Recoverability Of Damages In Loss Of Chance Claims Against Professional Advisers

Are we now seeing the effects of a stricter test for the recoverability of damages in loss of chance claims?

This is an area of law which might be said to produce some odd results. Say a client sues its adviser for failing to raise a particular issue on the negotiation of a corporate transaction. The loss suffered would generally be calculated on loss of chance principles, based on the likelihood of the counter party to the transaction having agreed to vary the deal if the issue had been raised.

Assume the chances of a successful negotiation were only 30%. The client can sue its adviser for 30% of its losses. Yet in all likelihood even if the issue had been raised in negotiations as it should have been, the deal would not have changed.

One might say the client is better off pursuing the adviser than he would have been negotiating the issue in the first place.

The Court of Appeal in Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 decided that the applicable test for recoverability of damages where there are both contractual and tortious duties (generally the case in a claim by a client against a professional adviser) is the contractual one; that is, whether the loss was in the contemplation of the parties at the time of the contract.

The recent Court of Appeal decision in Timothy Wright v Lewis Silkin LLP [2016] EWCA Civ 1308 (21 December 2016) demonstrates helpfully how this narrowing of the application of the test can operate to limit damages flowing from a failure by a professional to provide advice to his client. It seems to us a useful decision. The Court also flagged the forthcoming Supreme Court judgment in Gabriel v Little, which may lead to a re-examination of the much-litigated SAAMCO principles.

The background

In May 2009, Lewis Silkin were engaged by Mr Wright to provide legal advice in connection with his appointment as Chief Executive of Deccan Chargers Sporting Ventures Limited ("DCSV"), a company controlling one of the teams in the Indian Premier League.

Lewis Silkin drew up Heads of Terms ("HoT") for Mr Wright's appointment with DCSV. The HoT included a guaranteed severance payment - in the event that Mr Wright's employment was terminated he was to receive the immediate payment of £10 million. The HoT were governed by English law, but did not include a jurisdiction clause.

Mr Wright was dismissed in late January 2009. DCSV failed to make the guaranteed severance payment, and on 2 February 2009 Mr Wright commenced...