Opportunity as an asset
A commercial opportunity is an asset.1 This follows from the analysis in chapter four. In order to form the subject matter of a compensable loss, a commercial opportunity must have some non-negligible monetary value. A chance with a non- negligible monetary value constitutes an asset, because it represents the chance of an anticipated future cash flow.
Support for the proposition that a commercial opportunity is an asset can be found in
Gregg v Scott,2 in an observation by Lord Hoffmann that was referred to with approval by a majority of the High Court in Tabet v Gett.3 Lord Hoffmann observed,
obiter, in the course of considering whether the loss of a chance of a better medical
outcome was a form of actionable damage, that ‘most of the cases in which there has been recovery for loss of a chance have involved financial loss, where the chance can itself plausibly be characterised as an item of property, like a lottery ticket.’4 Despite characterising the loss narrowly as a form of ‘property’, as distinct from the broader
1 See Mark S Mandell and Susan Marcotte Carlin, ‘The Value of a Chance: The Evolution and
Direction of Chance in Tort Law’ (1986) 20 Suffolk University Law Review 203; Melvin Aron
Eisenberg, ‘Probability and Chance in Contract Law’ (1998) 45 Univeristy of California at Los Angeles
Law Review 1005, 1049; Jeremy L Pryor, ‘Lost Profit or Lost Chance: Reconsidering the Measure of
Recovery for Lost Profits in Breach of Contract Actions’ [2007] 19 Regent University Law Review 561, 578; Harvey McGregor, McGregor on Damages (Sweet & Maxwell, 19th ed, 2014) [10–062]. See also, Harvey McGregor, ‘Loss of chance: where has it come from and where is it going?’ (2008) 24(1)
Professional Negligence 2; Lord Neuberger, ‘Loss of a chance and causation’ (2008) 24(4) Professional Negligence 206.
2 Gregg v Scott [2005] 2 AC 176.
3 Tabet v Gett (2010) 240 CLR 537, 581 [124] (Kiefel J; Hayne, Crennan and Bell JJ agreeing). 4 Gregg v Scott [2005] 2 AC 176, 197 [83] (emphasis added).
concept of ‘asset’, it is clear from the context that his Lordship was using the word property in its later, broader sense.
This interpretation is consistent with Anglo-Australian law, which only requires that the relevant opportunity have some monetary value.5 More specifically, it is also consistent with the approach taken in Anglo-Australian law, both prior, and subsequent, to Gregg and Tabet, in which the loss of a non-proprietary opportunity, such as the opportunity to renegotiate a contract,6 has been accepted as a compensable loss of opportunity.7 For example, in Watkins v Jones Maidment Wilson (a firm),8 the claimant alleged that, as a result of the defendant’s negligent advice, the claimant entered into a building contract with a third party on less favourable terms, and thereby suffered a loss on entry into that transaction, and the loss of a chance of negotiating more favourable terms with the third party. On a preliminary trial of the question whether the claim for loss of a chance was statute barred, Arden LJ (with whom Longmore and Thomas LJJ agreed) agreed with the trial judge that the loss of a chance arose at the time the claimant entered into the contract and therefore the claim was statute barred. Her Ladyship observed that the claimant’s chance of negotiating a better agreement was ‘an asset with a measurable value’,9 and its absence meant that the claimant has suffered an immediate loss.
Opportunity as cash flow
The loss of a commercial opportunity represents the loss of an asset. This asset represents the chance or opportunity of an anticipated future cash flow.
5 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 364 (Brennan J); Howe v Teefy (1927) 27 SR
(NSW) 301, 307 (Street CJ; Gordon and Campbell JJ agreeing); Chaplin v Hicks [1911] 2 KB 786, 793 (Vaughan Williams LJ; Fletcher Moulton and Farwell LJJ agreeing).
6 See, eg, Heenan v De Sisto (2008) Aust Torts Reports 81–941; Jacfun Pty Limited v Sydney Harbour Foreshore Authority [2012] NSWCA 218 (25 July 2012); Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602; Watkins v Jones Maidment Wilson (a firm) [2008] EWCA Civ
134 (4 March 2008).
7 Contra Graham Reid, ‘Gregg v Scott and lost chances’ (2005) 21(2) Professional Negligence 78
(doctrine of loss of a commercial opportunity should be confined to the loss of proprietary rights such as a chose in action).
8 Watkins v Jones Maidment Wilson (a firm) [2008] EWCA Civ 134 (4 March 2008). 9 Watkins v Jones Maidment Wilson (a firm) [2008] EWCA Civ 134 (4 March 2008), [24].
The loss of a commercial opportunity represents the loss of an opportunity of an anticipated future cash flow in two senses. First it may represent the loss of an opportunity to receive an anticipated future net cash inflow. This cash inflow may take the form of an expected benefit, such as a prize or reward;10 the payment of a sum of money, such as a tip,11 a commission,12 or a debt;13 rights under a guarantee;14 a cause of action (with some prospects of a favourable outcome);15 the sale,16 or exploitation,17 of an asset; or the ability to tender for,18 negotiate,19 enter into,20 or renegotiate,21 a contract.
Secondly, it may represent the loss of an opportunity to avoid, reduce or defer an anticipated future net cash outflow. This cash outflow may take the form of an expected detriment, such as a cost,22 a loss,23 or a liability.24
10 Chaplin v Hicks [1911] 2 KB 786. 11Manubens v Leon [1919] 1 KB 208.
12 IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138 (19 June 2009); Nicholas Prestige Homes v Neal [2010] EWCA Civ 1552 (1 December 2010).
13 Domine v Grimsdall [1937] 2 All ER 119 (judgment debt); Molinara v Perre Bros Lock 4 Pty Ltd
(2014) 121 SASR 61 (commercial debt).
14 Pritchard v DJZ Constructions Pty Ltd [2012] NSWCA 196 (28 June 2012).
15 Johnson v Perez (1988) 166 CLR 351; Lewis v Hillhouse [2005] QCA 316 (26 August 2005), [24]
(Keane JA; McMurdo P and Wilson J agreeing); Falkingham v Hoffmans (a firm) (2014) 46 WAR 510.
16 G W Sinclair & Co Pty Ltd v Cocks [2001] VSCA 47 (26 April 2001); Williams v Pagliuca [2009]
NSWCA 250 (19 August 2009); First Interstate Bank of California v Cohen Arnold (a firm) [1996] PNLR 17; Stovold v Barlows (a firm) [1996] PNLR 91.
17 Howe v Teefy (1927) 27 SR (NSW) 301 (racehorse); Glenmont Investments Pty Ltd v O’Loughlin
(No 2) (2000) 79 SASR 185 (mechanical dinosaur).
18 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. 19 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.
20 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, 416–17 (Dixon and Fullagar
JJ; McTiernan J agreeing); Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 13 (Mason, Wilson and Dawson JJ).
21 Heenan v De Sisto (2008) Aust Torts Reports 81–941; Jacfun Pty Limited v Sydney Harbour Foreshore Authority [2012] NSWCA 218 (25 July 2012); Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602; Watkins v Jones Maidment Wilson (a firm) [2008] EWCA Civ
134 (4 March 2008). See also, Craig Smith, ‘Recognising a Valuable Lost Opportunity to Bargain when a Contract is Breached’ (2005) 21 Journal of Contract Law 250.
22 Lewis v Hillhouse [2005] QCA 316 (26 August 2005), [24] (Keane JA; McMurdo P and Wilson J
agreeing).
23 Daniels v Anderson (1995) 37 NSWLR 438.
24QBE Insurance Ltd v Moltoni Corporation Pty Ltd (2000) 22 WAR 148, 151 [7] (Ipp J), reversed,
but reasoning approved, sub nom Moltoni Corporation Pty Ltd v QBE Insurance Ltd (2001) 205 CLR 149, 163 [24] (Full Court).