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The Court of Appeal’s review of ‘loss of chance’

The Court of Appeal’s review of ‘loss of chance’

A defendant’s breach of contract or negligence can deprive a claimant of the opportunity to obtain a benefit and/or avoid a loss.

In some cases loss of chance claims can be speculative and therefore uncertain as the Court has difficult job of considering how a third party would have acted in such circumstances.

Polly Hill an Associate in our Commercial Dispute Resolution department considers below the recent case of McGill v The Sports and Entertainment Media Group [2016] EWCA Civ 1063  in which the Court of Appeal gave a helpful review of the authorities.

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Mr McGill, a football agent, claimed that he had entered into an oral agreement with a professional football player on 6 April 2007 to act as the player’s exclusive agent to secure a new contract in return for an agent’s fee. Pursuant to the Football Association’s regulations contracts of this nature must be in writing.

Mr McGill claimed he arranged a deal for the player to be transferred to Bolton Wanderers Football Club however, the transfer was ultimately arranged by another agent, the Defendant, The Sports and Entertainment Media Group.

Mr McGill commenced Court proceedings against the player claiming damages for breach of contract which settled for £50,000.

Three years later in 2012, Mr McGill commenced proceedings against the Defendant for the torts of inducing a breach of contract and conspiring to use unlawful means. Mr McGill claimed that the Defendant had found out about his proposed deal, that they induced the player to breach his contract with Mr McGill and the agreed transfer terms were similar to those arranged by Mr McGill for which the Defendant received an agency fee of £300,000.

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First Instance

The Court found that Mr McGill and the player had entered into an oral contract and that the Defendant had induced the player to break that contract and/or conspiracy by unlawful mean. However the Court found Mr McGill’s claim failed as he failed to prove on the balance of probabilities that, but for the Defendant’s inducement, he would have secured a written contract thereby obtaining a relevant agency fee.

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The Court of Appeal’s Decision

Mr McGill appealed alleged that the first instance analysis of causation and loss was wrong which should have been loss of a chance namely, the loss of a chance of earning a commission under a written representation agreement.

The Court allowed Mr McGill’s appeal that he had entered into a legally binding contact with the player even though it did not comply with the FA’s regulations, he was entitled to an award of damages against the Defendant for loss of a chance to earn a transfer fee and rejected the Defendant’s Jameson argument that his settlement with the player prevented him from pursuing the Defendant.

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 In Jameson v Central Electricity Generating Board [2000] 1 AC 455 the Court considered whether a claimant with separate tortious causes of action against two parties for the same damage which it settled with one of party debarred pursuing a claim against the other. The key question was whether the settlement was intended to be in full satisfaction of the tort. The House of Lords dealt with the same issue in Heaton v. AXA Equity and Law Assurance Society Plc [2002] UKHL 15 but in a contractual context where the Court held that Party A could not pursue Part C if a settlement with Party B fixed the full measure of the estimated loss.

In McGill, the Court considered whether settlement of the claim against the player had fixed the full measure of his loss and in particular the term of “full and final settlement of all claims arising out of the matters set out in the statements of case”. The Court concluded that settlement terms with the player did not fix Mr McGill’s loss as the facts and causes of action Jameson and Heaton as against the player and the Defendant differed. In Mr McGill’s case one was contractual, the other was in tort and clear language in the settlement agreement with the player was needed if it was intended to have also satisfied his claim against the Defendants. In this case there was no such language and therefore the Defendant’s Jameson argument failed.

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Loss of Chance

The Court referred to the principles laid down in the cases of Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 1602 and Wellesley Partners LLP v Withers LLP  [2016] 2 WLR 1351 that where a claimant’s loss depends on the hypothetical acts of a third party, the claimant must:

  • Prove that there was a real or substantial (rather than speculative) chance that the third party would have acted so as to confer the benefit in question. This establishes causation.
  • If causation is established, the loss is quantified by quantifying the damages by the appropriate percentage of the likelihood that the third party would have acted in this manner.

The Court applied these principles to Mr McGill and concluded that there was a real or substantial chance that, but for the interference of the Defendant, the player would have entered into a written agreement with Mr McGill. The oral agreement contemplated there would have been a compliant agreement otherwise, payment of the agency fee could never have materialised and the player was bound by an implied term to cooperate with McGill in bringing about this situation.

The Court of Appeal remitted the case back to the first instance judge to determine the appropriate percentage who had originally found on the balance of probabilities that his would not exceed 50%.

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Once a claimant has proved on the balance of probabilities that a defendant’s actions caused the claimant to lose the relevant chance, the claimant can recover damages.

Mr McGill’s damages are yet to be determined and whilst these may be modest, his success means he is unlikely to be liable for the Defendant’s costs which is a substantial gain.

The Court’s analysis of the decisions in Jameson and Heaton highlights the need to consider whether a settlement agreement with a defendant should include the release or reservation of rights against third parties. The effect will either prevent a claimant bringing separate claims against third parties relating to the same damage or stop third parties raising the argument that the settlement debars any action against it.