HP-2020-000016 - [2025] EWHC 1451 (Ch)

There was some debate as to the extent to which a claim for lost profits arising from the defendant’s conduct requires proof, on a balance of probabilities, that the claimant would in the counterfactual case have traded profitably. MGA’s consistent position was that it was indeed necessary for Cabo to show on a balance of probabilities that it would have traded profitably in the counterfactual case. Cabo’s position on this point was not entirely clear. Cabo’s opening submissions and written closing submissions contended that it was not necessary to establish on a balance of probabilities that Cabo would have traded profitably. Ms Kreisberger in her oral closing submissions, however, accepted that it was necessary to prove causation of any head of loss on a balance of probabilities. She also accepted that if a claim was made for lost profits caused by the defendant’s conduct, it would be necessary to prove on the balance of probabilities that there would have been profits in the counterfactual scenario; and she reiterated that Cabo’s case was that it would indeed have been highly profitable in the counterfactual case.

To the extent that any doubt remains as to Cabo’s position on this point, the approach adopted by MGA and in Cabo’s oral closing submissions is, in my judgment, clearly correct. The contrary approach put forward in Cabo’s written closing submissions on this point relied on the judgments of the Court of Appeal in in Parabola and Vasiliou. Those cases do not, however, support the position advanced by Cabo. Both cases were claims for lost profits on the basis that, but for the conduct of the defendants, the relevant businesses (in Parabola a stock trading company, in Vasiliou a restaurant) would have traded profitably. In both cases the approach taken by the trial judges was to consider first whether, on a balance of probabilities, the businesses would have traded profitably, before going on to make a “reasonable assessment” of the profits which would have been achieved. In both cases that approach was upheld by the Court of Appeal.

At §23 of Vasiliou, Patten LJ commented that Mr Vasiliou’s competence and the restaurant’s prospects of success were not matters that went to causation, but were at most relevant to the assessment of how profitable the restaurant would have been. Those comments do not, however, suggest that in a claim for lost profits which would have been made but for the defendant’s conduct, it is possible to avoid considering whether on a balance of probabilities the business would have been profitable at all. Quite the contrary: Patten LJ approved the approach taken by the trial judges in two successive claims in the dispute which led to the appeal, both of whom had made findings on a balance of probabilities that the restaurant would have been successful and profitable, before assessing what the lost profits would have been. Patten LJ also cited and relied upon the passage from the judgment of Toulson LJ in Parabola above, in which Toulson LJ had approved the same approach taken by Flaux J in that case.

Nothing in Patten LJ’s comments at §23 suggested that it was possible to bypass consideration of whether Mr Vasiliou had established on a balance of probabilities that the business would have been a profitable one. Rather, those comments seem to have been made in the context of an explanation of the distinction between the Allied Maples loss of chance doctrine and the approach which had been adopted by the trial judges, rejecting the appellant’s submission that the quantification of profitability should have been subject to a discount to account for the possibility of failure. That can be seen in Patten LJ’s observations at §24:

“Judge Levy, in the passages I have quoted from his judgment, found as a fact that Zorbas would have been a successful restaurant and therefore assessed its lost profits on that basis. His analysis of the variable factors I have outlined which formed the agreed components of that calculation involved taking into account the time needed to establish a reputation and other everyday contingencies but did not involve a more general discount of the kind described in Allied Maples to take account of the statistical probability of failure. That was excluded by his finding that the restaurant would have been a success.”

Patten LJ returned to these points at §44:

“As explained earlier, the issue of how successful the restaurant would have been was not an issue of causation. It was relevant only to quantum. Judge Dight and Judge Levy were satisfied that the restaurant would have been profitable and calculated the damages accordingly. One can express this in terms of them assessing the chances of success at 100% but either way there is no room for a further discount. The calculation of profits which they made was not determined as the best level of profits reasonably obtainable. It was the amount which on their findings he would have earned.”

Patten LJ’s point was therefore that having concluded on the balance of probabilities that the restaurant would have been successful and profitable, the correct approach was then to make a reasonable assessment of how successful the restaurant would have been, taking account of the restaurant’s chances and everyday contingencies arising under that scenario, rather than assuming the “best level of profits reasonably obtainable”. Put another way, having determined whether on a balance of probabilities the restaurant would have been successful and profitable, the quantification exercise then required assessment of how successful and how profitable it would have been.

As Nugee J commented in Wellesley Partners v Withers [2014] EWHC 556 (Ch), §188(5)–(6), the important point arising from these cases is that where the claim is for a loss of profits arising from a lost opportunity to trade, the court must first decide on a balance of probabilities whether the claimant would have traded profitably. Nugee J continued at §188(7):

“… it is clear from Parabola and Vasiliou v Hajigeorgiou that if the court finds that trading would have been profitable, it then makes the best attempt it can to quantify the loss of profits taking into account all the various contingencies which affect this: see Parabola, para 23. This neither requires any particular matter to be proved on the balance of probabilities (see Parabola, para 24) nor has anything to do with the loss of a chance as such (see Vasiliou v Hajigeorgiou, para 25). The assessment of the loss will itself include an evaluation of all the chances, great or small, involved in the trading (see Parabola, para 23). Once the judge has assessed the profits in this way, any further discount is therefore inappropriate (see Vasiliou v Hajigeorgiou, para 28).”

The analysis of Nugee J in Wellesley was cited at length by Bryan J at in Assetco v Grant Thornton [2019] EWHC 150 (Comm), §412. At §§435–440 Bryan J also cited the judgment of Males J in SCF Tankers v Privalov [2016] EWHC 2163 (Comm), [2018] 1 WLR 5623, applying essentially the same approach at §55:

“The true position is that in principle damages can be awarded for loss of profits even if a claimant might have made a loss. The approach which the court will adopt is to ask whether the claimant has proved to a sufficient standard (which may be the balance of probabilities, or sometimes merely that there was a real and substantial chance as in loss of a chance cases) that its trading would have been profitable. If so, the court will make the best assessment of the damages that it can, applying if necessary a discount to reflect whatever uncertainty exists, while recognising that a party seeking to show what might have happened is not required to perform an impossible task with unrealistic precision.”

Bryan J then continued at §441 that SCF Tankers was a case like Parabola and Vasiliou where the claim is for the loss of profits arising from a lost opportunity to trade generally. “In such a case the court first decides if the claimant would have traded successfully – in SCF Tankers v Privalov whether a profit would have been made by the defendants.” The quantification exercise should then, he considered, be approached in the way described by Nugee J in Wellesley.

The consistent approach taken in all of these cases is therefore that where the claim is for the loss of profits in a business resulting from a lost opportunity to trade, the first question for the court is whether the claimant has established on a balance of probabilities that it would have traded profitably, but for the matters relied upon as establishing the defendant’s tortious liability. If the answer to that question is “yes”, then the court will assess what that profit would have been, making the best attempt it can to establish that on the evidence (see the similar summary at §83 of BSV v Bittylicious [2024] CAT 48).