A number of cases we have been dealing with lately involve claims for consequential losses. Some of these claims stem from the miss-selling of interest rate hedging products, while others have arisen in more “traditional” types of litigation.
CAN THE LOSS OF A CHANCE BE RECOVERABLE?
When putting together such claims clients will often mention that had it not been for the wrong they would have had the opportunity to do something which would have benefited their business. For instance they would have won a lucrative tender or they would have had the ability to bid for a contract. Cases involving loss of an opportunity are known as “loss of chance” cases.
In loss of chance cases the court is invited to assess hypothetical outcomes where the wrongdoer’s breach of contract or of a duty of care deprived the claimant of the opportunity to obtain a benefit or avoid a loss. The difficulty here is the very nature of a chance – the benefit was never certain and the lucrative tender mentioned above may never have been won.
THE X FACTOR
A useful and interesting example of how these losses are dealt with in practice is that of Chaplin v Hicks from 1911. The Defender, Mr Hicks, was a theatre director and a sort of Edwardian Simon Cowell. He devised an X-Factor like competition whereby he would recruit twelve aspiring actresses for his theatre company by a way of a public vote. Despite this somewhat novel format it should be said that the competition was basically a beauty contest.
The response to his competition was so overwhelming that, like the X-Factor, different auditions had to take place in different parts of the Country before contestants progressed to the national finals. Hicks initially received six thousand applications of which three hundred were picked to go to the public vote:
- The UK would be divided in to ten districts. Photos of the selected candidates for each district would be published in the local press for that district and readers would vote for their favourite candidates.
- After the voting was complete Mr Hicks would interview the top five candidates in each region.
- Mr Hicks would then recruit twelve actresses from this pool of fifty. All of whom would be offered three year contracts.
The Pursuer, Ms Chaplin, entered the competition and made it through to the interview stage. She was invited to attend an interview in London. However the invitation never reached her in time and she was unable to make the appointment. Ms Chaplin unsuccessfully tried to arrange a further appointment with Mr Hicks and he proceeded to the final round by interviewing the forty nine applicants who had made their appointments.
Ms Chaplin sued Mr Hicks for damages on the basis that as a result of Mr Hicks not allowing her an interview she had not been able to participate in the final round. As a result she had lost the chance to be awarded one of the twelve acting contracts.
The Ms Chaplin was awarded damages for the loss of a chance, assessed at 25% of winning the competition. The court proceeded on basis of Ms Chaplin’s statistical chance of winning (as if she were a lottery player who had a 50/12 chance of winning) without any actual assessment of her actual ability to win.
The general position, developed, over the course of the last one hundred years or so, would appear to be that if the Court is provided with the evidence of the likelihood of a chance, it will make an estimate of the loss on that basis. The very nature of losses of this kind being difficult to assess should not be a barrier to their recoverability.
If you have any queries arising from this article, please contact our Dispute Resolution team on 0131 226 8200.