Court of Appeal considers when court can use hindsight in assessing damages for "loss of a chance"

The Court of Appeal has considered the proper approach to awarding damages for the loss of a chance where a claimant has been deprived of a claim in litigation because of its lawyers’ negligence. It held that when courts value a lost chance, they should only exceptionally take into account evidence that would not and could not have been available at the notional trial date: Edwards v Hugh James Ford Simey, a Firm [2018] EWCA Civ 1299.

There has been some uncertainty as to the proper approach to this question. Comments in some previous cases arguably suggested that such evidence should ordinarily be taken into account in valuing the lost chance, to ensure that a claimant is not over- or under-compensated (see for example, Dudarec v Andrews [2006] EWCA Civ 256, considered in our blog post here).

In the present case, the Court of Appeal does not seek to establish a precise threshold as to when such evidence may be taken into account, but it clearly considers that a high threshold is needed. This threshold will be met where the original claim was based on fraud, or where there is a "significant or serious scale to the consequences of the supervening event" such that not taking into account that evidence would result in injustice.

Alex Sharples, a senior associate in our disputes team, outlines the decision below.

Background

The claimant, Mrs Edwards, pursued a professional negligence claim against the defendant firm of solicitors on behalf of her father's estate.

The defendant had represented the claimant’s deceased father in bringing a claim under a government scheme to compensate former miners suffering from Vibration White Finger (VWF). The deceased had accepted a settlement of £9,478 based on a standard letter of advice received from the defendant. He subsequently learned that there may have been deficiencies in the advice he was given and brought a claim against the defendant in the County Court seeking damages for professional negligence.

The County Court found that the letter of advice had several faults and that, but for these faults, the deceased would not have accepted the settlement. These findings were unchallenged on appeal. However, the County Court also concluded that the deceased's claim had no chance of success. This was on the basis that a report of a joint expert instructed for the purposes of the professional negligence action showed that, when the deceased had made his original claim for compensation, his VWF was insufficiently severe to support a claim even for the amount received in settlement. Causation of loss was thus not established.

Mrs Edwards appealed on the basis that the court should not have taken such evidence into account. Not only was it unavailable when her father accepted the settlement, such evidence would not have been created for the purposes of the original claim, given the requirements for applying to the VWF compensation scheme.

Decision

The Court of Appeal gave judgment in favour of Mrs Edwards, overturning the County Court’s decision and remitting the case for rehearing.

Irwin LJ (who gave the leading judgment, with which Singh and Underhill LJJ agreed) considered the case law in detail. Concluding that the "existing authority…has its difficulties", he said it was helpful to begin with first principles. As in any claim in tort, those who have suffered losses from professional negligence are entitled, so far as possible, to be put back in the position they would have been in, absent the negligence. This is the principle of full compensation, or restitutio in integrum.

Where lawyers' negligence has deprived a claimant of its claim – whether because it was not brought at all, or was abandoned, lost or under-settled – the measure of loss is the difference between what the claimant received and what it would have received absent the negligence. For these purposes, it is the value of the lost claim that needs to be assessed, Irwin LJ emphasised; there should not be a trial of the original claim as at the time of the negligence action.

Irwin LJ noted that in a number of cases, including Dudarec v Andrews (referred to above), when valuing the lost chance the courts took into account evidence that was not available at the notional trial date. However, those cases could be distinguished because the evidence in question would and should have been available at the notional trial date, had the litigation been competently conducted. They were not authority that the court should always take such evidence into account, or that the court should simply seek to determine the strength of the underlying claim as at the date of the professional negligence trial.

Irwin LJ recognised that public policy sets some limits to the principle of full compensation. He noted that there is no established threshold for when an event which could not and would not have been known at the notional trial date should alter the outcome of the professional negligence action. However, such cases should be exceptional. This would be the case where the original claim was based on fraud or where the event has such significant or serious consequences that to ignore it would result in injustice.

This threshold was not met in the present case; no fraud was proved and even with the fresh evidence the matter was not clear beyond doubt. Accordingly, the County Court had been wrong to decide, based on evidence that would not and could not have been available for the original claim, that the lost chance was valueless.

Note: The Supreme Court has dismissed an appeal against the Court of Appeal’s decision in this case: https://www.bailii.org/uk/cases/UKSC/2019/54.html. It did not, however, consider it necessary to express a concluded view on the question of whether, in awarding damages for professional negligence, the court can take into account evidence relating to the value of the original claim which would not have been available at the notional trial date. That was because what the claimant had lost was not a claim in conventional civil litigation, but rather the value of his claim under a government compensation scheme aimed at dealing with huge numbers of claims in a way that was “broadly fair”. Recoverability under the scheme did not depend on entitlement at common law nor did it correspond with what might have been the outcome in conventional civil proceedings. The further evidence the defendant wished to rely on, therefore, was “simply not relevant when constructing the counterfactual situation which would have arisen” if the solicitors had not been negligent.