Court of Appeal clarifies loss of chance in negligence claims

Background

The case of Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 was a landmark decision by the Court of Appeal concerning the loss of a chance in negligence claims. The case revolved around the alleged professional negligence of solicitors, where the claimant, Allied Maples, argued that due to the solicitors' failure to secure adequate warranties during a commercial transaction with Gillow, they lost the opportunity to negotiate a more favourable deal.

The primary legal issue in this case was whether Allied Maples could prove, on a balance of probabilities, that they would have taken steps to secure improved warranties had they been competently advised, and whether there was a real and substantial chance that the other party, Gillow, would have agreed to those improved terms.

Background

The case arose from a transaction in which Allied Maples was purchasing a business from Gillow. The crux of the issue was that Allied Maples claimed their solicitors failed to advise them adequately on seeking protection against contingent liabilities related to subsidiaries within Gillow's group. Allied Maples argued that this negligence resulted in their loss of an opportunity to negotiate a more favourable deal.

The Court of Appeal, comprising Lord Justices Stuart-Smith, Hobhouse, and Millett, was tasked with determining the appropriate legal principles to apply in assessing the claim of loss of a chance due to negligence. The court had to consider whether Allied Maples needed to prove on a balance of probabilities that they would have taken steps to secure better warranties if they had been competently advised, and whether the assessment of the chance that Gillow would have agreed to improved warranties should be considered as a loss of a chance.

Legal principles in question

The Court of Appeal's decision in this case was significant as it established a two-fold test for determining causation in loss of chance claims due to negligence. The first requirement was for the claimant to prove, on a balance of probabilities, that they would have taken the necessary steps if they had received competent advice. The second requirement was to assess the loss of the chance that the third party would have responded favourably to those steps.

The Court of Appeal was unanimous in its statement of this legal principle, although the judges differed in their application of the principle to the specific facts of the case. The decision was later endorsed by the House of Lords in the case of Gregg v Scott [2005] 2 AC 176, where Lord Nicholls of Birkenhead and Lord Hoffmann agreed with the Court of Appeal's statement of legal principle.

Allied Maples Group Ltd v Simmons & Simmons – Court of Appeal – [1995] 1 WLR 1602 – Case Summary

The Court of Appeal delivered a landmark ruling in the case of Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, clarifying the legal principles applicable to claims for loss of a chance due to professional negligence. The case revolved around the alleged negligence of solicitors in failing to secure adequate warranties for Allied Maples during a business acquisition from Gillow. The central issue was whether Allied Maples had to prove that they would have taken steps to secure better warranties if they had received competent advice, and whether there was a loss of a chance that Gillow would have responded favourably.

Background

The case originated from a transaction where Allied Maples was purchasing a business from Gillow. The primary contention was that Allied Maples' solicitors failed to secure improved warranties from Gillow, which would have resulted in a more favourable outcome for Allied Maples. The Court of Appeal, comprising Lord Justices Stuart-Smith, Hobhouse, and Millett, heard the case and delivered a unanimous decision on the legal principles applicable to loss of chance claims arising from professional negligence.

Legal principles and court's analysis

The court held that in cases of professional negligence involving loss of a chance, the claimant must prove on a balance of probabilities that they would have taken the necessary steps to secure a more favourable outcome if they had received competent advice. However, the court also stated that the assessment of whether the third party would have responded favourably to those steps should be based on the loss of a chance.

This decision was later affirmed by the House of Lords in Gregg v Scott [2005] 2 AC 176, where Lord Nicholls of Birkenhead and Lord Hoffmann endorsed the Court of Appeal's approach in the Allied Maples case. They agreed that there is no sensible basis in principle for distinguishing between the loss of an opportunity to achieve a more favourable outcome in a negotiated transaction and the loss of an opportunity to institute a legal claim.

Implications for legal practitioners

The court's decision in the Allied Maples case has significant implications for legal practitioners involved in negligence claims. It underscores the importance of providing competent advice to clients and the potential consequences of failing to do so. The ruling highlights that in cases of professional negligence, the client must prove on a balance of probabilities that they would have taken the necessary steps if they had received competent advice.

The court's decision also has implications for the assessment of damages in loss of chance claims. It established that the value of the lost chance should be assessed based on the likelihood of a favourable outcome, rather than on the balance of probabilities. This approach was later approved by the House of Lords in Gregg v Scott [2005] 2 AC 176, where Lord Nicholls of Birkenhead and Lord Hoffmann reaffirmed the Court of Appeal's legal principle.

Implications for legal practitioners

The Allied Maples case has significant implications for legal practitioners, particularly those involved in professional negligence and loss of chance claims. It emphasises the need for solicitors to provide competent advice to clients and the potential consequences of failing to do so. The ruling also highlights the importance of proving causation in negligence claims, as the client must demonstrate that they would have taken the necessary steps if they had received competent advice.

The decision further underscores the need for legal practitioners to ensure that their pleadings are sufficiently specific to give fair notice of the case that the defender is required to meet. This includes providing detailed averments of causation and loss, as well as the competent advice that the client ought to have received.

Conclusion

The Court of Appeal's decision in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 has provided much-needed clarity on the legal principles applicable to loss of chance claims due to professional negligence. The ruling has significant implications for legal practitioners, emphasising the importance of providing competent advice to clients and the potential consequences of failing to do so.

Learn More

For more information on professional negligence and loss of chance claims, see BeCivil's guide to English Data Protection Law.