- What lost opportunity damages are
- When the courts will allow the claim
- How the value of a lost chance is worked out
- Where the limits bite: personal injury and proof
- Common misconceptions about lost opportunity damages
- How a commercial lawyer helps you pursue the claim
- The question to ask before you sue
You can sue for the loss of a commercial opportunity. If another party's breach of contract, misleading conduct or negligent advice cost your business the chance to earn a profit, the law can award damages for the value of that lost chance. This is true even where you cannot prove on the balance of probabilities that the profit would definitely have been made.
These damages are usually called loss of a chance damages or lost opportunity damages. They are a specific category of compensatory damages used in commercial disputes. This article explains what they are, the elements a court weighs before awarding them, where the limits of the doctrine lie, and the misconceptions that most often lead business owners to undervalue or overvalue a claim.
What lost opportunity damages are
Ordinary compensatory damages aim to put the injured party in the position they would have been in if the wrong had never occurred. If a supplier breaches a contract and your business loses money as a direct result, compensation is measured by that proven loss.
Lost opportunity damages go one step further. They compensate for a benefit or profit that might have been earned but was lost because of the wrongdoing, rather than a benefit that was definitely going to be received. The loss is the chance itself, not just the eventual outcome.
To understand why this matters, consider a business that misses out on a tender because a professional acted negligently. The business may not be able to prove it would definitely have won that tender, because rival businesses were also competing. But it can prove it lost a real chance to win. In the right circumstances, the value of that chance is a recoverable loss.
When the courts will allow the claim
The foundation of Australian lost opportunity damages is the High Court decision in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, applied in cases such as Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135. Under that principle, where a wrong deprives a party of a commercial opportunity, the court can award damages for the value of the lost chance even if the benefit would probably not have been obtained.
The ordinary rule of civil proof is that the plaintiff must establish their loss on the balance of probabilities. In a lost opportunity claim, the position is more nuanced. To recover, the plaintiff must prove two distinct things.
First, the plaintiff must establish on the balance of probabilities that the other party's wrong actually caused the loss of the opportunity. The chance that was lost must be shown to have been real, not imaginary.
Second, the plaintiff must show the lost opportunity itself had genuine value. In Mal Owen Consulting, the New South Wales Court of Appeal described this as a chance that is of real value, being more than theoretical or negligible. The court does not need to be satisfied that the benefit would have been obtained, only that the chance of obtaining it was a real one.
The matters a court will weigh include:
- The wrong: a recognised cause of action existed, such as breach of contract, misleading and deceptive conduct under section 18 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)), or negligence.
- Causation: the wrong materially caused the loss of the opportunity, and a reasonable connection exists between the breach and the lost benefit.
- Reliance: where the claim is in misleading conduct, the innocent party must have relied on the conduct, and the conduct must be the material and direct cause of the lost chance.
- Real value: the chance was of genuine and substantial value, not speculative, theoretical or negligible.
- Foreseeability: the lost benefit was a foreseeable consequence of the wrongdoing.
Where these matters are made out, the court assesses the lost chance and awards the value of that chance, discounted according to the probability that the benefit would have eventuated.
How the value of a lost chance is worked out
A worked example shows how the doctrine operates in practice for a small business.
Suppose a boutique furniture maker, Alpine Joinery Pty Ltd, is shortlisted to supply cabinetry for a large new hotel development. The contract is worth an expected profit of $200,000. Final tenders close on a fixed date, and the developer requires certified financial statements alongside the tender to show the maker can complete the work.
Alpine's accountant negligently fails to prepare or lodge the certified statements on time, in breach of the accountant's retainer and duty of care. As a result, Alpine misses the deadline and the developer awards the contract to a competitor. Alpine cannot prove on the balance of probabilities that it would definitely have won the tender, because two other businesses were also shortlisted and were genuine rivals.
The loss Alpine suffered is not the $200,000 profit. The profit was never certain. The loss is the chance to win that profit. Under the principle in Sellars, Alpine can still recover the value of that lost chance, provided the chance was real and of more than negligible value.
The court would assess the probability that Alpine would have won the contract had the statements been lodged. If the evidence showed roughly a one in three chance, the damages might be in the order of one third of the expected profit, or around $66,000, rather than the full $200,000. This discounting is the core of loss of a chance damages: the award reflects the value of the opportunity as it stood, not the value of the outcome.
The same reasoning applies where misleading or deceptive conduct induces a business to enter, or refrain from entering, a deal it otherwise would not have. A loss of a chance arising from misleading conduct can be claimed, with damages calculated in the same way, provided the conduct was relied upon and drove the loss.
Where the limits bite: personal injury and proof
It is important not to assume that lost opportunity damages operate identically in every area of law. The doctrine is most at home in commercial disputes, and it has firm limits.
In personal injury claims, the High Court in Tabet v Gett (2010) 240 CLR 537 declined to recognise a loss of a chance of a better medical outcome as compensable damage in negligence. Where a plaintiff could not prove on the balance of probabilities that the defendant's breach caused the injury, the loss of a less than even chance of a better outcome was not, by itself, a recoverable loss. The injury itself had to be proven as a matter of causation.
That decision does not mean an injured worker can never recover for lost earnings. Loss of earning capacity is a well recognised head of personal injury damages. The point is more precise. In a negligence claim founded on personal injury, the plaintiff must generally prove the injury and its consequences on the balance of probabilities; they cannot fall back on showing they merely lost a chance of a better result.
The distinction matters for businesses too. Lost opportunity damages are not a substitute for proving causation. Where a claim is really about a past loss that should have occurred, the plaintiff still needs to establish that loss properly. Loss of a chance is a particular tool for genuine commercial opportunities, not a general escape route from the burden of proof.
Common misconceptions about lost opportunity damages
A common belief is that "if I cannot prove I would have got the profit, I get nothing." In a commercial lost chance case that is wrong. The value of the real chance is recoverable even where the profit itself is uncertain, as Sellars confirms. This is the feature that makes the doctrine valuable for business claimants.
The reverse misconception, that "any lost opportunity produces a payout," is also wrong. The chance must be real and of genuine value. A speculative or theoretical hope, such as an unquantified possibility of a future customer, will not support a claim. The courts discount heavily for uncertainty, and a flutter on an unlikely outcome with no evidence may be worth nothing.
Another misconception is that a court awards the full value of the lost profit. It does not. The award reflects the value of the chance, discounted by the probability of success. Expecting a windfall equal to the whole profit usually misunderstands the assessment.
A further misconception is that showing misleading conduct was misleading is enough. Section 18 of the Australian Consumer Law prohibits conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive. But to recover damages under section 236 of the Australian Consumer Law, the claimant must show they suffered loss because of that conduct. That requires demonstrated reliance and a causal connection between the conduct and the loss of the opportunity, not merely that the conduct had a tendency to mislead.
How a commercial lawyer helps you pursue the claim
Because lost opportunity damages turn on the value of a chance rather than a certain loss, they are a factual and evidentially demanding area of law. A commercial lawyer helps in several concrete ways.
A lawyer first identifies the strongest cause of action, which may be breach of contract, negligence or misleading and deceptive conduct, and assesses which gives the best avenue to damages. They gather and preserve the evidence needed to show the opportunity existed, was real and had value, such as tenders, correspondence, financial records and witness accounts. Because the value of the chance is a discount on expected profit, a lawyer often works with accountants to quantify the range of outcomes and the probability of each.
A lawyer also frames the causation case. In misleading conduct claims, proving reliance is often the decisive step, and the way the facts are presented can make or break the claim. Finally, a lawyer advises on the realistic value of the claim and the cost and risk of litigation, so you can decide whether pursuing it is worth the expense.
The question to ask before you sue
Before assuming a lost opportunity is unrecoverable, or assuming every missed chance is worth suing over, ask yourself a focused question about your own situation. Was the opportunity real, of genuine financial value, and lost because of a specific wrong committed by the other party, rather than because of market conditions, your own conduct, or luck?
If the answer is yes, the value of that chance is a real loss you may be able to recover, even without proving the profit was certain. If the answer is no, the doctrine will not manufacture a claim out of speculation. The difference between these two situations, and the discounting that applies to the award, is precisely where a commercial lawyer earns their fee. Because the value of a lost chance is measured at the time the opportunity was lost, and because limitation periods apply, gather the evidence early and get advice before the chance to pursue the claim is itself lost.