A Portuguese film producer involved in a long-running dispute over a troubled Terry Gilliam film has lost a High Court bid for damages.

Paulo Branco and production company Alfama Films claimed they were entitled to damages due to a breach of an agreement giving them the option to make The Man Who Killed Don Quixote.

They argued they should be awarded almost one million euros in damages from the Recorded Picture Company (RPC) for pre-production costs and producer’s fee “on the basis of the loss of a chance” to make the film.

But in a ruling on Thursday, His Honour Judge Hacon dismissed Mr Branco and Alfama Films claim, saying they “never had a substantial chance” of making the film.

The film, starring Adam Driver and Jonathan Pryce, was eventually released in 2018 after a 20-year battle by Mr Gilliam to get it made.

The film was beset by problems, with filming of the first version in 2000 – starring Johnny Depp and Jean Rochefort – hit by disasters including a flash flood, and eventually abandoned after Rochefort became ill and was unable to continue.

Rights to the film were sold to RPC in 2009, and on March 31, 2016, the company entered into option agreement with Alfama Films for a six-month term for 25,000 euros.

The agreement included a clause allowing for an extension of time in the event of legal proceedings or claims affecting the film, work and rights.

The following month, on April 29, 2016, Gilliam entered into a director’s agreement with Alfama and Mr Branco, who is the company’s chief executive and director.

But relations between the parties involved “soured”, the judgment says, and on October 14, 2016, RPC granted an option to Tornasol Films, a Spanish production company, which led to the film eventually being made and released.

The judgment says that after entering into the agreement with Tornasol, RPC “came to realise” Alfama’s option to make the movie may not have expired after six months, on September 30, 2016, because a letter sent by Mr Gilliam’s lawyer to Alfama at the end of August arguing the firm was in breach of the director’s agreement may have engaged the extension clause in the option agreement between RPC and Alfama.

RPC sought a declaration that Alfama’s option had expired at the end of September, which was dismissed by a High Court judge in 2017 and upheld by the Court of Appeal the following year.

Separately, legal proceedings in the French courts, which are subject to a further appeal, found Mr Branco did not act in breach of the director’s agreement.

RPC and Tornasol entered into an agreement while Alfama’s option term was still running, the judgment says.

In this latest round of litigation, Alfama and Mr Branco alleged RPC breached the terms of their option agreement, it says.

They claimed “their pre-production costs of 500,418.03 euros, or a proportion thereof on the basis of the loss of a chance” and “the balance of Mr Branco’s claimed producer’s fee of 400,000 euros, or a proportion thereof on the basis of the loss of a chance”.

RPC denied it had acted in breach of the agreement, and that if it did, its defence was that according to the terms of the deal, the film “could only have been made with Mr Gilliam as director; Mr Gilliam would not have agreed to continue working with Mr Branco, so the film would never have been made with Mr Branco as producer”.

The company also argued that “even if Mr Gilliam had agreed to continue as director, the producers would not have been able to raise the finances to enable the film to be made.”

Judge Hacon said the issues were whether RPC was in breach of the agreement by negotiating and entering into an agreement with Tornasol, and what would have happened if RPC had not entered into the Tornasol deal – whether “Mr Gilliam have settled his differences with Mr Branco sufficiently to make the film with Mr Branco as producer” and if so, whether Mr Branco would have been able to raise the necessary finance for the film.

He noted that the Court of Appeal had concluded that Alfama’s option to make the film had not expired by the time RPC entered into the Tornasol agreement in October and this was a breach of their agreement.

The judge concluded that due to the state of the relationship between Mr Gilliam and Mr Branco, “there was only a very low chance that if Mr Gilliam had had no option other than to continue to work with Mr Branco, his desperation to make the film was such that he would have tried to make the best of working with Mr Branco.”

He also said: “I am sure that Mr Branco hoped and expected to make the film and would not have invested time and money unless he did. But that is not to the point. The question is whether on the evidence I have seen events would in fact have led to the film being made with Mr Branco as producer.

“In my view not. As I have said, I think that even if Mr Gilliam had believed that Mr Branco had the finance in place, the chance of his being willing to continue working with Mr Branco was very low.

“Even if desperation had driven him to try, in such a counterfactual he would, well before any prospect of the start of shooting, have come to realise that Mr Branco was never going to raise sufficient money to make the film that Mr Gilliam wanted to make. At that point he would have left and there would have been no film. Any chance Mr Branco had of making the film would have fallen to zero.”

The judge concluded: “For the foregoing reasons, in my judgment the producers never had a substantial chance, nothing above a speculative chance, of making the film if RPC had not been in breach of the deed.”