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England and Wales Court of Appeal (Civil Division) Decisions

You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Pearson v Witherspoon [1999] EWCA Civ 3032 (22 October 1999)
Cite as: [2000] PNLR 110, [1999] EWCA Civ 3032, [2000] Lloyd's Rep PN 151

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BAILII Citation Number: [1999] EWCA Civ 3032
Case No: QBENF/98/1250/CMS1

Mr. Justice Gage

Royal Courts of Justice
Strand, London, WC2A 2LL
22 October 1999

B e f o r e :



- and -




(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No 0171 421 4040, Fax No 0171 831 8838
Official Shorthand Writers to the Court)


Mr. Patrick Phillips Q.C. and Mr. J. David Cook (instructed by Messrs. Carter Lemon of London, EC4 1HB for the Respondent)
Mr. Bernard Livesey Q.C. and Mr. Ian Ridd (instructed by Messrs. Barlow Lyde and Gilbert of London, EC3M 7NJ for the Appellant)



Crown Copyright ©

    Friday 22 October 1999

  1. LORD JUSTICE WARD: A solicitor is guilty of inordinate and inexcusable delay in prosecuting his client's claim for damages for breach of a commercial contract. Over a period of years there is speculation from time to time about the defendant company's being in financial difficulties but at other times having overcome them. Long after the trial of the action should have been concluded, a receiver is appointed to the defendant. Nonetheless the plaintiff proceeds to trial. The defendant plays no part in it. After consideration of the written material, damages totalling x are awarded under different heads of claim. The judgment proves to be worthless because the defendant company is insolvent. The plaintiff recovers nothing. So he sues his solicitor claiming damages for his professional negligence. These questions then arise:
  2. 1. Is the loss caused by the solicitor's negligence or by the company's insolvency? That in turn may lead one to ask what the precise scope of the solicitor's duty is .
    2. The client's loss being the loss of a chance, how are the chances of establishing liability, quantum and enforcement of the judgment to be assessed - broadly or in as fine a detail as possible?

  3. Shorn of peripheral detail, those are the issues which arise in this appeal and cross-appeal from the judgment of Gage J. of 3rd July 1998 when he ordered the defendant solicitors, Sanders Witherspoon, to pay the plaintiff, Mr Douglas Pearson, 315,000. I find it convenient to deal with the questions of causation and the valuation of the loss of the chance separately.
  4. Causation.

  5. The plaintiff was the proprietor of the Elm Service Station, Southend. It was a modest business, the profits coming from car servicing and repairs, some second hand car sales and the sale of petrol. In 1984 he had the opportunity to increase petrol sales by reason of a voucher agreement with Safeways whose supermarket was across the road. He harboured the ambition to transform the sale of some 4-5000 gallons a week into a million gallon site. To achieve that purpose, in April 1984 he contracted with Ferranti International Plc ("Ferranti") to reconstruct his forecourt and supply and install the latest computer-operated petrol pumps. The system was known to be a prototype. The pumps were to be operated by the customer and the volume of petrol was to be automatically recorded and shown on the display unit in the kiosk of the service station. During the installation, an unexpected structural problem caused the receptor tanks to lift out of the ground and extra building work had to be done by Ferranti. The work was completed and the new forecourt commissioned on 17th April 1985.
  6. In August 1985 the plaintiff, so he has contended, entered into a service agreement with a Ferranti subsidiary, Ferranti Industrial Electronics Ltd, but for convenience I shall refer to the companies together as "Ferranti". There were initial teething troubles but the system operated without any complaint from November 1985 until about March 1986. Meanwhile Ferranti were pressing for payment, including payment for the extra works they had to carry out. Mr Pearson was under-capitalised and could not pay. He instructed Mr Alec Hague, a legal executive employed by the first defendant, Sanders & Co, as the firm was then known, to assist him in staving off Ferranti's claim and also to seek some contribution from the insurers of the premises for the structural damage that had occurred.
  7. By April 1986 Mr Pearson was reporting the faulty operation of the pumps and till records. In July 1986 Ferranti issued a writ claiming 65,822. Mr Pearson advanced a counterclaim. It will later be necessary to see how that counterclaim developed. It is sufficient for the time being to point out that the first record on Mr Hague's file was an attendance note of 26th March 1987 in which it was recorded that he had suffered a petrol loss of 2200 gallons to that date. On 8th May 1987 the solicitors formulated the complaint that the computer was "not in concert with the pumps" and claimed that the loss was in the region of 7,000 and increasing at approximately 100 a week. In May 1987 Ferranti obtained summary judgment against Mr Pearson for 55,000 with liberty to him to defend the balance of the claim. In September 1987 Ferranti were informed that Mr Pearson might in the future launch separate proceedings against Ferranti for petrol losses caused by leaking tanks or computer error. In November 1987 that claim was valued at 19,000 odd plus labour time and interest. Mr Pearson did not issue his writ until 21st June 1988. In it he claimed against Ferranti some 29,000. Meanwhile Ferranti pressed on with their action against Mr Pearson. On the day before the trial in December 1988 he settled, agreeing to pay 16,500 and costs taxed in August 1989 at 7,759. The terms of the settlement did not affect the plaintiff's action against Ferranti.
  8. Not a lot happened thereafter. In August 1989 Mr Hague wrote to the plaintiff suggesting that he should apply for legal aid as a "shock tactic". The application was not in fact made until March 1990 and granted in July 1990. Counsel advised in October 1990 in favour of the removal of the limitation imposed on the legal aid certificate.
  9. Late in 1990 the plaintiff entered into negotiations with Kuwait Petroleum GB Ltd ("Kuwait" or "Q8") with a view to substituting Kuwait for his existing petrol suppliers. In the course of the negotiations Kuwait offered to replace the Ferranti petrol pumps and equipment with new pumps and equipment, rent free for five years with the right to purchase the whole system for 1. On the advice of his solicitors, the plaintiff rejected that offer so as not to prejudice his action against Ferranti and also because he feared there was no such thing as a free loan from a petrol company. Nevertheless the plaintiff entered into the agreement with Kuwait to supply his petrol for five years. In February 1991 either the plaintiff or Kuwait arranged for Dresser (UK) Ltd ("Dresser") to replace Ferranti and undertake the servicing of the equipment.
  10. So far as the dormant action was concerned, Ferranti applied in January 1991 to strike out the claim for want of prosecution. In response the plaintiff asserted that although the claim had been difficult to quantify, the losses were continuing, and his best estimate was that they were then in the region of 340,000.
  11. In March 1991 Mr Hague left the employ of the solicitors. A Mr Martin took over the conduct of the litigation for about 2 months and was followed by Mr Myles Cooper, an assistant solicitor. Mr Hague remained in the background because it was agreed he would continue to advise the plaintiff and act as agent for the first defendant. As the judge found, Mr Hague's relationship with the plaintiff "was a distinctly irregular one." Not the least most unsatisfactory aspect was that Mr Hague had a private arrangement with the plaintiff that he would be paid 10% of any "winnings" which the plaintiff recouped in his action against Ferranti over and above 300,000. The plaintiff did not have a harsh word to say about Mr Hague. He was not called to give evidence by either party.
  12. For various reasons the hearing of the summons to strike out was delayed until March 1992 when the Deputy Master held:-
  13. "There has been considerable delay in this case and both the delay itself and the character of the delay have to be viewed from the evidence of Mr Hague. I am bound to say I regard the evidence as utterly unsatisfactory. The delay is inordinate and inexcusable."

    He held, perhaps surprisingly, that Ferranti had suffered no prejudice and, again to Mr Pearson's counsel's surprise, there was no appeal.

  14. Mr Pearson had pressing creditors whom he wished to satisfy and he was concerned about reports in the press of Ferranti's faltering financial position to which I will later refer. In October 1992 he met a partner in another firm of solicitors, the second defendant and instructed it. The first defendant ceased to act in December 1992. The plaintiff became dissatisfied with the second defendant and his present solicitors took over in November 1993.
  15. The plaintiff's financial position had become critical. His bankers appointed a receiver to run the business of the service station in March 1993 but he and his solicitors resolved to continue the action against Ferranti. Then, and this is an important date, on 1st December 1993 administrative receivers were appointed for the Ferranti Group. In March 1994 a further writ was issued by Mr Pearson against Ferranti and those proceedings were consolidated with the first action. He also took proceedings against Dresser and Kuwait. He failed against Dresser. He continued against Ferranti as a trial date was fixed for 26th June 1994 but Allen & Overy, on Ferranti's behalf, secured an adjournment of the basis that the trial would last 3 - 4 weeks. The new trial date was 27th March 1995. As the date for trial approached Ferranti indicated that they would not wish to cross examine. Allen & Overy then came off the record. On 11th January 1996, when Ferranti were not represented, His Honour Judge Thornton Q.C. dealt with the matter on the written evidence before him and on 12th January 1996 entered judgment for Mr Pearson against Ferranti for the sum of 567,723.94 together with interest making a total of 1,063,707.10. Ferranti has no assets and the judgment debt is irrecoverable. Consequently on 27th November 1996 Mr Pearson issued these proceedings against his first and second solicitors.
  16. Thus the interesting questions arose: was Mr Pearson's loss caused by the negligence of his solicitors or by Ferranti's insolvency and more particularly did the solicitors owe a duty to guard against the risk of such insolvency? So far as negligence was concerned Gage J. recorded that it was common ground that a solicitor owed a duty to the client to act timeously. Given the extraordinary performance of Mr Hague, the first defendant was driven to acknowledge that the discharge of its duty was anything but satisfactory. The judge arrived at these conclusions:-
  17. "There can be no doubt that there was delay in the conduct of the action. The facts speak for themselves. However, there is in my view some force in Mr Livesey's submissions that up to December 1988 the proceedings were dictated by the pace of Ferranti's action. The correspondence tends to support the view that the plaintiff was more interested in defeating Ferranti's claim by whatever means than in prosecuting his own action. His funds were limited; no doubt he hoped that the defects in the system which had surfaced would be corrected by Ferranti. Delay there was during that period, but in my judgment it was not culpable delay: that it is delay caused by the negligence of the (First Defendant). I have no hesitation in holding that thereafter the delay which occurred was due to the negligence on the part of the (First Defendant). From the service of the defence until the summons to strike out, virtually nothing was done to process the actions. .... No evidence was given by any witness for the (First Defendant) and I have therefore no explanation as to why this advice (from counsel) was ignored. .... In my judgment, the evidence before me, which the (First Defendant) has not sought to explain by calling evidence on its own behalf, amply justifies my finding that the delays from December 1988 were due to a negligent failure by the (First Defendant) in the conduct of the action on the plaintiff's behalf.
    ... (After December 1998), in my judgment it was incumbent on the First Defendant to progress the matter with all reasonable speed. Without going into the fine detail by setting times for the precise steps in the action, it seems to me reasonable to expect that the (First Defendant) would be in a position to set the matter down for trial and also to ask for fixed date by June 1990. The information given by the Clerk of the Lists suggests that for a four week trial (as this one was to be) a fixed date could be provided somewhere between 15 to 21 months hence. I take a period of 18 months. It follows that in my judgment the likely trial date ought to have been in January 1992."

  18. There is no challenge to the finding of negligence nor to the conclusion that the trial should have taken place in January 1992.
  19. Since the second defendant could not have obtained a date for the trial until the summer of 1994, by which time Ferranti was already in receivership, the claim against it failed.
  20. The judge made other relevant findings of fact. He heard the evidence of Mr Dodd, the former operations' director of Ferranti's trading company, a thoroughly reliable witness whose evidence was accepted. That showed that Ferranti's financial difficulties stemmed from the purchase by it in 1987 of an American company, ISC. In 1989 the financial problems surfaced and were well publicised in the media. Nonetheless Ferranti survived the setback and in 1990 were able through a rights issue to raise a further forty million pounds, which was some token of the investors' belief in its well-being. The published accounts of the company show that it continued from 1989 to 1993 to have a substantial net asset value, 33.3 million at the end of the financial year in March 1993. Yet by the end of the half year in September 1993 there was a deficit of 32.2 million. Mr Dodd explained in his evidence that when the end came, it came very quickly.
  21. The plaintiff stated that he had expressed his concerns to the first defendant on a number of occasions but was ignored. He says that he showed Mr Hague a report in the Daily Mail in July 1990 which carried the headline "Ferranti 112m in the red." It was a report that "Ferranti's new boss", Eugene Anderson, had said that:-
  22. "Ferranti would make a loss in the first half of this year but hopefully a profit in the second half. He expects to pay an interim dividend in December next year. ... The shares fell 1.5p to 31.5p."

    On 15th August 1991 the financial pages of the Daily Mail carried the headline "Ferranti clings on." The report included this:-

    "By rights you and I should not be here today," Chairman Eugene Anderson candidly told journalist gathered yesterday for the annual results. The banks are holding off for three months while Anderson and his colleagues try to work out yet another plan to keep the group going. .... Ferranti's future certainly looks dubious ... Whether or how the banks nurse the company through the coming months remains to be seen."

  23. Mr Cooper acknowledged receipt of that cutting and asked his client whether he should send it to Ferranti's solicitors.
  24. All was not gloom. In April 1992 the newspapers reported, under the headline "Putting the spark back in Ferranti", that "Ferranti's survival is no longer in doubt." This was consoling for the plaintiff who faxed it to his solicitors with the comment, "It reads well I think". On 29th June an attendance note records a telephone conversation with the plaintiff as follows:-
  25. "He (Mr Pearson) has had a tip-off that the Ferranti deal with the Germans could well fall through, in which event Ferranti would be in serious financial difficulty. He wishes (counsel) to be advised of this and wishes the matter to pushed as a matter of urgency."

    Mr Cooper's response, rightly conceded to be "disgraceful", was:-

    "If (the plaintiff) wants it pushed he can push off - so there. Miles"

    In the light of that comment it is no surprise that trust and confidence was lacking in the relationship of solicitor and client which, as I have indicated, came to an end some months latter. By the time his second solicitors were involved the press were reporting on 1st March 1993 that "Ferranti may fly again". The tone of the article was optimistic about Ferranti's chances of survival and the share price had increased to 13p.

  26. The judge came to these conclusions:-
  27. "On this evidence I conclude that the First Defendant must have been aware of Ferranti's financial difficulties. I accept Mr Dodd's evidence that their difficulties were given widespread coverage in the media in 1989. I accept the plaintiff's evidence that he became aware of these difficulties through the media. It seems to me more probable than not that the First Defendant would have been aware of these problems from 1989 onwards either through the media or by being told about by the plaintiff. At that time Ferranti was the defendant to an action being taken by one of its clients and, in my judgment, the significance of the press articles cannot have escaped the First Defendant's attention. I accept that the press coverage thereafter did not by any means signal the collapse of Ferranti and on occasions was optimistic. But in my view the First Defendant must have been aware that Ferranti was having some financial problems, if nothing else from cuttings sent by the plaintiff. There can have been no other reason for the plaintiff to send the press cuttings other than to point out the risk that Ferranti might go into liquidation or that its assets might be disposed of in such a way as to deprive him of the benefits of a judgment. The risk may not have been a very great one but from late 1989 the First Defendant must have been aware of it."

  28. The judge dealt with the law. Counsel then appearing for the plaintiff relied on well known passages in Galoo Ltd -v- Bright Grahame & Murray [1994] 1 WLR 1360 to support his proposition that the question of causation should be dealt with as a matter of common sense. Mr Livesey Q.C., for the first defendant, relied on the speech of Lord Hoffmann in Banque Bruxelles Lambert SA -v- Eagle Star Insurance Co [1997] AC 191 that the decision depended on the scope of the duty of care which he said did not include a duty to guard against insolvency: foresight of the existence of a risk was not enough as there had to be awareness of the probability of Ferranti's insolvency. He relied on Chong Yeo & Partners & another -v- Guan Ming Hardware & Engineering Plc Ltd [1997] 2 SLR 729, a decision of the Singapore Court of Appeal.
  29. Gage J. held:-
  30. "I have been told that there is no decision of a United Kingdom court which bears directly on this point. In my judgment the answer to this issue lies in definition of the scope of a solicitor's duty in any given case. I accept that in general the scope of an implied duty of care will vary depending on the circumstances of the case, but in modern times it seems to me reasonable that a solicitor's duty in the conduct of litigation on behalf of the plaintiff will include a duty to guard against the risk of a defendant becoming insolvent or dissipating assets in such a way as to render a judgment valueless. In my judgment, where the risk of such an event is other than fanciful, it is plainly foreseeable. Accordingly a solicitor owes a duty to his client to take all reasonable steps to avoid the consequences of the risk becoming a reality. I see nothing unjust or unreasonable about the implication of such a duty. I recent years the courts have done everything in their power to discourage and prevent delay. This is common knowledge to all practitioners. It is well-known that delay is the enemy of justice for many and varied reasons. In my view the public might well be affronted if told that a solicitor who was responsible for unreasonable delay in the conduct of litigation was not responsible for the resulting failure to enforce a judgment obtained by his client because of the insolvency of the defendant. Accordingly, in my judgment, save where the risk of insolvency is to be regarded as fanciful, the scope of a solicitor's duty will be such as to require him to conduct litigation in such a way as to avoid, if possible, the hazard of insolvency becoming a reality. I reject Mr Livesey's submission that the risk must be such as to amount to a probability before it comes within the scope of a solicitor's duty.
    I would hold that on the facts of this case the First Defendant owed a duty of care to take steps to progress the litigation at such a speed as to obtain judgment, if possible, before Ferranti went into receivership. In my judgment its knowledge of Ferranti's financial difficulties was such that it was incumbent on the First Defendant to progress the litigation as fast as it reasonably could. If it had done so, on my findings, the trial would have taken place in January 1992. On that basis judgment would have been obtained before Ferranti went into Administrative Receivership. By its culpable delay the First Defendant was in my judgment in breach of its duty to the plaintiff and that breach was the dominant and effective cause of such loss as the plaintiff sustained."

  31. The high-water mark for the common sense test is Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360, 1374, where Glidewell L.J. said:-
  32. "The passages which I have cited from the speeches in Monarch Steamship Co. Ltd v Karlshamns Oljefabriker A/B [1949] AC 196 make it clear that if a breach of contract by a defendant is to be held to entitle the plaintiff to claim damages, it must first be held to have been an 'effective' or 'dominant' cause of his loss. The test in Quinn v Burch Bros. (Builders) Ltd [1966] 2 Q.B. 370 that it is necessary to distinguish between a breach of contract which causes a loss to the plaintiff and one which merely gives the opportunity for him to sustain the loss, is helpful but still leaves the question to be answered 'How does the court decide whether the breach of duty was the cause of the loss or merely the occasion for the loss?'
    The answer in my judgment is supplied by the Australian decisions to which I have referred (Alexander v Cambridge Credit Corporation Ltd. (1987) 9 N.S.W.L.R. 310 and March v E. & M.H. Stramare Pty. Ltd. (1991) 171 C.L.R. 506), which I hold to represent the law of England as well as of Australia, in relation to a breach of duty imposed on a defendant whether by contract or in tort in a situation analogous to breach of contract. The answer in the end is "By the application of the court's common sense".

  33. The correct approach for ascertaining compensation for loss is now laid down in a trio of recent cases in the House of Lords. In Banque Bruxelles Lambert S.A. v Eagle Star [1997] A C 191,210, Lord Hoffmann expressed this opinion:-
  34. "Much of the discussion, both in the judgment of the Court of Appeal and in argument at the Bar, has assumed that the case is about the correct measure of damages for the loss which the lender has suffered. ... The Court of Appeal began its judgment ... stating the principle that where an injury is to be compensated by damages, the damages should be as nearly as possible the sum which would put the plaintiff in the position in which he would have been if he had not been injured. It described this principle ... as "the necessary point of departure."
    I think that this was the wrong place to begin. Before one can consider the principle on which one should calculate the damages to which a plaintiff is entitled as compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation. A correct description of the loss for which the valuer is liable must precede any consideration of the measure of damages. For this purpose it is better to begin at the beginning and consider the lender's cause of action. (p.210G - 211B)

    A duty of care such as the valuer owes does not however exist in the abstract. A plaintiff who sues for breach of duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered. Both of these requirements are illustrated by Caparo Industries Plc. v Dickman [1990] 2 AC 605. (p.211H.)
    As Lord Bridge of Harwich said, at p.627:
    "It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage for which A must take care to save B harmless."
    A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them." (p.214D).

  35. In Nykredit Plc v Edward Erdman Ltd. [1997] 1 WLR 1627, 1631, Lord Nicholls of Birkenhead said:-
  36. "However, for the reasons spelt out by my noble and learned friend, Lord Hoffmann, in the substantive judgments in this case [1997] AC 191, a defendant valuer is not liable for all the consequences which flow from the lender entering into the transaction. He is not even liable for all the foreseeable consequences. He is not liable for consequences which would have arisen" (the fall in property prices) "even if the advice had been correct. He is not liable for these because they are the consequences of risks the lender would have taken upon himself if the valuation advice had been sound. As such they are not within the scope of the duty owed by the lender to the valuer."

  37. Lord Hoffmann explained at p.1638:-
  38. "It was accepted that the whole loss suffered by reason of the fall in the property market was, as a matter of causation, properly attributable to the lender having entered into the transaction and that, but for the negligent valuation, he would not have done so. It was not suggested that the possibility of a fall in the market was unforeseeable or that there was any other factor which negatived the causal connection between lending and losing the money. There was, for example, no evidence that if the lender had not made the advance in question, he would have lost his money in some other way. Nor, if one started from the proposition that the valuer was responsible for the consequences of the loan being made, could there be any logical basis for limiting the recoverable damages to the amount of the over-valuation. The essence of the decision was that this is not where one starts and that the valuer is responsible only for the consequences of the lender having too little security. Proof of loss attributable to a breach of the relevant duty of care is an essential element in the cause of action for the tort of negligence. Given that there has been negligence, the cause of action will therefore arise when the plaintiff has suffered loss in respect of which the duty was owed."

  39. Finally, in Platform Home Loans Ltd v Oyston Shipways Ltd [1999] 2 WLR 518, Lord Hobhouse of Woodborough said at p.533:-
  40. "As emphasised by Lord Hoffmann and Lord Nicholls, and as I have already observed, the Banque Bruxelles principle does not involve any question of factual causation. It involves a question which arises subsequent to the ascertainment of the lender's basic loss arising from the valuer's breach of duty. Further, as I also observed, it does not involve an approach of scientific apportionment. Although the speeches of Lord Hoffman include the word 'attributable,' it is not used as a factual concept but as a legal one. If an analogy is required, one can be found in the concept of remoteness of damage, for example the damages recoverable under the rules in Hadley v Baxendale (1854) 9 Exch 341 for breach of contract. As has been pointed out in a number of cases (e.g. County Ltd v Girozentrale Securities [1996] 3 All E.R. 834; and see McGregor on Damages 16th ed. (1977), p.152, para. 241 et seq.), there is a close relationship between the application of such concepts as remoteness, contributory negligence and causation (and, for that matter, scope of duty of care.) The same result can often be justified or formulated in any of these three ways.

    The principle drawn upon by Lord Hoffmann in the Banque Bruxelles case is stated in terms of, and defined by reference to, the scope of the duty of care. This is a distinct legal concept but is sometimes referred to in the language of remoteness of damage.
    Thus it is the scope of the tort which determines the extent of the remedy to which the injured party is entitled."

  41. I should also refer to Chong Yeo and Partners and Anor. -v- Guan Ming Hardware and Engineering Plc Ltd. (1997) 2 SLR 729. There the plaintiffs applied for summary judgment but their solicitors failed to exhibit the necessary documentary evidence and the matter had to be adjourned. There was delay. Judgment was eventually obtained. Before it could be enforced, the defendant company was put in the hands of receivers and eventually wound up. Yong Pung How C.J., delivering the judgment of the court, said at p.746:-
  42. "There was not a sufficiently proximate relationship between the parties to guard against the winding up or the appointment of a receiver of the debtor company. Such an obligation would impose too heavy a burden on advocates and solicitors accepting a normal retainer. It would require them to exercise care in proceedings beyond what would normally be expected since whether a company is wound up or a receiver appointed is determined by many commercial factors, not all of which would be within the ken or control of advocates and solicitors. It is conceivable that in some situations an advocate and solicitor would assume such responsibilities, but here, there was no evidence that the appellants had done so. Though the evidence possibly shows that the appellants knew of other creditors, and of the demands made by these creditors, this is not enough to lead to the conclusion that they assumed the responsibility of ensuring that they proceeded with such care that they would avoid the occurrence of a winding up. It was incumbent upon the respondents to show that there was such a voluntary assumption of responsibility. This they did not do. ...
    In conclusion, the only duty of care which was owed by the appellants was the general duty to take care in the conduct of the proceedings, and not to cause any delays."

  43. When dealing with "loss and causation", the court approached the matter on the basis that the breach was neither a necessary nor a sufficient cause of the failure to recover the judgment debt.
  44. "The appellants' breach only allowed an opportunity for the winding up to intervene. In such a situation, the winding up would normally be a break in the chain of causation, unless it was likely to occur: The Oropesa (1943) 1 All E.R. 211. There is much controversy over the degree of likelihood required, particularly where the tortfeasor has no control over the acts of others. Oliver L.J. in Lamb v Camden Borough Council ([1981] 1 Q.B. 625) at p. 644, referring to situations where the tortfeasor has no control over the occurrence of the intervening act, thought that there might be circumstances where what would be required is a very high degree of likelihood, or in His Lordship's words, "almost amounting to inevitability". It is questionable whether, on the facts, there was any likelihood, as opposed to a possibility, of winding up occurring." (p. 749

  45. Gage J. was correct to conclude that the answer lay in the definition of the solicitor's duty in the given case. He held it was reasonable to impose the duty where the risk was more than fanciful and was plainly foreseeable. He held there was nothing unjust or unreasonable about the imposition of the duty which necessarily serves to emphasise that delay is the enemy of justice. It is a powerful argument.
  46. In my view, however, the position is this. A solicitor's duty is ordinarily defined by the terms of his retainer.
  47. "The retainer when given puts into operation the normal terms of the contractual relationship, including in particular the duty of the solicitor to protect the client's interest and carry out his instructions in the matters in which the retainer relates, by all proper means:"

    per Scott L.J. in Groom v Crocker (1939) 1 KB 194, 222. The nature of those duties was further considered by Oliver J. in Midland Bank v Hett Stubbs & Kemp (1979) Ch. 384, 434:

    "The classical formulation of the claim in this sort of case as 'damages for negligence and breach of professional duty' tends to be a mesmeric phrase. It concentrates attention on the implied obligation to devote to the client's business that reasonable care and skill to be expected from a normally competent and careful practitioner as if that obligation were not only a compendious, but also an exhaustive, definition of all the duties assumed under the contract created by the retainer and its acceptance. But, of course, it is not. A contract gives rise to a complex of rights and duties of which the duty to exercise reasonable care and skill is but one."

    I am troubled about the judge's approach and the weight he gave to the foreseeability of the risk of insolvency. To repeat it, he said:-

    "In my judgment, where the risk of such an event is other than fanciful, it is plainly foreseeable. Accordingly a solicitor owes a duty to his client to take all reasonable steps to avoid the consequences of the risk becoming a reality."

    I add the emphasis. In my judgment the implication of a duty does not follow as a matter of course from the foreseeability of the consequences. That was made clear in Nykredit where the negligent valuer was held "not even liable for all the foreseeable consequences". Something more than foreseeability is required. Lord Bridge had said in Caparo at p.617/8:-

    "What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed, a relationship characterised by the law as one of 'proximity' or 'neighbourhood' and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other party."

    Thus, it seems to me that one must consider the extent of the solicitors' knowledge and the degree of foreseeability as part and parcel of ascertaining where the reasonableness, fairness and justice of the case lies.

  48. Here, as the judge found, Ferranti's difficulties, following the fraud perpetrated upon them, were given widespread coverage in the media in 1989. The plaintiff was aware of it and the judge was right to hold that it was more probable than not that the solicitors were equally aware of the problems from 1989 onwards either through their learning of the reports in the media and/or being told about it by their client. Mr Dodd gave this evidence about the suspension of Ferranti's shares on the stock exchange (Transcript Day 1 p.6D -7F):-
  49. "Q. In the period of the month or so which followed, arrangements were made with the company's bankers to ensure the refinancing of the company, and that was announced in November 1989, is that about right?
    A. It would be about right, yes.
    Q. After which, to the outside world, the company had sufficient resources to pull itself round from the setback which it had suffered; that is right, is it not?
    A. Well, in retrospect, the answer is no, it didn't. But it appeared so at the time.
    Q. In any event, in 1989, it appeared to you all that with the finance in place, it was possible to renew building up the business?
    A. Yes.
    Q. We do not have those annual reports (from 1989 to 1993) and it is perhaps unnecessary to look at them in detail, but what they did show was that the company continued to have substantial net value, is that fair?
    A. Yes"

    That, in my judgment, was not information which would reasonably have led to an expectation of imminent collapse of a substantial public company.

  50. In July 1990, the Daily Mail published its report. Mr Pearson said of that when he was cross-examined (Day 4, p. 34D)
  51. A. I was concerned that they would go bankrupt, of course, but I didn't think a big company like that would, not a big and established company like that.
    Q. Indeed, there was nothing in this article on which you now rely to suggest that they would? Far from it! The article suggested to you, did it not, that the prevailing mood was optimism? It would be profitable in the second half of the year?
    A. I accept that".

    That in my judgment would have been the reasonable expectation to hold at that time.

  52. However, in August 1991, the Daily Mail reported that 'Ferranti Clings On.' That was the article which reported that 'Ferranti's future looks dubious'. That was undoubtedly information which ought to have woken the sleeping dogs. It was information passed to the solicitors. By virtue of their retainer, they would have assumed the responsibility for responding to changes of event and for adapting the tactics of the litigation to meet changed circumstances. This was a change which justified action. Although they were already negligent in failing to prosecute the claim with due expedition, justice, fairness and reasonableness now demanded that they become responsible for the risk of a successful judgment being unenforceable. They now came under a fresh duty to act swiftly to bring the action to trial. It is for the consequences of the breach of that duty they should be liable.
  53. No response was forthcoming from them. If they had reacted with due and proper diligence, the solicitors would, on the judge's timetable, have been able to obtain a date for hearing 18 months later, i.e. by about April 1993. The trial was expected to last for four weeks and time for writing judgment had to be allowed, say another four weeks. Thus the plaintiff ought to have had his judgment in June 1993, very approximately six months or less before the receivers moved in.
  54. In my judgment, the duty of the solicitor in accepting the retainer to act for a client in litigation, is the duty to act with all due expedition and not to cause delays. The kind of loss against which it is the duty to safeguard the client is the kind of loss which flows from the loss of the right of action as where the claim has been struck out. The loss flowing from the inability to enforce any judgment actually obtained is in my, view, a different kind of loss. It is a loss at one remove from the conduct of the litigation to trial and judgment. Gage J. was right to have regard to general policy and to the notions of justice and fairness to decide whether the duty is extended to cover that risk. With respect to him, I disagree with his conclusion. In my judgment, policy demands that delay in litigation be eradicated but those demands do not extend as far as imposing upon solicitors the risk of non-recovery of a judgment debt. Reasonableness, fairness and justice as between solicitor and client do not require the imposition of a duty on the solicitor arising simply from the retainer to protect the client against the risk of a judgment not being enforced through impecuniosity of the defendant, at least without responsibility being assumed by the solicitor or sufficient notice of that impecuniosity making it reasonable, fair and just to extend the duty to cover that loss. Here foreseeability of the possibility of Ferranti's collapse was not sufficient to trigger an extension of the duty until the press reported that their future was dubious. That fact ought reasonably to have spurred the solicitors into action. In my judgment, they should not be held to be liable for the consequences of any delay before the notional date when the plaintiff could have had his judgment, June 1993. The assessment of the chances of recovering the fruits of that judgment must be viewed in that light.
  55. The chances of successfully recovering damages.

  56. The judge approached the matter in this way:-
  57. "In my judgment the correct approach for me to adopt is to value the plaintiff's chances of recovery in an action which should have taken place in January 1992. In doing so, I shall adopt a broad approach. I shall take into account in general terms the plaintiff's overall prospects of success; in broad terms his prospects on the quantum of damages; and his prospects of enforcing any judgment obtained."

  58. I propose to start with the plaintiff's prospects of success on damages. In my judgment, on this issue, it is relevant to note that the plaintiff's claim started at a figure of 29,000. By the time the second defendant ceased to act for him, the pleaded claim was 976,000. When it finally came for trial, I am told that the claim was put at approximately 2 million. Judge Thornton gave judgment for 567,723.94 before interest. These figures on their own give rise to the suspicion that the claim was an inflated claim.
  59. Mr Livesey made an attack on five specific items of damage. They were: loss of petrol/revenue; extra cost of employing staff; loss in capital value; loss of sale/growth in sales; and cost of finance. Some of his arguments were arguments in law and others depended of the evidence of the plaintiff. In final submissions Counsel for the plaintiff put forward an appendix which contained a summary of the plaintiff's counter arguments. I have already said that I propose to deal with this matter on a broad basis. I say no more than that, conscious as I am of the problems in this trial of dealing with these matters in detail, it seemed to me that there was some force in the submissions made by Mr Livesey....
  60. Taking all the factors into account both on quantum and the overall prospects of success, in my judgment, it is appropriate to discount the sum awarded by Judge Thornton by two thirds. I calculate the resultant sum as 189,241.31 which I propose to round up to 190,000. Carrying out a similar calculation of the sum for interest, I calculate interest as 165,327.66 which I shall round down to 165,000. The total sum is therefore 355,000.
  61. The next factor which I have to assess is what discount, if any, should be made to take account of the chances that the plaintiff would have been unable to have executed the judgment against Ferranti. Mr Dodd's evidence was that Ferranti endeavoured to deal fairly with all its claims and particularly those of small customers. He agreed, however, that in the circumstances prevailing after 1989, Ferranti would have taken every legitimate step to postpone paying a claim. This would entail delaying as long as possible or settling at a minimum sum. If it had thought that a judgment was incorrect, it would have appealed. On the other hand it would not have wanted to run the risk of a winding up petition being presented.
  62. Assuming a trial in January 1992 with judgment reserved, in my opinion, the probability is that any judgment obtained that at date would have had a reasonable prospect of being successfully executed. I propose to allow a modest discount of ten per cent to allow for the chance that the plaintiff might not have been able to execute. This produces a figure of 314,500. I shall round up this figure and accordingly I assess the value of the plaintiff's lost chance of obtaining a valuable judgment in January 1992 in the sum of 315,000."
  63. Mr Livesey Q.C. on the appellant's behalf complains that the judge should have assessed the strengths and weaknesses of the plaintiff's case in more detail. Mr Phillips Q.C, who did not appear in the court below, no longer maintains the appellant's case at trial that the judge should have accepted Judge Thornton's assessment to the penny and now does not challenge the judge's broad approach, but submits by way of cross appeal that he discounted the plaintiff's prospects of success to too great an extent. Both counsel are agreed that the essential task for the judge was to assess the loss of the chance of recovery of damages.
  64. Because chances are not certainties, there is always an element of conjecture for which allowance must be made. The chances will range from a chance which is virtually certain, through chances which can be regarded as real or substantial, to those which at the other end of the spectrum are wholly speculative and must be ignored. The court's task is to do its best to place the chance within its proper range. That is what I understand the authorities to require. In Kitchen v Royal Air Force Association [1958] 1 W.L.R. 563, 575, Lord Evershed M.R. asked:-
  65. "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." (Emphasis added.)

  66. In Davies v Taylor [1974] A.C. 207, 212, Lord Reid said this:-
  67. "To my mind the issue and the sole issue is whether that chance or probability was substantial. If it was, it must be evaluated. If it was a mere possibility it must be ignored. Many different words could be and have been used to indicate the dividing line. I can think of none better than 'substantial' on the one hand or 'speculative' on the other. It must be left to the good sense of the tribunal to decide on broad lines, without regard to legal niceties, but on a consideration of all the facts in proper perspective." (Again I add the emphasis.)

  68. Gage J. did look at the matter broadly, but I fear he did not give consideration to all the facts in their proper perspective. In my judgment he should have had regard to all matters which were material to the assessment of each risk, and when considering the quantum of damages, to all facts relating to each discrete head of damage. He should have weighed the chances in as much detail as the facts permitted. The picture will inevitably be composed by a mixture of strokes of the broad brush as well as of the fine detail. He must apply both and, standing back, view the picture as a whole. The judge having failed to do so, it is now for this court to do its best in the circumstances.
  69. That examination requires us to consider the case from four aspects:
  70. 1. Was the judge entitled to make the findings about the plaintiff's lack of credibility which he did?
    2. How are the individual heads of damage to be quantified? Mitigation of damage needs to be considered in this respect.
    3. How are the prospects of success on liability to be evaluated?
    4. What were the chances of recovering any judgment debt before Ferranti's insolvency?


  71. The plaintiff's credibility was attacked on the basis that there were some seven topics on which he had demonstrably lied for personal gain.
  72. The first was that although he well knew that the financial limits of eligibility for legal aid current at the time were of income of 122 weekly and assets of 3,000, he still applied for legal aid and failed to reveal his belief that his business was worth in the region of half a million pounds or more and his drawings approximately 15,000 per annum. The judge held:-
  73. "I entertain considerable doubts as to the plaintiff's honesty in relation to his application for legal aid. However, I have not seen the form setting out his factual details nor have I heard evidence on this topic from anyone other than the plaintiff. In the circumstances, I am not prepared to hold that the plaintiff was knowingly involved in deceiving the Law Society for the purpose of obtaining legal aid."

  74. The second challenge was that he had made a fraudulent application for a mortgage. The plaintiff accepted that the application was fraudulent but contended it had been signed in blank and that he was not to blame nor was he party to the fraud. The judge held:-
  75. "I am quite unable to accept that the plaintiff knew nothing of the false statement in the application forms. The information in it and the information concerning Mr Lee must, in my opinion, have come from the plaintiff. In my judgment this document, on its own, shows the plaintiff as someone who was prepared to obtain a financial advantage by making false statements. His denial of knowledge of the false statements, which I do not accept, also affects the trustworthiness of his evidence to me."

  76. The third challenge related to falsities alleged in an affidavit he had sworn for the purpose of obtaining a stay of execution of the Ferranti judgment when he understated his income. The judge held:-
  77. "The plaintiff blamed his legal team for any inaccuracies in the affidavit. I am unable to accept that explanation. In my judgment he must have known when he swore the affidavit that it did not contain full details of his income and assets."

  78. Other allegations were made. They related to false statements in the sales particulars of the garage, false statements made with the purpose of obtaining a valuation of the business, false statements to obtain banking facilities and false statements of the volume of sales of petrol. As to those the judge made these findings:-
  79. "The other topics contain discrepancies in information given by the plaintiff to various people. Having observed the plaintiff in the witness box being cross-examined on all these topics, my conclusion is that he knowingly gave misleading information to people who sought information from him in connection with these matters. He denied doing so, but I do not accept his denial. It follows that I have formed an unfavourable view of the plaintiff's integrity and his truthfulness as a witness. In my judgment he is shown to be a person who in the past has not shrunk from giving false evidence and misleading information for the purpose of obtaining some financial advantage for himself."

  80. The respondent cannot attack the findings as such for there was ample material before the judge to enable him to come to those conclusions. Mr Phillips, on his behalf, does, however, mount a spirited attack on the fairness of the cross examination which elicited so much of this damaging information. The plaintiff, it is alleged, was subjected to a "forensic mugging". The procedural history upon which that submission depends is complicated and I shall do no more than summarise some salient features of it. The amended defence, having asserted that Ferranti had taken no part in the trial before His Honour Judge Thornton, went on to plead:-
  81. "It is expressly not admitted that had such evidence, cross examination or argument (on Ferranti's behalf) been advanced, the plaintiff would have recovered the sum of 1,063,707.10 or any sum."

  82. An attempt was made to strike out that part of the defence for being a collateral attack on the judgment of the Official Referee. At the hearing of the strike-out application, the defendant stated they were not attacking the Thornton judgment and consequently no order was made. In correspondence the defendants' solicitors confirmed that they did not intend to mount any collateral attack on that judgment. Despite that assertion, the defendants then served an expert report in which many of the challenges to the basis of the judgment were set out, though apparently no indication was given of the specific challenges to the plaintiff's credibility. In fact that report, though served, was not admitted. The plaintiff therefore went to the trial believing that the live issues were liability and causation; and the defendant, on the other hand, was expecting the plaintiff to be in a position to prove his damage and to deal with the weaknesses inherent in his case. A great deal of confusion rested upon what each side meant by there being no collateral attack on the Thornton judgment. It is easier now to see that there was a complete misunderstanding. Indeed, the respondent's skeleton argument acknowledges in paragraph 7.33 that:-
  83. "Now it may well be that the parties were at odds, the defendants considering that saying the plaintiff had no case against Ferranti was not a 'collateral attack' on the Thornton judgment and the plaintiff's advisors believing that that meant that the defence were not raising any Ferranti issues at all."

    The respondents do assert in paragraph 7.37:

    The Plaintiff says that the Defendants' pleadings were a totally inadequate platform from which to advance the detailed case sought to be made at trial and developed in this Appeal. The Plaintiff and his lawyers were in no way prepared to fight Ferranti issues, although they could well have done so appropriately given reasonable notice."

  84. It seems to me clear that wires were crossed. What makes it totally impossible for the respondent now to complain in this court is the fact that counsel who then appeared for the plaintiff did not object at the trial to the cross examination on these matters or seek an adjournment on the ground of being taken by surprise in order to prepare for the attack but simply argued in his closing speech that it was unfair for the judge to make specific findings on the heads of claim. The judge held:-
  85. "I reject the argument that the plaintiff has been taken completely by surprise on the points raised by Mr Livesey. Junior counsel for the plaintiff told me that apart from two small matters, Mr Livesey's cross examination and submissions followed the lines of the accountant's report. In addition, the plaintiff's counsel produced an appendix setting out its case on each head of claim together with references to the evidence which had supported those claims before Judge Thornton. Nevertheless, I am conscious of the fact that I have not seen all the evidence that was before Judge Thornton."

  86. In my judgment the judge came to the right decision. He had no reason to stop the cross-examination and was entitled to make the adverse findings against the plaintiff as he did. I reject the submission that the plaintiff had been 'ambushed'.
  87. The prospects of success on damages.

  88. I earlier adverted to the way in which the claim for damages grew and grew like Topsy. The claim of about 7,000 first made in May 1987 eventually grew to over 2m in January 1995. In April 1991, which was shortly after Ferranti had handed over to Dresser, the plaintiff instructed the new assistant solicitor that his claim was worth in the region of half a million pounds, though the attendance note in fact recorded the preliminary view:-
  89. "I have to say that it is optimistic to get 500,000 out of this but I think he is going to get 350,000 at a push".

    When, however, an amended statement of claim was served in February 1992, the loss had grown to 976,062. In October 1994 a schedule of loss valued the claim at 1,244,251. A new schedule of loss dated January 1995 put the claim at 2,050,054. Such huge quantum leaps never inspire confidence. As a result the claim cried out for close scrutiny.

  90. Mr Livesey has given it just that. He has subjected the heads of damage to a penetrating analysis under five heads.
  91. A. Loss of petrol/revenue due to inaccurate kiosk displays and pilfering.
    The claim was for 67,809. Judge Thornton awarded 18,671 but the criticism of his finding is that his calculations covered a period beyond the end of February when Dresser took over and Ferranti's liability ceased. If the claim were reduced on a linear basis, all the plaintiff would have been entitled to was 13,858. The plaintiff contends that Dresser could not immediately have remedied Ferranti's faults. That submission seems well founded to me. Taking a broad view of this head of claim, I would assess it at 16,000.
    B. The plaintiff claimed 836,476 for the loss in growth of sales but this is related to the fifth item for the diminution in the value of the business and they should be considered together.
    C. Cost of extra staff and use of managerial time.

    The plaintiff claimed that he spent a considerable time trying to remedy the faults and trying to deal with his irate customers. He contended that if he had not had to do so, he would have had more time to attend to his other business activities or to his leisure. He claimed 135,700 for 311 weeks up to 1st April 1991 at the rate of 300 a week, and from then onwards at 400 a week. He was awarded 92,100. The plaintiff relies on Tate & Lyle Food & Distribution Ltd v Greater London Council [1982] 1 W.L.R 149, in which Forbes J. held that the expenditure of managerial time in remedying an actionable wrong can be a head of special damage, but in my judgment the appellants are correct to contend that the case is no authority for the proposition that a sole trader can claim for lost managerial time if he cannot show that by devoting his time to dealing with the problems, he lost the opportunity to increase the profits or make other profits. The plaintiff's difficulty was that he could not demonstrate that the time he spent dealing with the petrol pump problems could have been profitably spent on his other business activities selling occasional cars or conducting the repair and service business. There is a separate claim for loss of profit anyway. He is not entitled to be compensated for the loss of leisure time. Moreover, the claim is, in my judgment, wildly exaggerated. As the first defendant points out, his actual drawings at the time were only 15,600, the same as or even less than he was claiming under this head as compensation for the few hours a week spent on dealing with the petrol pump problems. He would be bound to fail in his claim under this head.

    Mr Platt was the station manager. The plaintiff claimed 82,350 for him and the judge awarded 56,190. An analysis of the payments actually made by the plaintiff to Mr Platt revealed that he received only 6,090 by way of overtime or extra payments. He said that he was allowed to fill his motor car with petrol from time to time and that there was some contribution towards his domestic electricity bills. Mr Pearson claimed that the value of the ex gratia payments was an average of 105 per month which again seems exaggerated. The plaintiff's own evidence was that although the unfortunate Mr Platt suffered a loss of his leisure time, the plaintiff suffered no loss of profit beyond the 6,090 which was paid to Mr Platt. That may be all he is entitled to recover but I would add something for the possibility of showing he received free petrol and help with his electricity bills and I would round up to 10,000.

  92. There was then a claim for additional staff but the problem for the plaintiff is the same: he could only prove that he paid them an extra 8,459 which was the figure found by the judge. I would not disturb that assessment.
  93. D. Other financial losses.

    The first part of this claim is for the cost of finance. The basis of that claim was that, instead of reducing the borrowing needed to set up the new system and run the business in the early years after the system had been installed (which would have been achieved using some of the profits that would have been earned had the petrol sales been at the level anticipated), Mr Pearson in fact increased his borrowing and had to finance that increased borrowing over the whole period. The claim was, therefore, in general terms, a claim for damages quantified by reference to the interest paid on the borrowings made by Mr Pearson. He claimed over 250,000 and Judge Thornton awarded 101,855. In addition, however, he awarded interest on the damages at 2% over base rate. The first defendant's submission is that the plaintiff would be entitled to recover his losses of revenue under heads A and B and would be entitled to interest on those sums. That interest would compensate him for being kept out of that money. What he was not entitled to recover was the cost of finance in addition to the loss of revenue plus the interest on it because that would involve a duplication of compensation. The point is seen starkly in the 'final interest calculation' prepared for implementing Judge Thornton's judgment. The plaintiffs recovered not only the interest on the revenue loss under heads A and B and the interest claimed under head D as the cost of finance, but also interest on the interest recovered under head D. There can be no answer to the defendant's submission which is clearly correct. There was no prospect whatever of recovering under head D and this item should be excluded totally.

  94. The second aspect is the cost of 8,127 being the cost of keeping extra stocks of fuel to prevent the petrol station running dry through the Ferranti system malfunctioning and precluding access to certain tanks. Although it is submitted that this claim involves the same duplication as affected the cost of finance, I can see that purchase of an extra load was a reasonably prudent step to take. It is, however, not the cost of the petrol itself, because that would in due time be sold and profit recovered, but the cost of servicing the borrowing to make that extra purchase. Although I am extremely doubtful whether interest on that extra outlay could amount to as much as 8,127, Judge Thornton was satisfied by the calculation and I do not feel justified in reducing it.
  95. The third element is of a small amount of 2,602 as a payment to engineers as against which no criticism has been advanced.
  96. E. Diminution in the value of the business.

    115,000 was claimed and 100,000 awarded by Judge Thornton. This should be considered with item B, the loss in growth of sales, where 836,476 was claimed and 179,710 was awarded. The basis of the claim was that because of the regular failures of the system, the pumps at times could not be operated at all. At other times they had to be manually operated which was less convenient for the customers. They complained about all of the problems. They lost faith in the accuracy and reliability of the equipment and were frustrated by the delays. They went elsewhere to purchase their petrol. The reputation of the business suffered in consequence. The good local marketing opportunities were lost. Judge Thornton rejected the plaintiff's calculations based on gross profit and was right to do so. He did, however, accept the evidence of a chartered surveyor with much experience in the petrol retailing trade and so accepted that sales were likely to have grown at the rate of 3.5% annually.

  97. In my judgment there are formidable difficulties in the plaintiff's way. As is acknowledged in his skeleton argument:
  98. "It is accepted that a loss of business claim may often be difficult to sustain because there may be more than one competing cause."

    That is certainly true here. There was heavy competition. There was price cutting and a squeeze on margins. There was recession. There were many question marks about the plaintiff's bookkeeping and record keeping, the variance between the current claim and his profit and loss returns to the Inland Revenue and his VAT claims. There was no correlation demonstrated between the defects and the petrol throughput figures. Judge Thornton did not have the advantage of expert evidence in rebuttal of the plaintiff's claim and expert evidence was not admitted in the trial before Gage J. This part of the claim is fraught with uncertainty and in my judgment must be heavily discounted. I would reduce Judge Thornton's figure by two thirds to 60,000 in round figures.

  99. I would award nothing for the diminution in value of the business or, putting it another way, for loss of any goodwill. Even if a paper loss could have been established, there was no actual loss proved. The business was not sold but continued to ply its trade. There was every likelihood that had the Kuwait offer been accepted, then the favourable position would have been restored by the notional date of the trial which was the point in time at which that claim would have to be assessed.
  100. Notional Interest

  101. Gage J. also awarded the plaintiff 165,000, being in round figures one third of the amount of interest which had been awarded by Judge Thornton, even though (a) the interest which that judge awarded was to the date of the trial before him (12 January 1996), (b) the interest included non-interest bearing items, leading to a duplication of interest, and (c) it was awarded at the rate of 2% above the judgment rate, which for most of the period stood at 15%, whereas it is not in dispute that the interest rate should be the court special account rate. The judge was wrong in all three aspects. The interest is that which would have been awarded by a trial judge at the date of giving judgment and at the appropriate rate and for the appropriate period ending with the judgment which would have been given.
  102. In the result, but still subject to the vagaries of litigation, the plaintiff seems to have had a reasonable claim under these various heads to a total of 105,188, but, looking at the matter broadly, I would round down to 100,000.
  103. 3. The prospects of success on liability

  104. The plaintiff was not without his problems. He was a very unsatisfactory witness. He would have difficulties in establishing his claim. An issue was whether Ferranti had any maintenance contract with the plaintiff at all. They claimed that their service arrangement was made with the petrol company Conoco, that Conoco cancelled its contract with Ferranti and placed the contract with Lectronic Specialists Ltd who in turn sub-contracted back to Ferranti. A not dissimilar arrangement was made between Kuwait (Q8) and Dresser and in the litigation with Dresser the plaintiff lost that issue. Ferranti were also relying on a defence under the Unfair Contract Terms Act 1997. Mr Livesey then makes the point that there was apparently no trouble with the pumps after the teething problems had been sorted out and the allegations of defect only really emerged once Ferranti began to press its claim against Mr Pearson. The defects appear to have been quite easily cured once a receiver had been appointed to the plaintiff's business. There may well have been challenges to the plaintiff's technical expert: indeed in the Dresser litigation, Dresser's expert expressed very different views from those advanced on the plaintiff's behalf.
  105. On the other hand, Mr Pearson's counsel, whose professional competence was never doubted, expressed optimism about the prospects of success and Judge Thornton did deal with liability in his judgment and found for the plaintiff.
  106. Having regard to all these imponderables and to the general hazards of litigation, and having already pruned the damages considerably, I conclude that the plaintiff had a 75% chance of recovering his loss. I therefore value that chance at 75,000.
  107. 4. The chance of recovering a judgment debt from Ferranti.

  108. In the view I have formed of this case, the first defendant is not liable for any loss arising before June 1993. The evidence of Mr Dodd was that although Ferranti endeavoured to deal fairly with all claims and particularly those by small customers, they would nonetheless have taken every legitimate step to postpone paying a claim and would have appealed if necessary. There would have been every incentive to appeal an order in favour of the opportunistic Mr Pearson.. Given the parlous financial position of his business the receiver was already in there is in my view every reason to think that a stay of execution would have been granted. The press reports in June 1993 of Ferranti's prospects of survival were favourable and I doubt very much whether a court would have required any security for the costs of the appeal from Ferranti. There is, therefore, every prospect that Ferranti would have delayed until a point when due to its insolvency no money would have been forthcoming at all. On the other hand Ferranti dared not risk a winding up petition.
  109. I assess the chances of recovering the judgment debt as 50/50.
  110. Conclusion.

  111. In the result, in my judgment, the plaintiff would only be entitled to 37,500 from which Ferranti's outstanding costs of 7,759 should be deducted. Having taken a broad view of the case, and rounding up in the plaintiff's favour, there should be judgment for the plaintiff for 30,000.
  112. Subject to further argument from counsel, the sum of 30,000 which I would award should carry interest at the court special account rate running from the mid-point date between the date of the installation in April 1985 and March 1991 when Dresser took over, say from 22nd March 1988. I would invite counsel to agree the appropriate figure for interest. I would, therefore, allow the appeal, dismiss the cross appeal and substitute for the sum of 315,000 in Paragraph 2 of the order made by the judge the sum of 30,000 plus the sum agreed for interest.

    CHADWICK L.J.: I agree.

    PETER GIBSON L.J.: I also agree.

    Order: Appeal allowed as per judgment; cross-appeal dismissed with costs; monies paid into court be paid out, with interest to parties; legal aid assessment of respondent's costs.

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