La Trobe Capital & Mortgage Corporation Limited v Hay Property Consultants Pty Ltd [2011] FCAFC 4

By: Robert Sheldon

Oct 05 2011

Category: Damages, Loss of opportunity

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84. The best known case involving the loss of a chance to make a gain is Chaplin v Hicks [1911] 2 KB 786. The claimant entered into a beauty contest organised by the defendant. Fifty entrants were to be selected for interview and from those 12 to be offered a theatrical engagement. The claimant was selected as one of the 50 but, through the defendant’s breach of contract, was not told in time. The Court of Appeal held that she was entitled to damages for the lost chance of winning an engagement. This chance was, said Fletcher Moulton LJ (at 795) “[t]he very object and scope of the contract”. The damages were assessed proportionately with what the chances of gain were thought to be.

85. Sellars v Adelaide Petroleum NL [1994] HCA 4(1994) 179 CLR 332 is another important case. The directors of Adelaide Petroleum entered into parallel negotiations with two companies, Poseidon Ltd and Pagini Resources NL, to acquire the directors’ shareholding in Adelaide Petroleum as part of a restructure. Sellars signed an agreement to that effect on behalf of Poseidon. Later Poseidon claimed that Sellars did not have its authority to make the agreement. Accordingly, Adelaide Petroleum entered into a less favourable agreement with Pagini and sued for the lost opportunity to make a better arrangement with Poseidon. The question in issue was whether, to make out its claim for damages under s 82 of the TPA for a contravention of s 52, it was necessary for Adelaide Petroleum to prove on the balance of probabilities that a benefit would have been obtained from the opportunity to continue its negotiations with Pagini and, if so, the extent of that benefit. The alternative view was that it was only necessary for Sellars to establish the elements of the cause of action on the balance of probabilities.

86. The High Court acknowledged (at 335) that a distinction is required to be drawn between, on the one hand, proof of causation and proof of loss and, on the other, proof of the value of the damage for which recovery is sought. As to causation and the incurring of loss, that was to be determined on the balance of probabilities. But, when it comes to the assessment of damages, which involve consideration of future possibilities as well as past hypothetical facts, that only needs to be assessed according to “the degree of probability that an event would have occurred, or might occur” with the award of damages to be adjusted to reflect the degree of probability: at 350, citing Malec v J C Hutton Pty Ltd [1990] HCA 20(1990) 169 CLR 638, 643.

87.  Brennan J put the proposition succinctly (at 368):

Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point where there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant’s conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities.

Although the issue of a loss caused by the defendant’s conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation.

88. Applying those principles, La Trobe established (by admission) that Hay has committed an actionable wrong.

89. The assertion that had money not been lent to Jet, La Trobe would have entered into another loan on the same terms as the Jet loan is a hypothetical. Although it is a hypothetical the cases say that a plaintiff must establish on the balance of probabilities that s/he would have taken action to obtain the lost benefit: Allied Maples Group Ltd v Simmons & Simmons [1995] EWCA Civ 17[1995] 1 WLR 1602, 1610. There is, to my mind, no doubt that Mr Gidman’s evidence established the relevant hypothesis.

90. Having reached the point that a loss is established, its value must be estimated. That must be done no matter how difficult the task, even if some guesswork is involved:JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237, 241; Waribay Pty Ltd v Minter Ellison [1991] 2 VR 391, 398. What is required is to estimate the chance of La Trobe finding a substitute borrower willing to borrow on the same terms, whether or not the chance of this happening is more or less than even: Mallett v McMonagle [1970] AC 166, 176.

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