Hargreaves & Ors v Barron Industrial Services Ltd.

Assessment of damages for loss of a chance may require a broad, evidence-based estimate rather than exact arithmetic. A judge may choose a top-down valuation where a detailed bottom-up cost analysis is unreliable, excessively refined or inconsistent with contemporaneous calculations. Fixed overheads and minor cost items need not be separately deducted where the tender’s uplift already allows for them. An asserted need for additional managerial staff must be supported by evidence. An appellate court will uphold an evaluative valuation where the judge’s method was open on the evidence and involved no material error.

Barron Industrial Services Ltd sued three former employees and business associates over the loss of a chance to obtain a two-year bus-shelter maintenance contract. The trial judge found liability, valued the contract at £47,500, assessed the lost chance at 40 per cent and awarded £19,000. The appellants did not challenge liability or the 40 per cent assessment. They challenged only the valuation, arguing that additional managerial, variable and other operating costs should have been deducted, and that the valuation was inconsistent with the profitability of a competing tender. The central issue was whether the judge’s method of valuing the hypothetical contract could stand.

Lord Justice Jonathan Parker delivered the principal judgment, with Lord Justice Brooke agreeing. The appeal was dismissed.

1. Loss-of-chance damages involve two related assessments: the value of the benefit if the chance had succeeded, and the percentage assessment of the chance itself. Both exercises may involve speculation. The assessment does not become more accurate merely because numerous uncertain calculations are undertaken.

2. The judge was entitled to reject the appellants’ detailed bottom-up cost analysis and adopt the respondent’s top-down approach. The cost-based analysis had not been used in the contemporaneous tender calculations and was undermined by the unreliability of the evidence and by inconsistencies in the appellant’s own calculations. The judge was entitled to estimate the contract’s profitability by reference to the adjusted tender figures and an assumed increase in work.

3. The evidence did not establish that an additional manager would have been required. The trial judge accepted the relevant witness’s specific denial of that need. In any event, the 25 per cent uplift in the tender was intended to cover overheads, including a proportion of managerial salaries. Other minor cost heads were likewise covered by the uplift and did not require separate deduction.

4. The alleged inconsistency arising from evidence that the competing tender would not have been profitable had no substance, since the meaning of profitability in that concession was unclear. There were therefore no good grounds to disturb the valuation of £47,500 or the resulting award of £19,000. The appellants were ordered to pay £10,000 costs of the appeal.

• Court of Appeal (Civil Division): In [2003] EWCA Civ 1038, dismissed the appeal and ordered the appellants to pay the respondent’s appeal costs.
• High Court, Birmingham District Registry: On 29 October 2002, HHJ Norris QC entered judgment for the respondent in the sum of £19,000, representing 40 per cent of the assessed value of the lost contractual opportunity.