19 Jul 2018
"Don't it always seem to go, you don't know what you've got 'til it's gone": the value of a lost commercial opportunity
By Tim Jones, Danielle Davison and Bianca Fernandez
The critical question is whether the lost opportunity had real value.
In business, and in litigation, parties are often faced with the dilemma – but for another party's conduct, I would have done "X" – and now the opportunity to do so has been lost. But what is the value of a "lost opportunity"? The recent decision of the New South Wales Court of Appeal in Mal Owen Consulting Pty Ltd v Ashcroft  NSWCA 135 is a helpful reminder.
The case against one solicitor leads to a case against another
In July 2006, Mal Owen Consulting Pty Ltd (the appellant) retained a solicitor, Peter Ashcroft (the respondent), to recover moneys owed to it by Peter Bouzanis (also a solicitor). Though the respondent did (on behalf of the appellant) institute proceedings against Bouzanis in the District Court in 2006, he failed to pursue those proceedings over the following three years. The respondent accepted this failure constituted both a breach of the contractual obligations under his retainer, and his duty of care in tort.
In January 2010, the appellant instructed new solicitors to pursue its claim against Bouzanis. Those solicitors commenced fresh proceedings in June 2010. Judgment was obtained against Bouzanis in those proceedings on 31 August 2012 in the sum of $200,808.
An appeal by Bouzanis was dismissed on 20 April 2013.
On 26 June 2013, Bouzanis was served with a bankruptcy notice. He entered bankruptcy on 18 December 2013. The appellant did not recover a dividend from the bankruptcy.
The appellant subsequently commenced proceedings in the District Court against the respondent seeking damages for his failure to expeditiously pursue the original proceedings brought against Bouzanis in 2006. The trial judge dismissed the claim.
The appellant appealed. The key issues on appeal were:
- whether the appellant was entitled to recover for loss of a valuable commercial opportunity, even if it could not be established on the balance of probabilities that the opportunity would produce financial gain; and
- how the value of the lost opportunity was to be assessed.
Was the appellant entitled to recover for loss of a valuable commercial opportunity?
A claim for breach of contract promising a valuable commercial opportunity lies without proof of loss. A solicitor who agrees to undertake proceedings on behalf of a client does not promise to achieve an outcome. Rather, the promise is to take steps to ensure that the client has the best opportunity or chance of obtaining a favourable outcome.
The critical question is whether the lost opportunity had real value. An opportunity will have "real value" if there is some colour of value to the lost opportunity. This means the value must be something more than merely theoretical or negligible value.
To determine whether an opportunity has "real value", it is necessary to identify with precision the particular opportunity that has been lost. In this case, it was not merely the opportunity to bring proceedings against the appellant's former solicitor, but to have the proceedings that were in fact commenced in 2006 pursued expeditiously to an outcome. It was this opportunity – the opportunity to have the 2006 proceedings pursued expeditiously or, as Acting Justice Barrett put it, "the opportunity to obtain and enjoy the fruits of due and timely prosecution of the original proceedings" – which was of real value to the appellant in this case, and which was ultimately lost. Here, it was relevant to note that:
- The 2010 proceedings which were ultimately pursued against Bouzanis were successful. That of itself meant the earlier proceedings (which were not diligently pursued) were of "real value".
- In financial terms, the 2010 proceedings were worthless to the appellant. However, it did not follow that the proceedings were worthless in 2006. In particular, the court noted Bouzanis was a practising solicitor in and after 2006. For that reason, the court considered Bouzanis had a greater incentive to avoid the bankruptcy to which he eventually succumbed in December 2013 as a result of the second proceedings.
The appellant was therefore entitled to recover the value of its lost opportunity from the respondent.
How was the value of the lost opportunity assessed?
Once it is established that:
- a plaintiff has suffered some loss or damage because it has lost an opportunity which has value beyond mere theoretical or negligible value; and
- it was more probable than not that an opportunity of value would have been received but for the defendant's negligence,
the focus turns to the actual value of the lost opportunity.
Value must be ascertained at this stage by reference to "the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance" of which the plaintiff has been deprived. As to this, Acting Justice Barrett noted that an assessment of value "by reference to the degree of probabilities and possibilities of factual hypotheses may require a process of estimation extending even to a degree of guesswork and may lie at any point within a broad range". Further, he noted the assessment is "upon the quantifications, in money terms, of the value inherent in the ability to pursue the opportunity (or the prospects of success that the opportunity embodies) in the factual context in which it was available to be pursued".
Both Justice Basten and Acting Justice Barrett determined that, in the circumstances of this matter, an appropriate, albeit speculative, assessment would permit recovery of 50% of the debt without interest, a total of $100,000. This factored in, for example, the possibility that the 2006 proceedings may have been compromised at an early stage, and that the appellant probably would not have recovered the full amount of its debt, even if the 2006 proceedings had been pursued expeditiously.