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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  EWCA Civ 3032 (22 October 1999)
Cite as:  PNLR 110,  EWCA Civ 3032,  Lloyd's Rep PN 151
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr. Justice Gage
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WARD and
LORD JUSTICE CHADWICK
|DOUGLAS LESLIE PEARSON
|- and -
| SANDERS WITHERSPOON
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. 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. 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?
"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.
"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."
"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."
"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.
"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."
"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."
"The passages which I have cited from the speeches in Monarch Steamship Co. Ltd v Karlshamns Oljefabriker A/B  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  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".
"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  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).
"However, for the reasons spelt out by my noble and learned friend, Lord Hoffmann, in the substantive judgments in this case  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."
"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."
"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  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."
"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."
"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 ( 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
"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.
"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?
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?
That, in my judgment, was not information which would reasonably have led to an expectation of imminent collapse of a substantial public company.
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.
The chances of successfully recovering damages.
"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."
"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.)
"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.)
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?
"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."
"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."
"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."
"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."
"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."
"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."
"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."
The prospects of success on damages.
"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.
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  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.
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.
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.
"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.
3. The prospects of success on liability
4. The chance of recovering a judgment debt from Ferranti.
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.