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Failure to provide advice: Loss of a chance

McCrindle Group Ltd v Maclay Murray & Spens
14 May 2013
Court of Session, Outer House

Facts

McCrindle Group Ltd (MGL) raised an action for damages against Maclay Murray & Spens, Solicitors (MMS) on the grounds of breach of contract and professional negligence. The litigation proceeded as a loss of chance action.

MGL had instructed MMS as its solicitors in relation to an arbitration against Haden Young Limited (HYL). During the course of the arbitration, MMS had failed to advise MGL that its entitlement to claim pre-award interest or damages in the arbitration had expired. MMS had failed to advise MGL to raise a protective court action which would have entitled them to pre-award interest and thus would have made it pointless for HYL to exclude the award of damages from the arbitration. The arbitration ran from 1992 until 2004. Given the length of the arbitration, MGL‟s entitlement to interest was roughly equal to the value of the principal claim. Parties subsequently settled the dispute extra-judicially in 2004 and, as a result, the arbiter did not require to rule on the merits of MGL‟s claims and the merits of the claims have never been fully analysed.

MGL subsequently claimed that the failures of MMS resulted in a smaller settlement sum than would otherwise have been agreed and caused MGL to lose a chance of settling the arbitration on terms considerably more favourable than those which were eventually agreed. The Proof (trial) proceeded on the issues of causation and quantum with MGL claiming the following sums as damages:

  • The difference between the settlement agreed in 2004 and what would have been achieved in May 2003 if MGL had been advised that they had no right to claim pre-award interest or damages in the arbitration;

  • Pre-award interest on the total sum that would have been achieved in a settlement with HYL if MMS had not been negligent;

  • The expenses incurred in the arbitration after the opportunity for settlement had passed; and

  • Judicial interest on those sums.

Findings

The Court held that there is a distinction between a loss of chance claim which requires valuation of the loss of an established right and a claim which requires causation to determine the loss of a benefit. The latter requires the claimant to prove, on a balance of probabilities, that negligence caused the loss of benefit. Where the alleged lost benefit depends on the hypothetical action of a third party, the claimant must show that there was a real or substantial chance that the third party could have conferred the benefit. The Court held that the present case was in the latter category, as it concerned negligent failure to advise which led to the client being deprived of information which may have been used to their economic benefit, rather than the former, which requires loss of an item of property.

After the requirements of causation have been satisfied, the assessment of damages may involve the evaluation of a chance. As the present claim was complex and based on a long-lasting arbitration, it was only possible to assess the value of the principal sum, and therefore pre-award interest, by taking a broad approach with reference to the behaviour of the parties.

The Court subsequently held that MMS‟s failings caused MGL to suffer the loss of its claim for pre-award interest (and damages) and also contributed to the failure of the negotiations to settle the arbitration on 29 May 2003, resulting in the loss of a chance of settlement. Lord Hodge valued the claims at £189,000 and £90,000 respectively. The matters of expenses (costs) and judicial interest will be dealt with at a later date.

Comment

It is clear from this case that various arguments were advanced in respect of causation and quantum but, in particular, the law on the valuation of a chance took centre stage in Lord Hodge's decision. Lord Hodge's judgment provides a very useful summary of causation and valuation in loss of a chance cases. The case concerned the admitted loss of a right and also a claim that there had been loss of a chance to achieve a better economic outcome in the past. The law generally does not allow recovery for the loss of a chance, including an economic chance, but it has long been recognised that, in certain cases, the loss of an economic chance is a recoverable head of damages. Particular reference was made to the decision of Lord Prosser in Kyle v P & J Stormonth Darling (1992) SLT 264.

Lord Hodge usefully directed parties to the matter of causation when dealing with a “loss of a chance” case. It is necessary to establish whether or not the negligence or breach ultimately caused the lost opportunity. After causation has been confirmed, the Court will then need to assess the value of the alleged loss. In valuing the loss, Lord Hodge stated that a discount should be applied to any calculation of loss of opportunity to reflect the fact that it might not have happened at all - in this case, settlement at a higher sum. It is important to note that in assessing any such discount, Lord Hodge relied heavily on the evidence of the witnesses at trial about the full circumstances around the settlement discussions and negotiations. He did not simply apply a formulaic approach.

Lord Hodge's judgment will certainly prove to be a useful resource in future professional negligence actions given the significant number of “loss of a chance” cases which are being pursued and it will be interesting to see how the judgment will be applied going forward.

The judgment

Contact

For further information, please contact Andrew McConnell, DWF Biggart Baillie on 0141 228 8034 or Catherine Hart, Professional Support Lawyer, DWF Biggart Baillie on Catherine Hart, on 0141 228 8084

By Andrew McConnell

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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