England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE TOULMIN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		11th March 2008

Lord Justice Waller:

1. This is a renewed application, permission having been granted in relation to one ground by Toulson LJ.
2. By a judgment of 12 April 2006 HHJ Toulmin QC found the defendants had acted in breach of their fiduciary duty of loyalty and their fiduciary duty not to misuse information. The assessment of damages came on before him and by a judgment dated 31 July he assessed damages in the sum of £144,871.54. What he was having to do was to calculate the loss of chances and the worth of those chances, in three areas. He first had to calculate whether Také had lost sales in the existing range of furniture to a company, Dreams. Second, he had to calculate whether they had lost the chance of sales of new ranges of furniture to Dreams and thirdly he had to calculate whether they had lost the chance of sales of bedroom furniture to Argos. It should be noted that Dreams were an existing customer; Argos would have been a new customer.
3. The defendants, who I shall call "BSM", sought to appeal the decision of the judge on five points. Those five points are set out in paragraph 9 of Mr Comiskey's main skeleton argument:

"(i) The learned judge took the wrong approach in assessment of the profit margin on future sales of the Respondent's existing range to Dreams.

(ii) The learned judge took the wrong approach in assessment of the profit margin on future sales of Respondent's new range to Dreams.

(iii) The learned judge erred in reaching his conclusion on the level of sales of the Respondent's new range to Dreams.

(iv) The learned judge erred in his assessment of the Respondent's loss of a chance to sell bedroom furniture to Argos.

(v) The learned judge erred in his assessment of the likely level of sales to Argos."

4. The matter came before Toulson LJ on paper. He granted permission in relation to (iii) and advised the parties to settle the matter by mediation so renewal of the application relates to the other four points.
5. I can say straight away, and I believe my Lord to agree, that it seems to us that permission should be granted in relation to (i) and (ii) but not in relation to (iv) and (v). I shall explain my reasoning very shortly: so far as Ground (i) is concerned the point relates to the profit margin on future sales of the existing range to Dreams. What the judge did, one can see from paragraph 74 through to 81:

"74. The next issue is the gross profit percentage which I should apply.

75. It seems to me that Dreams may well have succeeded in reducing significantly the prices which it paid and on which the profit margin of 37% contended for by Také is based.

76. On the other hand, the prices would not have been reduced to the level to provide the profit margin of 5% to 10% contended for by Mr Morley, or the 15% which he was asking for to cover the commissions of himself and Mr Low.

77. On the other hand, in my view, Dreams would have succeeded in reducing the profit margin well below the 37% contended for by Také.

78. I prefer to take the more conservative figure of 20.68%.

79. It so happens that this is the profit rate, taking the price of the Highgrove bed at the Defendants' price rather than the price contended for by the Claimants', which would have produced an overall price of 30.17%.

80. On this issue Mr Sagadhiani says that the price in the one price list which I have seen was an exceptional one-off price, because Také had to pay for the mould cast of the product in the first container from Malaysia.

81. It should not be taken that I disbelieve Mr Sagadhiani because, for other reasons, I take the lower monthly gross profit. I reach that figure because I am concerned to take a conservative view of the profit margin.

6. It will be seen from those paragraphs that essentially what he did was to look at the maximum being claimed by Také at a profit margin of 37%. He then looked at the lower figure being put forward by BSM at 5% or 10% and then he came to an intermediate figure of 20.68%. He then suggests that it so happened that that profit rate took the price of what is called the Highgrove bed at the defendants' price rather than the price contended for by the claimants, which would have produced an overall profit of 30.17%. He further says that he is not saying that Mr Sagadhiani was not telling the truth when Mr Sagadhiani was explaining how it was that a particularly low profit was made on that particular item.
7. It was explained to us how those figures of 30.17% and 20.68% had come into being at the trial. There is a schedule at page 192 produced by an accountant which seems to produce an average profit margin of 36.91%, but what was agreed by counsel was that if you take an overall profit margin of all the items in that schedule and if you accept one of the items, which is the Highgrove bed, as adjusted as Mr Sagadhiani was suggesting, that would produce an average of 30.17%, whereas if you made that average on the basis unadjusted for that explanation from Mr Sagadhiani you have a profit margin of 20.68%.
8. What Mr Comiskey was arguing before the judge was first that it would not be right to take the 30.17% adjusted on the basis of Mr Sagadhiani's evidence because that evidence simply did not provide a proper explanation; thus, he submits that the proper starting point was the unadjusted figure of 20.68%. He then says that if the judge had properly reasoned the matter thus far he would have concluded as he did that prices were going to be reduced after the relevant breaches and, if you reduce it by the same percentage as he did reduce it, that would have reduced 20.68% down to 13.5%. In my view there is an arguable point as to whether the judge was entitled to do what he did, which is essentially plump for a middle figure between 37% and 5% or 10%percent rather than approaching the matter as Mr Comiskey says he should have done: dealing with how you reach the 30.17%, dealing with how you reach the 20.68% and then dealing with the question as to whether there should have been an adjustment downwards. That deals with Ground (i).
9. So far as Ground (ii) is concerned the same point arises, so far as future sales are concerned, both of the new range for Dreams and any sales that there might be in the future to Argos but there is a further point so far as the new range for Dreams is concerned, which really comes to this: what Mr Comiskey says is that there really was no evidence as to the profits that would have been obtained so far as the new range was concerned. What was produced was a list of the prices agreed so far as sales to Dreams was concerned, but no list of prices was produced so far as the suppliers was concerned. What Mr Sagadhiani said was simply that he kept these prices in his head. The judge really does not seem to deal with that point. He does not seem to deal with how he reached the conclusion in relation to the prices that would have been charged by the suppliers and I would, for my part, allow that aspect of Ground (ii) to be argued as well.
10. I would refuse permission in relation to the Argos matters simply on this basis: so far as the loss of a chance is concerned the argument of Mr Comiskey on behalf of BSM in the court below was that the goods that might have been sold to Argos would have failed a qualitative test and there would not have been an agreement in relation to prices. The only point he has really pursued here relates to the qualitative aspect but, as it seems to me, the judge really found two bases for suggesting that the qualitative aspect might have been got over. One was that he accepted Mr Sagadhiani's explanation in relation to the quality control test that is much criticised by Mr Comiskey, but the other is that he says that Mr Hughes was enthusiastic after his visit to the factory in China, that allowing judge to form the view that Argos would be and were still interested in the possibility of purchasing these goods. As it seems to me, the judge only assesses that chance at 40%, which is not a very high chance but it is a chance; and it seems to me that there is no basis on which the Court of Appeal would reverse that finding.
11. As regards the level of sales, which is Ground (v), it seems as though Mr Sagadhiani was suggesting very high figures indeed for the sales that would have been achieved to Argos and that a Mr Bates had produced a statement in which he produced a range of figures, the top of the range being 8,000 beds. BSM chose not to compel Mr Bates to come and give evidence so that he could be cross-examined on the figures he was producing. The judge chose the top of Mr Bates' range. What is suggested is that it is arguable that the judge should have taken the middle figure for the range, some 4,500. As it seems to me this is not a point which would have any prospect of success in the Court of Appeal and that is why I refuse permission to appeal on that ground.
12. Thus permission is given for Grounds (i) and (ii) in addition to the ground that Toulson LJ gave, which is Ground (iii).

Lord Justice Dyson:

13. I agree.

Lord Justice Waller

14. I think I should add that I would utterly agree with Toulson LJ that the fact that one has given permission on two further grounds does not detract from his suggestion that every attempt should be made to settle the matter by mediation, if not between solicitors.

Order: Application granted on two additional grounds, but not on two others