When is a ‘lost opportunity‘ really lost? And, when it is, what’s it worth?
These were the questions considered by the NSW Court of Appeal in the recent decision Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135.
Background
In 2006, a solicitor, Ashcroft, was retained to recover a debt. Court proceedings were started but not actively pursued (the First Proceedings). This was accepted by Ashcroft as a breach of professional duty.
In 2010, new solicitors were appointed and fresh proceedings commenced which resulted in a judgment debt of $200,808.00 being awarded (the Second Proceedings). The subsequent appeal was unsuccessful and on 18 December 2013 the debtor entered bankruptcy. The plaintiff was not paid a dividend from the bankruptcy.
Appeal
Proceedings were started in the District Court of New South Wales against Ashcroft in which the primary judge, Taylor SC DCJ, dismissed the claim.
The points of appeal were:-
- Whether the appellant was entitled to recover for loss of valuable commercial opportunity, even if it could not be established the opportunity would produce financial gain.
- Whether the trial judge erred in finding the appellant had not established financial loss.
- Assessment of the value of the lost opportunity.
The Court of Appeal found it was necessary to prove, on the balance of probabilities:-
- The lost opportunity was not merely of theoretical or negligible value; and,
- There existed the possibility of some recovery in the earlier proceedings had they been pursued expeditiously.
The fact that the Second Proceedings resulted in a judgment of $200,808.00 was sufficient to show the opportunity had value. The opportunity the appellant was denied was “the opportunity to bring the [First Proceedings] to a favourable conclusion”.
The 2013 bankruptcy rendered the Second Proceedings worthless to the appellant but the court found that the expeditious pursuit of the First Proceedings may have resulted in an early settlement. The court pointed to two factors illustrating that the lost opportunity to bring the First Proceedings to a favourable conclusion was of greater than theoretical or negligible value: 1) the judgment in the Second Proceedings established the validity of the action; and, 2) the intention of the defendant to continue in practice as a solicitor provided incentive to settle the matter and avoid bankruptcy.
Having established the ‘lost opportunity’ was both ‘lost’ and of some value, the Court of Appeal looked at the calculation of that loss. The Court of Appeal acknowledged “the uncertain nature of the assessment of recovery at an earlier point in time“, and applying “a process of estimation extending even to a degree of guesswork “, awarded $100,000.00 plus the appellant’s costs. This was lower than the judgment in Second Proceedings and took account of their Honours’ belief that the most likely outcome if the First Proceedings had been expeditiously pursued, was an early negotiated settlement.
