The coverage of the recent death of OJ Simpson filled the airwaves with re-runs of clips from what was dubbed “The Trial of the Century” and reminded the world of the power of televised court proceedings to captivate audiences.

OJ’s brush with the law does have some very tangential relevance to the recent Scottish appeal judgment in the case of Centenary 6 Limited v TLT LLP [2024] CSIH 13!

While nobody would argue the facts of the case can compete with the intrigue of Johnnie Cochran, the bloody leather gloves and “If it doesn’t fit, you must acquit”, the full appeal hearing in Centenary 6 was live streamed on the Scottish Courts website (and remains available to view there). Any interested viewer would have heard various references not to gloves and murder weapons, but to lost chances and ‘broad brushes’.

This article explores the Centenary 6 Limited v TLT LLP case application of 'loss of chance' damages and the court's preference for a "broad brush" approach over mathematical precision. For those not keen on watching the entire appeal, we summarise the key takeaways and their implications for future legal practice in Scotland.

Background

As the following summary shows, nothing about this case or the facts from which it arose was straightforward.

The dispute arises out of the liquidation of Centenary Holdings III Limited (“CH III”), a former drinks and entertainment company which, whilst no longer trading, had retained some assets and liabilities. At the time of entering liquidation, Centenary 6 Limited (“C6”) was the sole shareholder. A significant liability that lay with CH III was a thoroughly unattractive 25-year full repairing and insurance lease of bespoke office space in London (the “Ark”) with a £5 million annual rent. The landlord of the premises was Deka Immobilien Investment GmbH (“Deka”).

In the early 2000s, CH III had been part of the Vivendi group. Vivendi sought to get rid of CH III’s lease obligation at the Ark but Deka, who held all the cards in the negotiation, would only consent to assignation to an organisation with a triple A credit rating. To get around this, Vivendi sought a convoluted solution: an internal restructure of assets and then the sale of CH III with the lease obligation to a party interested in renovating the Ark. C6, with its wholly owned subsidiary of CH III and the Ark lease, was sold to a Mr Richards.

CH III went into liquidation in 2005. Various litigations followed in relation to Vivendi’s solution, which had proven to be legally problematic (to say the least). Meantime, Deka submitted a claim in the liquidation for £38 million under the terms of the Ark lease. Against this grab bag of difficult facts, the joint liquidators of CH III ended up agreeing a compromise agreement under which Deka’s claim was agreed at £28 million, a sum which C6 subsequently argued war in excess of what dividend would otherwise have been due to Deka in the liquidation. The agreement did not contain any anti-embarrassment clause (should Deka go on to mitigate their losses by re-letting or selling the Ark). In 2006, Deka sold the Ark (with vacant possession) for £47 million.

As a contributory to CH III (liable to contribute to its assets on liquidation), C6 went on to lodge a note in the liquidation under section 212 of the Insolvency Act 1986 seeking a contribution of £22.325 million to the assets of CH III from the joint liquidators. Section 212 provides a mechanism, amongst other things, for a Court to order a liquidator to make a contribution to a company’s assets where there has been a breach of duty by the liquidators in relation to the company. C6 argued that in entering into the compromise agreement with Deka the joint liquidators had breached their duties by failing to exercise the skill and care to be reasonably expected of ordinarily competent liquidators. In particular, no reasonably competent liquidator would have entered into the compromise agreement without an anti-embarrassment clause (which consequently allowed Deka to go on and realise a ‘windfall’ on the sale of the Ark whilst also being able to continue to realise their agreed claim in the liquidation).

C6 instructed TLT to represent them in the section 212 proceedings. The Court ordered C6 to lodge caution, however, C6 failed to lodge caution, or an acceptable alternative, on time despite multiple extensions to the deadline. C6’s section 212 note was therefore refused and the proceedings brought to an abrupt and, at least in C6’s eyes, premature end.

C6 went on to raise a professional negligence action against TLT alleging that TLT’s failure to lodge caution amounted to a breach of the professional duties TLT owed to C6.

Initial judgment

Prior to the trial starting, TLT admitted that the failure to adequately advise C6 in relation to obtaining and lodging a valid bond of caution or equivalent amounted to a breach of their duties to C6, and therefore that they had been negligent. As a defence however, they argued that their breaches had not caused any loss to C6 because C6 had a nil (or negligible) chance of success in the section 212 proceedings.

What would have been C6’s prospects in the section 212 proceedings but for TLT’s admitted negligence was therefore a key question in the dispute. This was because the damages sought were ‘loss of a chance’ damages. Essentially, where a party would have pursued a particular course but for the alleged negligence, subject to causation they can seek to recover the value of that lost chance in damages. The value of the lost chance will be determined by determining how likely it was that the party pursuing the case would have taken a different course had the defender not been negligent. Loss of a chance damages arise frequently in professional negligence cases, particularly in relation to solicitor negligence and lost litigation opportunities (as here).

It is relatively settled law in both Scotland and England and Wales, following in particular the English authorities of Allied Maples v Simmons & Simmons and Perry v Raleys Solicitors, that, when considering what might have happened differently, the hypothetical actions of the party pursuing the claim and the actions of third parties should be assessed differently. Where the pursuing party says it would have acted differently, the court must decide whether it would have done so on the balance of probabilities. However, where a third party would have required to act differently, another approach is taken; the court will assess the likelihood of a different outcome on a probability basis.

How the court should approach the probability basis was central to TLT’s defence.

In this case, C6’s chance of success in a claim against the liquidators was broken down into five key elements:

• whether the claim against had prescribed (was time-barred);
• whether C6 could have secured litigation funding or alternatively self-funded the claim;
• whether C6 could have established breach of duty on the part of the joint liquidators;
• whether the joint liquidators would (and could) have reached an agreement with Deka limiting its claim to less than £28 million if they had not breached their duties;
• if so, whether there would have been a surplus available to C6 after payment in full of CH III’s creditors.

Essentially, was it likely that C6 could have pursued the claim, would they have been successful in proving their case against the joint liquidators, and would success have resulted in a financial benefit flowing back to C6 in the liquidation.

It can be seen that the answer to these questions lay both in what C& would have done and what third parties would have done. The question of whetherC6 could have succeeded in the section 212 note proceedings had TLT not been negligent clearly turned on what third parties (the joint liquidators, litigation funders and the court hearing the note, among others) would have done.

The Outer House judge assessed each of the points individually and in detail, finding in C6’s favour on the chance each of them would have occurred (i.e. that C6’s claim had not prescribed prior to the section 212 note being lodged). The judge then turned to assessing what overall percentage of success was to be applied to the lost chance. The Lord Ordinary explicitly took a broad brush assessment (pulling together his conclusions on the various factors) and came to a figure of 65%. This figure was therefore applied to the full value of C6’s claim against the joint liquidators in determining the value of recoverable damages against TLT for the lost chance.

Appeal

Both parties appealed elements of the Outer House’s judgment. TLT appealed almost all of the issues determined by the judge. C6 also cross-appealed a few specific decisions on the quantification of damages in relation to expense. The Inner House therefore had to consider the majority of the judgment at first instance.

The court allowed C6’s appeal in part, in relation to how certain losses were calculated by the commercial judge.

However, TLT’s appeal was entirely rejected. This article focuses on why the court did not accept TLT’s arguments.

Appeal judgment: the formula for success

Much of the decision relates to the specific facts that arose in this case. However, the Court’s determination of the way an overall percentage for the lost chance would be calculated raised a more general principle that is applicable to future cases where lost chance damages are sought.

It was argued by TLT that the commercial judge erred by not adopting a “mathematical approach” to calculating the overall value of C6’s lost chance.

In essence, TLT argued that because the lost chance as a whole was comprised of numerous contingent events, each depending on the hypothetical conduct of third parties, and C6 needed to clear each of those in turn to succeed, working out the value of the overall lost chance required the contingencies to be separately calculated then multiplied. TLT argued this approach was consistent with various English cases, where similar complicated facts existed. In other words, TLT argued the commercial judge’s ‘broad brush’ was the wrong tool to use when deciding this case.

The Inner House rejected the suggestion that there is a strict rule which requires a mathematical approach to be taken. It found that in some circumstances, the contingent events are all interrelated such that a broad, rather than mathematical, approach is appropriate.

The Inner House did not reject entirely the use of a mathematical approach, but in cases involving lost chances arising from failed litigation, it appears the court will generally reject the mathematical approach in favour of a ‘broad brush’. This is likely to favour those pursuing such claims, to the extent the court has some leeway to draw broad conclusions and does not need to ‘show its working’ in minute detail.

Matter of law v lost chance

The Inner House’s language when discussing the mathematical approach discussed above is slightly at odds with how the commercial judge approached the issue of whether the claim against the joint liquidators had prescribed.

Earlier in its judgment, the Inner House appears to have endorsed the commercial judge’s finding that, as a matter of law, the claim had prescribed. The commercial judge did not see this question as one which involved a loss of a chance analysis; he considered it was a matter of law that he could decide one way or the other. Yet, when discussing the mathematical approach to calculating the lost chance, the Inner House refer to there being a 100% chance that C6 would succeed on prescription, which is the language of a lost chance.

The commercial judge’s approach to determine prescription as a matter of law and not a lost chance was mirrored by a different commercial judge in another solicitor negligence case from 2023 - Ronnie O’Neill Freight Solutions Limited v MacRoberts LLP – when he considered whether, in the pursuer’s counterfactual scenario, an interim interdict would have been granted was a matter of law and not an issue to be determined on a lost chance basis.

It is unclear from the C6 appeal whether the Inner House endorses the ‘matter of law’ approach or not.

The appeal also shone a light on how efficiently the Scottish commercial court system is able to operate, which is worth highlighting.

Justice delayed? Not so.

Evidence in this case was heard in December 2022. The commercial judge noted in his judgment there were over 10,000 pages of documents and over 500 pages of witness statements and expert reports. It is not surprising the evidential hearing extended to 12 days. Despite the complexity of the matters in dispute and the volume of evidence, the Commercial Judge issued his judgment in May 2023.

The appeal was heard over three days in February 2024. The length of the appeal hearing reaffirms the complexity of the case. The arguments advanced by TLT essentially invited the Inner House to reconsider large swathes of the evidence – a time consuming exercise. The Inner House’s judgment was issued in June 2024.

Of course, things are not typically known to move quickly in the legal world however this case progressed through both the Commercial Court and the Inner House at a brisk pace. The Scottish court system should be commended for that.

Individuals and businesses who trade in Scotland should take away from this case that Scottish courts offer an effective and relatively speedy dispute resolution procedure capable of resolving very complicated cases on a par with the English commercial courts.

As mentioned above, the appeal was live streamed in full. it is a positive development that Scottish judges have been willing to bring in live streaming, and that this case was chosen for broadcast.

This was open justice on show via the live stream rather than the TV screen!

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