EWJ 60 April 2025 web - Journal - Page 11
and Scenario 2 were ‘true alternatives’, which could not
be combined (Main Judgment [681]).
before, the deduction of the £2.5m credit. The Court
of Appeal explained this point in two ways.
On reflection, the judge held that these claims were
cumulative. If the 60% chance of achieving Scenario 1
did not eventuate, the residual 40% chance needed to
be considered. The judge found that of that 40%
chance, there was a 32% (i.e. his original 80%) chance
of achieving the Scenario 2 outcome, and an 8% residual chance that there would have been no earlier development than actually took place. This resulted in
an additional award of £316,792.03 [110].
The first explanation [121-125] was that the two
cumulative counterfactuals applied by the judge
amounted to a 92% chance that Barrowfen would
have carried out the Amended Original Development
Scheme. There was a residual 8% chance that it would
not. It was, therefore, only right to bring 92% of the
£2.5m credit into account, and no more. This was
achieved by deducting the credit before applying the
loss of chance discount. On the 8% counterfactual: “the
breaches of duty and negligence could not be said to have
caused Barrowfen to receive any benefit, since it would have
carried out the Revised Development Scheme of its own
accord” [124].
This amount reflected the value of the 32% chance,
which was calculated as follows:
40% (the residual loss of chance) x 0.8 (the chance of
recovering under Scenario 2 based on the Administration Claim breaches) = 32%
The second explanation was based on Hartle v Laceys
[1999] Lloyd’s Rep PN 315 . Barrowfen had argued
that Leech J was bound to deduct the credit first because of this decision of the Court of Appeal. In giving
permission to appeal, Lewison LJ had considered it
indistinguishable but noted that the court had “found
the point difficult” [71]. S&B argued that there could
(now) be no doubt that Barrowfen had obtained the
benefits of the Revised Development Scheme and so
credit should be given for the entire amount.
0.32 x £989,975.09 (the total net loss figure in the
Administration Claim) = £316,792.03
The Court of Appeal’s decision
Two key points on loss of chance came before the
Court of Appeal. First, Barrowfen appealed the decision that it should give credit for the increased capital
value of the Revised Development Scheme. Second,
S&B cross-appealed, arguing that the judge should
have applied the loss of chance percentage before,
rather than after, deducting the £2.5m credit.
In Hartle, a vendor lost the chance of selling property
before a slump in the market. The proceeds of the lost
sale would have been £360,000, and the proceeds received from the actual sale were £150,000. The judge
applied the percentage chance of selling at the higher
price (60%) to the net difference between these positions (£210,000), rather than to the £360,000 followed
by a deduction of £150,000. In other words, he gave
credit for the actual benefit before applying the
discount, as Leech J did here.
Credit for Capital Value Increase, and adding
Future Financing Costs
The Court of Appeal upheld the judge’s decision to
apply the £2.5m credit to the calculation. In doing so,
the court placed particular emphasis on (1) the compensatory function of damages, and (2) the application of the principles of causation and mitigation, as
developed in the leading contract law authorities of
British Westinghouse and Fulton Shipping [76]-[86].
Snowden LJ summarised the reasoning in Hartle as
follows:
“The key to Ward LJ’s reasoning was his characterisation of
the case as one in which the negligence of the defendant caused
the claimant to lose the opportunity to get the difference between the higher price of the intended sale to the developer
and the lower price of the sale that actually took place later.”
Snowden LJ (giving the leading judgment) held that
credit should be given where the benefits were causally
connected to the breaches of duty for which damages
were awarded, or where they resulted from attempts
to mitigate loss. On the facts, both tests were satisfied.
The Defendants’ breaches of duty, Barrowfen’s losses
of rental income, its additional costs of development,
and the eventual completion of the Revised Development Scheme, formed part of the same continuous
course of events [103]. All of the losses and gains across
this period fell to be taken into account.
The point could be tested this way; if Barrowfen’s
developer’s profit had been reduced by the negligence, this would be the difference between the hoped
for profit and actual profit, with the result discounted
to reflect the possibility that it would have happened
anyway. This is true despite the fact that at trial the fact
of that loss could be regarded as a certainty since it
had eventuated. By the same token, the fact that (as
S&B argued) the benefit had actually eventuated does
not mean it was always certain to eventuate.
The Court of Appeal also agreed that future financing
costs could not be brought into account to negate this
credit. When the Revised Development Scheme was
completed in April 2021, the clock stopped. At that
point, it was open to Barrowfen to sell the development, to realise the profits from doing so, and to reinvest them elsewhere. Barrowfen had to bear the
consequences of its commercial decision not to sell,
and any losses flowing from that decision [103].
Implications
Snowden LJ’s commentary on Hartle (quoted above)
seems especially important and useful. It reminds us
that when dealing with a loss of a chance case, the aim
is to assess the loss of a chance to make a particular gain.
This highlights the fact that there are two distinct
stages to the inquiry. First, identifying the ‘gain’ which
the Claimant could have made. Second, calculating
The Loss of Chance calculation
The Court of Appeal also upheld the judge’s decision
to apply loss of chance percentages after, rather than
EXPERT WITNESS JOURNAL
9
APRIL 2025
