ON APPEAL FROM THE HIGH COURT OF JUSTICE
Chancery Division, Birmingham District Registry
Ms Geraldine Andrews QC, sitting as a Deputy High Court Judge
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE TOMLINSON
| Ausman Ramzan
|- and -
Mr Leslie Blohm QC & Mr John Stenhouse (instructed by Silks Solicitors) for the Respondent
Hearing date : 16 June 2011
Crown Copyright ©
Lady Justice Arden :
Background and judgments of the judge
"127. Ausman Ramzan's claim for damages is based on the continuing (and continuous) infringement by Brookwide of his rights to enjoy the use of his property since he acquired the beneficial interest in the store room and the fire escape on 23rd May 2001. The second action was commenced within six years of that date, and accordingly Ausman Ramzan is entitled to damages from 23rd May 2001 onwards. It may not matter precisely how the cause of action is framed: Brookwide's behaviour was, and is, undoubtedly tortious. It was and is a breach of trust, a continuing trespass on land, and a denial of Ausman Ramzan's right in equity to have the freehold title conveyed to him. There was and is a derogation from the grant made under the 1992 Transfer by Agra."
"133. Exemplary damages, by contrast, are awarded to teach the defendant that "tort does not pay" and to deter him and others from similar conduct in the future: see Broome v Cassell & Co Ltd  AC 1027 at 1072-1073. Such damages may be awarded only in certain limited categories of case. These include a case of trespass to land, where the defendant's conduct has been "calculated by him to make a profit for himself which may well exceed the compensation payable": Rookes v Barnard  AC 1129 per Lord Devlin at 1226."
" 144. Appropriating property with reckless disregard of the rights of others, and then taking all available steps to ensure that it cannot be returned, all with a view to making a gain, is almost as bad as deliberately taking for oneself property which is known to belong to someone else. "
"The Claimant is awarded damages as follows:
(a) damages for the past and continuing trespass, breach of trust and denial of title by Brookwide from 23 May 2001 and continuing;
(b) damages representing all profits obtained by Brookwide Limited from leasing out the Store Room as part of the property demised by Brookwide Limited at 123 Alcester Road, Moseley, to tenants for profits;
(c) exemplary damages for the wrongful and continuing appropriation of the Store Room by Brookwide Limited
for such period(s) as the Court may direct and subject to any further order that the Court may make transferring or vesting beneficial title in the Store Room to or in Brookwide Limited and awarding damages in lieu of re-instatement of the Store Room, together with interest on all such damages, to be assessed by the Court. (For the avoidance of doubt, it is agreed that the extent (if any) to which damages awarded under any head above shall be taken into account when quantifying damages under any other head(s) above is a matter left open for determining at the trial of the assessment of those damages.)"
" I reject Mr Mitchell's argument that in order to recover under this head, the claimant must prove that he would install a new fire escape. No authorities were cited to me in support of that proposition and, as Mr Stenhouse pointed out, the point was never even pleaded, though I would not have dismissed it on that technical ground alone if it had had any merit. As I stated earlier in this judgment, damages for tort are designed to put the injured party in the position in which he would have been if the wrong had not been committed. If the wrong had not been committed the claimant would still have had a fire escape. That item had a value, independent of the value of the land to which it was attached. The best measure of that value is the agreed cost of putting in a replacement. The claimant is therefore entitled to compensation for the loss of the fire escape, regardless of his intentions and regardless of whether he is able to effect reinstatement (this may depend on whether planning permission can be obtained). Occasionally in contract cases, the costs of replacing an item that was not delivered or repairing an item that was delivered in a damaged condition will not be awarded because on the facts it would have been unreasonable for the injured party to replace or repair it, as the case may be. However, this is a claim brought purely in tort, and in any event it would not be unreasonable to replace the fire escape. The nature of the loss falls within normal principles of causation and remoteness, and there is no issue as to mitigation. The costs of the installation of a new fire escape have been agreed by the experts at £72,570 plus value added tax (VAT) and that is the sum I shall award under this head."
"1. The damages payable by the Defendant to the Claimant pursuant to paragraph 11 of the Order made after the trial of this action and dated 21st April 2008 ("the Order") are assessed in the following amounts:
Under Paragraph 11a of the Order
a. £55,000 in respect of the capital value of the store room;
b. £23,210.64 in respect of mesne profits. However, in order to avoid double recovery the sum of £19,741.60 awarded under Paragraph 11b of the Order is to be set off against this sum.
c. £72,570 plus VAT (in total £85,269.75) in respect of the cost of restoring a fire escape on the first floor of No 125 Alcester Road.
d. £225,073.50 for the loss of profits from the first floor function room at No 125 Alcester Road from 23rd May 2001 up to and including 8th October 2010.
Under Paragraph 11b of the Order
Under Paragraph 11c of the Order
2. The Defendant shall pay simple interest on the aforesaid damages in respect of mesne profits and loss of profits from the function room, and on the sum of £19,741.60 awarded under Paragraph 11b of the Order, at the rate of 6% per annum for the period from 23rd May 2001 to 8th October 2010 amounting in total to £139,705.14. No other sum shall bear interest prior to judgment. Interest shall run on the total of the damages and pre-judgment interest at the judgment rate from 8th October 2010 until payment."
Issues on this appeal
Issue 1: £225,073.50 for the loss of profit
"Where that involves a hypothetical exercise, the court does not apply the same balance of probability approach as it would to the proof of past facts. Rather, it estimates the loss by making the best attempt it can to evaluate the chances, great or small (unless those chances amount to no more than remote speculation), taking all significant factors into account: see Davies v Taylor  AC 207, 212, per Lord Reid, and Gregg v Scott  2 AC 176, para 17, per Lord Nicholls of Birkenhead, and paras 67-69, per Lord Hoffmann."
(per Toulson LJ in Parabola Investments Ltd v Browallia  QB 477 at )
" Mr Mitchell submitted that the court should approach the matter as if Mr Ausman Ramzan were opening up the function room for business as a fresh business in 2001. In my judgment, that approach is misconceived. It is based on a false factual premise. Although this claimant's claim only relates to the profits that were lost during his period of ownership of the misappropriated land, and he acquired it two years after the expropriation, the question the court has to determine is what loss he suffered in consequence of the trespass and breach of trust. If the expropriation had not occurred, the fire escape would have remained functional, and the function room would have been trading continuously from 1999 onwards despite Mr Mohammed Ramzan's bankruptcy, so that when Mr Ausman Ramzan acquired the land in 2001 he would not have been faced with starting up a new venture on the first floor of the restaurant."
Issue 2: £23,210.64 in respect of mesne profits
Issue 3: £19,741.50 awarded as damages for breach of trust
"The law frequently affords an injured person more than one remedy for the wrong he has suffered. Sometimes the two remedies are alternative and inconsistent. The classic example, indeed, is (1) an account of the profits made by a defendant in breach of his fiduciary obligations and (2) damages for the loss suffered by the plaintiff by reason of the same breach. The former is measured by the wrongdoer's gain, the latter by the injured party's loss.
Sometimes the two remedies are cumulative. Cumulative remedies may lie against one person. A person fraudulently induced to enter into a contract may have the contract set aside and also sue for damages. Or there may be cumulative remedies against more than one person. A plaintiff may have a cause of action in negligence against two persons in respect of the same loss.
Faced with alternative and inconsistent remedies a plaintiff must choose, or elect, between them. He cannot have both. The basic principle governing when a plaintiff must make his choice is simple and clear. He is required to choose when, but not before, judgment is given in his favour and the judge is asked to make orders against the defendant. A plaintiff is not required to make his choice when he launches his proceedings. He may claim one remedy initially, and then by amendment of his writ and his pleadings abandon that claim in favour of the other. He may claim both remedies, as alternatives. But he must make up his mind when judgment is being entered against the defendant. Court orders are intended to be obeyed. In the nature of things, therefore, the court should not make orders which would afford a plaintiff both of two alternative remedies.
In the ordinary course, by the time the trial is concluded a plaintiff will know which remedy is more advantageous to him. By then, if not before, he will know enough of the facts to assess where his best interests lie. There will be nothing unfair in requiring him to elect at that stage. Occasionally this may not be so. This is more likely to happen when the judgment is a default judgment or a summary judgment than at the conclusion of a trial. A plaintiff may not know how much money the defendant has made from the wrongful use of his property. It may be unreasonable to require the plaintiff to make his choice without further information. To meet this difficulty, the court may make discovery and other orders designed to give the plaintiff the information he needs, and which in fairness he ought to have, before deciding upon his remedy. A recent instance where this was done is the decision of Lightman J. in Island Records Ltd. v. Tring International Plc.  3 All E.R. 444. The court will take care to ensure that such an order is not oppressive to a defendant.
In the ordinary course the decision made when judgment is entered is made once and for all. That is the normal rule. The order is a final order, and the interests of the parties and the public interest alike dictate that there should be finality. The principle, however, is not rigid and unbending. Like all procedural principles, the established principles regarding election between alternative remedies are not fixed and unyielding rules. These principles are the means to an end, not the end in themselves. They are no more than practical applications of a general and overriding principle governing the conduct of legal proceedings, namely, that proceedings should be conducted in a manner which strikes a fair and reasonable balance between the interests of the parties, having proper regard also to the wider public interest in the conduct of court proceedings. Thus in Johnson v. Agnew  A.C. 367 the House of Lords held that when specific performance fails to be realised, an order for specific performance may subsequently be discharged and an inquiry as to damages ordered. Lord Wilberforce observed, at p. 398: "Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity."
The procedural principles applicable to cumulative remedies are necessarily different. Faced with alternative and inconsistent remedies a plaintiff must choose between them. Faced with cumulative remedies a plaintiff is not required to choose. He may have both remedies. He may pursue one remedy or the other remedy or both remedies, just as he wishes. It is a matter for him. He may obtain judgment for both remedies and enforce both judgments. When the remedies are against two different people, he may sue both persons. He may do so concurrently, and obtain judgment against both. Damages to the full value of goods which have been converted may be awarded against two persons for successive conversions of the same goods. Or the plaintiff may sue the two persons successively. He may obtain judgment against one, and take steps to enforce the judgment. This does not preclude him from then suing the other. There are limitations to this freedom. One limitation is the so called rule in Henderson v. Henderson (1843) 3 Hare 100. In the interests of fairness and finality a plaintiff is required to bring forward his whole case against a defendant in one action. Another limitation is that the court has power to ensure that, when fairness so requires, claims against more than one person shall all be tried and decided together. A third limitation is that a plaintiff cannot recover in the aggregate from one or more defendants an amount in excess of his loss. Part satisfaction of a judgment against one person does not operate as a bar to the plaintiff thereafter bringing an action against another who is also liable, but it does operate to reduce the amount recoverable in the second action. However, once a plaintiff has fully recouped his loss, of necessity he cannot thereafter pursue any other remedy he might have and which he might have pursued earlier. Having recouped the whole of his loss, any further proceedings would lack a subject matter. This principle of full satisfaction prevents double recovery."
"36 In general, the common golden thread that runs through each of these three categories of remedy mentioned above [tort, contract and restitution] is that the claimant has suffered loss. But that is not always the case: see, for example, user damages discussed below. Similarly, in an action for breach of fiduciary duty, an account of profits can be awarded in circumstances where the claimant has suffered no loss, as in Regal (Hastings) Ltd v Gulliver (Note)  2 AC 134 (and a claim for an account of profits consequent on a breach of duty could arise even though there is no misuse of a property right, as where a director uses a power to make calls on shares for a collateral purpose). Moreover, user damages are not always assessed by reference to the fair price for what has been taken from the claimant. They may be assessed by reference to the profit that the defendant has made: see, for example, Ministry of Defence v Ashman (1993) 66 P & CR 195. Wrotham Park damages likewise may be awarded even though there is no loss. But the user damages and Wrotham Park damages still have an element of compensation within them in this sense, that while there may be no actual loss they are clearly cases where the law takes the view as a matter of policy that the claimants if they prove their claims are entitled to substantial compensation for the mere invasion of their rights.
37 It follows that the categories of damages identified above are not mutually exclusive. User damages can be restitutionary: they can be awarded where the claimant has suffered no loss and on the basis that the defendant is ordered to pay a sum by reference to the gain he would otherwise make. Damages for trespass to property, for instance, are awarded on the basis of market rent even if the claimant would not have let the property if vacant: see Swordheath Properties Ltd v Tabet  1 WLR 285. At the same time they can be described as compensatory. The view that they combine elements of both compensatory and restitutionary awards is supported by the decision of the Privy Council in Inverugie Investments Ltd v Hackett  1 WLR 713, 718b. Damages for trespass to land, for instance, are intended to compensate the claimant for being kept out of his land on whatever basis they are assessed. I do not therefore agree with the judge that user damages or Wrotham Park damages are necessarily compensatory. Nor do I consider that Lord Nicholls so held in Attorney General v Blake  1 AC 268. Lord Nicholls considered, at p 279e, that user damages were probably best regarded as exceptions to the general rule that damages are assessed on the basis that they compensate the claimant for his loss or injury. He also regarded Wrotham Park damages as, at p 284a: "payment [by the defendant] in respect of the benefit he has gained." If user damages and Wrotham Park damages were purely compensatory, they would not have been stepping stones to the conclusion that the court could grant an account of profits for a breach of contract.
38 What, however, does distinguish user damages from other compensatory damages is the fact that they are in general awarded because the defendant has made improper use of an asset of the claimant. In economic terms, there has been a transfer of value for which the wrongdoer must account. But that is also a feature of the present case. Devenish seeks in economic terms, by means of its claim for an account of profits for breach of statutory duty, to recover the amount of the overcharge that it has paid to the defendants out of its assets and in diminution of its net worth. Not all non-proprietary torts share this feature: for example, this feature is not present in claims for damages for defamation or personal injury. It is, however, often present in claims for breach of contract and for invasion of a statutory right where rights of property in the broadest sense are invaded for the benefit of the wrongdoer. A contractual right is a form of property (though it lacks some of the qualities of a property right). If the law of remedies were to be required to be coherent in economic terms, and this were the critical factor, the same remedies ought to be provided in each of these situations. However, even so, they would under Blake's case be subject to strict judicial control through the requirement for exceptional circumstances."
Issue 4: £85, 269.75 in respect of the cost of restoring the fire escape
Issue 5: £60,000 as exemplary damages
"not sure to what extent an award of exemplary damages will, in practice, increase the amount recoverable by Ausman Ramzan." (first judgment, paragraph 145)
This suggested that the judge anticipated that the nature of the award of exemplary damages would be to strip Brookwide of any gain, which was not recoverable by the award of damages in the action. When, however, she came to assess exemplary damages she concluded that it would not be sufficient to require Brookwide to disgorge its profit. She considered that it was necessary to find a sum which would act as a deterrent "against repeating its objectionable behaviour in other properties", adding "£20,000 to Brookwide is a drop in the ocean." (second judgment, paragraph 70).
" For some defendants it is possible that having to pay compensation which unexpectedly turns out to be in the order of £369,000 would give them serious pause for thought before doing it again, but I am far from persuaded that it would make any difference to Brookwide's attitude. Brookwide would probably regard the fact that the expropriation happened to preclude the claimant from earning such significant sums from the hire of the function room as a matter of chance, a scenario that was unlikely ever to be repeated. Even if it were, the chances that the aggrieved party would be willing to take on an opponent of Brookwide's size, financial backing, and acumen would be regarded as slender. It is very likely that Brookwide was surprised when Mohammed and Ausman Ramzan commenced proceedings against it and was even more surprised when they saw the litigation through to the end. My strong impression of Brookwide and the group to which it belongs, based on all the evidence in this case, is that they would not hesitate to do anything that would promote their own self-interest, even if occasionally it might mean having to pay someone significant compensation if they overstepped the line. The fact that they bricked up the dividing wall, cut through the fire alarm wires, and effectively made the expropriation of the store room a fait accompli before taking any steps to check the legal position with the Land Registry probably says everything that one needs to know about the attitude of the individuals behind Brookwide. The size of the compensation (and having to give up all its profits) would not in itself deter Brookwide from doing the same thing again if it felt it could get away with it. Having said that, I must bear in mind that the award of exemplary damages must be 'moderate', though that is to be assessed in the overall facts of the case and in the light of the conduct and the need to mark disapproval, as Peter Smith J said in Design Progression Ltd v Thurloe Properties Ltd  EWHC 324 (Ch),  1 EGLR 121,  1 WLR 1. Therefore the amount of exemplary damages should not exceed a sum which in my view would suffice, in addition to the compensation, to teach Brookwide the necessary lesson that conduct of this type will not be tolerated and does not pay.
 I have considered the level of awards made in other cases but they afford little guidance….
 Although I was at one time attracted by the idea of taking the approach of awarding a percentage of the compensatory damages, on reflection it seems to me that an award in the region of £100,000 or any figure above this would probably be excessive, particularly given the significant amount of the compensation before exemplary damages are awarded. Taking all the relevant considerations into account, it seems to me that the appropriate figure by way of exemplary damages in the present case, where the misconduct was so serious that a strong deterrent message is justified, should be £60,000. Although that figure is three times the actual profit made from the wrongdoing, on the evidence before the court it is only one week's average contribution by Brookwide to Agra's income. I also do not believe it to be out of line with the level of fine that might be imposed in a criminal case for theft by a trustee of the beneficiary's land."
"59. I would also like the Court to take into account the effect on myself and my son over the last 5 years of having to go through the courts to obtain justice and compensation and damages. This is a process that has been deliberately dragged out and made worse and more expensive by the Noe family [the ultimate owners or controllers of the Agra group] over more than 5 years, to a point where it has become almost unbearable. I believe that this has been done deliberately in an attempt to wear us out and make us give up. In the process of this over the last 5 years, I have developed high blood pressure from the stress, and I have had to go onto medication because of all this pressure and stress.
60. My son Ausman also suffers with "Bell's Syndrome" which is to do with too much thinking when a person worries too much and thinks a lot and gets stressed. The problems that have been suffered from the theft of the Room have affected him as well."
Issue 6: interest on damages
" A typical commercial rate is 2% over base. In May 2001 the base rate was 5·25%, so 2% over base would have been 7·25%, but in March 2009 the base rate was only 0·5% so 2% over base would have been 2·5%. So far as the damages for mesne profits and breach of trust are concerned, strictly speaking it may be more appropriate to consider the rate that could have been achieved by investing the money rather than the rate it would have cost the claimant to borrow the money, but at the end of the day this is unlikely to make a significant difference. Moreover, some of the elements of damages would have been paid at different times within the relevant period—for example, the profits made by the defendants from renting out the flat were earned on a monthly basis and they obviously could not be disgorged until they were earned. In the light of this additional complication, Mr Mitchell's concession that he would accept an average rate of 6% per annum over the entire period seems to me to be not only sensible but fair."
Lord Justice Lloyd:
Lord Justice Tomlinson