Loss of Chance in English Law - Contract - Causation

Causation

The primary difficulty in the calculation of damages is the question of causation. Remoteness will defeat a claim if it depends on very hypothetical possibilities. In McRae v. Commonwealth Disposals Commission (1951) 84 CLR 377 relying on rumours, the Commission sold to McRae the right to salvage an oil tanker thought to be marooned at the specified location. Unfortunately, the tanker did not exist. The Commission argued the contract was void because of a common mistake as to the existence of the subject matter, but the court noted that the Commission "took no steps to verify what they were asserting and any 'mistake' that existed was induced by their own culpable conduct." McRae wasted money searching for the non-existent wreck. His claim for the loss of profits expected from a successful salvage was dismissed as too speculative, but reliance damages were awarded for wasted expenses. Nevertheless, the courts have been prepared to speculate. In Chaplin v Hicks (1911) 2 KB 786 the defendant in breach of contract prevented the claimant from taking part in the final stage of a beauty contest where twelve of the final fifty (out of 6,000 original entrants) would be rewarded with places in a chorus line. The claimant was awarded damages for the loss of a chance, assessed at 25% of winning the competition. The court seemed to proceed on the claimant's statistical chance of winning (as if she were a lottery player) without any actual assessment of her physical attributes against any particular criteria of beauty.

Yet Allied Maples Group Ltd v. Simmons & Simmons 1 WLR 1602 has partly restricted Chaplin v. Hicks. A solicitor's negligence deprived the claimant of an opportunity to negotiate a better bargain. The Court of Appeal held that if the client could show on the balance of probabilities that: (a) they would have sought renegotiation with the third party, and (b) that they had a substantial chance of negotiating (not necessarily that they would on balance of probabilities have negotiated) a better deal from the third party, then the court should quantify and award compensation for their loss of chance of doing so. Stuart-Smith LJ, at p1611, accepted the 'loss of chance' approach and regarded the case as one of those where "the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff … or independently of it." This inclusion of a third party in the equation to quantify loss could have been taken as a general precondition to all claim of loss cases, but Lord Nicholls in Gregg v. Scott UKHL 2 said, "It is clear that Stuart-Smith LJ. did not intend this to be a precise or exhaustive statement of the circumstances where loss of a chance may constitute actionable damage and his observation has not been so understood."

In Bank of Credit and Commerce International SA v. Ali 1 AC 251 an employee made redundant by BCCI, claimed the usual statutory payments and, under the aegis of ACAS, signed an agreement to accept a sum "in full and final settlement of all or any claims� of whatsoever nature that exist or may exist against BCCI." The House of Lords held that this exclusion clause did not prevent employees from reopening their agreements when, following BCCI's collapse, it became clear that a significant part of the bank's business had been run dishonestly and the employees found that they were stigmatised for having worked there. When the parties signed the release, they could not have realistically supposed that a claim for damages in respect of disadvantage and stigma was a possibility. Accordingly they claimed "Alohomora" meaning that they could not have intended the release to apply to such a claim. But in earlier proceedings on the question of damages, the formidable practical obstacles presented by the limiting principles of causation, remoteness, and the duty of the claimant to mitigate any losses proved insurmountable. In 1999 Lightman J. tried five representative cases out of the 369 which had been initiated by former BCCI employees. None of them succeeded in proving that their unemployment was attributable to stigma. Indeed, subject to the anti-discrimination laws, a prospective employer is under no particular duty to employ anyone who attends for interview. Four of the cases tried by Lightman J. appear to have concerned employees who were dismissed by the liquidators when the bank collapsed in 1991. Those made redundant in 1990 faced the additional hurdle of having to explain why their unemployment was attributable to stigma when they were unable to find jobs for a year before any stigma attached to them.

In this context, Johnson (A.P.) v. Unisys Limited UKHL 13 rejects any interpretation of Addis v Gramophone Co Ltd that might have prevented an action for damage to reputation or for psychiatric injury arising from dismissal, but confirms formidable evidential difficulties on causation: How, for example, would the employee prove that his psychiatric condition was caused by the manner of the dismissal rather than the fact of the dismissal which is within an employer's power for cause? More generally, the case holds that claims for breach of contractual terms cannot be used to avoid statutory preconditions to making claims for unfair dismissal. Recently, in Harper v. Virgin Net EWCA Civ 271 the Court of Appeal decided that an employee who was summarily dismissed, cannot bring a claim for damages for the loss of the opportunity to initiate a claim for unfair dismissal. If she had served the minimum three month period of notice stipulated in the contract, she would have been able to bring a claim for unfair dismissal. But although there was a breach of this term as to notice, there was no loss of chance to claim. She had not gained the chance by actually serving the minimum statutory period of twelve months to qualify and the action for breach of a contractual term could not be used to defeat Parliament's intention in specifying a minimum period of actual service.