Lost opportunity to pursue litigation: difficulties in assessing damages
I have written previously about the task in quantifying damages for loss of opportunity, in particular in the context of a claim for breach of contract.
Recently, in Pearce v Waller Legal Pty Ltd,[1] a plaintiff sought damages for loss of opportunity arising from a claim of professional negligence. The plaintiff succeeded in proving that because of the negligence of the law firm representing him in an earlier proceeding, he had been deprived of the opportunity to pursue the economic loss component of an abuse claim against a religious institution in that proceeding.[2] (The plaintiff had sued, and had reached a settlement in that proceeding, in respect of a claim of general damages only.)
Because the plaintiff had succeeded in establishing liability for professional negligence and causation in respect of his loss, the question then arose: how was that loss, in the form of a lost opportunity to litigate the claim for economic loss, to be assessed?
Having recited the guiding principles as set out in cases such as Sellars v Adelaide Petroleum NL,[3] which principles relate to both breach of contract and negligence claims, J Forrest J noted the difficulty in assessing damages for a lost opportunity to litigate; ‘endeavouring to assess the value of the lost opportunity caused by a failure to litigate can be fraught with problems’.[4] His Honour noted the comments of Keane JA in Lewis v Hillhouse, who had said:
An opportunity to litigate, considered in the abstract and without regard for the prospects of a favourable outcome, is not something of value. Rather, it is an occasion of confrontation, conflict and expense. No litigant suffers any real loss by losing the opportunity to run up dry gullies.[5]
Had the plaintiff here been running up a dry gully? A number of themes arise from the Court’s reasons in Pearce v Waller Legal Pty Ltd.
The likeliest scenario of a likely settlement
The plaintiff submitted that the most likely outcome for the plaintiff in pursuing the lost avenue of litigation would have been a settlement of that claim part-way through the proceeding, prior to commencement of trial. In accepting that submission and its underlying scenario, J Forrest J said:
[The scenario] reflects not only common practice and experience in this Court but also accords with [the plaintiff’s] expressed desire on multiple occasions … to resolve the claim as soon as possible. Whilst there was a remote chance that the case might have proceeded to trial, it was vastly more likely that it would settle.[6]
It therefore was relevant to assessing the value of the lost opportunity to litigate that:
settlement of claims (either along the lines of the plaintiff’s claim, or litigious claims in general — the answer is unclear) was the typical outcome in the Supreme Court; and
the plaintiff himself had wanted to settle his claim.
Misplaced assessment of litigation risk
In quantifying the damages, the Court relied upon evidence of the amount the claim would likely have settled for at mediation.
In doing so, it was relevant to assess the plaintiff’s prospects of succeeding in his claim for economic loss. This was because such prospects could have affected the formulation by the defendant in that proceeding of any terms of an offer to settle.
His Honour rejected as ‘ludicrous’ the plaintiff’s suggestion that there would have been a 10–15 percent uplift in any settlement amount given a ‘general and unspecified litigation risk’. Having expressed ‘major reservations’ about the plaintiff’s credibility and reliability as a witness[7] — which, in turn, might have harmed the plaintiff’s prospects in succeeding in any claim for economic loss — his Honour said of the litigation risks:
[T]he risks are all at the other end of the scale. The perils relating to the prosecution of [the plaintiff’s] economic loss claim were significant and this was correctly appreciated by both [the plaintiff’s solicitor and counsel] and need not be restated.[8]
Crystal-ball gazing: an unsuitable approach
His Honour rejected the plaintiff’s estimates of past earnings and of his hypothetical earnings if the alleged abuse had never occurred, considering them to be ‘riddled with guesses and speculation to the point of being arguably inadmissible’ and thinking it perhaps no more advantageous than gazing into a crystal ball.[9] It therefore was necessary for his Honour to make an informed estimate, much like a civil jury would have been required to do.
Maintaining the distinction between general damages and damages for economic loss
Finally, in assessing damages for economic loss, the Court rejected the law firm’s submission that any measure of damages should be reduced given the fact the plaintiff had received a settlement sum on account of a claim for general damages. His Honour regarded the submission as ‘fail[ing] to properly identify the nature of the claim brought in this Court’ and held that:
General damages and damages for economic loss are separate heads of damage and if [the plaintiff’s] case had proceeded to verdict, then there would have been [discrete] awards. Neither would be offset against the other. The manner of assessment of the losses under the two heads are unrelated and there is no question of double compensation.[10]
Ultimately, the Court awarded damages of $200,000 plus interest at a simple interest rate of 4.5 percent for the period between when settlement would likely have occurred and the date of the Court’s decision. The total, $263,000, was significantly less than what the plaintiff had sought — on his calculations, a sum in excess of $1 million.
All told, the case illustrates the difficulties in pursuing damages for economic loss arising from a lost opportunity to litigate. In also perhaps sits in the broader picture of the complexities involved in prosecuting a claim for damages for a lost opportunity of any kind.
[1]: [2025] VSC 324.
[2]: Ibid [670].
[3]: (1994) 179 CLR 332.
[4]: Pearce v Waller Legal Pty Ltd [2025] VSC 324, [677].
[5]: [2005] QCA 316, [24].
[6]: Pearce v Waller Legal Pty Ltd [2025] VSC 324, [679].
[7]: Ibid [114].
[8]: Ibid [681].
[9]: Ibid [687].
[10]: Ibid [694].