England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBENF 97/0036/1

(DISTRICT JUDGE OLDHAM )

Royal Courts of Justice

Strand

London WC2

Tuesday, 30 March 1999

B e f o r e:

LADY JUSTICE BUTLER-SLOSS

LORD JUSTICE SCHIEMANN

LORD JUSTICE WALLER

- - - - - -

SALESLEASE LIMITED

Plaintiffs/Respondents

- v -

ROBERT JAMES DAVIS

Defendant/Appellant

- - - - - -

(Handed Down Transcript of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

- - - - - -

MR M E COLES (Instructed by Dixon & Templeton, Hampshire, SP61 1AU) appeared on behalf of the Appellant

CYRIL KINSKY (Instructed by Cartwright Cunningham Haselgrove, Walthamstow, London, E17 9PL) appeared on behalf of the Respondents

- - - - - -

J U D G M E N T

(As approved by the Court )

- - - - - -

LORD JUSTICE WALLER:

The issue raised by this appeal relates to the assessment of damages for conversion. The facts fall within a fairly short compass and the sums involved are not great by modern standards, but the answer to the problem raised is not that straightforward.

On 22 September 1993 the plaintiffs leased to Mr Campbell a MOT Testing machine. Mr Campbell was a tenant of the defendant. It seems that the defendant was forced by Mr Campbell’s contract to terminate the lease of the premises. That led to Mr Campbell repudiating the lease for the equipment, by letter dated 19 November 1993, from Mr Campbell’s solicitors to the plaintiffs.

The correspondence shows a dispute as to the precise circumstances in which over the period November 1993 to April 1994 the equipment remained on the defendant’s premises. However, it seems to be common ground that at or about the end of March 1994 there was agreement that the equipment should be left on site in the hope that the defendant would be able to persuade an incoming tenant to take on the equipment to the benefit both of the plaintiff and the defendant. Indeed, on 6 April 1994, it seems the defendant offered £5,000 for the equipment on behalf of a prospective tenant, saying that he would like to offer the premises and the equipment as a package. This offer the plaintiffs turned down. The defendant asserts that the plaintiffs counter-offered a sale of the equipment for £6,000 to the defendant. That offer was not accepted and on 8 April 1994 according to the defendant in his affidavit he was told that the plaintiffs “now wanted £12,500.00”.

Unbeknown to the defendant it seems that on 8 March 1994 a Mr Gyles had sought a Saleslease facility for certain new equipment corresponding very closely to that which had been leased to Mr Campbell. Mr Gyles’ application had however in March 1994 effectively been turned down by the plaintiffs because they were only prepared to offer £5,000 by way of a facility against the capital value of equipment of £15,000. Within the plaintiffs there seems however to have been a change of personnel and a Mr Griva, who swore an affidavit which was before the District Judge, had further thoughts in relation to Mr Gyles. Having had words with a Mr Haydon who had previously turned down Mr Gyles the contemplation was that Mr Gyles might be persuaded to take the second-hand equipment at this stage at the defendant’s premises. In his affidavit Mr Griva says:-

“Accordingly, I contacted the Brokers acting for Mr Gyles, ... and on the 8th April 1994 they confirmed to me that Mr Gyles was interested. I thereafter had a number of telephone conversations with Mr Gyles over the next few days and it was agreed on the 11th April 1994 that he would lease the equipment from us for a deposit of £2,000.00 plus vat, to be followed by 24 monthly instalments of £446.41 plus vat. [It seems that this figure should be £466.41] Mr Gyles was extremely anxious to get his hands on the equipment as soon as possible and was quite happy to enter into the deal without inspecting the equipment; he also agreed to bear the costs of collection from the Defendant’s premises. As far as I am concerned, this was a finalised and binding agreement between our company and Mr Gyles, subject only to collection of the equipment and completion of the necessary documentation."

By letter dated 3rd May 1994 the defendant gave notice that the plaintiffs could remove the equipment but stated:-

"If you wish to remove them which you appear eager to do, I will require a full reinstatement of the building to its original condition or the cost of such. This has been quoted as £1,350.00. In addition, I require storage fees of £650 ... and a sum of £150 to cover my time telephone calls and general expenses. On receipt of payment you may remove your goods by appointment. You have seven days to make payment and remove the goods. Alternatively if you wish to carry out the reinstatement yourselves the goods will remain on the premises until the work is carried out to my satisfaction and payment of the storage and other costs is made. There will be an additional cost under these circumstances for attendance and supervision. I await your reply."

The plaintiffs, through Mr Griva, responded by letter dated 5th May setting out the full history of the matter. It is of relevance that in setting out the full history no reference was made to any contract made on 11th April 1994. That letter ended in the following way:

"I should advise you at this point that we are so incensed with the contents of your letter that we would sooner fund the costs of a Court Order to have these goods removed, and I should further advise you that if you continue to take obstructive measures with us in removing these goods and we are not able to assign this lease, our solicitors will be instructed to claim against you for damages and losses incurred as a result of the failed assignment.

This for your information will amount to some £12,303.74 plus VAT, plus any as yet unquantified damages. No doubt Mr Campbell’s solicitor will counter claim any claims made by yourself against him in the event of us instigating proceedings against Mr Campbell.

I should advise you that you have 7 days in which to respond to this office to confirm a date for the removal of these goods, in order that I may contact the prospective assignee to conclude this matter for all."

That letter was followed by a letter from solicitors for the plaintiffs to the defendant which said:-

"Unless we hear from you by close of business Friday 20th May 1994 to arrange for our Clients to collect their equipment we shall issue proceedings in the High Court for delivery up of the equipment or its value to our Clients, and damages for retention. The valuation and damages will be to the extent of the rentals they would receive under a novation of the former agreement with Mr Campbell that is being arranged, in the region of £12,500.00. Any liability caused by the failure to novate the agreement to the proposed lessee will also be sought."

A writ was then issued on 13 June 1994. There would appear to have been further negotiations during July 1994. The defendant was not co-operative still claiming the cost of repairs if the equipment was removed and a charge that would be made for storage. That led to the solicitors for the plaintiffs’ letter dated 22nd July 1994, in which it was stated:-

"Your client is behaving in an unreasonable and obstructive manner and notwithstanding the fact that we repeated an undertaking on our clients behalf to put right damage caused by removing the equipment in our letter of 17th May, has caused our clients severe loss by preventing our clients from arranging a novation of the former agreement with Mr Campbell that was worth approximately £12,500.00."

The language of that letter seems to indicate that by 22nd July 1994 the opportunity to assign to Mr Gyles had disappeared. Only on 1st August 1994 was the equipment released to the plaintiffs by the defendant.

An application for Order 14 judgment was then pursued and the plaintiffs obtained judgment on 27th February 1995 for damages to be assessed.

The plaintiffs’ case on damages is in essence that leasing second-hand equipment of this type is hardly possible. Thus, in the result, once having retrieved the equipment they were only able to sell that equipment for the sum of £5,000 to an entity called Saturn Automotives Services. They say however that as of 11th April 1994 they had managed to persuade Mr Gyles to take the equipment on a leasing contract under which they would have received substantially more than £5,000 i.e. the sum of £13,194. Due to the delay in returning the equipment (so they argue) Mr Gyles made different arrangements thus the deal with Mr Gyles was lost and thus the plaintiffs have suffered damages being the difference between the sum of £5,000 and £13,194 which would have been achieved from Mr Gyles.

The defendant’s case is that (a) there is serious doubt as to whether there ever was any deal done with Mr Gyles; (b) there is serious doubt as to whether Mr Gyles would have paid the full sum of £13,193.84 both because he was a risk which the plaintiffs had previously not been prepared to take on and because he in fact only stayed in the premises to which this equipment was to be delivered for a period of one year; and (c) in any event (the defendant asserts) he was not made aware that this special deal was available from Mr Gyles and Mr Gyles alone. Accordingly they say that the measure of damages should be the difference between the market value of the equipment and the sum for which the equipment was ultimately sold. It is conceded that there is in fact no difference between those figures and thus damages are asserted to be no more than £250 or nominal and I shall return to that aspect below.

That this bargain with Mr Gyles was exceptional is accepted by the plaintiffs. At least it is accepted in their evidence, if not accepted in the submissions of Mr Kinsky. In the affidavit of Mr Entwistle, paragraph 7 (p.68 of the bundle) he said:-

"I must, however, stress that we are not in the business of providing such equipment (or indeed any equipment) on operating lease. The company deals in finance leases. Accordingly, arrangements such as that with Mr Gyles were very rare and it was purely coincidental that at the time we were first looking to sell this Bradbury package, Mr Gyles was looking to take one on but could not afford the finance for a new one. The deal with Mr Gyles had been approved and the only thing needed to complete the transaction was the delivery of the equipment."

The case was resolved by the District Judge on affidavit evidence only. He concluded that, on the balance of probabilities, there was a contract between the plaintiffs and Mr Gyles and on that basis he awarded the whole sum on that contract by way of damages less a discount for accelerated payment of £500.

Before this court, an attack has been made on the District Judge’s finding that there was a contract made with Mr Gyles. It is pointed out that the deal alleged is asserted to have been done on 11th April 1994, and yet neither the letter of 5th May or 17th May refer to it. Furthermore, the sum claimed in those letters is not the sum which it is now alleged was due from Mr Gyles under the contract made. In addition it is submitted that it is almost inconceivable that a deal of this sort was not recorded in some way in writing and there is simply no written record anywhere of the alleged contract with Mr Gyles.

Those are forceful submissions, but the Court of Appeal in a case of this kind is very reluctant to interfere with a finding of fact by the District Judge. I am not persuaded that the District Judge was not entitled to take the view that he did although I would interpret the finding as being not necessarily that a concluded contract had been made on 11th April 1994, but simply that on the balance of probabilities if the MOT equipment had been returned by 20th May 1994 (the date specified in the solicitors’ letter of 17th May 1994), the deal with Mr Gyles would have been finalised.

The situation thus was as I see it in summary is as follows. First, the plaintiffs had the opportunity of a deal with Mr Gyles by chance, and that was the only deal available to them which could have produced a value of £13,194. Second, the value otherwise was £5,000 for which the plaintiffs would, and ultimately did, sell the equipment. Third, without for the moment assessing what the defendant was being told by the plaintiff, the ordinary expectation of the defendant who was retaining the equipment would be (1) that retention might lead to a difference between what the plaintiff could dispose of the goods for as between the date of original detention and the date when the goods were handed back, or conceivably (2) might lead to a loss of hire (if the goods could have been hired out) during the period of detention. He could not be expected to know (unless informed) of the fact that the plaintiffs could not lease the second-hand equipment other than to one person Mr Gyles, who was available only by the chance that he wished to lease new equipment and the internal decisions (a) not to sell new equipment to him, but (b) to take a risk of selling second-hand equipment to him.

So far as the law on damages is concerned, the position, (so far as torts affecting goods and their misappropriation), is summarised in McGregor on Damages 16th Edition as follows:-

“1436

Loss beyond that represented by the market value of the goods may be incurred by the plaintiff through being deprived of their use. Whether he can recover for such consequential loss turns on the principles of remoteness of damage."

....

“1438.

On the other hand, the plaintiff’s loss of profits on contracts made with third parties has tended to form too remote an item of damage. That such a loss may be recoverable is recognised, but it has been allowed only where it could have been anticipated by the defendant. Thus in Bodley v. Reynolds the plaintiff recovered for his loss of custom by reason of the defendant’s conversion of the tools of his trade, but of this decision it was said in France v. Gaudet that the defendant must be shown to have known that in the nature of things inconvenience beyond the loss of the tools would be caused to the plaintiff. The leading case in this connection is The Arpad , where the Court of Appeal held that the plaintiff could not recover as damages for conversion of part of a cargo of wheat his loss of profit on a sale of the wheat before the conversion. The Court of Appeal explained France v. Gaudet , where a buyer had successfully claimed in conversion against his seller, who refused to deliver, the price at which he had resold the goods to a third party, as turning on the fact that the resale price had been taken merely because it was evidence of the market price in the particular circumstances of the case. It may be, however, that The Arpad does not accord entirely with the general rules of remoteness in tort damages and it has been suggested elsewhere that, if the matter should come up before the House of Lords, their lordships may well prefer the strong dissent of Scrutton L.J."

In The Arpad [1934] P.189 the plaintiff was claiming damages based on certain particularly lucrative contracts entered into prior to the contract of carriage unbeknown to the carrier. It was a case in which there was no market and thus the plaintiff could not have gone out into the market and bought in goods for the purpose of fulfilling the contracts. The claim was both for breach of contract and in conversion. The majority held that the true measure of damages was the value of the goods at the date of non-delivery disregarding circumstances peculiar to the plaintiff not made known to the defendants prior to the entry in to the contract of carriage. It was held that the measure of damages in tort was the same as in contract, and that value of the wheat should be taken at 23s 6d and not 36s which was the price under the more lucrative sales contracts. In a strong dissenting judgment Scrutton L.J. did not agree with the majority’s approach. He felt that in tort the damages did not require notice to the wrongdoer of their probability whereas in contract the rule in Hadley v Baxendale requires the consequences to be in the contemplation of the parties.(see pp.205-206).

That approach seems to reflect, admittedly in the different context of negligence, the view approved in Re Polemis [1921] 3 KB 560. . In that case Scrutton L.J. himself said at 577:-

".... if the act would or might probably cause damage, the fact that the damage it [the negligence] in fact causes is not the exact kind of damage one would expect is immaterial, so long as the damage is in fact directly traceable to the negligent act, and not due to the operation of independent causes having no connection with the negligent act, except that they could not avoid its results."

The Wagon Mound [1961] AC 388 P.C. has however overruled that decision and made reasonable foreseeability the test of the existence of liability. In that case Viscount Simonds said:-

"It does not seem consonant with current ideas of justice or morality that for an act of negligence, however slight or venial ..., the actor should be liable for all consequences, however unforeseeable and however grave, so long as they can be said to be ´direct’. It is a principle of civil liability, subject to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act. To demand more of him is too harsh a rule, to demand less is to ignore that civilised order requires the observance of a minimum standard of behaviour."

It is in any event the majority judgments in The Arpad that are binding on us, and it seems to me that in a case of wrongful detention of goods McGregor on Damages is right in saying that the appropriate test for recovering something above the market value should be by reference to whether that loss could have been anticipated by the defendant.

This case is in any event not as straightforward on its facts as The Arpad for this reason. In The Arpad it was clear that the direct cause of the loss, even of the lucrative contracts, was the delay in delivery. In this case there are distinguishing features; first, the loss being claimed is a loss on another contract, the Campbell lease, and is not a simple loss of profit claim; second, the plaintiffs assert that they could not in normal circumstances lease as opposed to sell; in one sense one cause of the loss was that feature; third the ability to lease was only present by virtue of a combination of fortuitous factors (a) that a customer had by chance applied for finance in relation to similar new equipment, and (b) had been turned down. If either of those features had been absent, the loss on the Campbell contract would have been incurred mitigated only by the sale price of the equipment.

The question to my mind is whether the defendant could reasonably have anticipated that the loss on the Campbell contract would be fully mitigated by a further lease if the equipment was returned when demanded, but could not be mitigated other than by a sale if there was a delay in return. That raises various questions. What knowledge did the defendant have of any of the features relating to Mr Gyles? At what date did he have that knowledge? Should he have anticipated the consequences of not returning the equipment on demand? If so when? If he should have anticipated the consequences, and be liable for them, how should damages be assessed?

Leaving on one side for the moment, the time at which he had any knowledge, the maximum knowledge that in my view he could be said to have had at any time prior to handing back the equipment is that the plaintiffs were intending to assign the contract with Mr Campbell to someone unidentified, and intending to recoup £12,500., if they did so. That, as it seems to me, is all that is made clear by the letters of 5th and 17th May 1994, and there is no suggestion that anything further was communicated to the defendant orally. There was nothing to put the defendant on notice that the plaintiffs could not in the ordinary course of things lease the equipment to one of any number of customers once they obtained its return, or putting the matter the other way, there was nothing to put the defendant on notice that the only assignee available was Mr Gyles, and that a delay in handing the equipment back would have any effect other than to delay the ability of the plaintiffs to enter into a new lease. Furthermore, and this really comes to the same thing, there was nothing to put the defendant on notice of the fortuitous circumstances that lead Mr Gyles to be available, and to be the only customer available to take the equipment on lease.

In my view accordingly it could not be said that the defendant should have reasonably anticipated that if the equipment was not handed back immediately on demand, the only possibility of entering into a leasing contract would be lost.

It is on the above view unnecessary to consider what also seems to me to be a vexed question which is whether once the equipment has been demanded back, the plaintiff could put the defendant on notice of special features so as to render the defendant liable on a continued detention of the goods, and I would prefer to express no view on it.

The above view also renders it strictly unnecessary to consider what would have been the appropriate quantification of damage if the plaintiff was entitled to recover by reference to the contract with Mr Gyles. It seems to me however that it is likely in this case that a very similar result should have been reached by that route. Mr Gyles was not thought a good risk so far as new equipment was concerned. It further appears to have been the case that Mr Gyles in fact ceased carrying on business at the premises to which it was intended the equipment should be delivered within a year. The correct question thus to pose would have been what chances were there of the plaintiffs receiving, over the period of two years, the whole £13,193.84 or putting it another way substantially more than the sum certain of £5000 which the plaintiffs did recover by sale in September 1994.

I am doubtful whether it would have been right to assess the chances of receiving more than £5,000 as realistic, and it seems to me that the District Judge’s approach of awarding the whole sum that would have been due from Mr Gyles with a discount of £500 would in any event have been wrong.

When it was put to Mr Coles whether he had in mind a figure to which the damages should be reduced, he at first said £250. He was not very clear as to how that should be calculated, and was ultimately inclined to the submission that no damages had been established by the plaintiffs. It seems to me that in this context the defendant is entitled to rely on the fact as Mr Coles had in his skeleton argument, that the defendant had offered £5,000 on 6th April 1994 for the equipment. In my view the plaintiff has not established that any damage was suffered by the delay in returning the equipment, and accordingly I would allow the appeal, and on the assessment of damages give judgment for the defendant.

LORD JUSTICE SCHIEMANN:

I regrettably differ from the conclusion reached by My Lady and Waller L.J. for reasons which I can state shortly. In my judgement justice requires that if a tortfeasor is accurately warned by his intended victim of the financial consequences to the victim of the tortfeasor persisting in his tort and yet the torfeasor deliberately goes on to persist in acting unlawfully the person injured by that unlawful conduct should be compensated for that which he has lost. The judgments of the majority in The Arpad [1934] P.189 do not provide any foundation for a contrary view nor have we been referred to any case which compels it. I regard the defendant in the present case as having been sufficiently accurately warned to bring that principle into play in the present case.

The crucial facts in the present case are not in dispute.

1. For a period after November 1993 the equipment remained on the Defendant’s premises with the Plaintiffs’ consent;

2. In April 1994 the Plaintiffs had the opportunity of a deal with Mr Gyles which would have produced a value of £13,194.

3. Prior to 3 May 1994 the Plaintiffs intimated to the Defendant that they wished to remove their goods

4. On 3.5.94 Mr Davis wrote to the Plaintiffs

“I have now taken advice on this matter and I am informed that the goods are a fixture and an alteration to my building. If you wish to remove them, which you appear eager to do, I will require a full reinstatement of the building to its original condition, or the cost of such. This has been quoted as £1,350.00. In addition, I require storage fees of £650 and a sum of £150 to cover my time, telephone calls and general expenses. On receipt of payment you may remove your goods by appointment. You have seven days to make payment and remove the goods. Alternatively, if you wish to carry out the reinstatement yourselves, the goods will remain on the premises until the work is carried to my satisfaction and payment of the storage and other costs is made. There will be an additional cost under these circumstances for attendance and supervision. I await your reply”.

5. By letter of 5 May 1994 the Plaintiffs indicated to the Defendant that they were in the course of arranging a novation of the agreement with Mr Campbell and that if that novation was hindered by the Defendant refusing to release the goods the damages would be about £12,500.

The letter contained the following:

“On 6/4/94 we discussed the possibility of selling the equipment to an end user, a prospective ingoing tenant that you have for unit two, A30 bypass. I subsequently advised you on 8/4/94 that we would not wish to accept the offer made by the ingoing tenant, as we wished to assign the agreement to a third party as we were legally obligated to do so in order to maximise mitigation of Mr. Campbell’s debt with Saleslease Ltd. You then advised me that you therefore wished the equipment to be removed in two weeks as your tenant could be moving into the building. In that conversation I agreed that we would address the problem of putting right any damage caused by removal of the equipment but not alterations to the building preceding and during the installation of the equipment.”

The District Judge made no finding as to whether indeed the defendant was advised on the 8th April 1994 that the plaintiffs wished to assign the agreement to a third party. We can not resolve that matter.

The writer of the letter then set out a list of attempts to arrange removal of the goods which had been met with failure to reply to messages and continued:

“Your request for storage fees of £650 is completely outrageous and your request for the sum of £150 to cover your time, telephone calls and general expenses is quite frankly farcical. You mentioned that we may remove the goods by appointment. This would certainly be possible if you were to begin returning telephone calls. I should advise you at this point that we are so incensed with the contents of your letter that we would sooner fund the costs of the Court Order to have these goods removed and I should further advise you that if you continue to take obstructive measures with us in removing these goods and we are not able to assign this lease, our solicitors will be instructed to claim against you for damages and loss incurred as a result of the failed assignment. This for information will amount to some £12,303.74 plus VAT, plus any as yet unquantified damages........ I should advise you that you have seven days in which to respond to this office to confirm a date for the removal of these goods in order that I may contact the prospective assignee to conclude this matter once and for all”.

Assuming that this letter arrived in the normal course of post, it is thus clear that as from 14 May 1994 the defendant was wrongfully detaining the goods.

6. There then followed the letter from the Plaintiffs’ solicitors quoted by Waller L.J. which read:

“.... Unless we hear from you by close of business Friday 20th May 1994 to arrange for our clients to collect their equipment we shall issue proceedings in the High Court for delivery up of the equipment or its value to our clients, and damages for retention. The valuation and damages will be to the extent of the rentals they would receive under a novation of the former agreement with Mr Campbell that is being arranged, in the region of £12,500. Any liability caused by the failure to novate the agreement to the proposed lessee will also be sought.”

7. Mr. Gyles stated in an affidavit of 27.6.95:

“........It was agreed that I would effectively take over the balance payable on the agreement with their customer which was £12,303.74. I considered this to be a very good deal because the equipment was only a few months old and I would have had to have paid considerably more than this for a new package. Unfortunately after the arrangement had been agreed a problem came up. As I recall, the landlord of the premises where Salesleases’ previous customer had operated was refusing to release the equipment. Although I was not directly involved, I do know that Saleslease were trying hard to recover this equipment so that they could complete our deal. Unfortunately, the matter went on and on for two or three months and eventually I could wait no longer. I felt that I was losing new business all the time because the MOT package was not in my premises and working. Accordingly, I had no option but to make arrangements elsewhere.”

8. The opportunity to assign the agreement to Mr Gyles disappeared sometime in June or July 1994.

On behalf of the defendant it was argued that the judge was wrong to hold that a deal would have been concluded with Gyles had the goods not been detained. I agree with Waller L.J. that this court should proceed on the basis that, on the balance of probabilities, if the MOT equipment had been returned by 20th May 1994 the deal with Gyles would have been finalised.

It has not been, and could not be, argued on behalf of the Defendant that he was entitled to maintain that he would not release the goods unless various sums were first paid by the Plaintiffs.

On those facts it is clear that the goods were wrongly detained by the Defendant at least from 14 May 1994. A week before this the Defendant had been told what we must take as being the truth, namely, that his refusal to release the goods would result in damage amounting to about £12,500. He had been told that this is what the Plaintiffs would receive from a proposed assignee. Yet he persisted in that refusal.

I accept that he had not been told that there probably would be difficulty, at the time when he might ultimately decide or be compelled to release the goods, in finding another proposed assignee prepared to pay that sum. I accept that the name of the proposed assignee had not been revealed to the Defendant. I accept that he had not been told that the value of the goods for resale would be likely to be less than the value to the plaintiffs of the proposed assignment. The other members of the court, as I understand their judgements which I have read in draft attribute crucial significance to these three factors. They seem to me of no significance. What matters in my judgement is what appears from the passages which I have emphasised in the letters from which I have quoted, namely, that the defendant was informed that there was a proposed assignee (who might even be in a position to sue the Plaintiffs) and the loss attributable to any inability to assign.

I do not accept that any failure by the Defendant to understand that any loss which might follow from his refusal to permit the goods to be collected in time to enable the deal with Gyles to go through could not be fully mitigated by a later sale and was unlikely to be fully mitigated by a later lease to anyone other than the proposed assignee, relieves the Defendant of liability to pay for the loss of which he had been warned. Why should the victim be disabled from recovering because he did not spell out to the tortfeasor that it would not be possible to mitigate the loss which the tortfeasor had been warned he would cause if he persisted in his tort?

The present case can be distinguished from cases where

1. a tort is committed

2. at the time of the commission of the tort the tortfeasor has no means of knowing the true financial consequences of his tort,

3. thereafter he is told of those consequences but is in no position to avert them, and

4. no further wrongful act is committed after the warning of the financial consequences.

In the present case the damage which was actually caused to the Plaintiffs was caused to them by the Defendant’s deliberate and wrongful detention of the goods after the Defendant had been told that an assignment was in the offing and had been given a figure as to what the Plaintiffs would lose if the assignment went off. That figure turns out to be accurate (assuming for the moment the solvency of the proposed assignee). I am not persuaded that it is right in principle to deny the Plaintiffs the right to recover this loss in those circumstances and no case has been cited which compels us to come to that conclusion.

I accept, of course, that we are bound by the majority in judgments in The Arpad but I do not accept that they assist the appellants. The Arpad was not concerned with a situation where the tortfeasor had advance notice of the loss which would in fact be incurred by the victim. This lack of advance notice was a crucial factor in the judgement of the majority as appears from the following quotations from the judgements of Greer L.J. and Maugham L.J. to which I have supplied the emphases. The first said at p.209:

“.... it seems to me unreasonable to hold that a shipowner contracting with a shipper on the terms of a bill of lading should be held liable to pay damages occasioned by an unknown assignee of the bill of lading, measured by the loss sustained by the latter’s inability to comply with a contract made two months before the shipment by such unknown assignee, the shipowner having no notice of such contract and no opportunity of refusing to carry goods on the terms that he should be so liable.”

and at p.210:

“....no notice was or could be given by the respondent s to the appellants before the goods were shipped, or at any time, of the prices at which they had bought or the prices at which they had sold, or indeed that they were buyers or sellers at all.”

He quotes with apparent approval at p.219 the following sentence from Sedgwick on Damages:

“..in principle, unless the plaintiff has been deprived of some particular use of his property, of which the other party was apprised, and which he may thus be said to have directly prevented, the rights of the parties are fixed at the time of the illegal act, be it refusal to deliver, or actual conversion, and that the damages should be estimated as at that time”

Maugham L.J. said at p.221

“......I must make it clear that in the circumstances of this case the shipowner could not, in my view, properly be held to know that the plaintiffs or any other holder of the bill of lading had entered into contracts of sale or was procuring the goods for the purpose of resale. I agree with what my brother Greer has said on this point...”

In my judgement, the tortfeasor in the present case was apprised of the particular use of the property of which the plaintiffs they would be deprived if he persisted in wrongfully refusing to release the goods and moreover was apprised of the income which the plaintiffs would obtain from that use. As I have indicated it is my view that if a tortfeasor is accurately warned by his intended victim of the financial consequences of persisting in his tort and yet deliberately goes on to persist in acting unlawfully the person injured by that unlawful conduct should be compensated for that which he has lost.

For my part, I see no reason to interfere with the District Judge’s finding that the Plaintiffs are entitled to recover the loss caused by their inability to assign the Campbell lease to Mr Gyles. I have, however, to address the question what that loss is. The district judge worked on the basis that Mr Gyles would have fulfilled his commitments.

The appellant submitted that, even if the court rejected his main submission that no deal with Gyles would have gone ahead if the appellant had been willing to release the goods,

1. Gyles would not have fulfilled his obligations under that deal and

2. if he did not the Plaintiffs would not have been able to recover the full £13,194.

The respondents dispute each of those propositions.

In support of these submissions the appellant relies on

1. the hearsay evidence in his affidavit of 15.4.96 that the letting agents thought that, probably in May 1995, Gyles vacated the premises overnight and that the premises contained a lot of equipment including a Ferrari, a Porsche and a virtually new Harley Davidson Motorcycle which were removed.

2. the fact deposed to by the respondents’ solicitor that towards the end of June 1995 Gyles had told him that he had hurt his back and had had to close his business down

3. the fact that the respondents had originally only been prepared to finance Mr Gyles to a limit of £5000 and were only prepared to increase that limit in circumstances where the respondents found themselves (by reason of the appellants unlawful detention of the goods) in a position of some financial pressure to do a deal with Mr Gyles involving a loan of a greater amount.

In my judgement there is no real reason for saying that the balance of the sums due would not have been recovered from Mr Gyles as to whose assets in the event of any bankruptcy we know nothing. Even if they had not been, the respondents would have been able to sell the equipment for a sum around £5000 - depending on the date of default. This would in all probability have covered the shortfall.

In my judgement there is not enough material here to make it proper to deduct any sum from the amount for which judgement has been given. The law relating to the calculation of damages is complicated and at times unclear and this is not the case in which to embark on a long analysis of it. I note the following features which have helped to persuade me that this is not a proper case for a discount to reflect the uncertainties of financial life:-

1. Gyles and the Plaintiffs thought it right in May 1994 to go ahead with the deal

2. There is not enough material here for the court to conclude that Gyles was dishonest, or that the business was regarded by either party as likely to close down before all the instalments were paid or that, if it were to close down before such time , Gyles would be unwilling or unable to fulfil his then outstanding contractual commitments to the Plaintiffs.

3. Gyles claimed in his affidavit that one of the reasons he was losing business was that the MOT package was not at his premises and working.

4. The £2000 first instalment would have been payable in May 1994.

The appellants claim a credit for sums recovered from Mr. Campbell. The respondents reply, correctly in my view, there is no reason for giving such credit. The sums received from Mr. Campbell do not go to reduce the loss caused by the loss of the contract with Mr. Gyles - and that is the loss which was caused by the appellant’s tort.

I would dismiss this appeal.

LADY JUSTICE BUTLER-SLOSS:

I have read the judgments of Schiemann LJ and Waller LJ in draft and gratefully adopt Waller LJ´s description of the facts. I agree with My Lords that this court should be reluctant to interfere with findings of fact of the lower court, in this case the finding of the District Judge that there was a deal between the plaintiffs and Mr Gyles of the 11th April 1994 for the sum of £13,194. The plaintiffs accepted in evidence that the deal was exceptional. The defendant had himself offered £5,000 for the equipment on the 6th April which the plaintiffs rejected. He did not know of the agreement with Mr Gyles shortly thereafter. He did know from the plaintiffs in May 1994, when he wrongly retained the goods, that the plaintiffs’ estimate of the damage to them as a result of the wrongful detention was in excess of £12,500, but he was never informed that there was one person only, that is to say Mr Gyles, from whom the plaintiffs could receive the greatly increased value of the equipment.

The action of the defendant in retaining the equipment after the plaintiffs sought its return was wrongful and reprehensible but the short issue is whether the damages for the tortious act of wrongful misappropriation of property should reflect the value of the equipment in April of £13,194 or the market value of second hand equipment of £5,000, the figure at which it was eventually sold. If it is the lower figure, the damages would be nominal.

In McGregor on Damages (16th ed.) paragraph 1436 at page 945, it is stated:-

"Loss beyond that represented by the market value of the goods may be incurred by the plaintiff through being deprived of their use. Whether he can recover for such the editor consequential loss turns on the principles of remoteness of damage."

In The Arpad [1934] P 189, there was a claim both in contract and in tort in respect of the short delivery of Roumanian wheat shipped from a Black Sea port to Hull. Two members of the Court held that the true measure of damages was the value of the goods at the date of non-delivery and special circumstances peculiar to the sale of the wheat unknown to the owners were to be disregarded. They held that the measure of damages was the same in tort as in contract. In a strong dissenting judgment Scrutton LJ disagreed on both issues. Despite the force of the dissenting judgment, and certain reservations expressed by McGregor , this Court is bound by the majority decision.

In my view a consequential loss which is special to the circumstances of the particular plaintiff and which is not known to the tortfeasor may be regarded as too remote, (see The Wagon Mound [1961] AC 388). In the present appeal I do not see how the letter of the 5th May 1994 from the plaintiffs and the subsequent letter from their solicitors warning the defendant that they would be claiming over £12,500 was any indication that they had a single opportunity to sell the equipment at that price. He did not have the relevant information nor was he put on notice as to the special position at any time before he handed back the equipment on the 1st August 1994. It cannot in my view be said that the defendant ought to have anticipated that if the equipment was not returned in May or thereabouts the only possibility of disposing of the equipment for £12,500 or so would have been lost.

For the reasons set out in the judgment of Waller LJ and for these reasons I too would allow the appeal. There does not seem to me to have been any damage suffered by the plaintiffs as a consequence of the late return of the equipment and on the assessment of damages I would give judgment for the defendant.

Order: Appeal allowed with costs here and below; order of the court below set aside; judgment for the defendant; application for leave to appeal to the House of Lords refused. ( This order does not form part of the approved judgment )