Lloyd's Maritime and Commercial Law Quarterly
Loss of chance and the evaluation of hypotheticals in contractual claims
In the light of recent observations in Gregg v. Scott, this article assesses the legal basis for permitting recovery of damages for loss of chance in the contractual context, seeking to justify such recovery and to analyse the process and standard of proof applicable when proving loss and establishing causation in the case of a contractual claim based on one or more hypotheticals. It also considers some of the difficulties in evaluating these hypotheticals, particularly in the case of sequential or alternative multiple contingencies, and in arriving at a measure for recovery of loss of chance. Finally, it is argued that when seeking to establish liability the courts should avoid mathematical percentages which are relevant to the determination of quantum .
In a contractual claim, in addition to the need correctly to identify the nature of the loss being claimed,1 the claimant has to prove that loss2 and to establish that it was caused by the breach of contract,3 ie, that on the balance of probabilities the defendant’s breach was “an effective”4 or “dominant” cause of [the claimant’s] loss.5 In principle, the claimant is then entitled to recover in full for that loss.
However, if the loss involves the loss of a chance of securing the expectation under the contract where that loss turns upon the hypothetical actions of third parties, it is not possible to establish the existence of an “actual” loss. Nevertheless, the Court of Appeal
* Professor of Commercial Law, Centre for Legal Research, University of the West of England, Bristol. This article was delivered as a paper at the SLS Conference, University of Keele, September 2006 and the author acknowledges the helpful comments of conference delegates. She is also grateful to Kit Barker, Michael Furmston, Catharine Macmillan, Rob Merkin and an anonymous referee for helpful comments on an earlier draft. All errors or omissions remain her own.
1. Ruxley Electronics & Construction Ltd v. Forsyth  1 AC 344 and South Australia Asset Management Corp v. York Montague Ltd  AC 191, especially at 211, per Lord Hoffmann.
2. Cf Cory v. Thames Ironworks and Shipbuilding Co Ltd (1868) LR 3 QB 181.
3. Equitable Life Assurance Soc v. Ernst & Young  EWCA Civ 1114;  2 BCLC 603;  PNLR 16, , per Brooke LJ.
4. In Monarch Steamship Co Ltd v. A/B Karlshamns Oljefabriker  AC 196, 212; (1948) 82 Ll L Rep 137, 147, Lord Porter referred to the test as being whether the breach was “the effective cause” [emphasis added].
5. Galoo Ltd v. Bright Grahame Murray  1 WLR 1340, 1374, per Glidewell LJ. It can, however, be argued that there is a difference in degree between a cause which is “effective” and a cause which is “dominant or substantial”.
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