64The assessment of damages based on the loss of a chance has been the subject of a number of judicial expositions. They are concerned with the proper approach to both past and future hypothetical events. The relevant starting point in this discussion is the judgments of the High Court in Malec and, in particular, the passage from the joint reasons of Deane, Gaudron and McHugh JJ at 642-643 (with which Brennan and Dawson JJ agreed). After referring to the fact that a common law court determines on the balance of probabilities whether an event has occurred, so that with respect to events which have or have not occurred, damages are assessed on an all or nothing approach, their Honours considered that the approach of the court is different in the case of an event which it is alleged would or would not have occurred or might or might not yet occur. The joint judgment continued at 643:
The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded." [Emphasis added]
65Malec was a personal injury case. The leading authority in the High Court in a commercial context is Sellars where the passage from the joint judgment of Deane, Gaudron and McHugh JJ in Malec was cited with approval at 350 by Mason CJ, Dawson, Toohey and Gaudron JJ. Sellars was a case involving a contravention of s 52 of the Trade Practices Act 1974 (Cth) and a claim for damages under s 82 of that Act.
66In the course of their reasons the plurality referred to the decision of the High Court in Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 which was also a case involving ss 52(1) and 82(1) of the Trade Practices Act. Although Gates was distinguished in Sellars, it may be said to have some relevance to the facts of the present case.
67In Gates the appellant had entered into a policy of insurance induced by a misrepresentation that it would entitle him to benefits if he were totally disabled from following his occupation as a builder. In fact the policy entitled him only to benefits if he was disabled from following any occupation, so that he was not entitled to benefits when disabled only from following his occupation as a builder. The High Court held that if the appellant had been able to establish that he could and would have entered into a policy of insurance containing a disability clause of the kind represented to him had it not been for his reliance on the representation, he might have been awarded damages equal to the benefits that would have been payable under that policy, less the premiums paid or payable. Having failed to establish that matter, the appellant was not entitled to damages on that account.
68In Sellars at 352, the plurality observed that Gates was not a decision on the question then under consideration. This was because
"[t]here was no evidence as to what the appellant would have done had he known that the respondent insurance company did not offer insurance on the terms he wanted; nor was there any evidence that insurance was available on those terms elsewhere. Consequently there was no evidence to show that there was a chance of making alternative arrangements for insurance ..."
I shall return to the no evidence point below as it seems to me to have some resonance with the present case: see [32] above.
69After consideration of a number of other authorities, the plurality in Sellars then continued (at 355) in the following terms:
"... we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the Court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognised in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation to confining the principle to cases of any particular kind.
On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities." [Italics in original]
It is to be noted that their Honours emphasised the requirement that the loss of the relevant commercial opportunity must have "some" value, not being a negligible value.
70Brennan J also commented in Sellars on the High Court's decision in Gates. At 362 his Honour observed that Gates
"shows that, for the purposes of s 82(1) of the Act, the loss of a mere opportunity to acquire a benefit is not in itself a loss, but the loss of a benefit will be such a loss if the plaintiff proves that he could and would have taken the opportunity and that the benefit would then have been yielded." [Emphasis added]
71After considering a number of authorities his Honour then observed (at 364):
"As a matter of common experience, opportunities to acquire commercial benefits are frequently valuable in themselves, not only when they will probably fructify in a financial return but also when they offer a substantial prospect of a financial return ... Provided an opportunity offers a substantial, and not merely speculative, prospect of acquiring a benefit that the plaintiff sought to acquire or avoiding a detriment that the plaintiff sought to avoid, the opportunity can be held to be valuable. And, if an opportunity is valuable, the loss of that opportunity is truly 'loss' or 'damage' for the purposes of s 82(1) of the Act and for the purposes of the law of torts." [italics in original]
72At 368 Brennan J further remarked as follows:
"Although the issue of a loss caused by the defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation. However, where the amount of the loss depends on the happening or non-happening of some event, it is unnecessary to speculate on the possibility that it might have happened and it is impermissible to do so. A plaintiff seeking to prove the amount of a loss does not obtain the right to argue for a possibility by refraining from adducing evidence of the fact. Nor, in my opinion, is it necessary or permissible to speculate on the prospects that a court might have awarded a pecuniary sum to a plaintiff who has lost a cause of action."
73In my opinion, the following propositions may be deduced from the above passages from Sellars as relevant to the present case:
(a) Prosperity must prove on the balance of probabilities that it has sustained some loss or damage although in a case such as the present, it may do so by demonstrating that, on the evidence, Strathearn's conduct caused the loss of a commercial opportunity which had some value which was not negligible;
(b) Thus there must be evidence as to what Prosperity would have done had it known that the QBE policy did not offer cover on the terms it wanted and, further, that cover was or at least may have been available on those terms elsewhere;
(c) Upon the assumption that Prosperity proved that had it known that the QBE policy would not provide it with the cover it sought, it would have proceeded through its broker into the market to seek such cover, it must still prove as a matter of probability or possibility that such cover would have been available and provided to it at a price and on terms which it was prepared to pay and accept; in other words, it must elicit evidence as to the value of the chance which it alleges it lost as a result of Strathearn's conduct;
(d) It is thus impermissible, in the absence of evidence, to speculate on the possibility that such cover would have been obtainable; rather, the evidence must establish that there was a substantial, and not merely a speculative, prospect of its availability. Prosperity cannot merely argue for a possibility by refraining from adducing evidence to support the probability or possibility that the cover sought was not only available but could be obtained on acceptable terms.
74The authorities to which I have referred were the subject of detailed consideration by this Court in Daniels v Anderson (1995) 37 NSWLR 438 in the joint judgment of Clarke and Sheller JJA. At 529 their Honours noted that Gates had been considered in Sellars but had been distinguished
"because the plaintiff, who asserted that he had been induced by misrepresentation to enter into a policy of insurance which did not provide the benefits he sought, failed to lead any evidence to show what he would have done had he known that the respondent insurance company did not offer insurance on the terms he wanted, nor evidence that insurance was available on those terms elsewhere"
Their Honours then cited the passage from the judgment of Brennan J commenting upon Gates which I have recorded at [70] above.
75Their Honours then remarked (at 530) that the issue of causation should be approached upon the basis of proof upon the balance of probabilities, with the qualification that an assessment of whether the chance which is said to have been lost had a value is to be made upon the possibilities or probabilities of the case. Accordingly, it was appropriate to consider initially the question whether a chance was lost as a consequence of the breaches of duty alleged, and in the event that an affirmative answer was given to that question, to defer consideration of the value issue to be dealt with in determining whether, and if so what, damages were payable.
76At 564 their Honours noted that how the directors of the plaintiff would have acted was, in the absence of evidence, so uncertain as to be incapable of evaluation. Any attempt to determine the possibility that they would or might have acted in a particular manner was
"so fraught with uncertainty as to constitute nothing more than speculation"
77Tabet v Gett [2010] HCA 12; (2010) 240 CLR 537 was a personal injury medical negligence case involving the loss of chance of a better medical outcome. However, at [124] Kiefel J, with whom Hayne and Bell JJ on the one hand and Crennan J on the other agreed, remarked as follows:
"What cases in contract, such as the Commonwealth v Amann Aviation Pty Ltd and Sellars v Adelaide Petroleum NL, have in common is that the commercial interest lost may readily be seen to be of value itself. The same cannot be said of a chance of a better medical outcome or a person's interest in it. ... And in Sellars v Adelaide Petroleum NL Brennan J observed that, '[a]s a matter of common experience, opportunities to acquire commercial benefits are frequently valuable in themselves'. So long as an opportunity provides a substantial and not merely a speculative prospect of acquiring a benefit, it can be regarded as of value and therefore loss or damage." [Emphasis added, footnote references omitted]
78In this Court the relevant authorities were recently discussed by Giles JA, with whom Mason P and Matthews AJA agreed, in Heenan v DiSisto [2008] NSWCA 25; (2008) 13 BPR 25213 at [28] - [32]. At [28] in particular his Honour observed (omitting citations) that
"the damages are assessed according to the degree of probability that the events would have occurred, provided the probability is not so low as to be speculative or so high as to be practically certain: Malec v J C Hutton Pty Limited. As was stated with particular reference to commercial transactions in Sellars v Adelaide Petroleum NL, 'damages for deprivation of a commercial opportunity ... should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued.'"
79Finally, in McCrohon v Harith [2010] NSWCA 67 McColl JA, with whom Campbell JA and Handley AJA agreed, reviewed the relevant authorities at [96] to [99]. At [98] her Honour, citing Malec at 643 and Sellars at 349, relevantly observed:
"In such cases, the court approaches the hypothetical situation in terms of the degree of probability of it occurring. The court does not require the plaintiff to demonstrate that, to use the present case as a model, there was a 51% chance of the respondents briefing Queensland solicitors if they had been properly advised. Rather the court takes the chance of that having happened into account even if it falls below 50%, as long as it is not "so low as to be regarded as speculative"." [Emphasis added]