Ipsofactoj.com: International Cases [2003] Part 5 Case 9 [CAEW]




- vs -

Bank of Credit & Commerce International SA




31 JANUARY 2002


Lord Justice Pill


  1. This is an appeal against the judgment of Lightman J given on 25 June 1999 whereby he dismissed claims for damages, known as the stigma claims, against Bank of Credit and Commerce International SA (“BCCI”) by former employees. There are over 300 stigma claims. The litigation is managed by Lightman J and on 29 July 1998 he made an order for the trial of five test cases, including those of Mr. Syed Badshah Nawab Husain and Mr. Iqbal Zafar (“the appellants”). His order provided that any determination or finding as to the law or the facts common to cases not before the court as test cases should be binding on the other employees who were listed in a schedule to the order.

  2. The claims of Mr. Husain and Mr. Zafar and three others were considered by the judge at a hearing which lasted 9 weeks with hearings on 36 days. The judge rejected their claims. On 4 May 2001, Chadwick LJ and Arden LJ granted a limited permission to appeal to the appellants


  3. The claims arise out of the conclusion of the House of Lords in Malik & Mahmud v BCCI [1998] AC 20 that, in a contract of employment, there is an implied obligation on an employer not to carry on a dishonest or corrupt business. If there is a breach of that obligation as a result of which an employee’s future employment prospects are handicapped, damages may be recoverable for financial losses sustained. Further, it makes no difference if the employee only heard of the employer’s conduct after leaving the employment. Dealing with an entitlement to damages for financial loss, Lord Steyn, with whom Lord Goff, Lord Mackay and Lord Mustill agreed, stated, at p 52G:

    The principled position is as follows. Provided that a relevant breach of contract can be established, and the requirements of causation, remoteness and mitigation can be satisfied, there is no good reason why in the field of employment law recovery of financial loss in respect of damage to reputation caused by breach of contract is necessarily excluded.

  4. Lord Steyn referred to difficulties of proof and continued at page 53D:

    It is, therefore, improbable that many employees would be able to prove ‘Stigma compensation’. The limiting principles of causation, remoteness and mitigation present formidable practical obstacles to such claims succeeding. But difficulties of proof cannot alter the legal principles which permit, in appropriate cases, such claims for financial loss caused by breach of contract being put forward for consideration.

  5. Lord Nicholls of Birkenhead, with whom Lord Goff and Lord Mackay agreed, also referred to the difficulties involved. Among them, at page 42E was:

    Finally, although the implied term that the business will not be conducted dishonestly is a term which avails all employees, proof of consequential handicap in the labour market may well be much more difficult for some classes of employees than others. An employer seeking to employ a messenger, for instance, might be wholly unconcerned by an applicant’s former employment in a dishonest business, whereas he might take a different view if he were seeking a senior executive.


  6. The present claims are to be approached on the basis that, in the words of Lord Nicholls, the employer “was conducting a dishonest and corrupt business”. There was before the judge a statement of “agreed misconduct”. In his summary of that misconduct, the judge stated:


    It was agreed that the Bank was hopelessly insolvent from at least 1986, and the proper inference must be that it was insolvent (or at least of doubtful solvency) from the mid 1970s, for it is agreed that the wrongdoing during the period from the mid 1970s on was designed to conceal the true financial position of the Group and its insolvency or doubtful solvency.


    The fraudulent activities were not isolated, but systematic over a very long period of years. They took on a life of their own. They formed, or related to, part of the Bank’s banking activities. The wrongdoing included payments of bribes and kickbacks (to employees of the Bank, officers of other banks and public officials), the preparation of false records (including the recording of sham and fictitious transactions) and the creation of fictitious (i.e. forged) documentation; the unlawful purchase of its own shares; money laundering (including the laundering of drug money); defalcations; and the preparation and filing of false annual accounts vastly overstating assets and understating liabilities. Even today the Liquidators cannot say what is the full extent of the frauds. The sums involved in the frauds were massive running into billions of dollars. Such was the Bank’s wrongdoing that, when the house of cards collapsed, the insolvency of the Bank ran into billions of pounds causing huge losses to customers. The fraudulent activities were recorded principally in the Cayman Islands and in other off-shore locations, but were orchestrated, and sometimes conducted, from London.


    The wrongdoing and consequent collapse were likely to be (as they were) the greatest banking scandal ever and to cast a cloud (in the eyes of the public) on those employees of the Bank who were perceived to be involved in or party to the wrongdoing; ....

  7. It was in July 1991 that the scandal broke and BCCI entered into provisional liquidation. In January 1992 the company was ordered to be wound-up compulsorily. Mr. Husain was a payroll officer in the personnel department and was dismissed on the liquidation of BCCI. Mr. Zafar had a more senior and expert position. He was Regional Manager for Southern Africa and a relatively senior officer. He had been dismissed by BCCI in 1990. He obtained a job in June 1991 with Albaraka International Bank Limited (“AIBL”) but was dismissed from it in August 1991. Both men were in their 40’s. Neither of them has since been employed. They seek damages on the basis that it has been the breach by BCCI of the trust and confidence clause which has caused their failure to obtain employment.


  8. In making their submissions, the parties agree that in deciding the test to be applied, nothing turns on whether the claim is in contract or in tort. The underlying rule of the common law is that “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed”, (Parke B in Robinson v Harman [1848] 1 Exch Rep 850 at 855), a statement since frequently cited with approval. The judge considered in great detail the events between the appellants’ dismissal and the trial. He concluded that their failure to find work was not caused by BCCI’s breach of the trust and confidence term.

  9. It will be necessary to consider the evidence in more detail but the appellants’ basic complaint about the judge’s approach can be put simply. The appellants challenge the judge’s treatment of the evidence and his failure to draw inferences. They also submit that the judge was wrong to conduct a “job-specific exercise”. He should have adopted a “broad brush” approach by which he evaluated the diminished chance of work and put a value on it. Loss should necessarily have been inferred from the evidence of corruption and the widespread publicity given to it. Failing that, loss should in the circumstances have been inferred from the evidence of the appellants’ failed job applications. It was not a necessary requirement (and was unrealistic) to have to call prospective employers to give evidence as to why they did not offer employment to the appellants.

  10. An issue arises as to whether the judge wrongly excluded evidence known as the “anecdotal” evidence. Subject to that, two issues on which permission to appeal has been granted arise. The first is whether the judge selected the correct legal test to be satisfied by the appellants in order to establish financial loss consequent on breach of the trust and confidence term. The second is whether, whichever legal test is applied, the judge was wrong in failing to draw inferences of financial loss in the case of each appellant from the evidence as a whole. It included evidence of the publicity given to wrongdoing at BCCI, evidence of the appellants’ previous employment histories and their efforts to obtain employment since the relevant dismissals, statistical evidence and the evidence of experts and witnesses from Coutts’ Career Consultants Ltd (“Coutts”). Mr. Zafar also challenges the judge’s finding of primary fact that his dismissal from AIBL was not, wholly or even in part, caused by the breach by BCCI of the trust and confidence term.

  11. In his approach to the issues in the case, the judge did not minimise the scandalous way in which BCCI had been operated. He set out the statement of agreed misconduct. The judge referred in some detail to the publicity given to the misconduct. Mr. Kent QC, for the appellants, relies on that sustained bad publicity in support of the submission that the appellants were at a serious disadvantage in their job applications. The publicity suggested endemic corruption on a vast scale and for a long time. Articles in national newspapers referred to fraud being manifest in the bank “from top to bottom”. The bad publicity was sustained; as late as April 1993 an article in a national newspaper included the allegation that “there was corruption at every level of their [BCCI] operation”. It is submitted that the bad publicity is an important component in the case. The appellants were inevitably prejudiced by that publicity and their standing on the labour market was reduced. The effect of the stigma was compounded by the appellants’ lengthening period of unemployment and by their increasing age. The judge failed to take into account long-term and cumulative effects of the existence of the stigma. The possible becomes probable if repeated often enough, it is submitted. The disadvantages resulting from the breach of the trust and confidence term were such that, at lowest, a lost chance of employment entitling the appellants to damages had on balance of probabilities been established. The judge adopted too high a threshold, it is submitted, in converting that disadvantage into an actionable loss.


  12. In his judgment, which I have had the opportunity to read in draft, Robert Walker LJ has considered the judge’s approach to the consequences of a breach of contract in circumstances such as the present. I agree with him that the judge has adopted an over-elaborate approach to the legal issue. I agree with the approach set out by Robert Walker LJ at paragraph 88 of his judgment. I do not consider that cases such as Aerial Advertising Co v Batchelor Peas Ltd (Manchester) [1938] 2 All ER 788 and Ratcliffe v Evans [1892] 2 QB 254 assist the appellants. In those cases, loss of business by reason of the wrong was proved, and the issue was as to quantification.

  13. Neither do I consider that the decision of the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1 assists them. Complex factual issues may arise when deciding whether a particular loss has been caused by a breach of contract or breach of duty in tort. Having referred to the speeches in McGhee, Lord Bridge of Harwich, in Wilsher v Essex Area Health Authority [1988] AC 1074, at 1090, stated:

    The conclusion I draw from these passages is that McGhee v National Coal Board laid down no new principle of law whatever. On the contrary, it affirmed the principle that the onus of proving causation lies on the pursuer or plaintiff. Adopting a robust and pragmatic approach to the undisputed primary facts of the case, the majority concluded that it was a legitimate inference of fact that the defenders’ negligence had materially contributed to the pursuer’s injury. The decision, in my opinion, is of no greater significance than that and to attempt to extract from it some esoteric principle which in some way modified, as a matter of law, the nature of the burden of proof of causation which a plaintiff or pursuer must discharge once he has established a relevant breach of duty is a fruitless one.

  14. To obtain substantial damages the claimant must prove, on a balance of probabilities, loss resulting from the breach of contract. The loss alleged in the present cases results from the failure to obtain employment. It is for the appellants to establish that the breach of the trust and confidence term is a cause of that failure. The parties called a very substantial amount of evidence about causation, the respondents attempting to defeat the appellants’ case that there was a causal link and also the appellants’ submission that an inference should be drawn that a loss had occurred. The respondents were entitled to do that and to subject to close scrutiny the appellants’ case that it is stigma resulting from their employment with BCCI which has caused their failure to obtain work. They were entitled to subject the claims to what as been called a job specific exercise. It is for the judge to decide whether, on the evidence, loss results from the breach (or in a negligence action from the breach of duty (Wilsher v Essex Area Health Authority).

  15. In deciding that issue, the trial judge may draw inferences in a common-sense way. The fact that the loss cannot be quantified precisely need not be a barrier either to a finding that it was caused by the breach or to an assessment of the loss in a commonsense way (Ratcliffe v Evans and Aerial Advertising Co v Batchelor Peas Ltd (Manchester)).

  16. In many cases a loss of business resulting from a breach of contract will readily be assumed, inferred or proved. It will not always be necessary to call a prospective customer to say that, but for the breach by the defendant, he would have done business with the claimant. In personal injury cases, a court may be very ready to infer that a manual worker who has lost, for example, a limb is likely to suffer loss of earnings as a result. Causation must however be proved and it is open to a defendant to put the claimant to proof and to call evidence with a view to disputing the alleged causal link between breach and loss, the loss in the present cases being the absence of paid employment.

  17. The judge is entitled to draw conclusions from the results of that exercise though, in considering evidence specific to particular jobs, he must not lose sight of the overall picture and must reach a conclusion about loss on the basis of the evidence as a whole. The evidence of the parties has been carefully scrutinised in the course of a long trial. In his judgment, the judge has summarised the evidence, commented upon it and made clear and detailed findings of fact.

  18. One way the appellants put their case is on the basis of the loss of a chance of employment. They rely on the decision of this Court in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602. Solicitors failed to advise the plaintiffs sufficiently in a property transaction. A warranty against liability for a former tenant’s obligations under leases was not obtained. The trial judge held that, on a balance of probabilities, there was a real and not a mere speculative chance that the plaintiffs, had they been properly advised, would have successfully re-negotiated with the vendor to obtain proper protection. The decision was upheld in this Court. It was held that where the defendant’s negligence consisted of an omission, causation depended upon the answer to the hypothetical question as to what the plaintiff would have done if the defendant had not been guilty of the omission, which was a matter of inference to be determined from all the circumstances. Where the plaintiff’s loss depended on the hypothetical action of a third party, he was entitled to succeed if he could show that there was a real or substantial, rather than a speculative, chance that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff (per Stuart-Smith LJ at p 1611 expressed as his category (3)). Stuart-Smith LJ stated:

    In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, ... that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?


    I have no doubt that ... the second alternative is correct.

  19. Reliance is also placed on a statement of Lord Lowry in Spring v Guardian Assurance Plc [1995] 2 AC 296 at 327, a case in which a reference given by an employer about a former employee constituted a negligent misstatement. Lord Lowry stated:

    Once the duty of care is held to exist and the defendants’ negligence is proved, the plaintiff only has to show that by reason of that negligence he has lost a reasonable chance of employment (which would have to be evaluated) and has thereby sustained loss: McGregor on Damages 14th ed (1980), pp 198-202, paras 276-278 and Chaplin v Hicks [1911] 2 KB 786.

    Stuart-Smith LJ in Allied Maples expressed agreement with that statement.

  20. In Chaplin, the plaintiff was one of 50 finalists in a competition for 12 prizes and was held entitled to damages for wrongfully being deprived of the opportunity to take part in the final. On the evidence, it was impossible to decide whether she would have won a prize; she was entitled to damages for loss of the chance. In Kitchen v Royal Air Force Association [1958] 1 WLR 563, the plaintiff lost the opportunity to bring an action against the original wrongdoer. He was entitled to damages on the basis of the Court’s assessment of the prospect of success he would have had against that wrongdoer (Parker LJ at p 576). In Allied Maples the majority held that it was possible to make “an informed judgment of what the chances were of achieving certain results” (per Hobhouse LJ at p 1620). Millett LJ, dissenting, would not have allowed damages because “the outcome of such negotiations is a matter of pure speculation” (p 1625).

  21. I do not consider that Lord Lowry in Spring was proposing to deprive judges of the opportunity to make findings of fact on causation on the basis of evidence before them. Lord Lowry made the statement in the context of a finding of fact by the trial judge that one of a number of named companies would probably have employed the plaintiff. Moreover, in the absence of a favourable reference, the job application could not, under the rules of the regulatory body Lautro, be considered on the merits so that consideration on the merits was a hypothetical event.

  22. In Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443, a business was held entitled to damages for infringement of a patent. The judge awarded damages on the basis that the patentees would have achieved 15 sales if the infringers had not made their 25 wrongful sales. A loss was claimed on 25 sales and the judge did not identify the 15 which would in fact have been achieved by the patentees. In upholding the finding of the judge, Staughton LJ relied on Allied Maples. He stated:

    In my judgment the issue as to the amount of the patentees’ loss in the present case was a question in the second class; it depended on the hypothetical actions of third parties, that is to say the buyers of the infringing machines (or spare parts, servicing and CAD systems). The judge was entitled to conclude that the patentees had lost a chance of making sales to those buyers – no doubt a chance of differing probabilities in each case. He was entitled to evaluate the chances as a whole, rather than separately, if he chose to do so. The contrary view, that if the judge found 25 chances of a sale, each of 49 per cent probability, he should award nothing is absurd.

    Staughton LJ must in my view have been referring to the third of Stuart-Smith LJ’s classes in Allied Maples, that dealing with the hypothetical action of a third party.

  23. With respect, Gerber was not a loss of a chance case in quite the sense the expression was used in class 3 in Allied Maples. The loss, if any, suffered by the parties by reason of the infringement was capable of analysis in the light of actual events. The decision is, however, entirely explicable on the conventional basis already considered. It was open to the judge to infer, on an evaluation of the evidence, that 15 sales were lost. The absurdity contemplated by Staughton LJ would have been an absurdity on an analysis of the evidence using commonsense. Hutchison LJ stated, at p 487, that there was in his view “evidence sufficient to enable [the judge] to reach an assessment of lost profits”. The judge in Gerber was entitled to infer that 15 sales were probably lost without identifying 15 specific transactions. On different evidence he would have been entitled to reach a different conclusion.

  24. I do not consider that the judge was obliged to apply the loss of a chance principle in the present case. It is a useful tool for applying the general principle, that it is for the claimant to prove causation, in circumstances in which the consequences of the breach cannot easily be determined because it is impossible or extremely difficult to reconstruct events on the basis that there had been no breach.

  25. In the present cases it may be said that it cannot be known with certainty what would have happened if the appellants had applied for jobs without having the alleged stigma of previous employment by BCCI. The relevance of that alleged stigma to the events in question was however analysed in the most detailed and comprehensive way at the trial. The effect, if any, upon their employment prospects of the appellants having previously been employed by a corrupt employer was capable of analysis and was thoroughly analysed. Upon the judge’s findings, to which it will be necessary to refer in some detail, he was not obliged to assess the loss of a chance; he found on the evidence that stigma played no part in the failure to obtain employment. Had there been evidence in Kitchen that the claim against the original wrongdoer had no chance of success or in Allied Maples that the vendor would in no circumstances have renegotiated, the judges in those cases need not have applied the loss of a chance principle as they did.


  26. 25. Having set out the legal principles on which he proposed to rely, the judge first set out the factual background to the dispute. He then summarised and commented upon what he described as the expert evidence. That included three experts on the labour market, Mr. Langman for the appellants and Professor Rajan and Mr. Davies for the respondents. It included the evidence of Coutts, a specialist consultancy engaged by BCCI to assist employees and former employees to find other employment. Evidence was given by Mrs Docker, Ms Tsoflias, Mr. Parker and Mr. Charlesworth. Evidence was also given by witnesses from prospective employers and recruitment agencies. Many former BCCI employees did obtain other work. There was evidence that, of those registered with Coutts, almost half had found employment by Spring 1992, well over half if the self-employed and those in education and training were included.

  27. In the next section of his judgment, the judge set out the different ways in which the appellants’ case was put and commented upon them. He then considered the individual cases of the 5 employees chosen as test cases. They included the present appellants. Finally the judge expressed his general conclusions. At each stage the evidence was considered in considerable detail. The sections of the judgment dealing with the facts cover over 170 paragraphs and, on a rough calculation, about 40,000 words.

  28. Having considered the expert and statistical evidence, the judge rejected the notion that loss and damage should necessarily be assumed or inferred in stigma cases. He stated that it was the “direct evidence of loss suffered by each of the employees due to stigma” which was the “real case which calls for detailed consideration”.

  29. The judge stated that he felt able to “place only limited reliance on the evidence of Mr. Langman and where it is in conflict with that of Professor Rajan and Mr. Davies, I incline to prefer the evidence of the latter”. The judge stated that he found Professor Rajan “a most impressive witness” and that the views of Mr. Davies merited “great weight”. The judge’s criticisms of Mr. Langman’s evidence and the approach he had adopted to employees and to statistical material are clearly set out. We have been referred to a good deal of the statistical material and to the transcript of evidence and the criticisms were in my view criticisms the judge was entitled to make. The judge’s summary was:

    I would summarise the evidence of the three experts as to the effect that in the difficult labour market to which the Employees were exposed, there were a multitude of factors affecting their prospects. Stigma was a potential handicap if they chanced to apply for a job to a prospective employer who took the view that their previous employment by the Bank placed a cloud over the former employees of the Bank which could not be dispelled by the Liquidator’s references, but such an attitude on the part of prospective employers is not to be assumed.

  30. The judge found the evidence of the Coutts witnesses helpful. He stated that “Ms Tsoflias was the witness whose evidence I found to be of the greatest value, weight and assistance”. As summarised by the judge, Ms Tsoflias stated, amongst other things,:

    Coutts sent mailshots to some 1,300 prospective employers about job vacancies specifically for former employees of the Bank. One of her jobs was to contact employers to whom mailshots were sent to follow up the mailshots. She never received any indication whatsoever from these employers that they regarded former employees of the Bank in a less favourable light than any other potential employees as a result of the circumstances surrounding the Bank’s collapse, and in her frequent discussions with her colleagues they never mentioned any such indication. If there had been any such indication, there would have been a huge problem apparent to everyone;

    Mr. Charlesworth did accept that BCCI employees were marginally disadvantaged.

  31. The judge concluded:

    I can summarise the Coutts evidence by saying that the prospects of obtaining fresh employment very much depended on the attitude of the individual client; past employment by the Bank though a cause of anxiety on the part of clients and a possible ground for a prospective employer preferring another candidate with equal skills, did not deter prospective employers approaching Coutts to fill their vacancies and was not seen or experienced by Coutts to be a problem or at any rate a substantial problem. A prejudice against former employees on the ground of stigma was very much the exception to the general rule. There were other more pressing problems for the clients e.g. problems with English, age, market conditions and unrealistic expectations and demands.

  32. The judge summarised the evidence of employers and recruitment agencies:

    In short, whilst stigma is capable of attaching to a former employee of the Bank in the eyes of particular prospective employers and (to a greater or less extent) handicapping that former employee vis-à-vis that prospective employer, that can only be tested on a case by case examination of each prospective employer. Stigma (like a multitude of other factors) may come into play to the prejudice of a particular job applicant depending on the identity of the prospective employer: there can be no presumption that it has come into play or will come into play on any particular application.

  33. Under the heading “Status of Stigma as a Consideration”, the judge stated:

    The prospective employers may be assumed to have known that the candidate was previously employed by the Bank and have had some recollection of the collapse of the Bank and that there had been fraud at the Bank. But beyond this it is not possible to make any assumption as to the extent of the impact of the media publicity on them or whether this led to their having any preconception as to the integrity of employees of the Bank generally. It would not be fair for a prospective employer to adopt the attitude that previous employment by the Bank placed a candidate under a cloud; something more must be necessary to implicate the candidate. It is not possible to assume that any particular prospective employer took the (unfair) view that all former employees of the Bank were ‘under a cloud’. Some prospective employers may have held this view and for them that stigma may have been a consideration in their thinking when the Employees' job applications were before them, but this would have been exceptional. In every particular case that attitude of the particular employer has to be proved: it cannot be presumed. It is merely one of the possible reasons for an adverse decision. The onus is upon the Employees to prove that it was in fact a reason for an adverse decision in his case. It is important to bear in mind that there are not (as repeatedly maintained on behalf of the Employees) only two alternative explanations for the Employees’ unemployment, namely their unemployability and stigma. I have already indicated some of the multitude of other alternative explanations.

  34. On behalf of Mr. Husain, reliance is placed on the fact that between July 1991 and August 1998 he made 471 job applications. In 1990, he was 53 years old. He was called for interview only 8 times and received no offers of work. He had, prior to 1991 been in regular employment with BCCI. For 11 years he was in the Personnel Department and ran the salary section. Stress is placed on the very small number of occasions on which Mr. Husain was called for interview.

  35. Mr. Zafar had been employed by BCCI for 16 years in a senior position including Regional Manager for the Southern Africa Region. In 1990 he was 45 years old. He made 860 job applications between October 1991 and August 1998 and was called for interview on only 17 occasions. Stress is again placed on the number of times the appellant was not called for interview.

  36. Of Mr. Husain, the judge stated:

    I should first say a few words on my impression of the witness. .... But though he frequently reminded me of his duty as a Muslim to speak the truth, I regret to say that his evidence revealed him to be thoroughly dishonest, untruthful and unreliable. In his evidence (as in his applications for employment), he said whatever he thought best served his purpose. He lied (for example) about his work experience, his position at the Bank, his performance and disciplinary record, his involvement in his charity, the time devoted to his book, his job search and his written applications to POCL. .... By reason of the frequency of contradictory statements by him on so many topics, it is often difficult to decide which is true and which is false. His spoken English was not fluent. His difficulties with the English language are apparent on his application forms. ....

  37. The judge commented that Mr. Husain was not willing to engage in temporary or part-time work though this can often lead to permanent employment. While he made 43 applications in January 1992, in the 4½ years between April 1992 and September 1996 he made only 49 applications. Many applications were made after that date but the judge concluded that “This burst of activity is only attributable to his desire to show willingness to take a job in his anticipated claim for stigma damages against the Bank, though I do not think that he seriously intended to take up any of them”. The judge considered some of the job applications to be “hopeless”. Applications were supported by “deliberately false statements as to his means and stated or implied (again quite falsely) that he had banking facilities”. In some applications, Mr. Husain “set out deliberately to exaggerate (and thereby falsify) his experience and qualifications”. The judge noted that “In a number of applications for jobs in 1997 and 1998 he explained the gap in his employment between leaving the Bank and the dates of the job applications as a period expended in writing the book and in his activities for the Charity. I believe that this is essentially true and that this was the priority in his life throughout this period, though Mr. Husain tried to explain these statements in his job applications as falsehoods justified by his need to obtain the jobs in question”. The judge stated that he was “not surprised that Mr. Husain has remained unemployed: there were ample compelling reasons of which stigma is not one”.

  38. The judge’s conclusion in relation to Mr. Husain was:

    Mr. Husain has not discharged the burden of proof that stigma was a cause of the failure of any job application or the loss of a chance on such an application, or that there is any real possibility that it will be such a cause in the future. I am not satisfied that stigma played any part in Mr. Husain’s failure to obtain employment. This was at least part attributable to his limited efforts to find a job (on several occasions interrupted by lengthy trips abroad, trips to which no reference was made in his witness statement); in the case of the applications which he did make, he had the handicaps of poor English, the poor quality of his completed application forms, the contraction in the payroll industry and the fact that he had a limited amount to offer prospective employers. Mr. Langman himself commented on his weak qualifications and the problem he had with his written English. Age must have increasingly become a handicap. The falsehoods in his applications might well have been exposed at interviews with draconian consequences. By October 1996 he was almost 50 years’ old and already long term unemployed, and accordingly any prospect of employment thereafter was extremely limited. Any of these, as well as questions of personality, ethnicity and the quality of the competition may have decided the outcome of his applications. Questions of mitigation accordingly do not arise, but if they did I would have had difficulty holding that he made reasonable effort to mitigate.

  39. The judge stated his impression of Mr. Zafar. It included these comments.

    1. “Neither his spoken nor written English is fluent”

    2. “He has a very inflated opinion of himself and his abilities and is apt to adopt a very critical indeed jaundiced view of fellow employees and he cannot and will not keep such views to himself. He is arrogant and quite unable in a dispute to see or understand the other party’s point of view. ....”

    3. “He is a totally unreliable witness, unwilling or unable to distinguish falsehood from the truth and who lies whenever it suits his purpose.” The judge referred to an occasion when the appellant “quite deliberately set out to mislead the Court”.

  40. The judge described Mr. Zafar’s applications for employment and his dismissal by AIBL, which I will consider separately. The judge set out his conclusions in relation to Mr. Zafar in a sub-paragraph entitled “Reasons for Unemployment”.

    I have given the most anxious consideration to the questions whether Mr. Zafar has satisfied me on the balance of probabilities that stigma was an effective cause (whether sole of contributing) of (a) any of the rejections I have considered or (b) the loss of a chance of getting such jobs. I have concluded that the answer is firmly in the negative. His case has been handicapped by the fact that he has called none of those who interviewed and rejected him, compounded by the facts where such witnesses have been called by the Bank they have refuted his evidence and that his own account of interviews lack evidential weight because he is not a credible witness. There were a multitude of potential candidates as causes: though stigma could have played a part, the evidence does not satisfy me that stigma did play a part or was a cause. Factors to which the various employers (or their agents) in rejecting Mr. Zafar may have given varying weight include:


    Mr. Zafar had an exaggerated view of the ‘catch’ that he was to any prospective employer.


    his banking skills, and experience were generalist and his knowledge and experience in Islamic banking was limited;


    the recession and the diminution in the banking market in the early 1990’s (with the shrinking opportunities for generalists) made his job search more onerous, a fact reflected in his inability to find a job before the joined AIBL;


    his written English was poor (reflected in his poorly presented applications) and his spoken English was far from fluent, a potential handicap in the senior positions to which he aspired;


    his personality was not impressive or immediately attractive and (under pressure) becomes highly unattractive. He is prone to lecture and bully. He is not a person who would create a favourable impression at an interview: he is neither impressive nor straightforward. The character revealed in the course of his cross-examination was of a man who cannot and will not give a direct (let alone truthful) answer to questions and that may be expected to come over to an experienced interviewer;


    he was not a good ‘team member’. This would have come across (as Mr. Davies said in evidence) surprisingly quickly at an interview;


    he does not come over as straightforward. His unwillingness and inability to distinguish truth from falsehood were at risk of revealing itself (e.g. as to his ‘clients’, his CV, his knowledge of Islamic Banking). Prevarication is second nature to him;


    his age (45 in October 1990) increasingly made him too senior for posts which were a match for his talents. Age was a serious factor from 1995;


    his ethnic group;


    the absence of readily available references; and


    added to the above with the passage of time after September 1991 was the length of his unemployment and his dependence on benefits.

  41. The judge expressed his general conclusions in relation to the five claims before him, only two of which for present purposes it has been appropriate to consider in detail.


    The Employees have established that the Bank was in breach of the T&C Term of their contracts of employment, but they have not established that this breach caused financial loss to any of them. In Malik Lord Steyn gave the clearest warning that because of difficulties of proof it was improbable that many employees would be able to prove their entitlement to compensation. This trial underlines that warning and the critical importance in stigma cases such as this of credible evidence by the prospective employer or his agent of the impact of stigma on his decision to reject the job application in question.


    The Employees’ cases consisted of three elements


    they relied on their long-term failure to obtain employment and they invited the Court to infer that stigma was the likely cause. But stigma was not a likely cause and there were alternative more impelling causes. There is no room for any presumption that stigma played a part in the adverse decisions made on their job applications. (Subject to one proviso) only a small minority of prospective employers are likely to have adopted the view that any stigma attached to job applicants who were former employees of the Bank and that this placed them under a cloud. The proviso is that there was not present any substantial reason to believe that the individual job applicant was personally implicated in the wrongdoing. No such reason could have existed in respect of the general body of former employees of the Bank. Accordingly there can be no presumption that any particular prospective employer who was approached viewed former employees of the Bank as under a cloud, and the onus was on the Employees to establish that the prospective employers to whom they made job applications held this view and rejected their applications on this ground (whether on this ground alone or on this and other grounds). The Employees were unable to discharge this onus.


    The Employees gave evidence that on occasion the prospective employers expressly or impliedly stated that they were rejecting their job applications on grounds of stigma. But if the Court is to accept such evidence the witness must be credible and the evidence must be clearly and reliably recollected; and even if the evidence is accepted, it is not necessarily enough to entitle the Employees to succeed, for the reasons given to an applicant by a prospective employer may be of limited guidance as to his true reasons. The evidence adduced by the Employees generally was not credible and did not establish that stigma had the effect claimed.


    The Employees have also adduced evidence from some three prospective employers that stigma prompted their decisions to refuse the Employees’ job applications, but their evidence was plainly concocted.


    The evidential hurdles in the way of success in claims for stigma damages are substantial and any litigation is likely to prove protracted and expensive. Accordingly the greatest caution is called for before any such proceedings are instituted and the continuing viability of such proceedings must be the subject of continuing review. The prospects may be expected rarely to attain the required level to justify proceedings in the absence of reliable and tested evidence of the prospective employer or his agent. In any exceptional case when consideration is given to bringing proceedings without calling the prospective employer or his agent, at the very least the prospective employer and his agent should be approached before any proceedings are commenced to discover their account of events and see what evidence they can and will give; and the prospects of success must be assessed in the light of the response or absence of response by them. This precaution does not appear to have been taken in this case.


  42. The conclusions with respect to Mr. Husain and Mr. Zafar are fatal to their claims. The judge was entitled to make the findings he did. We have been referred to many parts of the transcript of evidence and doubt has not in my view been cast upon the validity of the findings. The judge did not deal specifically with the point that both men were called for interview on very few occasions. It is, however, clear from his comments and reasoning that he had reached the conclusion that stigma was not the cause of their failure to obtain employment, which was the relevant conclusion. The fact that some only of the factors he relied on would have been relevant at the stage of deciding whether to call for interview does not defeat that conclusion. Even assuming (without accepting) that the BCCI link may have reduced the number of interviews, the judge was clearly of the view that the eventual outcome of the applications was unaffected by stigma.

  43. The judge was entitled not to assume or to infer, in either case, that loss resulted from BCCI’s breach of the trust and confidence term in the contracts of employment and to conclude in terms that it did not. I bear in mind the submission that some of the factors mentioned by the judge, such as increasing age and the increasing length of unemployment, are capable of operating cumulatively with a stigma to cause a loss or increase a proved loss. The inclusion of these factors as reasons for unemployment does not, however, affect the validity of the judge’s conclusion that stigma did not “play a part or was a cause” of the unemployment or the validity of the reasoning which led to it.

  44. In his general conclusion, the judge gave guidance as to what a successful claim is likely to involve. Having regard to the length of the hearing before him and the evidence and submissions he had heard, he was entitled to give that guidance and was well placed to do so. The guidance requires most careful consideration by claimants. I only add that it cannot be said as a matter of law, and the judge was not putting it as such, that it is necessary to call, or approach, the prospective employer or employers. On the judge’s findings of fact, which I find no reason to disturb, there can, as Mr. Jeans for BCCI put it, be no general inference of loss in these cases from the fact of unemployment. The onus is on a claimant to establish a loss of employment by reason of stigma in his particular case.


  45. Mr. Kent rightly puts the subject of Mr. Zafar’s loss of employment with AIBL as requiring separate consideration. Mr. Zafar was appointed Assistant Managing Director of that company as from 1 June 1991. It was agreed that he should receive a mandate specifying his duties. The judge has set out in considerable detail in his judgment the short but eventful history of Mr. Zafar’s employment. It was terminated with immediate effect on 16 August 1991 shortly after the BCCI scandal broke. He was paid the equivalent of 3 months pay in respect of the termination. On 4 November 1991 he issued a writ against AIBL claiming damages for breach of contract. On 28 November 1997, it was ordered by consent that £26,000 in Court be paid to Mr. Zafar together with a contribution of £10,000 towards his costs in full and final settlement of his claims.

  46. The judge’s conclusion about the termination was:

    Generally I am satisfied that Mr. Zafar’s employment by AIBL was always under threat because of the opposition of the Resident Directors to his appointment and was doomed by reason of his personal incompatibility with them and finally brought to an end by reason of his refusal to sign a contract to accept the position of Assistant General Manager. His previous employment by the Bank was a matter ventilated about the time of his dismissal, but this was not a ground for his dismissal. It was referred to by Lord Denman and by Dr Kamel as a matter which might be taken into account, but I do not think that it was or in any way affected the outcome. The Resident Directors and Shareholders could reach no agreement with Mr. Zafar as to the post Mr. Zafar should occupy. Despite his protestations to Dr Kamel to the contrary, Mr. Zafar insisted on the elevated status of Assistant Managing Director: and that was not acceptable to the Resident Directors or the Shareholders. The Resident Directors had had enough of him for the other reasons I have mentioned, and the Shareholders (as they decided to go along with the Resident Directors on the 19th June 1991 on the question of Mr. Zafar’s job title) decided to go along with those directors on his dismissal. When it came to the crunch, those directors had the Shareholders’ trust more than Mr. Zafar did, and the Shareholders did not want a war with the Resident Directors over Mr. Zafar. Some insight into the Shareholders’ attitude to his former employment by the Bank may be found in Mr. Zafar’s evidence to the effect that (1) though the lights were flashing regarding the Bank before his appointment, they were no barrier to his original appointment; and (2) after the collapse of the Bank the Shareholders told him they still wanted to appoint him managing director. The Resident Directors had long intended to rid AIBL of him for other reasons. I do not think that stigma played any part in his dismissal or was an effective or contributing cause of it or of the loss of a chance of his remaining with AIBL. I should add that, even if I had held that stigma was a cause, I would have held that it was only a minor contributory cause, that it did not affect the outcome and that if it did have any impact that impact was limited to marginally accelerating the inevitable; and that, since in any event Mr. Zafar’s employment would have been terminated for the other reasons I have given in a matter of weeks, if not days, and he received substantial compensation for this termination from AIBL no substantial award of damages was appropriate.

  47. Mr. Kent submits that the finding that stigma was not an effective or contributory cause of the dismissal was, on the evidence, perverse. The documentary evidence referred to by the judge pointed to stigma being the cause of dismissal and there was no oral evidence from those involved in the relevant events to defeat that conclusion. The credibility or lack of credibility of Mr. Zafar could have no bearing upon the conclusion on this issue, it is submitted.

  48. Mr. Jeans submits that the opinion the judge formed of Mr. Zafar is relevant to this issue. It enabled the judge to form a view as to the relationship and dealings between Mr. Zafar and other officers and employees of AIBL. The contemporaneous documents reveal considerable differences between Mr. Zafar and the others. In evidence Mr. Zafar denied such problems until his first written statement and the contents of a telephone conversation recorded on 20 July 1991 were put to him. Mr. Jeans submits that the BCCI connection was only a peg on which to hang a decision taken on other grounds. The documents reveal a dispute as to whether Mr. Zafar should be Assistant Managing Director or Assistant General Manager. The minutes of the Board Meeting of 14 August 1991, to which the judge referred, referred to Mr. Zafar’s not accepting the offer of employment with the changed designation. It was resolved that “Mr Zafar, having refused to accept the offer of employment as conveyed to him in writing by the Managing Director, as per instructions of the Vice-Chairman, be dismissed with immediate effect”. There is no reference in that minute to BCCI being a factor and there is no reference to it in Mr. Zafar’s forceful response to the dismissal in his letter of 18 August.

  49. There is force in the submission that the contradiction between the resolution adopted at the Board Meting and other documents containing a reference to the BCCI factor is unresolved. However, on the evidence as a whole, the judge was in my view entitled to come to the conclusion he did on this issue. An AIBL internal minute dated 9 July 1991 in which the position of Mr. Zafar was reviewed, included the statement: “We had hoped to resolve this tiresome matter quietly but believe the BCCI events have overtaken this strategy”. That, however, is not necessarily inconsistent with the respondents’ “peg-hanging” submission. There is no justification for reversing the judge’s finding of fact. Mr. Zafar’s oral evidence, and the view taken of it by the judge, is a relevant factor in interpreting and assessing the significance of the events in the summer of 1991.


  50. The judge refused an application to admit at the trial evidence of 15 witnesses directed to the experiences of other former employees of BCCI seeking work following closure. The application had a curious history. It was first made before the trial on 20 November 1998. The judge declined to admit the evidence but ordered that Mr. Langman, the claimants’ expert witness, be at liberty to annex the witness statements to his report. Miss Booth QC had stated, in the course of argument before the judge, that the claimants were perfectly happy for the statements to go in and for the judge to attach to them what weight he wanted to attach.

  51. On 11 December 1998 Miss Booth sought permission to call Mr. Vaz MP “to give factual evidence about the market place”. A question arose as to whether Mr. Vaz was prepared to name people referred to in his statement. Miss Booth stated that he would be spoken to and “if he is prepared to give names we will renew our application at that point”. That application was not renewed.

  52. On 25 February 1999, 8 days into the trial, the claimants renewed their application to call witnesses and also, and for the first time, submitted that the Coutts witnesses should be excluded. There had been no change in circumstance between the renewed application and the earlier one. The judge refused the application to exclude the Coutts witness. The judge referred to the lateness of the application and to the fact that the Coutts evidence related to their own experience when acting as consultants for the Bank in this very matter.

  53. No objection is now taken to that decision but it is submitted that the “anecdotal” evidence should also have been admitted. The judge declined to review his decision, giving reasons. The admissibility of the material was the subject of a further submission later in the trial. In his judgment, the judge gave his reasons for excluding the evidence and did so in terms substantially the same as those given on 25 February:

    I refused the applications for two reasons. The first was because such evidence does not satisfy the test of admissible similar fact evidence: it was not logically probative of the Employees’ case: the fact (if established) that another person was refused work by one prospective employer because of stigma was no evidence that the Employees were likewise refused work on this ground by prospective employers whom they approached. The second was that, even if such evidence could have some probative value, in my discretion it would be unjust to allow such evidence, for it would be the occasion for a disproportionate increase in the length of trial and costs. The evidence of witnesses alleging that they have been refused employment on grounds of stigma (like the evidence of the Employees in this case) requires the most careful examination, and can only properly be evaluated in the light of discovery and investigation of the incidents in question (and this includes contact with, and often evidence by, the prospective employer in question). To undertake this exercise in respect of each anecdotal incident would heap trial upon trial and would involve a disproportionate expenditure of time and cost for (at best) a marginal return.

    The judge also expressed his conclusion that, though Mr. Langman had permission to consider the 15 witness statements, Mr. Langman had not in the event based his opinions in evidence upon the contents of those statements.

  54. The judge’s decision was in my view entirely justified on the second ground given, if not the first. I do not accept his conclusion that the proposed evidence could not logically be probative of the claimants case as presented. It was capable of assisting the judge in deciding whether to draw an inference favourable to the claimants. However, the decision was justified as a decision, in the interests of justice, to limit the scope of the trial. A limited number of test cases had been chosen for investigation with a view to a manageable trial. The contents of the statements of other claimants, and the letters they say they had received, opened very broad areas for enquiry, if the evidence was to be assessed fairly. Putting in statements without cross-examination and further enquiries would have been of very limited value. Enquiries as to the credibility of the proposed witnesses and of material they claimed to have received from prospective employees would have been necessary, especially in the context of a case in which the judge found that other such material had been concocted. Quite apart from the possibility of dishonesty, extensive enquiries would have been necessary into the activities of persons who had not been selected for test purposes. Indeed, one of the statements was from a woman who had declined to be a test case because she did not want the strain of that responsibility. In the context of a case in which a broad range of evidence was before him, the judge was also entitled to conclude that the bearing of the experience of other employees upon the test cases to be considered in great detail was “marginal”.


  55. Mr. Allen QC was present at the hearing of the appeal on behalf of claimants not involved in the test cases. Given constraints of time, the Court was not prepared to hear Mr. Allen cover the ground which had been covered by Mr. Kent nor, in the event, did he seek to do so. Mr. Allen was invited to identify any point which the Court ought to have in mind which it would not have in mind in relation to the appeals but which was distinctive to his clients. He did not do so. Mr. Allen was offered the opportunity to put in a written submission when he had heard the submissions of the parties to the appeal but did not take that opportunity. Mr. Allen did propose that the Court should hand down a provisional judgment on which he should have the opportunity to make submissions on behalf of other parties before a final judgment was delivered. We refused that application.

  56. This account is not given by way of adverse comment upon Mr. Allen’s presence at the hearing of the appeal. It may well prove to have been of assistance to his clients. The Court’s duty is, however, to consider the two appeals before it and not cases not before it.


  57. I would dismiss these appeals

    Lord Justice Robert Walker

  58. I agree that these appeals should be dismissed for the reasons set out in the judgment of Pill LJ, which I have had the advantage of reading.

  59. If these two appeals stood alone, I would not wish to add anything. But as the judge’s conclusions on issues of law and fact are to be binding in relation to other claims within this managed litigation, I wish to add a short comment on one evidential point, and some rather more extensive comments on the topic of loss of a chance.

  60. The evidential point is whether it was necessary, as a matter of law, for the claimants to call evidence from prospective employers as to the effect of BCCI stigma on particular job applications made to them. Credible evidence of that sort from an independent source would no doubt give powerful support to a claim. But I respectfully agree with Pill LJ that it was not necessary as a matter of law. To impose that requirement would put a large (and in many cases insuperable) obstacle in the way of stigma claims.

  61. In paragraphs 64ff of his judgment the judge considered (under the heading ‘Loss of job or loss of chance of job’) what the stigmatised employees had to prove in order to establish loss. The judge rightly noted that the relevant principles are discussed at length in the decision of this court in Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602 (Stuart-Smith and Hobhouse LJJ, with Millett LJ agreeing on the law but dissenting on the facts). I am far from confident of adding to the clarity of the exposition in Allied Maples but I venture to make some observations of my own.

  62. Two points should be noted at the outset. The expression ‘loss of a chance’ (which may have been first used in Chaplin v Hicks [1911] 2 KB 786, 791) has over the years been used to cover a variety of situations, some of which may be thought to stretch and distort its original meaning. It is most apt to cover the loss of a single identifiable opportunity which, although difficult to evaluate, was “something which had a monetary value” (the words used by Vaughan Williams LJ in Chaplin v Hicks at p.793). The clearest example is when the claimant’s right of action for damages against a third party is lost through the negligence of a solicitor who fails to commence proceedings in time. Kitchen v Royal Air Force Association [1958] 1 WLR 563 was such a case. In it Lord Evershed MR. said (at p.575),

    In my judgment, what the court has to do (assuming that the plaintiff has established negligence) in such a case as the present, is to determine what the plaintiff has by that negligence lost. The question is, has the plaintiff lost some right of value, some chose in action of reality and substance? In such a case, it may be that its value is not easy to determine, but it is the duty of the court to determine that value as best it can.

  63. Chaplin v Hicks itself is often referred to as another example of the loss of a chance, but it is hardly a good example of a third-party decision which must be “justifiable by objective criteria” (Millett LJ’s description in Allied Maples at p.1623). Study of the facts shows that Mr. Hicks, the actor-manager who organised the talent competition, changed the rules so that the final selection of twelve winners was to be made, not by the votes of newspaper readers, but by Mr. Hicks himself, at interviews at the Aldwych Theatre in London. So it was not ultimately a case of third-party volition at all, but it seems to have been treated as if it was.

  64. In other cases the label ‘loss of a chance’ has been used much more loosely. As is said in McGregor on Damages (16th edition, para 375, at the beginning of the section dealing with loss of a chance),

    All cases dealing with loss of business and professional profits depend upon the chance and contingency that other parties will act so as to bring profits in to the plaintiff; customers must come to the shop, audiences to the theatre, fish to the hook.

    The author then proceeds to consider the case where there is “one particular chance that the plaintiff loses, one particular contingency upon which a gain to him has depended”.

  65. The other preliminary point to be made is that both in the true ‘loss of a chance’ case (exemplified by a solicitor’s negligence in allowing a claim to become statute-barred) and in other more debatable ‘loss of chance’ cases the question arises both on the issue of causation and (if the claimant gets that far) on the issue of quantum. That point is very clearly made in the judgment of Millett LJ in Allied Maples at 1622 D-F and at 1623 A-D. Similarly Stuart-Smith LJ said at p.1614D:

    .... the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying between something that just qualifies as real or substantial on the one hand and near certainty on the other.

    The order for a split trial of the issues of liability and quantum led to some confusion in Allied Maples (see Hobhouse LJ at 1621 G-H).

  66. In paragraph 66 of his judgment the judge set out most of the important statement of principle in the judgment of Stuart-Smith LJ at 1609H to 1611C. Stuart-Smith LJ’s three-fold classification can be briefly summarised as follows:


    In the typical case of personal injury through a positive act of negligence, causation must be decided on the balance of probability. But so far as quantum depends on what will actually happen in the future (such as whether the claimant will develop arthritis as a result of his injury) the court makes an assessment, often in percentage terms.


    Where the defendant’s breach of duty is an omission (such as a failure to give correct legal advice, or to provide proper safety equipment) the court has to decide what the claimant would have done had the duty been performed. Would the claimant have followed correct advice, or used the proper equipment? These are hypothetical questions, but they are decided on the balance of probability as to what the claimant himself would have done.


    Where proof of loss depends on the hypothetical action of a third party, the claimant can succeed if he shows that there was a real or substantial chance of that third-party action taking place, the evaluation of the chance being a question of quantification of damage.

  67. The process of assessment of the risk of complications mentioned in Stuart-Smith LJ’s first category (paragraph 63(1) above) can perhaps be explained by recognising that the court is not really concerned with predicting the future. It is concerned with answering a present question: what is the prognosis for this claimant?

  68. Examples of the type of case in the second category (paragraph 63(2) above) are the well-known cases of Sykes v Midland Bank Executor and Trustee Co [1971] 1 QB 113 and McWilliams v Sir William Arrol & Co [1962] 1 WLR 295. In Sykes the claimant (a professional man whose firm had been given inadequate advice as to the terms of a lease) failed, despite being pressed by the judge, to give any positive evidence about what his firm would have done had they been given adequate advice. In McWilliams the judge found that a steel erector who had fallen to his death would not have used a safety belt (which the employer, in breach of statutory duty, failed to provide). Both claims failed because causation had not been established on the balance of probability.

  69. The type of case in the third category (paragraph 63(3) above) is similar to the second category in that it raises a hypothetical question: what would have happened in the past, or would be likely to happen in the future, if some event (that is, the defendant’s breach of duty) had not occurred? The question is hypothetical because the actual course of events took a different turning. As Lord Browne-Wilkinson put it in Bolitho v City & Hackney Health Authority [1998] AC 232, 239,

    The question is what would have happened if an event which by definition did not occur had occurred.

  70. Bolitho was a medical negligence case. Cases of that type often raise particularly difficult questions of causation, and this court was referred to several decisions of the House of Lords on complex questions as to the causation of physical injuries, some in the context of medical negligence: McGhee v National Coal Board [1973] 1 WLR 1, Hotson v East Berkshire Area Health Authority [1987] AC 1074, Wilsher v Essex Area Health Authority [1988] AC 1074 and Pickford v Imperial Chemical Industries [1998] AC 1189. These cases do not, I think, give much direct assistance on the issues which have to be decided on this appeal.

  71. It is however worth noting that in Hotson, although Lord Bridge (at p.782) saw formidable difficulties in the concept of

    .... the lost chance of a better medical result which might have been achieved by prompt diagnosis and correct treatment,

    Lord Mackay (at p.786) considered that it would be unwise to lay down a rule that a claimant could never succeed by proving loss of a chance in a medical negligence case.

  72. It is also worth noting, before leaving the medical causation cases on one side, that in the typical case where treatment is given under the National Health Service a single defendant is generally responsible for a number of different healthcare professionals whose acts or omissions (in a medical emergency which may last for hours or days) are alleged to have brought about a bad outcome. If all these healthcare professionals are employed by the defendant, any question as to what one of them (for instance, a registrar or consultant who should have been called sooner) would have done but for an antecedent breach of duty by someone less highly qualified, must, it seems, be decided on the balance of probability, since in the eyes of the law no third party is involved. That seems to be the approach of Hobhouse LJ in Joyce v Merton, Sutton & Wandsworth Health Authority (1996) 7 Med LR 1, 20 in a passage expressly approved by the House of Lords in Bolitho:

    Thus a plaintiff can discharge the burden of proof on causation by satisfying the court either that the relevant person would in fact have taken the requisite action (although she would not have been at fault if she had not) or that the proper discharge of the relevant person’s duty towards the plaintiff required that she take that action. The former alternative calls for no explanation since it is simply the factual proof of the causative effect of the original fault. The latter is slightly more sophisticated: it involves the factual situation that the original fault did not itself cause the injury but that this was because there would have been some further fault on the part of the defendants; the plaintiff proves his case by proving that his injuries would have been avoided if proper care had continued to be taken.

  73. The distinguishing feature of Stuart-Smith LJ’s third category is that the uncertainty in the last element of causation is as to what would have been decided or done by a third party whose decision or conduct is to some degree capable of assessment on rational grounds. In the paradigm case of the claim which legal advisers have allowed to become statute-barred (Kitchen) the question was whether Mrs Kitchen would have succeeded in her claim after her husband had been killed by a defective electric cooker. The third party in cases of that sort is the court, an impersonal abstraction which would (but for the failure to commence proceedings) have determined the claim in an objective and impartial manner. In other cases the third party may be expected to act in his own best interests and his conduct may in that way be predictable (see Millett LJ in Allied Maples at pp.1623H –1624A).

  74. After his citation of Allied Maples the judge referred to the very well-known observations of Lord Reid in Davies v Taylor (on which Stuart-Smith LJ relied in Allied Maples) and to the decision of this court in Nestlé v National Westminster Bank [1994] 1 AER 118. Nestlé was a claim for equitable compensation for breach of trust in the investment of trust funds, and I do not think it is of much help here.

  75. Then (in paragraph 70 of his judgment) the judge stated that the test must be whether the court can decide “as a matter of historical fact” whether the claimant would, in the absence of the defendant’s breach of duty, have obtained an advantage or avoided a detriment (in other words, whether the chance would have turned out in his favour).

  76. The judge distinguished two situations: where the defendant’s wrongdoing has made it impossible to carry out that exercise of ascertaining historical fact, and where the exercise has remained possible and has in fact been carried out, but in a way which is, from the claimant’s point of view, flawed. The second half of my last sentence is a paraphrase of paragraph 70(2) of the judgment, and for the sake of accuracy I will set it out in the judge’s own words:

    The wrongdoing may be such that, whilst the relevant decision-making process was completed and a decision made on the merits, by reason of the wrongdoing the decision-maker may have taken into account matters which (but for the wrongdoing) he would not have done. In that case it is possible (albeit it may be difficult) to investigate as a matter of historical fact what, if any, part the matters in question played in the decision-making. Where this is the situation the claimant must prove that the matters in question were a cause of the absence of a decision in his favour.

  77. I have no difficulty with the first of the two situations envisaged by the judge. As Mrs Kitchen’s claim never got to court, it is plainly impossible to ascertain, as a question of historical fact, what the outcome would have been. But what if the negligence of the legal advisers (assumed not to be protected by advocate’s immunity) had consisted of an obviously culpable failure to engage and call an expert witness? Then the trial judge who heard (and dismissed) the claim might make clear in his judgment that he regarded the failure as fatal to the success of the claim; but he would be unlikely to state unequivocally that the claim would otherwise have succeeded. Even if he were to go that far, I am not sure how far his statement would establish anything as a matter of historical fact, unless that means no more than a strong probability.

  78. In considering whether his view accorded with the authorities the judge then referred to the decision of this court in Stovold v Barlowes [1996] 1 PNLR 91, to the decision of the Court of Appeal of New Zealand in Balfour v Attorney General [1991] NZLR 519, and to the decision of the House of Lords in Spring v Guardian Assurance [1995] 2 AC 296.

  79. Stovold is a case of some interest. It was heard at first instance before Allied Maples but reached this court after Allied Maples. It was a claim for solicitor’s negligence arising out of the failure of a solicitor, Mr. Campbell of Barlows, in despatching documents which were urgently needed in order to achieve the sale of a house belonging to his client, Mr. Stovold. On Thursday 14 September 1989 Mr. Dunn, the solicitor acting for the prospective purchaser, asked for the documents (the Land Registry entry and a draft contract) to be sent to him as a matter of urgency. Both solicitors had offices in Surrey. Mr. Campbell said that he would post them that evening. In fact (without Mr. Dunn having been asked whether he was in the DX system) Mr. Campbell’s secretary lodged them in the DX for the attention of Dunn & Co, a firm of tailors and outfitters.

  80. Had the documents been sent by first class post they would probably, but not certainly, have arrived on the Friday. When they had not arrived on that day Mr. Susans looked at another house and made an offer for it. When the documents had not arrived by the Monday Mr. Susans told Mr. Dunn to proceed with the purchase of the new house, but not to tell Mr. Campbell until he was ready to exchange contracts on the new house.

  81. At first instance Jowitt J held that Mr. Campbell was in breach of duty and (on the balance of probability) that but for the breach Mr. Susans would have proceeded with the original purchase. The case is of particular interest because Mr. Susans gave evidence and there was an issue as to the credibility of his evidence. The trial judge accepted him as a witness of truth and relied on his evidence (in re-examination) that even if the documents had arrived on the Tuesday, he and his wife would probably have carried on with the original purchase.

  82. In this court that conclusion was challenged. Mr. Susans’ evidence was closely analysed and shown to contain inconsistencies. This court (Stuart-Smith, Pill and Otton LJJ) differed from the trial judge and concluded (in Pill LJ’s words at p.105) that Mr. Stovold’s chance disappeared on the Friday. That focused attention on another imponderable, that is whether (if posted by first-class post on the Thursday evening) the documents would have arrived on Friday morning. This court concluded that there was a reasonable chance that they would have done and that there was no reason to interfere with the judge’s finding that in that event Mr. Susans would not have gone to see the new house on Friday afternoon. So the claim succeeded but the award was reduced by half.

  83. In my view Stovold illustrates (especially with the doubts about the reliability both of the first-class post and of the third party’s evidence) that these questions of causation and quantum cannot be reduced to a single comprehensive test, however convenient that would be. There are too many variables in play.

  84. The decision of the Court of Appeal of New Zealand in Balfour does not offer much assistance on the issue of causation. The facts were complicated and obscure, covering a period of over ten years during which Mr. Balfour’s attempts to make a career in working with disadvantaged children were dogged by widespread rumours about his sexual orientation. The evidence as a whole suggested that the particular file note (on his personal file at the Department of Education ) on which Mr. Balfour based his claim was a reflection (rather than a significant source) of the rumours (which no-one sought to justify at trial). There is in the judgment of the court no discussion of principles of causation.

  85. Spring is an important case on the application of the Hedley Byrne principle (see Hedley Byrne & Co v Heller & Partners [1964] AC 465) to references given by employers in respect of former employees or representatives. Mr. Spring had been an estate agent and also an appointed representative (within s.44 of the Financial Services Act 1986) for Guardian. Guardian bought the estate agency (Corinium) and Mr. Spring was dismissed by Corinium’s newly-appointed chief executive. He wished to become an appointed representative with Scottish Amicable and two other life offices. Guardian negligently provided Scottish Amicable with a reference which could hardly have been less encouraging. It said among other things:

     .... his former superior has further stated that he is a man of little or no integrity and could not be regarded as honest.

    The ‘former superior’ was the newly-appointed chief executive who had sacked him. The reference was written by an assistant chief compliance officer who was not actuated by malice. Scottish Amicable refused Mr. Spring’s application and so did the other two companies, which had received similar references.

  86. For present purposes the main importance of the case lies in a passage towards the end of Lord Lowry’s speech (at p.327)

    Once the duty of care is held to exist and the defendants’ negligence is proved, the plaintiff only has to show that by reason of that negligence he has lost a reasonable chance of employment (which would have to be evaluated) and has thereby sustained loss: McGregor on Damages 14th ed (1980) pp.198-202, paras 276-278 and Chaplin v Hicks [1911] 2 KB 786. He does not have to prove that, but for the negligent reference, Scottish Amicable would have employed him.

    Lord Lowry then set out quite a long passage from the judgment of the trial judge discussing submissions that Mr. Spring would not have been appointed even if he had received a careful and accurate reference. This passage ended:

    As I observed in argument, the only person capable of giving an authoritative answer to the hypothetical question posed would have been somebody in [the Scottish Amicable compliance officer’s] position who had sat in this courtroom throughout the many days of evidence and heard all the facts about the plaintiff and his career at Corinium. As it is, having done so myself, I can only say that, in my judgment, on balance, had the plaintiff received the careful and accurate reference he was entitled to, he would probably have obtained employment with one of these companies.

    Lord Lowry indicated that the trial judge’s finding of fact might be irreversible, but that the House of Lords had not heard argument on the point. He did not comment on the trial judge’s apparent reliance on a balance of probability test. Allied Maples had not then reached this court.

  87. The facts of Spring were fairly extreme and the trial judge accepted the description (by Mr. Spring’s counsel) of the reference having been the ‘kiss of death’ to his career in insurance. There was however room for debate as to whether he would have been appointed on the basis of a true reference (there was evidence of some inexperience and some mis-selling, not involving dishonesty, on Mr. Spring’s part). The ‘kiss of death’ point (that is, the decisive negative effect of the untrue reference) led Lightman J to conclude that Spring fell within his first category, where the ascertainment of historical fact is impossible. I infer that if Mr. Spring’s reference had been only mildly discouraging (but still negligent) the judge would have allocated it to his second category (in which it is in principle possible, although it may be difficult, to decide an issue of causation as a matter of historical fact).

  88. In my respectful view the judge was wrong in discerning any real difference in principle between his two categories. I consider that in all these cases there is a single question: but for the defendant’s breach of duty, what would the third party have done (and what would have been the outcome for the claimant)? This question is necessarily hypothetical because the breach of duty has sent the actual course of events down a different turning. The court may sometimes be able to answer the hypothetical question with a high degree of confidence and some precision. In other cases it may have to take a broad view on a number of imponderables. But the sharp distinction between “no decision” and a (flawed) “decision made on the merits” cannot in my view be supported either on principle or on authority. It is, I think, akin to the distinction between “no transaction” and “successful transaction” cases which was rejected by the House of Lords in South Australia Asset Management Corporation v York Montague [1997] AC 191 (see the speech of Lord Hoffmann at p.218).

  89. Whether that is right or not, the judge did in my respectful view err in the way in which he approached the facts of the cases before him. The way in which he had instructed himself on the law led him to distinguish (in paragraph 76 of his judgment) between cases in which past applications to prospective employers had, or had not, been considered on their merits. He then (in paragraphs 77ff) considered future applications and (in case he were wrong on the law) past applications on a ‘loss of a chance’ basis. His conclusion in this part of his judgment (paragraph 81) was that no applicant for a job can be said to have, in respect of any application, a real or measurable chance of obtaining it. He regarded that as conclusive against the claimants’ claims (although he still went on to consider other points).

  90. I think the judge’s approach was over-elaborate and that he overlooked some mundane facts. Apart perhaps from those near the very top of the employment ladder (who may aspire only to be Chairman, or Director-General, or Permanent Secretary) job-seekers do not usually set their hearts on a single job vacancy. They expect (especially in an overcrowded industry suffering serious recession) to have to make many job applications. They hope to be short-listed for interview for some vacancies and eventually to be successful in obtaining the offer of a job on satisfactory terms.

  91. That was the position of most of those made redundant by BCCI’s liquidators. It is clear from the evidence that they reacted in different ways to their predicament. Some were resentful and negative about seeking new employment. Some were over-ambitious (or simply unrealistic) in applying for posts for which they were insufficiently qualified. A large number of them did avail themselves of the services of Coutts PDC and many of them were successful in obtaining a job within a reasonably short time. But in every case the question to be answered was whether stigma from a job-seeker’s previous employment with BCCI had 

    1. a real (or substantial) effect and

    2. if so, how great an effect on his obtaining employment.

    This is not an easy question to answer, and the whole history of an individual’s search for employment is relevant to answering it: how many jobs he applied for, whether the applications were sensibly targeted and well presented, how many interviews he obtained, how each interview went, and any stated reasons (which would not necessarily be the only reasons or even the true reasons) for rejection. Each application is therefore relevant, but the question must be answered on the job-search as a whole.

  92. That view is supported by the judgment of Staughton LJ (with which Hobhouse and Hutchison LJJ agreed on this point) in Gerber Garment Technology v Lectra Systems [1997] RPC 443. The issue was as to the proof and computation of loss of profits caused by a patent infringement. After citing Allied Maples, Staughton LJ said (at p.460):

    In my judgment the issue as to the amount of the patentees’ loss in the present case was a question in the second class [Stuart-Smith LJ’s third category]; it depended on the hypothetical actions of third parties, that is to say the buyers of the infringing machines (or spare parts, servicing and CAD systems). The judge was entitled to conclude that the patentees had lost a chance of making sales to those buyers – no doubt a chance of differing probability in each case. He was entitled to evaluate the chances as a whole, rather than separately, if he chose to do so. The contrary view, that if the judge found 25 chances of a sale, each of 49 per cent probability, he should award nothing is absurd.

  93. In my view the same approach would be appropriate in this case. If in relation to any particular claim the trial judge was satisfied that a job-search which was successful after (say) twelve months would (but for the job-seeker’s stigma) have been successful after six months then damages would in my view be recoverable for that six months’ loss of employment, even if it was impossible to identify which particular job application would, but for stigma, have been successful. But the judge’s finding that there was no general prejudice (a finding which he was entitled to make, especially on the evidence of Ms Tsoflias and the other Coutts’ witnesses) must make it much more difficult for any claimant to prove that stigma was the cause of any significant postponement of reemployment.

    Jonathan Parker LJ

  94. I also agree that this appeal should be dismissed, for the reasons which Pill LJ has given.

  95. I add a few observations of my own in relation to the arguments addressed to us on the question of loss of a chance, as it arises in the instant case.

  96. A former employee who claims damages against his former employer for breach of what the judge described as the trust and confidence term must prove not merely that by reason of that breach his prospects of future employment were diminished (“stigma”), but also that the stigma caused him to suffer financial loss (see Malik v BCCI [1998] AC 20, in particular per Lord Nicholls at p.40C-E, where he equates such loss with special damage in a defamation action).

  97. Where the financial loss alleged takes the form of, or includes, loss of a chance, causation of damage is not to be confused with assessment of damage. On ordinary principles, causation must be proved on the balance of probabilities. In the instant case, either the stigma was an effective cause of the alleged loss or it was not (see Nestle v National Westminster Bank Plc [1994] 1 All ER 118 at 141f per Leggatt LJ, a passage quoted by the judge in paragraph 69 of his judgment). There is no room for any half-way house in relation to causation: no room, that is to say, for any percentage calculation to reflect the chance (possibility) that the stigma may have been an effective cause of the alleged loss.

  98. Where causation is proved, the court may, if and to the extent that it is appropriate to do so on the facts of the particular case, assess the resulting loss by adopting a percentage figure to reflect loss of a chance. Such an approach to the assessment of damage is likely to be appropriate in relation to future events, and it may, depending on the facts of the particular case, be appropriate in relation to past events (see Stuart-Smith LJ’s exposition in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 at 1609H-1611C). Examples of cases in which this approach has been adopted in relation to past events are the well-known cases of Chaplin v Hicks [1911] 2 KB 786 and Kitchen v Royal Air Force Association [1958] 1 WLR 563.

  99. In the instant case, I accept the submissions of Mr. Jeans QC (for BCCI) that had the claimants succeeded in establishing a general prejudice in the employment market against former employees of BCCI as a result of stigma, it would have been open to them to invite the court to infer that but for that general prejudice a claimant would have succeeded in obtaining – albeit not a particular job – a job of a particular type or at a particular level of salary. In the event, however, the judge found as a fact (as in my judgment he was entitled to do) that no such general prejudice existed. Absent general prejudice, it was necessary for the claimants to prove that stigma was an effective cause of the failure of their job applications on what the judge described as a “job-specific” basis. In other words, it was necessary for them to show that stigma was an effective cause of the failure of a particular job application. That too they failed to do on the findings of the judge (findings which, once again, he was in my judgment entitled to make.


Malik & Mahmud v BCCI [1998] AC 20; Robinson v Harman [1848] 1 Exch Rep 850; Aerial Advertising Co v Batchelor Peas Ltd (Manchester) [1938] 2 All ER 788; Ratcliffe v Evans [1892] 2 QB 254; McGhee v National Coal Board [1973] 1 WLR 1; Wilsher v Essex Area Health Authority [1988] AC 1074; Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602; Spring v Guardian Assurance Plc [1995] 2 AC 296; Kitchen v Royal Air Force Association [1958] 1 WLR 563; Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443; Chaplin v Hicks [1911] 2 KB 786; Sykes v Midland Bank Executor and Trustee Co [1971] 1 QB 113; McWilliams v Sir William Arrol & Co [1962] 1 WLR 295; Bolitho v City & Hackney Health Authority [1998] AC 232; Hotson v East Berkshire Area Health Authority [1987] AC 1074; Pickford v Imperial Chemical Industries [1998] AC 1189; Joyce v Merton, Sutton & Wandsworth Health Authority (1996) 7 Med LR 1; Nestlé v National Westminster Bank [1994] 1 AER 118; Stovold v Barlowes [1996] 1 PNLR 91; Balfour v Attorney General [1991] NZLR 519; Hedley Byrne & Co v Heller & Partners [1964] AC 465; South Australia Asset Management Corporation v York Montague [1997] AC 191; Gerber Garment Technology v Lectra Systems [1997] RPC 443

Authors and other references

McGregor on Damages (16th edition)


Michael Kent QC and Isaac Jacob (instructed by Messrs Finers Stephens Innocent) for the Appellants

Christopher Jeans QC and Annie Hockaday (instructed by Messrs Lovells) for the Respondents

Robin Allen QC (instructed by Beale & Co) for the other represented Claimants

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