No Chance - Court of Appeal rules not to extend 'loss of chance' to commercial valuations


In this article, we look at how the courts assess damages in 'loss of chance' cases. Michael Axe also reports on the English Court of Appeal's recent warning regarding the dangers of applying these principles to commercial valuations, which is likely to be of particular interest to valuers and surveyors.

The 'loss of chance' doctrine has evolved as a way of assessing the value of damages in cases where the claimant has lost a particular opportunity or chance as a result of the defendant's breach of contract or negligence. Damages for 'loss of chance' are, by their very nature, less precise than damages which relate to a specific sum (such as repair costs or unpaid invoices) but the Courts have established a process for calculating the value of such losses.

However, in the 2010 case of Law Debenture Trust Corp plc v Elektrim SA, the Court of Appeal provided further clarification on when it would not be appropriate to apply the 'loss of chance' doctrine. In this case, the damages to be paid to the claimant included damages for the loss of a payment that was to have been calculated based on the 'fair market value' of the defendant's assets. The key issue in calculating the 'fair market value' of the defendant's assets was how to assess the value of certain shares that it held.

The Court of Appeal confirmed that not every case where the court has to assess what a third party might have done will be treated as a 'loss of chance' case.

The Court of Appeal confirmed that in a case such as this, rather than apply the 'loss of chance' principles, the courts should do their best to estimate what a banker would have concluded the true value of the shares to be.

The decision therefore appears to draw a distinction between claims relating to a 'concrete' asset (such as a share) and those relating to more 'intangible' assets (such as a right to pursue a court claim).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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