Dennard & Ors v Pricewaterhousecoopers LLP

On an application for permission to appeal, a challenge to factual findings has no real prospect of success where the findings were open to the trial judge on the evidence. In assessing loss of a chance, the court must distinguish between proof, on the balance of probabilities, that a third party would have taken the relevant step and proof only of a valuable chance that it would have done so. If the step is proved, the loss is assessed as the resulting damage and is not discounted as a chance. If only a chance is proved, the court may assess that chance conventionally by reference to the evidence. Grounds which can arise only if a recoverable loss exceeds a contractual liability cap may be refused as academic where other grounds make that threshold unattainable.

Former shareholders in Ryhurst brought contractual and negligence claims against PricewaterhouseCoopers LLP concerning a valuation used in the sale of their shares. Vos J found that PwC had been negligent, assessed the competent valuation at £8.8 million, and awarded £427,000 for the lost chance of obtaining a higher sale price. He rejected the conflict-of-interest claim.

The claimants sought permission to appeal on factual findings, valuation methodology, loss-of-chance assessment, construction of a limitation clause, its reasonableness, and the conflict claim. The central issues were whether the proposed challenges had a real prospect of success and whether any remaining grounds could affect the outcome.

1. Permission refused. The proposed appeal had no real prospect of success on the challenges to the findings that a competent valuation would have been £8.8 million and that the sale would have proceeded at £5.5 million, subject at most to a higher offer. Those findings were within the range open to the judge on the evidence.
2. The judge was entitled to treat the equity-only discount as appropriate to an open-market valuation. Although Barclays owned the subordinated debt, the valuation had been requested as a proper market value and had to reflect the position of a notional purchaser other than Barclays. The negotiating team understood the discount, so the valuation was not misleading.
3. There was no inconsistency in the loss-of-chance assessment. Where a third party is proved, on the balance of probabilities, to have paid more, the resulting damage is proved and no chance discount arises: Owners of the Ship “Front Ace” v Owners of the Ship “Vicky 1” [2008] EWCA Civ 101. Here, read as a whole, the judge found only a good chance that Barclays would increase its offer to £6.5 million. He therefore made a conventional 75% assessment. That approach was consistent with the two-stage approach identified in Allied Maples v Simmons.
4. The argument that Barclays might have offered a further £500,000 separately from the valuation negotiations did not undermine the judge’s global ceiling of £6.5 million. Grounds concerning the construction and reasonableness of the £1 million limitation clause were academic because the other findings meant that damages could not exceed that sum.
5. The conflict claim was rejected on the facts. PwC was not alleged deliberately to have favoured Barclays by undervaluing the interests, and the judge found no indication from Barclays that PwC would necessarily obtain refinancing work. Permission was accordingly refused on all grounds. Lord Justice Rimer agreed.

1. Court of Appeal (Civil Division): On the claimants’ application for permission to appeal, permission was refused. [2010] EWCA Civ 1437
2. High Court (Chancery Division): Vos J awarded the claimants £427,000 damages for breach of contract and rejected the conflict-of-interest claim.