Coudert Brothers v Normans Bay Ltd

Where negligent professional advice deprives a claimant of a real and quantifiable chance, that chance may constitute recoverable damage even though the claimant cannot prove that the desired outcome would probably have occurred. The claimant must prove on the balance of probabilities what the claimant would have done. The hypothetical conduct of third parties is assessed by valuing any substantial, rather than speculative, chance.

A defendant cannot reduce liability by relying on a further breach of duty committed by that defendant. The value of the lost chance must reflect the improvement that proper advice would have produced, taking account of later events affecting the chance but for which the defendant was not responsible.

A firm advised an investor after its successful tender for shares in a Russian manufacturer. The tender proposed investment over five years, although the approved investment programme required three years. The Russian courts later invalidated the tender and related agreements. The investor claimed that competent advice would have led to amended agreements, regulatory approval and a valuable chance that the transaction would survive.

Buckley J found professional negligence and assessed the lost chance at 70%. The advisers appealed on the existence and curability of the defect, the applicability of loss-of-chance principles, the absence of anti-monopoly approval and compliance with privatisation voucher rules. The central issues were whether the claim was properly valued as a lost chance, whether the advisers could rely on their own separate negligence to reduce that value, and whether 70% fairly represented the chance lost.

1. Appeal allowed in part. Waller LJ, with whom Laws and Carnwath LJJ agreed subject to limited observations, upheld liability but reduced the recoverable lost chance from 70% to 40%.

2. The judge was entitled to find that the approved investment programme required three years. Authenticated copies, the contemporaneous material and the findings of the Russian courts provided powerful evidence. The unused voucher objection was also rejected: its absence from the Russian proceedings strongly indicated that it would not have caused the transaction to fail.

3. The claim was properly treated as one for loss of a chance. Under the principles in Allied Maples, a claimant must prove on the balance of probabilities what the claimant would have done following competent advice. Where the outcome also depends on hypothetical conduct by third parties, the claimant need only establish a substantial rather than speculative chance; its value is then assessed as damages. The advisers had contracted to provide a chance that the transaction would withstand challenge, and that chance was real and capable of valuation.

4. The advisers could not rely on their own negligent failure to obtain anti-monopoly permission to break the chain of causation or reduce the chance's value. Waller LJ treated this as an application of the principle that a person may not rely on that person's own wrong to secure a benefit. Laws LJ, with Carnwath LJ agreeing, also regarded causation as an evaluative judgment about the extent to which the defendant should justly be responsible. The point was properly raised in reply to the denial of causation and did not seek damages upon a separate, time-barred claim.

5. The approach in the medical loss-of-chance decisions, including Gregg v Scott [2002] EWCA Civ 1471, should not be extended to this established category of professional-negligence claim. Laws and Carnwath LJJ expressly shared that conclusion.

6. The 70% valuation was too high. The judge had improperly upgraded the chance because prosecution appeared improbable. The later hostility that caused the prosecution, and the risk that the amended transaction would nevertheless have been invalidated, reduced rather than increased its value. Comparing the chance enjoyed under the unamended transaction with the improved chance competent advice would have supplied, the court assessed the lost chance at 40%.

1. Court of Appeal (Civil Division): The appeal was allowed in part. The finding of liability was upheld, but the assessment of the lost chance was reduced from 70% to 40%: [2004] EWCA Civ 215.
2. High Court, Queen’s Bench Division: Buckley J held in judgments dated 19 February and 20 March 2003 that the advisers were negligent and liable for a lost chance, which he assessed at 70%. No citation is stated in the judgment.