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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Glossop Cartons And Print Ltd & Ors v Contact (Print & Packaging) Ltd & Ors [2020] EWHC 1377 (Ch) (09 March 2020) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1377.html Cite as: [2020] EWHC 1377 (Ch) |
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BUSINESS AND PROPERTY COURTS
IN MANCHESTER
BUSINESS LIST (ChD)
1 Bridge Street West Manchester M60 9 DJ |
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B e f o r e :
Sitting as a Judge of the High Court
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(1) GLOSSOP CARTONS AND PRINT LIMITED (2) BRIAN SIDEBOTTOM, JACQUELINE CAMERON SIDEBOTTOM-EVERY & JILLIAN CAMERON WOODACRE (suing as individuals and as the RAYMOND JOSEPH PARTNERSHIP (a firm)) |
Claimants |
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-v- |
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(1) CONTACT (PRINT & PACKAGING) LIMITED (2) PHILIP SMITH (3) EMBARK PENSIONS TRUSTEES LIMITED (formerly called LIBERTY TRUSTEES LIMITED) |
Defendants |
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MR NEIL BERRAGAN (instructed by Squire Patton Boggs) appeared on behalf of the Defendants
Hearing dates: 3-5 March 2020
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Crown Copyright ©
JUDGE HODGE QC:
"103. The decision of the House of Lords in the New Smith Securities case establishes that a defendant who induces the claimant to enter into a transaction as the result of a fraudulent misrepresentation, is bound to make full reparation for all the damage directly flowing from that transaction. However, those damages must be assessed on the basis that the innocent claimant has acted reasonably to mitigate its loss on discovering the fraud. Nor should a claimant be entitled to recover in respect of potential losses which it had fully appreciated and factored into the purchase price. I have already pointed out that if the electricity supply representation had not been made, the claimants would have been prompted to investigate the electricity supply to Unit 3, potentially leading to the discovery of the inadequacy of the existing power supply; and whilst it was impossible to say exactly what would have happened if the true state of affairs had been revealed, it was improbable in the extreme that matters would have proceeded in the same way as they did in fact proceed. This justifies an approach to the assessment of damages that compensates the claimants for the fact that Unit 3 suffered from an inadequate power supply; but it should not operate to insulate the claimants from potential commercial risks which they had appreciated and had factored into their calculation of the purchase price because to do so would over compensate the claimants for the consequences of the defendant's fraud.
104. I do not consider that I can or should go further than this in addressing the issue of loss and damage."
"None of these plans are the result of clever or original thinking. The existing layout lent itself perfectly to our requirements and needs, and we felt it could be readily adapted to meet those needs at a cost that was not excessive or disproportionate. We envisaged carrying out the works in stages over time when we had funds available."
At the present point in time Mr Sidebottom could not say whether these ideas had fed into the final projections made by the claimants. The works would have been done section by section as funds had become available. Mr Sidebottom accepted that the execution of the works depended on the profits generated by the business and other expenditure that Glossop might incur. He accepted that the £ 50,000 had only been an estimate, and he recognised that building costs could exceed their estimate.
"We wished to ensure the combined businesses of Glossop Cartons and Contact was up and running before looking to set up the digital suite and move the two digital machines to Haigh Avenue. The reason for this is that the bulk of our production was done by conventional non-digital production machinery and as such this was the mainstay of the company."
Mr Dagnall points out that we do not know the breakdown in terms of profitability between the two strands of Glossop's business. However, it is Glossop which possessed that relevant information; and if Glossop wanted to contend for an increased profit margin on digital - as opposed to conventional - printing, it should have produced the evidence to substantiate that case. As Miss Ibbotson put it, the accountancy experts had not appreciated that conventional printing operations had been transferred to Stockport within a few weeks of completion, so the reality was completely different from the set of assumptions that they had made. Mr Green accepted that the costs of the Old Mill had been entirely special to Glossop, and that his figures had been based entirely on Glossop's own particular circumstances because that was all that he had had to work on. Miss Ibbotson accepted, in re-examination, that now that she knew the facts and the costs, the more reasonably mitigation had been for Glossop to have carried on with their plan to use Unit 3, rather than Unit 4, for the digital printing operations.
"There is in truth only one legal measure of assessing damages in an action for deceit; the plaintiff is entitled to recover as damages a sum representing the financial loss flowing directly from his alteration of position under the inducement of the fraudulent representations of the defendants. The analogy of the assessment of damages in a contractual claim on the basis of cost of cure or difference in value springs to mind. In Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 at 360G, Lord Mustill said: 'There are not two alternative measures of damages, as opposite poles, but only one; namely, the loss truly suffered by the promisee.' In an action for deceit the price paid less the valuation at the transaction date is simply a method of measuring loss which will satisfactorily solve many cases. It is not a substitute for the single legal measure: It is an application of it".
Lord Steyn went on to consider the three limiting principles which, even in a case of deceit, served to keep wrongdoers' liability within practical and sensible limits. Those three concepts were causation, remoteness and mitigation. In practice, the inquiries under those headings were said to overlap; but they were distinct legal concepts. For present purposes, causation was said to be the most important. Lord Steyn continued:
"The major issue in the present case is whether there is a causal link between the fraud and the loss arising by reason of the pre-existing fraud perpetrated on Ferranti. How should this matter be approached? The development of a single satisfactory theory of causation has taxed great academic minds … But, as yet, it seems to me that no satisfactory theory capable of solving the infinite variety of practical problems has been found. Our case law yields few secure footholds. But it is settled that at any rate in the law of obligations causation is to be categorised as an issue of fact. What has further been established is that the 'but for' test, although it often yields the right answer, does not always do so. That has led judges to apply the pragmatic test, whether the condition in question was a substantial factor in producing the result. On other occasions judges assert that the guiding criterion is whether in common sense terms there is a sufficient causal connection … There is no material difference between these two approaches. While acknowledging that this hardly amounts to an intellectually satisfying theory of causation, that is how I must approach the question of causation".
Lord Steyn then went on to discuss the second limiting principle of remoteness. He said that that requirement was in issue in the instant case:
"If there is a sufficient causal link it must still be shown that the entire loss suffered by Smith is a direct consequence of the fraudulently induced transaction".
Lord Steyn then went on to consider the third limiting principle, which was the duty to mitigate.
MR BERRAGAN: My Lord, I am very concerned about interrupting your Lordship's judgment, but that figure has not been incurred. Nobody has installed a full permanent minor supply to Unit 3.
JUDGE HODGE QC: Sorry, I thought the temporary minor supply had been.
MR BERRAGAN: The temporary one has been, yes.
JUDGE HODGE QC: Yes.
MR BERRAGAN: But no one has installed a full permanent one yet.
JUDGE HODGE QC: Yes, I was dealing with the figure of £ 1,262.
MR BERRAGAN: I am sorry, I thought your Lordship just said the 17 - no, my apologies, my Lord.
JUDGE HODGE QC: I said the former figure.
MR BERRAGAN: My apologies, my Lord; my apologies, my Lord.
JUDGE HODGE QC: The former figure of £ 1,262 has actually been incurred. In my judgment it is recoverable as a consequential loss. The figure of £ 17,915, however, has not been incurred. That figure, in principle, would have been factored into the purchase price for Unit 3. That was in fact paid not by Glossop but by the second claimants. But because they, as purchasers, had made a good bargain, paying only £ 200,000 for a unit which would have been worth £ 250,000 without the electricity supply problem, and the problem of flooding, there has been no loss. In practice, any reasonable purchaser would have incurred the small additional cost - less than £ 700 - of a major supply; but that greater sum would not have been recoverable by way of damages for fraudulent misrepresentation. So, in relation to item one, it seems to me that £ 1,262 is recoverable as an incurred consequential loss, but the figure of £ 17,915, which has not been incurred, would only have been factored into the purchase price for Unit 3 which was paid by the partnership, as purchaser, and is therefore not recoverable by Glossop. As I have already indicated, it is included within the award of damages for breach of warranty or representation in the Lease Sale Agreement for Unit 3.