England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EPSOM COUNTY COURT
(HIS HONOUR JUDGE HULL QC)

		Royal Courts of Justice Strand London WC2 Thursday, 7th March 2002

1. LORD JUSTICE TUCKEY: This is a renewed application by the claimants in these proceedings, Cosgrove Packaging Limited, for permission to appeal from two decisions made by His Honour Judge Holman in the Manchester County Court on 19th November 2001 in which, firstly, he refused to order a split trial and then gave judgment for the Respondents, BMB UK Limited, under CPR 24 because the claim had no realistic prospect of success.
2. The proceedings arise out of the sale to the applicant of a plastic moulding machine in 1995 for the sum of £120,000. The applicants alleged that the machine was defective and started proceedings against BMB in April 1996. The Statement of Claim claimed damages for loss of profit for 231 hours of lost production: "approximately £18,500." There was a further claim for loss of profit for inability to achieve the machine's warranted rate of production, but that claim was abandoned.
3. BMB denied that they were the sellers of the machine or that it was defective and put the applicant to proof of any loss. Little happened in the proceedings for a considerable time after April 1996, apart from the fact that the court made an order for directions which was not in any way complied with. But in June 1999, when BMB sought in separate proceedings to recover service charges for the machine, the other action revived. The amount claimed by BMB was not in dispute, but the applicants sought to set off their claim in that action against the claim for service charges and the two sets of proceedings were consolidated.
4. Case management conferences, in which further orders for directions were made, took place in January and April 2000. By this time the applicant had shown little enthusiasm for their remaining claim for loss of profit, but said that they wanted to pursue their claim for loss on the basis that because the machine was defective it was worth considerably less than they had paid for it. They asserted in correspondence that they had sold the machine some time in 2000 for £30,000, and at the second of the case management conferences they were ordered to serve evidence relating to this sale by 6th June 2000. They failed to comply with this order by 6th June or at any time. Nor did they apply to amend their claim to put the claim for loss on that basis, or put forward any other evidence to justify this claim for diminution in value.
5. The trial was first listed for hearing in October 2000, but it was adjourned until the 10th January 2001 because of witness difficulties. Between these two dates the applicant's solicitors wrote to say that the claimant was no longer pursuing the loss of profit claim. Their witness statements had said that the defects had caused the claimed amount of down time but had made no attempt to establish what financial losses this had caused, if any. Nor had any discovery been given to this end.
6. The trial was further adjourned on 10th January 2001 because the applicant said that it needed further time to deal with a handful of documents which had been discovered late by BMB on the issue of who the contracting party was. At that time, however, they were put firmly on notice that BMB would be contending that there was no evidence to support the loss of profit claim.
7. So it was, more than six and a half years after the sale of the machine, that the matter came on for trial before His Honour Judge Holman on 19th November 2001 with an estimate of three days. Mr Hilton, for the applicant (as he is before us today) realising his difficulty in proving any loss, in the circumstances which I have outlined, applied at the outset for the judge to try liability only at that time and to adjourn the question of quantum at the end of that trial for a further hearing, by which time he said the appropriate evidence could be put before the court if indeed a trial on quantum was required. He submitted that there were substantial issues on liability which might take two days or so to try. So the court's time would not be wasted in that respect.
8. This application was opposed by BMB who made it clear that if the application for a split trial was rejected they would apply for summary judgment. The judge refused the application. He recited the history, which I have summarised, and then went through the check list in CPR Part 1 attaching particular weight to the allocation of an appropriate share of the court's resources and concluded:

"If I apply all the facets of the overriding objective and take into account the history of this matter I have little hesitation in coming to the conclusion that the interests of justice are wholly against Mr Hilton's application..."

9. Mr Hilton submits that if one looks at what the judge said he did not specifically consider dealing with the applicant's case justly but erred in favour of a stronger inclination to punish them. He did not specifically take into account the fact that the time set aside by the court could have been used to try liability. He did not specifically consider the relative prejudice to the applicant which would be denied the opportunity of presenting their case to the court, and BMB who he contended would suffer little by the course which he proposed.
10. Finally, he submits that the judge failed to consider the proportionality of the decision which he made because there were other ways in which he could have reflected the court's displeasure at what had happened by less drastic means such as orders for costs and interest and the like.
11. I do not accept these submissions. The judge could not possibly have overlooked the need to deal justly with both the parties before him. By referring to the over-riding objective he undoubtedly had that in the forefront of his mind. Having regard to the history which he recited he was entitled to say, as he did, that enough was enough. The claim was already very stale and the applicant had had ample opportunity to put its case in order even after it had been put on notice of the deficiencies of its case on quantum. In refusing the application for a split trial the judge was acting well within his discretion and I can see no ground upon which this court could, or should, interfere with that decision.
12. The application for summary judgment which followed the judge's ruling was, I think, inevitable. In the state of the pleadings and the evidence before the court the most the applicant could expect, if it established liability, was an award of nominal damages. Costs of both sides to date were estimated to be about £60,000. It would have been quite wrong for the judge to have embarked on a trial on liability in which the costs of a further one or two days of trial would have been incurred if only £1 was at stake.
13. Mr Hilton had sought to save something by asking to be allowed to ask the appellant's lay witnesses to attempt to prove the loss of profit claimed, although they had not dealt with that at all in their witness statements. He also asked the judge to consider the claim for diminution in value on the basis that he would make an application for leave to amend the pleading to include that claim.
14. The judge rejected those approaches. He said of the loss of profit claimed:

"We know it is alleged that there were 231.25 hours of production lost but there is no evidence as to how that translates into £18,500...

I cannot think of anything more calculated in the present state of affairs to cause difficulty and prejudice to BMB than being confronted by a witness in a claim started five and a half years ago only now condescending to give evidence as to how this figure is arrived at, and without any material disclosure of any documents which might assist in substantiating the formulation of the claim."

15. He said much the same thing in relation to the claim for diminution in value, which had not been particularised in any way. The applicants had not complied with the order which had required them to put before the court evidence that they had sold the machine for £30,000. But that only started to deal with how they might establish loss in the sense in which such loss could be recovered under the provisions of the Sale of Goods Act, since it was accepted that the relevant date at which to determine any question of diminution in value was the date of the sale.
16. Be that as it may, Mr Hilton submits before us today that the judge, even on the state of the evidence as it was, was entitled to infer from the fact that there had been lost production time that some financial loss had been caused to the applicant. I cannot agree. It is for the claimant, in proceedings for breach of contract, to plead and prove that the consequences of any breach of contract which he establishes have caused loss measured in money terms. The applicant had not attempted to do this in the material it had put before the court and the court could not have been left to speculate as to whether or not there was any such loss.
17. Secondly, Mr Hilton submits that nevertheless the judge should have allowed the trial on liability to proceed and, at the end of the day, were he to decide that the applicant had established no loss that was something which he could and should have dealt with at the end of the trial when he came to deal with questions of costs. If, he says, the Judge had decided in the applicant's favour on the issues of liability, but had said (as it seems to me he would have been bound to say) that they had established no financial loss as a result of a breach, then the order for costs could have reflected the applicant's success on the issue of liability and they would have recovered something from the predicament into which they had got themselves. I do not accept that submission either. The judge was not required to embark on such an exercise having the inevitable consequence to which I have referred. He was entitled to say enough was enough and to save the defendants being put to the cost of, or the further cost of, a trial the outcome of which I think was inevitable.
18. At the end of the day, I think what Potter LJ said when he refused permission in this case on paper was absolutely right. He said:

"The judge's decision was robust, but justifiable within the discretion available to him under the CPR. The history of the matter, in relation to what was not a large claim (loss of profits had previously been abandoned as a head of provable loss) demonstrated a comprehensive failure by the claimants to prepare for an adjourned trial date, fixed when both liability and quantum, of which they had ample notice. The claim had become stale. Careful reading of the transcripts shows that the judge carefully considered the competing considerations of procedural and substantial fairness when deciding whether or not to order split trial so late in the day. Having decided not to do so, he was correct to hold that the evidence available to the claimants was insufficient to establish any substantial damage."

19. For these reasons I think this application must be refused.
20. LORD JUSTICE JONATHAN PARKER: I agree.