BUGSBY PROPERTY LLC v LGIM COMMERCIAL LENDING LIMITED & Anor

Where a breach of contract consists of positive acts assisting a competing transaction, causation is ordinarily established as a question of historical fact. Where the claimant’s loss depends on hypothetical acts of third parties, the claimant must show a real or substantial chance of the relevant outcome, rather than a speculative chance. The value of that chance is then assessed as part of the quantification of damages.

In a complex commercial case, the court may assess causation and quantum together where the evidence is complete. It should avoid artificial precision and need not multiply a series of interdependent percentages. Damages remain subject to ordinary rules of remoteness, including losses reasonably contemplated when the contract was made.

Bugsby approached L&G for finance for the proposed acquisition and redevelopment of Olympia. The parties entered into a confidentiality and exclusivity agreement. L&G later admitted that, while bound by that agreement, it assisted a rival consortium, Yoo, to obtain acquisition finance. Yoo acquired Olympia.

Bugsby claimed damages for breach of the exclusivity provisions and breach of confidence. It alleged that L&G’s assistance reduced its chance of acquiring Olympia and of obtaining related fees, investment returns and a property investment fund. L&G disputed causation, quantum and remoteness. The central issues were whether Bugsby had lost a real or substantial chance of success, how that chance should be valued, and which claimed losses were recoverable.

1. Liability. L&G’s negotiation, arrangement and provision of finance to Yoo breached clauses 7 and 8 of the Bugsby/L&G Exclusivity Agreement. The breaches were inadvertent, but that did not prevent legal consequences. Bugsby established a contractual duty of confidence, but failed to prove misuse of confidential information.
2. Loss of chance. The breach comprised positive acts. The relevant causation question was therefore what happened, and what would have happened, in the counterfactual competition between the bids. Bugsby was not prevented from bidding altogether. It had to establish that it had lost a real or substantial chance of success, rather than a speculative chance. The assessment of the value of that chance was a question of quantum.
3. Method. Because the trial evidence on causation and quantum was complete, it was permissible to consider both together. The court should stand back from the detail and reach an overall judgment. In a complex, interdependent commercial sequence, multiplying percentages at every stage would create artificial precision. A single overall percentage could properly be used where it better reflected the evidence.
4. Application. There was a near certainty that CapCo would have been prepared to sell to Bugsby and that Bugsby could have financed its bid. There was also a near certainty that Yoo could have obtained alternative finance, but an alternative lender would probably have required about nine weeks from a signable term sheet. The greater chance was that CapCo would have waited for Yoo, but Bugsby had a real and substantial chance, assessed at 40%, of winning the race. The court applied an overall 90% assessment to the matters treated as near certainties, producing a 35% reduction in Bugsby’s chance after rounding.
5. Heads of loss. The court awarded damages for the lost chances of acquisition and debt-arrangement fees, annual investment-management fees and Bugsby’s enhanced investment position. The claimed chance of establishing a successful property investment fund was negligible and failed. The total damages evaluation was £14,980,000, subject to incidental questions of calculation, interest and costs to be dealt with after hand-down.