Short Reads

Liability for loss of chance: a low hurdle

Liability for loss of chance: a low hurdle

Liability for loss of chance: a low hurdle

07.10.2015 NL law

In a recent judgment, the Dutch Supreme Court rendered an important decision on the way courts should deal with liability for loss of chance. The judgment shows that once it is established that the loss of chance was caused by a breach of contract or an act in tort, the hurdle to overcome for a claim for damages resulting from loss of a chance is rather low. In this case, the Supreme Court stated that, unless it becomes immediately clear that the lost chance would have been nil or very small, a lower court is obliged to determine the damages if necessary by means of an estimate.

Mr. O, the owner of a building, claimed damages from a local municipality. He allegedly incurred these damages because the local municipality breached a promise to take measures to allow the use of the building as a house under the applicable zoning plan. More specifically, the municipality had promised to include the building as a house in a draft zoning plan but it forgot to do so.

The municipality defended itself by stating that it did not have the final say in the zoning plan: even if it had included the building as a house in the draft zoning plan, the city council as well as the province could have refused to approve it. Had this occurred Mr O would not have been allowed to use his building as a house. Given that this was a possible outcome, the municipality maintained that there were insufficient grounds to establish a causal link between its conduct and the damages incurred by Mr O, which he strongly rejected.

The Court of Appeal followed the arguments advanced by the municipality and  ruled that there was no causal link between the damages of Mr O and the conduct of the municipality.

The Supreme Court overruled the Court of Appeal’s decision. It pointed out that the damages claimed by Mr O amounted to a loss of the chance for his building to obtain a zoning permit as a house. The Supreme Court ruled that there was clearly a causal link between the loss of this chance and the conduct of the municipality. If the municipality had included the building as a house in the draft zoning plan, there would have been a chance, at in least in theory, for the municipality and province to grant its approval thereto.

In the Netherlands, like many other jurisdictions, damages are calculated by comparing the actual situation of the claimant Mr O with the hypothetical situation that he would have been in had the breach not occurred.

The Supreme Court held that Mr O’s damages should equate to the value of the chance that a draft zoning plan including the building as a house had been approved by the province and the local municipality. This “loss of  chance” theory has been applied before by the  Supreme Court and is especially relevant in cases in which it is uncertain what would have happened had the event creating liability – either a breach of contract or an act in tort –  not occurred. In other words: it is applied in cases in which the hypothetical situation is uncertain. The text book example of such a case is the situation in which a lawyer forgets to file an appeal against an unfavourable judgment. Even though one cannot be sure how the appeal judge would have ruled in such a matter, the client has certainly lost the opportunity, big or small, to have the unfavourable judgment overruled.

As stated, the Supreme Court upheld that, unless it becomes immediately clear that the lost chance would have been nil or very small, a lower court is obliged to determine the damages if necessary by means of an estimate.

There are several ways to determine the damages in the current case. The court could try to determine whether the chance had a specific market value, e.g. by determining the difference in price of the building with the promise of the municipality to include the building as a house in a draft zoning plan and the consequent chance that it would obtain housing zoning compared to the situation in which there was no such chance afforded. Alternatively, the court could take a three step approach to assessing the damages: (1) determine the difference in value between the house with housing permit and without housing permit; (2) determine the chance had the city council and the province approved the housing permit; and (3) multiply (1) by (2).

The post Liability for loss of chance: a low hurdle is a post of Stibbeblog.nl

Team

Related news

01.05.2019 NL law
Arbitral award obligating Ecuador to prevent enforcement of USD 8.6 billion order does not violate public order

Short Reads - Due to environmental damage as a result of oil extraction in the Ecuadorian Amazon, oil company Chevron was ordered to pay USD 8.6 billion to Ecuadorian citizens. In order to claim release of liability, Chevron and Texaco initiated arbitration proceedings against Ecuador. Arbitral awards ordered Ecuador to prevent enforcement of the Ecuadorian judgment, leaving the Ecuadorian plaintiffs temporarily unable to enforce their judgment. According to the Supreme Court (12 April 2019, ECLI:NL:HR:2019:565), these arbitral awards did however not violate public order.

Read more

10.04.2019 NL law
Damage due to a defective driveway and the Dutch twenty year limitation period: When does limitation start in case of a continuous event that causes damage?

Short Reads - On 22 March 2019, the Dutch Supreme Court ruled (ECLI:NL:HR:2019:412) that the strict liability for buildings (opstalaansprakelijkheid) is not linked to a specific damaging act but to a damaging condition, as referred to in section 6:174 DCC. Therefore, there is no reason to regard a damaging act as an 'event that caused damage' as referred to in section 3:310 DCC concerning the limitation period for claims for damages.

Read more

01.05.2019 NL law
Termination of an agreement: compelling grounds?

Short Reads - When does a reason given for termination of an agreement qualify as a compelling ground? That was the central question in the Dutch Supreme Court's decision of 29 March 2019 (ECLI:NL:HR:2019:446). Depending on the nature of the agreement and the circumstances of the case, termination may only take place under certain conditions, e.g. only on compelling grounds. 

Read more

04.04.2019 NL law
European Court of Justice: actio pauliana is covered by jurisdiction rule of forum of contract. A judgment with foreseeable consequences?

Short Reads - Imagine that a debtor voluntarily concludes a transaction with a third party where he knows (or should know) that it hinders the creditor's possibilities of collecting the debt. In civil law countries, a creditor can invoke the nullification of that legal act by means of a so-called actio pauliana. This raises the question of which court has jurisdiction in the case of an international dispute, regarding an actio pauliana, that is instituted by a creditor against a third party?

Read more

11.04.2019 NL law
Double roles in attributing knowledge

Short Reads - The knowledge of a person who in fact runs a company can be attributed to the company if the sole director and shareholder is a 'straw man', the Supreme Court confirmed in a judgment of 29 March 2019. The rules by the Supreme Court are not revolutionary or even new. But circumstances essential for the attribution of knowledge are ignored. The double role played by the 'man in charge' raises questions about how to apply the rules as identified by the Supreme Court to the facts

Read more

28.03.2019 NL law
European Parliament votes in favour of representative actions for consumers

Short Reads - On 26 March 2019 the European Parliament approved an amended version of the European Commission's proposal for a Directive on representative actions for the protection of collective interests of consumers, following a debate on 25 March 2019. The Directive will become law once the Council and the European Parliament reach an agreement on the European Commission's proposal. The Council has not yet been able to adopt a position on the Directive, meaning that the Directive will most likely be considered again after the ­­­European elections in May 2019 by a different European Parliament

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring