the firemen in the affected area
probably leading to unacceptable risks so that any attempt to hold the fire in itself at the
wall would have been abandoned as too the affected area [71-2].
41. One view [Graham Reid in the Professional Negligence Journal Vol. 12, No. 2 (2001) at
133] is that it was incorrect for HHJ Lloyd Q.C. to base his assessment on the mere
presence of a third party’s actions in the causal path which the C would have had to
establish in order to make out its hypothetical outcome. It is certainly troubling for
anyone advising on these sorts of cases that it may be necessary to consider (as HHJ
Lloyd QC appears to have done) the locality and abilities of the local emergency services
when assessing percentage chance.
42. The difficulties in considering all “loss of a chance” cases, to my mind, come down to a
tension between principle in legal and logical analysis on the one hand and doing a
manifest unfairness to a party on the other hand. In judicial terms, those who have
feared and sought to limit the loss of a chance doctrine resist it on the basis of
consistency of legal principle and logic underpinned by a public policy argument of not
wishing to open “the floodgates of litigation”. Those who have taken sympathy with the
doctrine have fallen into another camp, approving and applying the doctrine on the
basis of practicality and fairness. This tension is reflected in the whole case history of
the doctrine and cannot be escaped. While to a degree it results in many cases
remaining open to debate and uncertainty of outcome for us acting as advisers to our
clients, on the other hand it does permit scope for imaginative and strong case
presentation and advocacy having an effect in a given case (an opportunity for solicitors
and barristers truly to earn their money!). While precedents are set and rules can be
taken and applied the precise scope and extent of the doctrine is somewhat elastic.
43. The tension between uncertainty and unfairness is displayed quite plainly in the last
case that I wish to talk about, Gregg v Scott [2005] UKHL 2 (27 January 2005). The true
contentious nature of the doctrine is captured in the judgments of both the CA and the
HL, who were split 2:1 and 3:2 respectively against the application of loss of a chance in
the case. Even the reasoning of each of their Lordships contains many differences:

The Facts
 Gregg discovered a suspicious lump. A doctor, Scott, was dismissive of it and failed to
send Gregg for any tests at all. The lump develops and whilst time runs on, Gregg’s
chance of survival depreciates significantly, critically in this case the chances of disease
free survival for ten years (on accepted expert evidence) were decreased from 42%
when Gregg first consulted the doctor, to 25% at the date of trial (at first instance).
Does Gregg receive damages for his loss of chance in surviving for longer, but for the
negligent acts and omissions of the Doctor? Is this any different to the facts ofHotson?
44. On some views this is different to Hotson. In Latham L.J.’s dissenting judgment in the CA
he distinguished the case because in Hotson the avascular necrosis was inevitable and
untreatable, whereas in Gregg at the time of the breach the tumour was treatable- the
tumour grew and the chances of successful treatment were reduced. There was
evidence that the cancer had spread by reason of the negligence of the doctor and that
was all that was necessary to found the claim in damages. The conclusion Latham LJ
reached, however, was rejected by the majority in both the CA and HL.
45. The majority [Lords Hoffman, Phillips & Baroness Hale] held that the question to be
answered was the simple one, and that as, on the balance of probabilities, Mr Gregg
was not going to survive for 10 years whether or not he had the treatment, he was
therefore not entitled to recover damages. Lord Hoffman relied on principle and
authority and the proposition that the law deals with lack of knowledge by invoking the
burden of proof [Para 79]. References were also made to the cost implications for the
NHS [Para 90] (cf minority view that this was something which had to be borne by the
NHS and was for the legislature to deal with [52-6]). Lord Phillips had concerns about
assessment in terms of percentages (i.e. the line is drawn in the sand by the balance of
probabilities and that is that) [Para 170]. He was also influenced by the fact that by the
time of the House of Lords hearing Mr Gregg was still alive! Baroness Hale looked at it
from the other end- pointing out that a claimant under an expanded loss of a chance
doctrine “with a better than evens chance would still only get a proportion of the full
value of [his] claim”.
46. The minority [Lords Nicholls & Hope] held that Mr Gregg’s chance of survival was 17%
less than it would have been and this was a real disadvantage which Mr Gregg suffered
as a result of the Doctor’s negligence. [see interesting analysis by Lord Nicholls [para
121] – the Doctor’s negligence resulted in Mr Gregg’s loss which was itself caused by a
physical injury, namely the enlargement of a tumour].
47. A distinction was thereby drawn by the majority of the Lords that you could not
compare the positions of Miss Hicks and Mr Gregg [See paras 83, 218] as Miss Hicks’
case was one of economic loss and Mr Gregg concerned physical injury. A clear
distinction made was between pecuniary cases and medical negligence cases. The
former said to be relatively straightforward to assess loss and damages, but the latter
simply too hypothetical. Intellectually this is fairly hard to accept, but plainly on policy
grounds it is supportable.
48. One rather philosophical explanation given by an academic of why the courts distinguish
between financial loss and med. neg. claims is the difference between deterministic
events, where balance of probabilities is appropriate, and indeterministic events, where
the loss of chance doctrine is appropriate [see Helen Reece, “Loss of Chances in the
Law” (1996) 56 M.L.R 188]. Reece gives the example of tossing a coin. Where the coin
is yet to be tossed, the caller does not know whether it will land heads or tails and there
is a 50% chance that he will be right in calling heads of tails. The situation is
indeterministic: there is no right answer. If the coin has already been tossed, but it is still
covered, there is still the same chance of calling correctly – 50%. However it is submitted
by Reece that the fact that no-one may know the outcome, because the coin is covered,
does not prevent there being a right answer – the coin has been tossed, the outcome is
deterministic. This is analogous to the tumour in the Gregg case and the injury in
the Hotson case. Human actions in contrast are indeterministic, Reece says, as you
cannot know how a human will act. You do not know whether Miss Hicks would win the
beauty contest (Chaplin) or whether a vendor will agree to amend the conditions of a
sale (Allied). Assessment of damages on the basis of loss of a chance is therefore
appropriate. Medical outcomes are arguably deterministic because they depend on
physical events which have already occurred, even though they may be impossible or
difficult to predict [see 40]. Proof on the balance of probabilities is therefore
appropriate.
49. Neuberger L.J. in his lecture at Inner Temple on 9 February 2005 described the Gregg
decision as a victory for legal consistency over fairness. It certainly would appear to be
‘one in the eye’ for the so-called ‘compensation culture’.
50. It is also, however, probably fair to say that the medical negligence cases pose
particularly difficult problems, putting aside questions of public policy, as thrown into
the mix are the limitations of scientific and medical knowledge, understanding and
treatment [see para 36 Gregg v Scott]. The hypothetical considerations in those cases
are only as good as the scientific and medical knowledge at that time. This, perhaps,
justifies the different treatment of pecuniary and med. neg. cases.

Conclusions
51. Having written this piece it is with some trepidation that I reach conclusions in an area
of the law that has so obviously not come to a settled view. The best I can do is to make
some general points by way of a starting point for practitioners:

(1) In each of these cases there will be a tension between principle and fairness. These
will underpin arguments of those on each side and will be what the Court is interested
in hearing. It is important to tailor the arguments accordingly.

(2) There is a distinction between pecuniary cases, where the doctrine is pretty well
established, and med. neg. cases where it certainly is not.

(3) In pecuniary cases identify whether or not the recovery sought would have been
dependent upon the hypothetical action of a third party had there been no breach. If
so, then you are or may be in “loss of a chance” territory and need to present the case
accordingly.

(4) In med. neg. cases where the negligent act caused a change in chances of recovery
by less than 50% prepare for your case to go all the way to the House of Lords!