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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Barrowfen Properties Ltd v Patel & Ors [2025] EWCA Civ 39 (23 January 2025) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2025/39.html Cite as: [2025] EWCA Civ 39 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Mr. Justice Leech
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE LEWIS
and
LORD JUSTICE SNOWDEN
____________________
BARROWFEN PROPERTIES LIMITED |
Claimant/ Appellant |
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| - and – |
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(1) GIRISH DAHYABHAI PATEL(2) STEVENS & BOLTON LLP(3) BARROWFEN PROPERTIES II LIMITED |
Defendants/ Respondents |
____________________
Roger Stewart KC and Joshua Folkard (instructed by Reynolds Porter Chamberlain LLP) for the Second Respondent
The First and Third Respondents did not appear and were not represented
Hearing dates : 24 and 25 July 2024
Additional materials provided on 30 September, 11 November and 29 November 2024
____________________
Crown Copyright ©
Lord Justice Snowden :
Barrowfen")
appeals with the permission of the Judge against his decision in the Reserved Matters Judgment that its award of equitable compensation for breach of fiduciary duty against the First Defendant ("Girish"), and damages for negligence against the Second Defendant firm of solicitors ("S&B"), should be reduced by about £2.5 million to reflect the increased capital value of a revised development scheme completed at a freehold commercial property owned by
Barrowfen
in Tooting, London SW17 (the "Property").
Barrowfen's
appeals as regards both S&B and Girish should be dismissed; S&B's appeal in relation to the deduction of the credit and application of the loss of a chance percentage ought also to be dismissed; but that S&B's cross-appeal in relation to interest should be allowed to a limited extent.
The background
Barrowfen's
claims arose out of a dispute between Girish and other members of his family including his brother, Suresh
Patel
("Suresh"), and Prashant
Patel
("Prashant"). Prashant is the son of one of Girish's other brothers, Rajnikant.
Barrowfen.
At the relevant times, the shares in
Barrowfen
were held in equal one-third proportions by an off-shore trust for Girish's children, an off-shore trust for Suresh's children, and a BVI company ("Bedford") that was owned and controlled by Prashant.
Barrowfen.
Girish acted as the managing director pursuant to a board resolution dated 20 January 1994 delegating authority to him.
Barrowfen's
principal asset is the Property, which was acquired shortly after the company's incorporation in 1984. Prior to the outbreak of hostilities between the family members,
Barrowfen
made an application for planning permission in respect of a scheme for the development of the Property which involved the construction of a hotel, a supermarket, other retail units and student accommodation. In October 2014, the planning committee of the local authority approved the application in an amended form (the "Amended Original Development Scheme").
Barrowfen,
and made a number of inquiries about its business. In October 2013, Suresh also questioned certain aspects of Girish's conduct of
Barrowfen's
affairs.
Barrowfen.
Barrowfen
or the Property. That course of conduct involved a number of actions which were subsequently alleged by
Barrowfen
in the claim to have involved dishonest breaches of Girish's duties as a director of
Barrowfen,
and breaches of fiduciary duty and negligence by S&B in failing to advise the company that Girish had a conflict of interest and that the company should take independent advice.
Barrowfen's
register of members and the forging of documents in an attempt to prevent Prashant from being appointed as a director of the company. These actions achieved their aim until August 2015 when Prashant was finally appointed to the board. However, even then, it was not until 1 December 2015 that Suresh and Prashant finally obtained control of the management of
Barrowfen
by revoking the resolution of 20 January 1994, thus terminating Girish's authority as managing director. Thereafter Suresh and Prashant also caused the board to terminate S&B's instructions to act on behalf of
Barrowfen.
Barrowfen
or to acquire the Property that was developed by Girish with advice from S&B after Prashant had been appointed to the board in August 2015. The plan was that a company owned and controlled by Girish would take an assignment of the benefit of a loan of just over £850,000 that had been made to
Barrowfen
by Zurich, together with its associated security. Girish's plan was that unless the other shareholders were prepared to agree to sell their shares to him, a demand would be made for
Barrowfen
to repay the loan,
Barrowfen
would be put into administration when it failed to repay, and Girish would then buy the Property pursuant to an agreement with the administrators.
Barrowfen
II") to be incorporated, and
Barrowfen
II took an assignment of the loan and charge from Zurich on 1 December 2015. Girish's plan to put the company into administration was activated in mid-February 2016 after the family members had agreed some unrelated personal partnership accounts. On 16 February 2016 Girish resigned as a director of
Barrowfen.
He then caused
Barrowfen
II to make a demand for repayment which
Barrowfen
could not pay immediately, and administrators were appointed by
Barrowfen
II the next day.
Barrowfen
II and the appointment of the administrators were challenged by the remaining directors of
Barrowfen.
Prashant and Suresh also made proposals to the administrators for Bedford to provide a loan of £4 million to refinance
Barrowfen
and to take it out of administration as a going concern. That proposal was objected to by Girish,
Barrowfen
II and S&B (in its capacity as a creditor) who proposed instead that the Property should be sold on the open market, and they used their votes to defeat the proposal that
Barrowfen
be refinanced by Bedford at the creditors' meeting in the administration.
Barrowfen
II and S&B continued to oppose Bedford's proposals. However, on 8 July 2016, Registrar Derrett directed the administrators to accept the revised loan proposals from Bedford, to terminate their appointment, and to return the control of
Barrowfen
to its directors. That was done on 16 September 2016.
Barrowfen
went into administration and the application was made to the court for directions. By December 2016 Prashant expressed the view that the Amended Original Development Scheme containing student accommodation was no longer the right design to maximise the value of the Property.
Barrowfen
proposed a revised and enlarged development scheme for a mixed development of a hotel, a supermarket, other retail units and residential apartments (the "Revised Development Scheme"). Prashant secured an agreement with Lidl to become the anchor tenant of the supermarket and agreed revised terms with Premier Inns in respect of the hotel. On 22 August 2017 the Revised Development Scheme was submitted to Wandsworth LBC, planning permission was granted in June 2018, and a new section 106 agreement was entered into on 10 August 2018. Demolition works at the Property commenced shortly thereafter.
Barrowfen
approximately £14 million to complete. The Revised Development Scheme was materially more expensive. This required
Barrowfen
to obtain a further loan of £8 million from Barclays Bank and a further £2.4 million of equity investment from Asian Agri Investments Limited ("Asian Agri") (which had become the sole legal and beneficial owner of
Barrowfen
on 6 May 2019) in order to finance the Revised Development Scheme.
"… that Suresh and he intended to retain the Property as an investment with the exception of the affordable housing element which was required to be sold (andBarrowfen
had already received an offer of £2.9m for that element of the scheme)."
The Main Judgment
Barrowfen
and that S&B had acted negligently, in relation to both the Company Claims and the Administration Claim. However, he found that S&B had not been dishonest and he dismissed the claims against the firm for breach of fiduciary duty and for various other causes of action (such as conspiracy and dishonest assistance).
Barrowfen's
loss of the chance to develop the Property at an earlier stage due to Girish's and S&B's breaches of duty.
Barrowfen
in May 2014. As regards S&B, the Judge held that if the firm had given the correct advice to Girish, he would probably have followed it and Prashant and Suresh would have taken control of the board of the company by early September 2014.
Barrowfen
through either of these routes, they would probably have raised the necessary funding and caused the company to proceed with the Amended Original Development Scheme by January 2015. The Judge assessed the overall chance of this final outcome occurring at 60%.
Barrowfen
into administration (either by Girish himself or S&B acting in accordance with their duties to the company). He concluded that in such a scenario there was an 80% chance that Prashant and Suresh would have found the funds to avoid the company going into administration and that they would have caused the company to commence the Amended Original Development Scheme by April 2016.
Barrowfen
20 months to complete the Amended Original Development Scheme so that, but for the breaches of duty by Girish and negligence of S&B,
Barrowfen
would have completed the Amended Original Development Scheme by the end of August 2016 or December 2017, rather than completing the Revised Development Scheme during April 2021.
Barrowfen's
main claim was for damages for the loss of the chance to obtain monthly rentals from the Property for the periods of 55 months (August 2016 - April 2021), alternatively 39 months (December 2017 – April 2021).
Barrowfen
also claimed various items of costs and expenses amounting in total to £756,577.09. These included costs of £401,864.73 relating to the administration, £30,243.69 relating to
Barrowfen
II's enforcement of its charge, and £324,468.67 in legal and professional costs which
Barrowfen
incurred in changing from the Amended Original Development Scheme to the Revised Development Scheme in 2016-2017.
Barrowfen
should give credit for the "increased developer's profit" that it was said that
Barrowfen
had made by completing the Revised Development Scheme rather than the Amended Original Development Scheme.
Barrowfen
would have received net monthly income under the Amended Original Development Scheme of £82,790. He further held that giving credit for a rent free period and rents actually received, the net rentals for 55 months, alternatively 39 months, under the Amended Original Development Scheme would have been £4,066,220 or £2,741,580 respectively. The Judge also awarded damages totalling £756,577.09 in respect of costs and expenses.
Barrowfen
had made on completion of the Revised Development Scheme and (ii) which it would have made if it had completed the Amended Original Development Scheme. In each case, this developer's profit essentially comprised the difference between the gross development value ("GDV") of the Property and the construction and finance costs of the development.
Barrowfen
had to give credit for that capital sum against its claim for damages for loss of a chance and costs and expenses. He did so in terms that followed a discussion earlier in his Main Judgment at [329]-[335] of the relevant legal principles under the heading "collateral benefits". In that section, the Judge had analysed a number of authorities, including Fulton Shipping v Globalia Business Travel [2017] 1 WLR 2581 ("Fulton Shipping") and Primavera v Allied Dunbar [2003] PNLR 12 ("Primavera"). He stated that the general principle was that a claimant had to give credit for any benefit which was attributable to the cause of the loss, but not for a benefit that was collateral in the sense of arising independently of the circumstances giving rise to the loss. The Judge also commented that he found particularly useful the guidance of Sir Andrew Morritt V-C in Needler Financial Services v Taber [2002] 3 All ER 501 ("Needler") at [24],
"In my view the authorities to which I have referred establish two relevant propositions. First, the relevant question is whether the negligence which caused the loss also caused the profit in the sense that the latter was part of a continuous transaction of which the former was the inception. Second, that question is primarily one of fact."
"673. [Counsel forBarrowfen]
submitted that
Barrowfen,
acting by Prashant and Suresh, took a commercial decision at its own risk to change to the Revised Development Scheme and that any additional profit was caused by their hard work. I reject that submission. In my judgment the [Revised] Development Scheme formed part of a single continuous transaction of which the breaches of duty committed by Girish and S&B were the inception (to use the formulation of Sir Andrew Morritt V-C in Needler). I have reached this conclusion for the following reasons:
(i) In considering this issue, it is important to keep in mind thatBarrowfen's
claim is that the [Defendants'] conduct delayed the development of the Property. This is not a claim, [therefore], for loss of profits (as in Fulton) or even the diminution in value of an asset (as in Primavera). It is for the loss of income caused by delay.
(ii) It is also important to keep in mind thatBarrowfen's
case (on which it has succeeded) is that the delay only came to an end on completion of the Revised Development Scheme in March or April 2021. Since
Barrowfen
has claimed (and recovered) damages for delay for the period right up until the date of trial, it would be unjust if it did not have to give credit for any benefits which it had received in the meantime.
(iii) Moreover, it wasBarrowfen's
own case and Prashant's unchallenged evidence that both the delay in carrying out the [Revised] Development Scheme and the additional costs which it incurred were caused by the Defendants' breaches of duty…
(iv) In my judgment, [Barrowfen]
cannot have it both ways. If
Barrowfen
incurred both the delay and the costs caused by changing from one scheme to the other, then the Revised Development Scheme formed part of a continuous transaction of which the Defendants' conduct was the inception. However, if the decision to change from one scheme to the other was not caused by that conduct, then
Barrowfen
is not entitled to recover damages either for the additional period of delay or the additional costs.
(v) In any event, I am satisfied that both schemes formed part of a continuous transaction on the facts. It is clear that the principal factors which ledBarrowfen
to adopt the Revised Development Scheme were Waitrose's decision to withdraw from the [Amended Original Development Scheme] in June 2016 (before
Barrowfen
had come out of administration) and the professional advice which Prashant received that residential flats would be more profitable than student accommodation. He took advice and made the decision in December 2016 (only two months after
Barrowfen
had come out of administration).
(vi) Finally, the experts were agreed that the period of 28 months to revise and implement the new scheme was a reasonable one and that the construction period of 22 months was also reasonable. I am satisfied therefore that there was no significant hiatus or gap between the decision to terminate the first scheme and the decision to adopt the second scheme."
Barrowfen
and gave two more general reasons in support of his conclusion,
"674. [Counsel forBarrowfen]
also submitted that
Barrowfen
should not have to give credit for the increased developer's profit on the Revised Development Scheme because
Barrowfen
intended to keep the development as an investment and it was not appropriate to set off a notional capital gain against the income losses which it had suffered. I also reject that submission. In Fulton Lord Clarke made it clear that the question whether a claimant must give credit for a benefit does not turn on the type of benefit concerned.
675. Moreover, in many professional negligence cases a claimant will recover damages from a defendant to compensate for the diminution in value of an asset. He or she will also have to give credit for any income which the asset has produced as a result of the Defendant's breach of duty. I can see no reason why the position should not be the same with income losses and a capital appreciation. Finally, I consider that the answer to [counsel's] point was put both succinctly and eloquently by [counsel for S&B] in his opening submissions (which I adopt). He said this (referring toBarrowfen's
claim):
"It is dependent on alleging that but for the events of which complaint was made, an alternative development would have taken place. It then seeks to compare this with the absence of rent for a period whilst an alternative development was undertaken. Both developments were or would have been undertaken for capital appreciation. It is therefore misconceived to take the rental claim as being a measure of loss without taking account of capital outlay and capital value.""
Barrowfen
had to give credit for the increased developer's profit from the Revised Development Scheme, the Judge then expressed the provisional view at [677] that he should deduct the credit before applying the loss of a chance percentages to the damages for the loss of rental income that he had identified. However, since the point of whether the deduction should be made before or after the application of the loss of a chance percentages had not been argued, he reserved the point for subsequent submissions and determination in the Reserved Matters Judgment.
The Reserved Matters Judgment
Barrowfen
should give credit for the increased developer's profit.
Barrowfen
advanced two further arguments as to why it should not be required to give credit for that sum at all.
Barrowfen's
first argument was that this extra value was solely referable to
Barrowfen
raising an extra £10.4 million to fund the enlarged Revised Development Scheme, and that this should have been treated as collateral to the loss of rental profits. The Judge rejected that argument. He summarised his reasons at [68],
"In conclusion, I accept that the additional profit of £2,508,182 was attributable to the additional capital whichBarrowfen
raised from Barclays and Asian Agri and that
Barrowfen
would not have been able to carry out the Revised Development Scheme without it. I also accept that it was reasonable for
Barrowfen
to mitigate its loss by carrying out the Revised Development Scheme. However, in my judgment the increased developer's profit which
Barrowfen
earned from that scheme was not collateral or res inter alios acta. All of those findings were reflected in my conclusions that
Barrowfen
was entitled to recover the lost income and additional costs up until completion of the Revised Development Scheme and that the increased developer's profit formed part of a continuous transaction of which the breaches of duty were the inception. "
Barrowfen's
second argument was based upon the fact that the Judge's determination of the increased developer's profit only took account of the finance costs up to completion of the development of the Property.
Barrowfen
argued that the assessment whether there was any increase in the developer's profit should also take account of the future financing costs that
Barrowfen
would incur on the additional £10.4 million that it had raised to finance the Revised Development Scheme calculated over the expected 25 year life of the development.
"70. I accept [Barrowfen's
expert accountant's] evidence that the increased cost of funding the Revised Development Scheme over 25 years will be £1,579,682 and that the opportunity cost to
Barrowfen
of investing additional shareholders' funds in the scheme was £1,887,702. I also accept that the total of these costs exceeds the amount of the additional developer's profit by £959,156 …
71. I also accept that as a matter of valuation methodology it would be appropriate forBarrowfen
to include future finance costs in a current valuation of the … Property … if Prashant intended to hold it as a long-term investment. I accept his evidence on this point. I also accept [S&B's expert accountant's] evidence that it would be appropriate to include future finance costs in a calculation of the developer's profit if that was the investor's intention or if one was carrying out a "
Barrowfen
specific" valuation. …
72. The real issue, to my mind, is whether the Court should adopt an "investor agnostic valuation" or a "Barrowfen
specific valuation" for the purpose of deciding whether to include future finance costs in the calculation of developer's profit…
73. In my judgment, the decision whether to adopt an investor agnostic valuation or aBarrowfen
specific valuation is not a matter of valuation methodology but a matter for legal argument…"
"78. I accept [S&B's] submission that it is not appropriate to include any future finance costs (whether debt or equity) in the appraisal of the developer's profit for the Property and I do so for the following reasons:
(1) Prashant accepted without qualification thatBarrowfen
could sell the Property in the marketplace as a completed development. He also accepted that if it found a more profitable investment
Barrowfen
could sell the Property to take advantage of it.
(2) He also accepted thatBarrowfen
"can do whatever it wants". In substance, he was accepting that the decision whether to hold or sell the Property is now one for the directors of
Barrowfen
and that the causative effect of the breaches of duty by Girish and S&B came to an end on the completion of the development.
(3) In my judgment, therefore, any finance costs whichBarrowfen
has incurred or will incur after completion of the Revised Development Scheme and over the life of its investment do not form part of the single, continuous transaction which I found [in the Main Judgment] at [673].
Barrowfen
could sell the Property tomorrow and realise the entire profit without incurring any further finance costs and could re-invest immediately in something more profitable. The decision to hold the investment for the foreseeable future is not the consequence of any breach of duty by Girish or S&B but of Prashant's own commercial judgment."
"87. I therefore find in favour of Girish and S&B on the Financial Costs Issue. In particular, I find thatBarrowfen
is required to give credit for the increase in the developer's profit of £2,508,182 even though
Barrowfen
invested additional capital of £10,397,271 in the Revised Development Scheme (based on the figures which I used in the [Main] Judgment). I also find that
Barrowfen
is not entitled to deduct from the increase in developer's profit either the future cost of funding the debt of £1,579,682 or the opportunity cost of investing additional shareholders' funds of £1,887,702 …"
Barrowfen's
losses before or after the application of the loss of chance percentages. After hearing argument on the authorities, including in particular Hartle v Laceys [1999] Lloyd's Rep PN 315, ("Hartle v Laceys") the Judge concluded, at [96]-[97],
"96. … having heard full argument I am satisfied that my provisional view was correct and that the deduction for capital appreciation should be made before the loss of chance percentage is applied. I have held that there was a 60% chance thatBarrowfen
would have implemented the Amended Original Development Scheme in January 2015 and it was common ground that it would have been completed by September 2016 … What
Barrowfen
lost, therefore, was the opportunity to develop the Property five years earlier than it did and the value of that opportunity is to be assessed by focussing on the entire picture (as in Ministry of Defence v Wheeler [[1997] 1 WLR 637]), which involves a comparison between the income which
Barrowfen
lost with the capital appreciation which it gained.
97. In my judgment, there is no relevant distinction between the present case and Hartle v Laceys. As Ward LJ pointed out [at page 330], C lost the chance to sell but he did not lose the property itself. What he lost, therefore, was a 60% chance of achieving a better price at an earlier date in time. The position is the same here.Barrowfen
lost the chance to develop in 2015 but it did not lose the Property. What it lost, therefore, was the chance of achieving an income stream at an earlier point in time but from an asset with a lower capital value. As Ward LJ put it: "He lost the chance of getting the excess of a over b but his chance of getting a - b was only 60% and so he should only recover 60% of it.""
"110. In my judgment, I made sufficient findings in the [Main] Judgment at [579] to [619] to be satisfied that the outcome of the Administration Claim was contingent on the outcome of the Company Claims and that if Prashant and Suresh had been unable to take control ofBarrowfen
or implement the Amended Original Development Scheme, Girish would have followed through with his plan to put the company into administration. I am satisfied, therefore, that I should award damages on a cumulative basis and I, therefore, award
Barrowfen
32% (i.e. 80% of 40%) of the damages for which I found Girish and S&B liable on the Administration Claim."
Barrowfen
had suffered as a result of the delay in being able to develop the Property.
Barrowfen
had pleaded a claim for so-called "interest as damages". This was a claim for damages to compensate
Barrowfen
for the lost opportunity to reinvest and generate a return on the rental income that it would have received from the Amended Original Development Scheme. At [129], the Judge found that this claim was made out on the basis of Prashant's evidence that if
Barrowfen
had carried out the Amended Original Development Scheme, it would not have used the rentals generated from the Property to repay its borrowings, but would have looked for alternative investment opportunities for those monies.
Barrowfen
was entitled to interest as damages for the lost opportunity to invest the rental income which it had not received by reason of the breaches of duty and negligence in the Company Claims and the Administration Claim. As indicated above, the Judge had found that these amounts were £4,822,797.09 and £3,498,157.09 respectively.[1] To these figures the Judge applied the relevant loss of a chance percentages (60% and 32%) giving net figures of £2,893,678.20 and £1,119,410.20. I shall refer to such amounts hereafter as the "Principal Amounts". The Judge determined that the rate for calculating interest as damages on such Principal Amounts should be 2% above the base rate.
"134. I therefore confirm and make final my provisional finding thatBarrowfen
is entitled to damages or equitable compensation of £1,388,768.05 in respect of the Company Claims against both Girish and S&B. I also award damages or equitable compensation of £316,792.03 against both Girish and S&B in respect of the Administration Claim. …
135. I also award interest as damages or equitable compensation at the rate of 2% above base rate or rates on the loss of a chance percentage of the gross rental income whichBarrowfen
would have earned from the Amended Original Development Scheme against both Girish and S&B. In particular, I award interest on £2,893,678.20 (i.e. 60% of the gross rental income) in relation to the Company Claims and interest on £1,119,410.20 (i.e. 32% of the gross rental income) in relation to the Administration Claim….
136. I leave it to the parties to try to agree the date or dates from which interest will run, the amount of any interest and the form of any order…"
The Interest Ruling
Barrowfen
contended that interest as damages on the Principal Amounts should run until 22 June 2022 when the Judge had given the Reserved Matters Judgment.
Barrowfen's
solicitors dated 17 May 2023. That letter set out and sought agreement to calculations of the amount of interest as damages that would be payable on the Principal Amounts to various end dates. These included March 2021, June 2022 and the date of the consequentials hearing on 24 May 2023. Although the letter calculated interest as damages on the Principal Amounts to 24 May 2023, as I have indicated, by the date of the consequentials hearing neither side was suggesting that interest as damages should be payable on the Principal Amounts after 22 June 2022.
Barrowfen's
argument and determined that interest as damages on the Principal Amounts should run until 22 June 2022. His reasoning is recorded in an approved note of the ruling as follows,
"Period
The first issue which I have to decide is the date until which pre-judgment interest runs. The question for me is whether pre-judgment interest should run only until 21 March 2021 or until 22 June 2022 when I delivered the principal judgment and the reserved matters judgment respectively.
….
In this case the function of the award of damages is to compensateBarrowfen
for the delay in the development of the Tooting Property. The role of damages is compensation for the loss in not developing earlier. The way in which I compensated
Barrowfen
was to award the income stream between September 2016 and the date on which
Barrowfen
would have completed the development and was able to let the Property. The function of interest is different. It is to compensate
Barrowfen
for being kept out of the relevant funds until final judgment.
Barrowfen
did not receive payment until 27 September 2022 when S&B paid the money. I agree that once the Revised Development Scheme was completed
Barrowfen
had an asset but its entitlement to interest did not end on that date. That entitlement only ended when the money was paid on 27 September 2022.
I therefore accept [Barrowfen's]
submissions and reject [S&B's] submissions.
Barrowfen
was made whole in March 2021 in the sense that it suffered no further damage but not interest. I award interest as damages from 21 March 2021 to 22 June 2022."
Barrowfen
that the pre-judgment interest as damages award should be compounded. He rejected that argument and concluded his ruling in this respect by stating,
"The amount of pre-judgment interest will be £337,229 to run to 22 June 2022 on a simple basis."
That figure of £337,229 was taken from the letter of 17 May 2023 from S&B's solicitors (above).
Barrowfen
in its skeleton argument. That issue was defined by
Barrowfen
as whether "post-judgment interest on the pre-judgment interest as damages award should run from 22 June 2022". The issue arose because the precise amount of the pre-judgment interest as damages award had not been assessed on 22 June 2022. It would seem that S&B were contending that statutory interest pursuant to the Judgments Act 1838 could only run from 24 May 2023, being the date when the precise amount of the award of interest as damages (£337,229) had been determined.
Barrowfen
objected that this would be unjust since it would leave a gap between 22 June 2022 and 24 May 2023 during which it would not receive interest on the £337,229 awarded as interest as damages.
Barrowfen
therefore contended that the court should order interest on that sum pursuant to the Judgments Act 1838 to run from 22 June 2022 pursuant to CPR 40.8(2).
Barrowfen
advanced an alternative argument that interest as damages ought to continue to 24 May 2023. In that regard
Barrowfen
sought the figure of £520,014 which had been given in the letter from S&B's solicitors of 17 May 2023 as the amount that would be payable as interest as damages on the Principal Amounts until 24 May 2023.
"Rate
Following further submissions the judge made the following ruling on the rate
I am minded to grant 2% over base from 22 June 2022 to 24 May 2023. I provisionally order £520,014 in pre-judgment interest until 24 May 2023. The parties have until 2 pm to challenge this figure…"
"Interest
1. There be judgment for [Barrowfen]
against [S&B] in the sum of £2,225,574.08 (being £1,705,560.08 principal sum which has already been paid [on 27 September 2022] plus £520,014 interest).
2. [S&B] shall pay [Barrowfen]
the sum of £520,014 by 4pm on 14 June 2023.
Post-judgment interest
3. [S&B] shall pay post-judgment interest on the principal sum to [Barrowfen]
pursuant to section 17 of the Judgments Act 1838 in the sum of £36,261 by 4pm on 14 June 2023."
Barrowfen.
The Appeal and Cross-appeal
Barrowfen
does not appeal the decision of the Judge to take account of the benefits that
Barrowfen
obtained by carrying out the Revised Development Scheme to mitigate its losses of rental income from the Property. However, it contends that when assessing the benefits, the Judge was wrong to assume a notional sale of the Property by
Barrowfen.
It contends that the Judge should have assessed the benefit on the basis that
Barrowfen
intended to continue to hold the Property because that was Prashant's uncontested evidence. As such, it contends that the Judge should either not have taken into account the increased value of the future rentals which the Property could generate at all, or should also have taken into account the future finance costs which
Barrowfen
would incur over the lifetime of holding the Property, which would eliminate the increased developer's profit of £2,508,182.
Barrowfen
contends that,
"(a) The correct approach was to evaluate any benefits and disbenefits of the course of mitigation adopted (the Revised Development Scheme), over the full period that the Scheme would be held for. This was the approach in British Westinghouse v Underground Electric [1912] AC 673.
(b) The Judge's approach is contrary to the case law on betterment to the effect that credit need not be given for a notional increase in capital value where there are no plans in fact to sell the asset.
(c) With the Judge having found that the Revised Development Scheme was part of a "continuous transaction" and not res inter alios acta, there was no pleading, factual evidence or findings, or legal justification for treating the Appellant following through its plans to hold the development as an investment as res inter alios acta as the Judge did. On the contrary, the position was a fortiori The New Flamenco (Fulton Shipping v Globalia) [2017] 1 WLR 2581, where an actual sale of a vessel was disregarded and the claimant deemed to have continued its plan of holding the vessel and chartering it out.
(d) Further, the basic measure of loss that was awarded by the Judge (four years and seven months of lost net rental income on the basis that the Amended Original Development Scheme would have been held as an investment) is inconsistent with the Judge's refusal to assess equitable compensation/damages on the basis that the Revised Development Scheme would be held as a long-term investment."
Barrowfen
objected that we should not hear argument on this aspect of the cross-appeal, but should simply dismiss it, leaving S&B to apply to the Supreme Court for permission to appeal. However, Lewison LJ's order did not purport to tie the hands of the court hearing the cross-appeal, and since we were already going to be hearing argument on
Barrowfen's
appeal relating to the assessment of damages, we heard argument on this ground too.
"(a) calculated that additional interest as a percentage of: (i) the principal sum owed by S&B toBarrowfen
… rather than (ii) the interest as damages awarded … ; and/or
(b) applied that percentage to a figure which assumed receipt byBarrowfen
of a hypothetical income stream from the Amended Original Development Scheme … after completion of the Revised Development Scheme and, accordingly,
Barrowfen's
receipt of the credit."
Barrowfen
maintains that the Judge would have been right to award additional interest as damages on the full amount of the Principal Amounts between 22 June 2022 and 27 September 2022, and upon the difference between the Principal Amounts and the Main Damages from 27 September 2022 to 24 May 2023. It calculates that in addition to the £337,229, a further £106,101 would be due, which would bring the total award of interest as damages to £442,330.
Analysis
Mitigation losses and gains
"The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps….
… this second principle does not impose on the plaintiff an obligation to take any step which a reasonable and prudent man would not ordinarily take in the course of his business. But when in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.
…
… provided the course taken to protect himself by the plaintiff in such an action was one which a reasonable and prudent person might in the ordinary conduct of business properly have taken, and in fact did take whether bound to or not, a jury or an arbitrator may properly look at the whole of the facts and ascertain the result in estimating the quantum of damage."
"I think the principle which applies here is that which makes it right for the jury or arbitrator to look at what actually happened, and to balance loss and gain. The transaction was not res inter alios acta, but one in which the person whose contract was broken took a reasonable and prudent course quite naturally arising out of the circumstances in which he was placed by the breach. Apart from the breach of contract, the lapse of time had rendered the appellants' machines obsolete, and men of business would be doing the only thing they could properly do in replacing them with new and up-to-date machines.
The arbitrator does not in his finding of fact lay any stress on the increase in kilowatt power of the new machines, and I think that the proper inference is that such increase was regarded by him as a natural and prudent course followed by those whose object was to avoid further loss, and that it formed part of a continuous dealing with the situation in which they found themselves, and was not an independent or disconnected transaction."
"29. … On the facts here the fall in value of the vessel was in my opinion irrelevant because the owners' interest in the capital value of the vessel had nothing to do with the interest injured by the charterers' repudiation of the charterparty.
30. This was not because the benefit must be of the same kind as the loss caused by the wrongdoer… As I see it, difference in kind is too vague and potentially too arbitrary a test. The essential question is whether there is a sufficiently close link between the two and not whether they are similar in nature. The relevant link is causation. The benefit to be brought into account must have been caused either by the breach of the charterparty or by a successful act of mitigation.
31. On the facts found by the arbitrator, the benefit that the charterers are seeking to have brought into account is the benefit of having avoided a loss of just under about US$17m by selling the vessel in October 2007 for US$23,765,000 by comparison with the value of the vessel in November 2009, namely (as the arbitrator found) US$7m.
32. That difference or loss was, in my opinion, not on the face of it caused by the repudiation of the charterparty. The repudiation resulted in a prospective loss of income for a period of about two years. Yet, there was nothing about the premature termination of the charterparty which made it necessary to sell the vessel, either at all or at any particular time. Indeed, it could have been sold during the term of the charterparty. If the owners decide to sell the vessel, whether before or after termination of the charterparty, they are making a commercial decision at their own risk about the disposal of an interest in the vessel which was no part of the subject matter of the charterparty and had nothing to do with the charterers.
33. As I see it, the absence of a relevant causal link is the reason why they could not have claimed the difference in the market value of the vessel if the market value would have risen between the time of the sale in 2007 and the time when the charterparty would have terminated in November 2009. For the same reason, the owners cannot be required to bring into account the benefit gained by the fall in value. The analysis is the same even if the owners' commercial reason for selling is that there is no work for the vessel. At the most, that means that the premature termination is the occasion for selling the vessel. It is not the legal cause of it. There is equally no reason to assume that the relevant comparator is a sale in November 2009. A sale would not have followed from the lawful redelivery at the end of the charterparty term, any more than it followed from the premature termination in 2007. The causal link fails at both ends of the transaction.
34. For the same reasons the sale of the ship was not on the face of it an act of successful mitigation. If there had been an available charter market, the loss would have been the difference between the actual charterparty rate and the assumed substitute contract rate. The sale of the vessel would have been irrelevant. In the absence of an available market, the measure of the loss is the difference between the contract rate and what was or ought reasonably to have been earned from employment of the vessel under shorter charterparties, as for example on the spot market. The relevant mitigation in that context is the acquisition of an income stream alternative to the income stream under the original charterparty. The sale of the vessel was not itself an act of mitigation because it was incapable of mitigating the loss of the income stream."
Barrowfen
came under the control of Suresh and Prashant, with a consequential delay in its ability to commence the Amended Original Development Scheme when it would otherwise have been able to do so.
Barrowfen
therefore lost the opportunity to receive a rental stream from the Property after the Amended Original Development Scheme could have been completed in August 2016 or December 2017. As the Judge correctly emphasised in the Main Judgment at [673],
Barrowfen's
main claim was for damages to compensate it for the loss of the chance of receiving such rental income from the Property.
Barrowfen
was under the control of Suresh and Prashant and able to progress the development of the Property, the directors reasonably took the view that the Amended Original Development Scheme was no longer commercially desirable and that it was appropriate for
Barrowfen
to incur further costs in formulating and implementing the Revised Development Scheme to mitigate its losses of rental income from the Property.
Barrowfen
directly caused by the breaches of duty by Girish and negligence of S&B, and then to quantify and take into account any further losses suffered or benefits received as a result of the reasonable steps taken by
Barrowfen
to mitigate those losses.
Barrowfen
was entitled to claim damages in respect of its loss of the chance of obtaining rentals from the Property if it had been developed in accordance with the Amended Original Development Scheme at an earlier date than it was in fact developed. It was also entitled to recover the costs of the administration and of resisting enforcement of the
Barrowfen
II charge, which it would not have had to spend had it not been for the breaches of duty and negligence.
Barrowfen
was entitled to recover damages in respect of the legal and professional costs and expenses of changing its proposals from the Amended Original Development Scheme to the Revised Development Scheme.
Barrowfen's
Property was capable of generating a greater level of rental income and capital sums from sale of the residential units than would otherwise have been the case. In my view he was right to consider that this was a benefit which was caused by the steps taken in mitigation and was required to be brought into account in the same way as the ability to earn increased profits from the use of the replacement machines was required to be brought into account in British Westinghouse.
Barrowfen
criticises that basis of valuation, which implied a notional sale of the Property on completion of the Revised Development Scheme, as being inconsistent with the unchallenged evidence of Prashant that
Barrowfen
has no intention of selling the Property.
Barrowfen's
argument is that because there will be no actual sale, the loans that it incurred to carry out the Revised Development Scheme will not in fact be paid off, the costs of such borrowing will continue to be incurred, and
Barrowfen
will continue to be unable to invest the funds subscribed for equity share capital elsewhere. Accordingly, so it contends, the continuing costs of borrowing and lost investment income over the entire anticipated 25 year lifetime of the Property should be brought into account to offset the increased capital value of the future rental stream and sale proceeds of the residential units that it will obtain from the Property.
Barrowfen's
future costs of borrowing and the lost investment opportunity for the equity subscription over 25 years would amount to £3,467,384 (£1,579,682 + £1,887,702). That exceeds the £2,508,182 increased developer's profit by some £959,202.[2]
Barrowfen
contends that the net effect is that the Judge should have held that carrying out the Revised Development Scheme has actually left it worse off than if it had carried out the Amended Original Development Scheme, and so there is no benefit caused by the breaches of duty or negligence which it should be required to bring into account and set against its damages.[3]
Barrowfen's
argument. In my view the Judge correctly applied the overriding principle established by British Westinghouse and identified by Lord Clarke in Fulton Shipping that the benefits that must be taken into account are those which are caused by the breaches of duty or negligence for which compensation is sought, or which are caused by the actions reasonably taken to mitigate the losses caused by those breaches of duty or negligence.
Barrowfen
of the opportunity to receive rentals from the Property for the period by which completion of the development was delayed. The company also incurred redesign and increased construction and financing costs in devising and carrying out the Revised Development Scheme in order to mitigate the losses of rental income. In the words of Viscount Haldane in British Westinghouse, that was a continuous dealing by
Barrowfen
with the situation in which it found itself, and was not an independent or disconnected transaction.
Barrowfen
had successfully mitigated its loss of rental income because it was able to receive rentals from the Property. It was no longer dealing with the situation caused by the breaches of duty or negligence. In this respect I agree with the short reason given by the Judge at paragraph 78(2) of the Reserved Matters Judgment, that "the causative effect of the breaches of duty by Girish and S&B came to an end on the completion of the development".
Barrowfen
takes a pleading point in ground (c) of its Grounds of Appeal (above), it was its own case that carrying out the Revised Development Scheme was a reasonable course of action to take to mitigate its loss of rental income, and that being so, I cannot see that there was anything unjust in the Judge recognising the fact that after completion of that development,
Barrowfen
was no longer acting to mitigate its losses. This was not a case in which an unpleaded external factor was held to break a chain of causation, but simply the natural end of the course of conduct upon which
Barrowfen
itself relied to claim various items of expense as reasonable mitigation of its losses.
Barrowfen
had by this stage obtained as a consequence of its action to mitigate its loss was the enhancement that the Revised Development Scheme brought to the value of the Property, namely an ability to generate an enhanced revenue stream and the proceeds of sale of the residential units. The approach of the Judge to valuing that benefit on the basis of the present price that a purchaser would pay for the Property was entirely conventional.
Barrowfen
was not similarly bound to continue to incur the financing costs of the loans that it had incurred to carry out the development, and neither was it bound to continue to forgo the future investment opportunities for its equity share capital. As the Judge held, after completion of the development,
Barrowfen
was free to take whatever decision it wished as to how to use or dispose of the Property, and it could do so independently of any continuing effects of the breaches of duty or negligence for which Girish or S&B were liable. In particular, as Prashant acknowledged, the company was free to decide whether to sell or retain the developed Property.
Barrowfen's
contention that the Revised Development Scheme is not a benefit for which it should give credit, but has left it worse off than if it had carried out the Amended Original Development Scheme, is entirely dependent upon
Barrowfen's
own commercial decision not to sell the Property. It is clear on the evidence that once the Revised Development Scheme had been implemented by way of mitigation,
Barrowfen's
decision to retain the Property (and thereby continue to incur the finance costs and miss out on the alternative investment opportunities for its equity share capital) rather than to sell the Property (which would enable it to bring those costs to an end and to take up alternative investment opportunities), has been its own independent commercial choice. Although
Barrowfen
has chosen to continue to own the Property, this is no longer part of a continuous course of conduct to deal with the situation in which it found itself as a result of the breaches of duty or negligence for which compensation is payable. That situation has been dealt with, and there is no reason why
Barrowfen
should be entitled to visit the adverse consequences of its further commercial decisions as regards the Property upon the defendants.
Barrowfen's
decision whether to sell or retain the Property was an independent one which was not connected with the mitigation of those losses.
Barrowfen's
grounds of appeal.
Barrowfen
suggests that these cases establish that where a claimant intends to hold a replacement property rather than sell it, it need not give credit for any increase in capital value. I do not agree that this is what the decisions show.
Barrowfen
primarily relies, is Harbutt's Plasticine v Wayne Tank and Pump [1970] 1 QB 447 ("Harbutt's Plasticine"). The claimant company's factory burned down due to the defendant's defective design of some equipment in the factory. In order to keep its business going, the claimant rebuilt a new factory on the site of the old. The Court of Appeal held that the claimant was entitled to the entire cost of replacement and did not have to give credit for the fact that it had a new factory rather than an old one.
"The destruction of a building is different from the destruction of a chattel. If a second-hand car is destroyed, the owner only gets its value; because he can go into the market and get another second-hand car to replace it. He cannot charge the other party with the cost of replacing it with a new car. But when this mill was destroyed, the plasticine company had no choice. They were bound to replace it as soon as they could, not only to keep their business going, but also to mitigate the loss of profit (for which they would be able to charge the defendants). They replaced it in the only possible way, without adding any extras. I think they should be allowed the cost of replacement. True it is that they got new for old; but I do not think the wrongdoer can diminish the claim on that account. If they had added extra accommodation or made extra improvements, they would have to give credit. But that is not this case. I think the judge was right on this point."
"It was clear in the present case that it was reasonable for the plaintiffs to rebuild their factory, because there was no other way in which they could carry on their business and retain their labour force. The plaintiffs rebuilt their factory to a substantially different design, and if this had involved expenditure beyond the cost of replacing the old, the difference might not have been recoverable, but there is no suggestion of this here. Nor do I accept that the plaintiffs must give credit under the heading of "betterment" for the fact that their new factory is modern in design and materials. To do so would be the equivalent of forcing the plaintiffs to invest their money in the modernising of their plant which might be highly inconvenient for them. Accordingly I agree with the sum allowed by the trial judge as the cost of replacement."
"I do not think that the defendants are entitled to claim any deduction from the actual cost of rebuilding and re-equipping simply on the ground that the plaintiffs have got new for old. It is not in practice possible to rebuild and re-equip a factory with old and worn materials and plant corresponding to what was there before, and such benefit as the plaintiffs may get by having a new building and new plant in place of an old building and old plant is something in respect of which the defendants are not, as I see it, entitled to any allowance. I can well understand that if the plaintiffs in rebuilding the factory with a different and more convenient lay-out had spent more money than they would have spent had they rebuilt it according to the old plan, the defendants would have been entitled to claim that the excess should be deducted in calculating the damages. But the defendants did not call any evidence to make out a case of betterment on these lines and we were told that in fact the planning authorities would not have allowed the factory to be rebuilt on the old lines. Accordingly, in my judgment, the capital sum awarded by the judge was right."
Barrowfen
simply lost opportunities to earn rental income by developing the Property sooner rather than later; and
Barrowfen
mitigated its loss of that income by choosing to carry out a revised development rather than the original one that had been planned.
"… if the evidence shows that the claimant had a choice, and that the route to mitigation which he chose was more costly than an alternative that was open to him, then a case will have been made out for a deduction. But if it shows that the claimant had no other choice available to him, the betterment must be seen as incidental to the step which he was entitled to take in the mitigation of his loss and there will be no ground for it to be deducted."
In the instant case, it is clear on the Judge's findings of fact that, albeit a reasonable one to take, it was
Barrowfen's
choice to devise and proceed with the Revised Development Scheme rather than simply to find a replacement for Waitrose and to implement the Amended Original Development Scheme.
Barrowfen
can rely upon an alternative explanation of the decision in Harbutt's Plasticine given by Rix LJ in The Baltic Surveyor, or a further theory advanced by Leggatt J (as he then was) in Thai Airways International v KI Holdings [2016] 1 All ER (Comm) 675 ("Thai Airways").
"So in the case of replacement buildings: the building may be new, but buildings are such potentially long-lived objects that the mere newness of a building may be entirely by the way. Of much more importance to a business owner is whether the replacement answers the needs of his business. Even where the replacement is of a moderately bigger size, … in the absence of any reason for thinking that the bigger size is of direct benefit to the claimant, he has merely mitigated as best he can. If, however, it were to be shown that the bigger size (or some other aspect of betterment) were of real pecuniary advantage to the claimant, as where, for instance, he was able to sublet the 20% extra floor space he had obtained in his replacement building, I do not see why that should not have to be taken into account. It is after all a basic principle that where mitigation has brought measurable benefits to a claimant, he must give credit for them: see British Westinghouse, where defective machines were replaced by new machines of superior efficiency. "
"79. As Rix LJ indicated in The Baltic Surveyor (at para 85), cases such as the Harbutt's Plasticine case in which no credit was given for any betterment in receiving new for old are best explained on the basis that the claimant did not obtain any proven pecuniary advantage. As a result of their mitigating action, the plaintiffs in the Harbutt's Plasticine case acquired a new factory which may have had a higher market value than the old factory which it replaced. But in circumstances where the plaintiffs had not wanted a new factory and had no known plans to sell it, this did not give them any more money. The position would have been different if it had been shown, for example, that the new factory would cost less to run. In such circumstances, in so far as it could be demonstrated that this benefit had been or was going to be realised in cash, credit would have to be given for it – as it had to be given in the British Westinghouse case.
80. The hypothetical examples of the man who has to buy a first class ticket to reach his destination when his train is cancelled and the claimant who hires a Rolls Royce when it is the only car available are explicable in the same way. The additional amenity of first class travel, although resulting from a step reasonably taken in mitigation of loss, does not confer any pecuniary advantage. Likewise, in so far as the claimant enjoys the benefit of a better car, it is not a benefit which either takes the form of money or which she could readily realise or be expected to realise in terms of money. The case where an impecunious claimant uses the services of a credit hire company to obtain a replacement vehicle is again similar in nature.
81. I conclude that, in assessing damages for breach of contract, credit must be given for any monetary benefit, whether chosen or not, which the claimant has received or will receive as a result of an action reasonably taken to mitigate its loss. By a "monetary benefit", I mean a benefit which either takes the form of money or which the claimant could reasonably be expected to realise in terms of money."
Barrowfen
obtained a measurable benefit as a result of carrying out the Revised Development Scheme in place of the Amended Original Development Scheme.
Barrowfen's
appeals against the credit required to be given for the increased developer's profit arising out of the Revised Development Scheme.
Application of the loss of a chance percentages
Barrowfen
earlier than they did, and there was a 60% probability that the Amended Original Development Scheme would have commenced in January 2015. The Judge also held that once Prashant and Suresh had taken control of
Barrowfen
on 1 December 2015, in a counterfactual in which there had been no breaches of duty and negligence as alleged in the Administration Claim, there was an 80% probability that Prashant and Suresh would have caused
Barrowfen
to commence the Amended Original Development Scheme in April 2016. The chance that the company would have commenced the Amended Original Development Scheme in that counterfactual was therefore (100% - 60%) x 80% = 32%.
Barrowfen
would have carried out the Amended Original Development Scheme and a residual 8% chance that it would not. But the increased developer's profit of £2,508,182 identified by the Judge was the difference between the value of the Property as actually developed under the Revised Development Scheme and the value which it would have had under the Amended Original Development Scheme. Since the lower reference point for calculation of that figure was based upon an assumption that the Amended Original Development Scheme would have been carried out, there is no logical basis for requiring that increased developer's profit to be brought into account in any scenario in which
Barrowfen
would not have implemented the Amended Original Development Scheme.
Barrowfen
would have left the Property undeveloped in that situation: that would have made no commercial sense. The only logical conclusion is that in such a situation
Barrowfen
would eventually have implemented the Revised Development Scheme and thus ended up with a property of the same enhanced characteristics as in real life. In that counterfactual, the breaches of duty and negligence could not be said to have caused
Barrowfen
to receive any benefit, since it would have carried out the Revised Development Scheme of its own accord.
Barrowfen
to give credit for a total of 92% of the £2,508,182. In contrast, the arithmetical effect of deducting the £2,508,182 after applying the loss of a chance percentage to the amount of lost rentals and costs in each counterfactual would have been to require
Barrowfen
to bring 100% of the increased developer's profit into the account, even though not all of that increased developer's profit would have been caused by the breaches of duty or steps taken in mitigation of loss.
"I have come to the conclusion that the latter approach is the correct one. Take slightly different facts. Assume just for the sake of the argument that Berkeley Homes were in [the defendant's] office with banker's draft for £375,000 in one hand and pen poised in the other to sign contract and conveyance when the [solicitors for V] telephoned to say they had registered their charge, so the deal was lost. One might well then say that Mr. Hartle had lost a certain sale, or one as certain as certain can be. His damages would be a - b with no discount because the chance is assessed at 100%. If the chance were 99%, one would make the 1% reduction. On the facts we have found a - b is to be reduced by 40%.
The unfairness of the former solution can be tested in this way. Assume we had found an 80% chance of a sale. 80% of £375,000 is £300,000. Assume the property was sold 12 months later for £300,000. It cannot be right that the loss of such a high chance does not sound in damages. If the [(a-b) x 60%] formula is adopted, then the loss of the chance always has a value.
… Mr. Hartle did not lose everything when he lost this sale. He lost the chance of the sale but he did not lose the property itself. He retained the chance to sell it at some indeterminate time for some indeterminate price. He lost the chance of getting the excess of a over b but his chance of getting a - b was only 60% and so he should only recover 60% of it."
The key to Ward LJ's reasoning was his characterisation of the case as one in which the negligence of the defendant caused the claimant to lose the opportunity to get the difference between the higher price of the intended sale to the developer and the lower price of the sale that actually took place later.
Barrowfen
to lose the opportunity to carry out the Amended Original Development Scheme, the value of that lost opportunity should be discounted to reflect the chance that it would not have eventuated; but that because
Barrowfen
received the certain benefit of the Revised Development Scheme, there is no basis for discounting the credit that should be given for that benefit. I do not accept that submission: it confuses the various heads of loss and benefits that are being taken into account.
Barrowfen
for the adverse consequences of losing the opportunity to carry out the Amended Original Development Scheme must be discounted to reflect the possibility that it might not have carried out that scheme in any event. That is why, for example, the damages for the lost opportunities to obtain rentals from the Property if the Amended Original Development Scheme had been carried out, were each multiplied by a loss of a chance percentage that (cumulatively) left an 8% chance that the Amended Original Development Scheme might not have been carried out in any event.
Barrowfen
would have made if it had carried out the Amended Original Development Scheme and the developer's profit that it actually made by carrying out the Revised Development Scheme. As I see it, that difference equates directly to the difference in the lost and actual sale values to which Ward LJ referred in Hartle v Laceys, and so naturally requires the application of a percentage factor to reflect the chance that such profit would have been made.
Barrowfen
could have claimed compensation for the diminution in capital value of the Property caused by the loss of the opportunity to carry out the Amended Original Development Scheme. But that diminution would have to be discounted to 92% to reflect the fact that even if there had been no breaches of duty or negligence, there was an 8% chance that
Barrowfen
would never have carried out the Amended Original Development Scheme.
Barrowfen
to lose the chance of getting "a" rather than "b". However, since the chance of getting "a" rather than "b" was only 92%, the losses that
Barrowfen
could recover would be (a-b) x 92%.
Barrowfen,
rather than an amount for which S&B is liable.
The award of £520,014
Barrowfen
£520,014 as "interest". The issues in this regard have undoubtedly been confused by the failure to distinguish between an award of "interest as damages" (which is an award of damages at common law) and an award of "interest on damages" (which is an award of interest pursuant to statute). What is, however, clear, is that the underlying basis for the award of "interest" in both cases is essentially the same – namely to compensate the claimant for the loss of use of money.
Barrowfen
interest as damages was designed to compensate
Barrowfen
for being unable to invest the Principal Amounts. In that initial ruling, the Judge explained that although the completion of the Revised Development Scheme meant that
Barrowfen
no longer suffered any loss of rentals, it remained unable to invest the Principal Amounts until S&B paid the Main Damages of £1,705,560 on 27 September 2022. S&B does not question that reasoning or appeal the Judge's rejection of its argument that the award of interest as damages should have ceased when the Revised Development Scheme was completed in March 2021.
Barrowfen
remained unable to invest the Principal Amounts until the Main Damages were paid on 27 September 2022, in his initial ruling on 24 May 2023, he did not award
Barrowfen
interest as damages until 27 September 2022. He awarded interest as damages only until 22 June 2022 in the sum of £337,229.
Barrowfen
in its skeleton argument for the consequentials hearing, which only sought an award of "pre-judgment interest as damages" until 22 June 2022. The reason for that limited request was clearly that the parties had agreed that S&B should pay £36,261 in statutory interest pursuant to the Judgments Act 1838 on the award of £1,705,560 as Main Damages. That agreement for payment of statutory (post-judgment) interest covered the period between the Reserved Matters Judgment on 22 June 2022 and payment on 27 September 2022.
Barrowfen's
claims for loss of the chance to receive rental income and costs and expenses had been reduced to an award of Main Damages by the Reserved Matters Judgment on 22 June 2022 and
Barrowfen's
entitlement to compensation for loss of use of the Principal Amounts after that date would be addressed by an award of statutory interest on the Main Damages.
Barrowfen
in its skeleton argument for the consequentials hearing as follows,
"Barrowfen
also contends (but S&B disputes) that post-judgment interest on the pre-judgment interest as damages award should run from 22 June 2022.
Barrowfen
relies upon Novoship (UK) Ltd v Mikhaylyuk [2013] EWHC 89 (Comm), which held (at [32]-[46]) that where pre-judgment interest is assessed on a date after judgment has already been given for the principal sum, interest under the Judgments Act may still start to run on both the principal and pre-judgment interest from the date of the earlier final judgment. Such an order may be made pursuant to CPR 40.8(2). This is the just order in this case. It was obvious from the Reserved Matters Judgment (which determined the principal amount on which interest would run and the rate of interest) that there would be a significant sum of interest to be paid and (at least approximately) what that sum would be, but there has been a gap in time until this hearing. If post-judgment interest is not awarded on this element from 22 June 2022,
Barrowfen
will be prejudiced in that there will be a gap in the interest awarded if pre-judgment interest does not continue to accrue until the date of the consequentials hearing (and
Barrowfen
will argue in the alternative that if post-judgment interest does not run on this element from 22 June 2022, then pre-judgment interest should continue to accrue after that date)."
Barrowfen
in parentheses at the end of this paragraph regrettably does not make clear that the "pre-judgment interest" that it reserved the right to contend should continue to accrue, was in fact interest as damages in respect of loss of use of the different (and much larger) Principal Amounts. Moreover, because no transcript of the consequentials hearing is available, it is unclear how the oral argument on the ability to order post-judgment statutory interest on £337,229 from 22 June 2022 developed into an argument on whether to award pre-judgment interest as damages on the much larger Principal Amounts from that date.
Barrowfen's
loss of use of the Principal Amounts would be compensated by an award of statutory interest on the Main Damages (which were based upon the Principal Amounts, less credit for the increased developer's profit). As I have indicated, that approach was reflected in the way in which
Barrowfen
presented the issues to the Judge in its skeleton argument.
Barrowfen
an element of double recovery for loss of use of the same underlying rentals, costs and expenses.
Barrowfen
to revisit his earlier ruling for the payment of £337,229 by way of interest as damages to 22 June 2022. The only remaining decision should have been the one identified by
Barrowfen
in its skeleton argument (see above). That issue was disputed at the time, but is now conceded by S&B, which accepts that the Judge would have been entitled to award £15,455 by way of interest on the £337,229 pursuant to the Judgments Act 1838 and CPR 40.8(2) for the period from 22 June 2022 to 27 September 2022.
Lord Justice Lewis:
Lord Justice Newey:
Note 1 Although the Judge did not say so expressly, it is clear from the figures to which he referred that he also included the lost opportunity to invest the £756,577.09 of costs and expenses that Note 2 In paragraph [70] of the Reserved Matters Judgment the extra loss is said to be £959,156. The small difference of £46 is unexplained and appears to be an arithmetical error. [Back] Note 3 Although
Barrowfen
had incurred as a result of the breaches of duty and negligence. [Back]
Barrowfen
contends that, over its anticipated lifetime, the Revised Development Scheme will be less profitable than the Amended Original Development Scheme would have been,
Barrowfen did not follow that contention through to its logical conclusion by claiming an additional £959,202 in damages. [Back]