England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE EDER
[2011] EWHC 2336 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		8 November 2012

Lord Justice Gross:

INTRODUCTION

1. This is an appeal by the Appellants ("Drivers Jonas") from the order of Eder J, dated 9^th September, 2011 ("the order"), entering judgment in favour of the First Respondent ("Capita"), in the amount of £18,050,000, plus interest for the period 6^th April, 2001 to 9^th September, 2011, itself amounting to £8,500,000, producing a total sum of £26,550,000.
2. In very broad terms, the case concerned the (allegedly) negligent valuation of a factory outlet centre ("FOC") and the question of what, if any, damages, had been proved to flow from such negligence (if established).
3. The concept of FOCs is now familiar. As recorded by Eder J in his judgment ("the judgment", at [27] et seq), they are shopping centres where the goods offered are sold at discounts to their original price of between 30% and 70%. The name reflects their historical origin in sites adjacent to factories. By 2001 (the time with which we are principally concerned) they tended to be purpose-built centres or "villages", with two groups of tenants: high street retailers selling their own goods at a discount and specialist FOC tenants selling discounted goods. As of 2001, there were 36 FOCs trading in the United Kingdom.
4. Eder J concluded that Drivers Jonas had been negligent in advising and valuing this FOC development. The upshot was that Capita paid the vendors significantly more than the market value of the development. The Judge went on to award damages on a diminution in value basis, plus interest. The Judge declined to reduce the damages payable by reference to the tax relief obtained by the investors (of whom more below), based on the (excessive) sum paid by Capita.
5. The factual background can be taken from the opening paragraphs of the Judge's careful and compendious judgment - [2011] EWHC 2336 (Comm):

"1. This is a substantial claim for professional negligence. The claim arises out of a failed investment in a factory outlet shopping centre ('FOC') which was to be developed from a Grade II* listed structure known as the 'Boiler Shop' situated at Chatham Historic Dockyard, Medway, Kent ('Dockside'). Dockside was acquired for the residue of a 155 year leasehold term on 5 April 2001 by the First Claimant ('Capita'). … Capita is trustee of The Matrix Chatham Maritime Trust ('The Trust') which was an investment vehicle established to enable 480 individual investors to invest in Dockside. The Second Claimant ('Matrix') sponsored the creation of the Trust and was responsible for establishing and promoting the investment. Capita paid the vendors of Dockside total consideration in the sum of £62,850,000 in order to acquire its interest in Dockside. Capita was appointed as trustee of the Trust by a Trust Deed dated 2 April 2001 which was executed by Capita and Matrix. The Trust is in the form of an Enterprise Zone Property Unit Trust ('EZPUT'). … Matrix is the Trust Manager under the terms of the Trust.

2. The Claimants say that they retained the Defendants, who were at the material time a firm of chartered surveyors and property consultants, to advise them in relation to the acquisition of Dockside; and that pursuant to such retainer the Defendants provided positive advice about Dockside's commercial prospects and valued Dockside in the sum of £62,850,000 (with the benefit of Enterprise Zone tax allowances) and £48,150,000 (without the benefit of Enterprise Zone tax allowances). The Claimants say that they relied upon this and, in particular, that Capita relied on this advice when it acquired its interest in Dockside. Capita retains the long leasehold interest in Dockside that it acquired on 5 April 2001. …"

6. As the Judge explained (judgment, at [2]), the ability of a FOC to secure and retain tenants and the level of rent it is able to demand from those tenants depends on the commercial viability and success of the FOC itself:

"There is no 'rack rent' for a FOC: instead the rent paid is a mix of a base rent and turnover rent. … turnover rent is, as the name suggests, calculated as a percentage of the turnover earned by a tenant per square foot of the unit occupied. The tenant pays the higher of base rent and the turnover rent. Accordingly, the rent payable by the tenants and receivable by the owner of the FOC depends on the success of the FOC and its tenants in attracting consumers to the centre and encouraging those consumers to spend money at its stores. Thus, if a FOC is not able to attract sufficient consumer spend through its doors then it will not attract, or will find it more difficult to attract, tenants and the rent that those tenants will be prepared to pay (both as base rent and as a percentage of their turnover) will be lower than at a successful FOC. The value of the FOC is assessed on a discounted cashflow basis by reference to an evaluation of the income (in the form of rent) that it is likely to be able to receive."

See further to the same effect, judgment, at [29].

7. Against this background, it was, as the Judge observed (judgment, at [3]), an "important element" of the Claimants' case at trial that the exercise of assessing the value of a FOC could not begin "until an assessment of that FOC's likely ability to attract consumer spend" had been undertaken. Such an assessment was referred to at trial – and on appeal – as a "CACI report", the abbreviation CACI referring to the name of a company specialising in the production of such an assessment. As summarised by the Judge (loc cit), the Claimants' case at trial was that:

"Without such a report … it is impossible to predict or to assess the likely rental levels that the FOC will be able to achieve and it is the income stream represented by the rents that then drives the capital valuation of the FOC. … the Defendants' failure to appreciate this and/or to undertake any such exercise competently lies at the heart of this case."

8. For its part, at trial, Drivers Jonas denied liability and causation and put quantum in issue. Drivers Jonas disputed the need for a CACI report and vigorously challenged the report of such a nature relied on by the (then) Claimants as part of their expert evidence at trial. Drivers Jonas contended, whereas the Claimants disputed, that reliance could be placed on comparables. In any event, this had been a speculative venture, "driven in large part by the desire to obtain for the individual investors extremely valuable tax allowances at the very end of the 2000-2001 tax year": judgment, at [6]. The Claimants were fully aware of the risks; the reasons for the failure of the venture were extraneous and not attributable to actionable fault on the part of Drivers Jonas. In a graphic phrase, Drivers Jonas submitted that the venture was "conceived in a boom but born in a bust".
9. Mention has already been made of the Trust being in the form of an "EZPUT" ("the EZPUT"). By way of introduction and explanation as to Enterprise Zones and EZPUTs, it suffices to have regard to the judgment:

"12. Enterprise Zones were established by the government in 1981 in order to encourage investment into deprived areas of the country with the aim of regenerating those areas. … In order to attract investment into the new Enterprise Zones, the zones were afforded a number of advantages. In particular, developments in the zones were subject to a simplified and accelerated planning process and expenditure on such developments received favourable tax treatment. These tax incentives took two forms: (a) relief from development land tax (which was abolished in any event in 1985) and, (b) the availability of 100% capital allowances for (qualifying) capital expenditure on the construction of commercial and industrial buildings within an Enterprise Zone. The availability of these capital allowances effectively reduced the net cost of investing in the construction of commercial and industrial buildings in an Enterprise Zone thus making such an investment more attractive than might otherwise be the case. … the capital allowances in effect provided a 'buffer' which partly reduced or off-set the risk of investment because any losses on such an investment would have to exceed the value of the allowances received before the investment represented a net or overall loss. As this makes clear, the rationale for investment in an Enterprise Zone was still, of course, the expectation of making a profit. The availability of tax relief simply provided some comfort as regards the downside risk of making that investment.

13. Generally, Enterprise Zone developments were of relatively high value, precluding the opportunity for individuals to make their own investments in them in the absence of some sort of investment structure employing unitisation. … an EZPUT is a unit trust scheme in which the trust acquires the property and each investor acquires units in the trust with each unit in turn carrying with it an entitlement to a pro-rata share in the underlying trust property. … investors were required to retain their interest for at least 7 years in order to benefit from the capital allowances."

10. Dockside is located in the former North West Kent Enterprise Zone, administered by an Enterprise Zone Authority ("EZA"), the South East England Development Agency ("SEEDA"). This Enterprise Zone and EZPUT were typical of such zones and trusts.
11. The taxation position of investors under an EZPUT is distinguished from that of unitholders under other unit trust schemes, as appears from the judgment:

"17. … tax relief was available on certain qualifying expenditure made within an Enterprise Zone. Section 469 of the Income and Corporation Taxes Act 1988 ('ICTA 1988') provides in like terms to its predecessor … that ordinarily income arising to the trustees of a unit trust scheme will be treated as income of the trustees and not of the unitholders for the purpose of the Tax Acts and that, accordingly, the trustees will be regarded as the persons to or on whom allowances and charges are to be made. EZPUTs are exempted from this provision by virtue of regulations 3 and 4 of the Income Tax (Definition of Unit Trust Scheme) Regulations 1988 ('the 1988 Regulations'). Importantly, the effect of this is that the capital allowances were made available to individual unitholders in an EZPUT rather than being treated as available only to the trustee of the Trust (a concept known as 'transparency'). Relief is only available in respect of expenditure that is attributable to construction within the Enterprise Zone ('Qualifying Expenditure'). Thus, in determining the relief to which an individual investor is entitled, an assessment must be made of how much of the purchase price being paid by the Trust (which is funded by the acquisition of units in the Trust by investors) is Qualifying Expenditure. …"

I shall return later to the importance of the position of individual investors in the EZPUT, as established by virtue of these provisions.

12. In the event, individual investors here obtained tax credit by investing through the Trust in Dockside. Subject, inevitably to differences attributable to the individual tax position of investors, it was not in dispute that the likely tax credit for investors was to be calculated as follows:

40% (the tax rate in question) x 85.71% (the Qualifying Expenditure) x the purchase price

Thus, on a purchase price of £62.85 million, the likely tax credits amounted to £21,547,494.

13. Certainly by the end of the appeal, it was common ground that tax was an integral part of an investment in the EZPUT. That said and as already foreshadowed, for investors to achieve a return on their investment and to avoid a loss, it was also necessary for the investment to be a commercial success. The tax relief provided a "buffer" for the investors rather than the sole raison d'être for the investment. The explanation lies in the use of loan finance to fund the acquisition of units. The EZPUT was structured with a view to periodic distributions of rental income to investors sufficing to cover the interest on such loans, to reduce the balance outstanding and to permit the repayment of the loans in full on exit, upon a sale of the property – after the 7 year lock in period. See, generally, the judgment at [20] and [66].
14. As will be recollected, the Judge awarded Capita the principal sum of £18.05 million as damages on the diminution of value basis. To explain how he came to this figure, it is necessary to say something as to the structure of the transaction, the elements of value and the percentage yields adopted.
15. So far as concerns the structure of the purchase transaction, Capita (as trustee) purchased the residue of a 155 year lease. That was followed by a lease back of Dockside to the Developer for a term of 17 years. There were, as Mr. Stewart QC (for Drivers Jonas) put it, "three elements of value in the scheme". The first was the value of the guaranteed rental for seven years, amounting to £4,006,750 p.a.; the payment of this rent was secured by a cash deposit. The second was the value of additional rent, by way of priority return, amounting to £550,000 p.a., for the first seven years; this element was not backed by cash but it was prioritised over income. The third was the present value of the anticipated rent from year 7 to year 155.
16. As to the appropriate yields, reflecting the relevant risk, there was an agreement between the experts that the first element (or component) should have a yield of 6.5%, thus providing a capital value for this component of approximately £21,975,000. As to the second element, it was common ground at trial that the yield figure would be higher than 6.5%, reflecting the fact that this component was not covered by any guarantee. Ultimately, the Judge, "doing … [his] best ..." (judgment, at [254]) held that the appropriate yield a competent valuer would have used for this element was 8.5%. The result was a capital value in April 2001 of approximately £2.8 million. As to the third element, the value of the reversion at the end of year 7, the appropriate yield was even higher. In the event, the Judge accepted the figure of 9.5% suggested by the Claimants' expert (a Mr. Barbour, of whom more below). The application of this yield resulted in a capital value in April 2001 of approximately £9,600,000. The total capital value of all these components in April 2001 was thus £21,975,000 + £2,800,000 + £9,600,000 = £34,375,000.
17. The Judge concluded (judgment, at [256]) that a competent valuer would have advised that this figure of £34,375,000 was the capital value of Dockside in April 2001, without the benefit of EZ allowances. It was to be compared with the figure given by Drivers Jonas of £48,150,000. The Judge went on to calculate the market value of Dockside which would have been advised by a competent valuer in April 2001, with the benefit of an Enterprise Zone allowance - and arrived at a figure of £44,800,000 (at [266]). That figure was to be contrasted with the Drivers Jonas valuation of £62,850,000 on the same basis. The difference between the two produced the figure of £18.05 million already underlined, which the Judge awarded by way of damages.
18. Pausing here, it is apparent that the Drivers Jonas valuation of £62.85 million was underpinned by the assumption that a ground floor rental figure for Dockside of £27.50 per sq foot ("psf") was realistic; in turn, this figure was based on an assumed average turnover of £275 psf: judgment, at [62], [69], [79], [81] and [84]. By contrast, the Judge's £44.8 million figure was based on Mr. Barbour's evidence of an appropriate projected turnover of £190 psf, giving rise to a ground floor rental figure of £19 psf: judgment, at [248].
19. Next, it is worthwhile to clear the decks by highlighting a number of matters which are neither appealed nor cross-appealed, as the case may be.
20. First, at trial, the Claimants' primary measure of loss was advanced on the basis of Aneco Reinsurance v Johnson & Higgins [2001] UKHL 51; [2001] 2 All ER (Comm) 929 – namely, that Capita was entitled to recover all the losses it had suffered as a result of acquiring and owning Dockside: judgment, at [298] et seq. The Judge rejected that claim and (as already recorded) awarded Capita damages on a diminution in value basis. There is no cross-appeal in relation to the Judge's rejection of Capita's primary measure of loss.
21. Secondly, the Judge considered in some detail (judgment, at [104] et seq) the scope of Drivers Jonas' duties both in contract and tort. In the course of doing so and of rejecting much of the Drivers Jonas case in this regard, the Judge observed (at [121]) that "Acceptance of risk is quite different from acceptance of negligence". The Judge went on to conclude (at [125]) that, in contract, "each and every one" of the pleaded terms of the retainer had been established on the evidence. In particular, (at [127] et seq), the Judge held that the role which Drivers Jonas agreed to and did perform was more extensive than what might be said to be an "ordinary valuation"; instead, the Drivers Jonas role included the provision of "commercial investment advice as to the commercial prospects of Dockside". The Judge, however, rejected the Claimants' submission that these two exercises were distinct:

"132. … at least so far as Capita is concerned, the purpose of such 'commercial investment advice' was to provide a valuation. Given the particular features of Dockside, that exercise of necessity involved an evaluation of the commercial prospects of Dockside as a trading FOC which, in turn, of necessity involved the Defendants giving consideration to and making recommendations regarding the likely prospects of Dockside to attract customer spend and tenants. However, in my judgment, the whole (or at least main) purpose of such exercise was to enable the Defendants to provide their valuation either with or without the benefit of relevant tax allowances. …"

As to tort, the Judge concluded, in essence (judgment, at [139]), that Drivers Jonas owed a parallel continuing duty of care in tort to both Capita and Matrix. There is neither an appeal nor cross-appeal from any of these conclusions of the Judge as to the scope of Drivers Jonas' duties.

22. Thirdly, as Ms Carr QC, for the Respondents, put it, Drivers Jonas does not challenge "the very many individual breaches of duty found by the Judge" as to the true value of Dockside. Importantly, as Ms Carr underlined, each of the breaches of duty found by the Judge "were also found to go to valuation". It was indeed for this reason that the Judge rejected the Claimants' freestanding commercial investment advice claim.
23. Fourthly, reference has already been made to the yields taken by the Judge to produce what he regarded as a competent valuation of Dockside. As Ms Carr further emphasised, Drivers Jonas has not appealed the Judge's conclusions as to those yields.
24. It is thus apparent that much of the judgment is accepted by both parties. Drivers Jonas, however, appeals to this Court on three discrete grounds, which may be summarised as follows:

i) Given the Judge's other findings of primary fact, there was no proper basis for his conclusion as to the correct valuation or valuation range for Dockside which would have been given by a competent valuer ("Issue I: No established loss"). If this ground of appeal is well-founded, then regardless of Drivers Jonas' unchallenged breach/es of its duties, the Judge was not entitled to conclude that any loss had been established. If so, then the entirety of the award of damages must be set aside; in contract, Capita would be entitled to nominal damages only; in tort, the claim would fail.

ii) The Judge erred as a matter of law in failing to require Capita to give credit for the tax benefits which had been received by investors as a result of the purchase of Dockside ("Issue (II): Tax").

iii) The Judge should not have awarded interest to Capita from 6^th April, 2001 on the full amount of damages of £18.05 million; the appropriate starting date for interest should instead have been the 6^th April, 2008 – the first date on which investors could have had access to their investment monies. Accordingly, they could not have been kept out of their monies prior to this date ("Issue (III): Interest"). For reasons which will become plain, Mr. Stewart accepted that if he succeeded on Issue (II), then Issue (III) fell away.

ISSUE (I): NO ESTABLISHED LOSS

25. (1) The rival cases: The Drivers Jonas case on this Issue was advanced by Mr. Stewart in a series of taut submissions:

i) The Judge found that there was no CACI report or performance analysis on which he could rely in forming a view as to value. The basis of this submission was the rejection by the Judge of the expert evidence of Mr. Parr, called by the Claimants in this connection.

ii) The Judge had also found that that it was an essential component of a competent valuation that there should be such a report or analysis.

iii) Thirdly, the Judge was thus left with the evidence of Mr. Barbour. However, in Mr. Stewart's submission, Mr. Barbour's evidence as to turnover or realistic rental figures was based entirely on the evidence of Mr. Parr which the Judge had rejected. The Judge was wrong to conclude that Mr. Barbour had undertaken any independent assessment of the rental figures. In any event, there was no logical basis for any such conclusion, given the thrust of Mr. Barbour's evidence – in particular his rejection of the use of comparables and the absence of any material (other than Mr. Parr's discredited evidence) to support the £19 psf figure.

iv) Accordingly, there was no basis upon which the Judge could conclude that the Drivers Jonas valuation exercise was wrong or that (even proceeding on the basis that Drivers Jonas was in breach of duty) any particular figure for loss could be established. It followed that the claim failed, at least other than as a claim in contract for nominal damages.

26. For Capita, Ms Carr vigorously disputed these submissions. However formulated, this was an appeal involving the need to challenge the Judge's core findings of fact. Mr. Barbour had not blindly relied upon the CACI report and had sufficient expertise, independent of Mr. Parr, to give a view as to the true value of Dockside. It would be remarkable if, notwithstanding the various (unchallenged) breaches of duty on the part of Drivers Jonas – all going to valuation – Mr. Barbour had no expert evidence to give as to the extent of loss. The Judge had been meticulous; there had been no fudging; he had concluded that Mr. Barbour was an impressive witness and he had been entitled to do so. Plainly Mr. Barbour had relied on the (subsequently discredited) evidence of Mr. Parr but there had also been an independent assessment by Mr. Barbour, which furnished an entirely satisfactory basis for the Judge's conclusion. It did not follow from the Judge's conclusion - that it was negligent not to undertake a performance analysis and produce a CACI report - that the Judge was not entitled to reach a conclusion as to the loss sustained by Capita; he was, instead, "perfectly entitled" to come to a view as to the true value of Dockside without such a report. So far as concerned Mr. Barbour, he had the relevant experience and was on the "inside track" of a secretive market. He had survived a challenge to his probity. Ultimately, this was a factual question for the Judge, with which this Court should not interfere.
27. (2) The Judge's central reasoning: I turn to trace the Judge's central reasoning on this Issue, contained (very largely) between [167] and [248] of the judgment.
28. To begin with, the Judge rejected the Drivers Jonas submission that he should, in effect, ignore Mr. Barbour's evidence: [168] – [171]. Although "… in certain respects Mr. Barbour's evidence was flawed…", he had the relevant expertise to qualify as an expert: [171]. The Judge accepted that Mr. Barbour had erred in respect of Mr. Parr's evidence in respect of two matters which "… were obvious from even a brief reading of Mr. Parr's report …"; Mr. Barbour's failure to appreciate these errors suggested that Mr. Barbour's evidence "… was or might not be entirely reliable": ibid. Notwithstanding these matters – and it will be appreciated that the Judge saw and heard Mr. Barbour give evidence – the Judge highlighted that Mr. Barbour had "lived and breathed" the FOC market for some 12 years and concluded (ibid):

"On the whole, I found him an impressive witness although he was at times prone to make sweeping generalised statements which were not always supported by relevant specific evidence. That is not to say that such statements were necessarily incorrect but simply that they were sometimes difficult to test."

29. The Judge went on immediately to say the following:

"172. It goes without saying that although I accept that Mr. Barbour had relevant expertise it does not follow that I should necessarily accept all or even part of his evidence. In light of the important errors that I have already referred to and my conclusions … below with regard to Mr. Parr's evidence which Mr. Barbour relied upon, I approach the remainder of Mr. Barbour's evidence with what I consider to be necessary caution.

173. As Mr. Barbour made clear, he would not expect a competent adviser to rely blindly or unthinkingly on a CACI report. Rather, it provides an informed basis for the exercise of professional judgment based on experience and expertise in the market in question. Thus Mr. Barbour did not suggest that it was necessary or even appropriate to rely unquestioningly on a full retail performance analysis report: his opinion was that such a report is research upon which the competent adviser can then rely when exercising their own expert judgment based on their experience in the market as to the likely rents that will be achieved and the report enables judgment to be exercised based on experience and an informed basis. The Claimants submitted that this is infinitely preferable to Mr. Sargent's 'gut feeling' (let alone to Mr. Blake's gut feeling from a premise of no relevant experience). I agree."

Mr. Stewart submitted that paragraphs [171] – [173] of the judgment constituted a "straw man", set up by Capita and with which he had no need to quarrel; in these paragraphs, the Judge had rejected an argument advanced by Mr. Stewart before him, not repeated on appeal, challenging the admissibility of Mr. Barbour's evidence on the basis of want of expertise. Mr. Stewart is no doubt right as to the argument directly under consideration by the Judge but, for my part, I am minded to think that these paragraphs have a rather wider import than Mr. Stewart is prepared to accept.

30. The Judge proceeded to reject the expert evidence of Mr. Sargent (called by Drivers Jonas) both to the effect that a full retail performance analysis was not necessary and also as to reliance on "comparables": [177] – [180].
31. It followed that (at [183]) the Judge accepted the Claimants' submission:

"… that the Defendants made no or no adequate or competent assessment of Dockside's ability to secure consumer spend from its catchment area and thereby acted in breach of duty …"

It was, however, "much more problematic" (at [184]) to determine what a competent full retail analysis would have shown. In turn, this led to a consideration of Mr. Parr's report.

32. Following an extended consideration of Mr. Parr's report and the powerful criticisms advanced by Drivers Jonas, the Judge held that Mr. Parr's exercise was of "no real assistance" (at [199]). The Judge's key conclusions are set out in the judgment as follows:

"190. The main flaw with regard to the reliance placed by the Claimants on Mr. Parr's evidence is … that the exercise carried out by Mr. Parr was designed to show what would have been predicted in 2001 as to the sales density of Dockside in 2003 i.e. at the time of opening of Dockside. … In particular, the Claimants sought … to rely on Mr. Parr's evidence (specifically his figure of £190 psf) to show likely sales density at the end of year 7 i.e. in 2008. But that is not an exercise which Mr. Parr ever did. Nor had he ever been asked to do such an exercise. Indeed his evidence was that he had never been asked to or actually carried out a CACI analysis looking seven years ahead. His evidence was that this would be 'crystal ball gazing'. For this reason alone, the exercise carried out by Mr. Parr is … of little, if any assistance when considering the main issue at the heart of this part of the case i.e. the likely rentals at the end of year 7.

191. Quite apart from this fundamental difficulty, it seems to me that the figures used by Mr. Parr to reach his sales density figure of £190 psf were, at the very least, questionable, at virtually every stage.

199. For all these reasons, it is my conclusion that the exercise carried out by Mr. Parr is of no real assistance in the present case. In summary … that exercise was not the relevant exercise for present purposes and, in any event, was flawed or at least questionable for the reasons set out above. The result is that although I accept the Claimants' case that the Defendants acted in breach of duty in failing to carry out or to obtain a full retail spend analysis, the analysis produced by Mr. Parr and relied upon by the Claimants does not … provide any reliable answer to the likely rental figure that would have been predicted by such an analysis if it had been performed in 2001 for the end of year 7 (2008)."

33. Inevitably, the Judge was then required to consider the impact of these conclusions on the rest of the Claimants' case ([203] et seq). It was plain that Mr. Barbour had regarded the procuring of a CACI report as of "critical importance" for a new FOC and had relied upon it in reaching his own conclusion as to a sales density of £190 psf and a ground floor rental value of £19 psf. In a passage which Mr. Stewart strongly disputed and which he submitted was unsustainable, the Judge then came to a crucial conclusion on the present Issue:

"204. The Defendants submitted that without adequate support from the CACI Report Mr. Barbour's evidence does not provide adequate admissible evidence for an incompetent valuation by the Defendants i.e. Mr. Barbour should, in effect, just fall away. I do not agree. For the reasons which I have already given, I do not accept the Defendants' general objections to Mr. Barbour's expertise. Although there is no doubt that Mr. Barbour relied upon the CACI report in support of his own conclusions, his reports fairly read did not depend exclusively on the CACI report. On the contrary, it seems to me that the views and conclusions expressed by Mr. Barbour were based not only on the CACI report but also on his own experience and expert analysis. I then turn to consider that evidence of Mr. Barbour and the particular criticisms of the work done by the Defendants and the advice which they gave."

34. There followed a withering set of criticisms of Drivers Jonas, all of which went to the £27.50 psf figure already referred to and none of which are individually challenged on the appeal. In broad summary, they are as follows ([205] et seq):

i) Inadequate and incompetent research.

ii) Inappropriate reliance on the established FOCs at Ashford and Braintree.

iii) A failure to take into account the competition which Dockside would face, in particular from the full price retail shopping centre at Bluewater (some 14 miles away) and the nearest competing (and established) FOC, namely, Ashford. In Eder J's view, the impact of competition could not be "over-stated" (at [215]).

iv) Inadequate allowance for tenant incentives and a marketing budget.

v) The "true, bleak picture" (at [221]), relating to location, design, layout and listed building status – ignoring the danger that if everything was not in place at the time Dockside opened or shortly thereafter, there was a risk of "downward spiral" (ibid) from which it would never properly recover. (See too, [223] et seq.) Problems as to the first floor, meant that there was an absence of "critical mass" (at [227]).

vi) A failure to advise on "three core limitations" as regards access to Dockside (at [222]).

vii) A failure to advise on letting restrictions imposed by the planning permission applicable to Dockside, with consequential size restrictions on ground floor unit sizes.

35. Pulling the threads together, Eder J said this:

"230. In summary, the Defendants failed to appreciate the disadvantages of the design, layout and listed building status of Dockside and the consequences these had for, among other things, attracting consumer spend and tenants and running costs. "

The Judge remarked (ibid) that it was unsurprising that others had either discounted Dockside or "walked away" from it. On the basis of these failings, the Judge concluded that the base figure of £27.50 psf used by Mr. Blake of Drivers Jonas "was far too high as even Mr Sargent accepted" (at [231]). That said, the critical question remained (ibid):

"… what would have been the advice of a competent adviser/valuer as to the likely rental income at year 7?"

36. Returning to Mr. Barbour's evidence and his figures of £19 psf for the ground floor and a first floor sales density equating to £9.50 psf for the first floor, the Judge reminded himself (at [233]) that to the extent Mr. Barbour relied on Mr. Parr's report it was "unreliable" (given the Judge's conclusions as to Mr. Parr's evidence). However, to the extent that Mr. Barbour's conclusions rested on his "experience", the Judge noted that Mr. Barbour's report had not identified the specific experience which would justify in quantitative terms the figures identified by Mr. Barbour rather than any other figures.
37. Eder J then carefully and fairly reviewed Drivers Jonas' criticisms of Mr. Barbour's evidence and methodology, before expressing his conclusion as follows:

"236. These particular criticisms of Mr. Barbour's evidence were … forceful. However, the difficulty is that each FOC is unique and the use of 'comparables' is largely unhelpful. As I have said, there is no doubt that Mr. Barbour has considerable general experience in the FOC market and, despite certain important errors in his evidence which I have identified, he was … an impressive witness. Ignoring Mr. Parr's evidence, the figures of £19 psf for the ground floor and £9.50 for the first floor were based on that experience and a broad assessment of the general state of the FOC market, the location of Dockside, the competition which it would face and the significant deficiencies inherent in its size and design which I have already addressed."

38. Matters did not end there. The Judge then turned at some length to the evidence of Mr. Sargent. In short summary, the Judge (at [237] et seq) concluded that Mr. Sargent's approach was flawed but observed, notably (at [247]), that on a fair application of Mr. Sargent's evidence to the facts, his assessment of rent for both the ground and first floors was "broadly similar to (if not lower than)" that adopted by Mr. Barbour.
39. Accordingly, Eder J's overall conclusion on this Issue was as follows:

"248. I have set out at some length the particular criticisms of the work done by the Defendants as advanced by the Claimants based largely on the evidence of Mr. Barbour. For the reasons set out above, I accept most of those criticisms. I have also set out above my comments with regard to the evidence of Mr. Barbour and Mr. Sargent concerning the likely rental figures. The Defendants emphasised what they described as the 'absolute vulnerability to an overdependence on statistics and mathematics'. They relied in particular on what Mr. Sargent said viz '… with valuation you do have to stand back and look at the overall number. You can drill down into the minutiae but, at the end of the day, it is the standing back approach and saying what looks reasonable.' I agree with the importance of that 'standing back approach'. Accepting that approach and having regard to everything I have said, it seems to me that the appropriate average rental figure for the ground floor was £19 psf and 50% of that figure i.e. £9.50 psf for the first floor … "

40. (3) Discussion: Mr. Stewart's submissions were advanced powerfully and attractively. Nonetheless and with respect, I am unable to accept them. I am not persuaded that this Court should depart from the Judge's conclusion on this Issue. My reasons follow.
41. First, I have regard to the nature of the appeal on this Issue: it is an appeal squarely on fact, a matter which gains emphasis when the nature of a valuation exercise is considered (see below). The Judge heard the evidence and saw the witnesses. As Ms Carr submitted, rightly, it was for the Judge to decide whether Mr. Barbour's support for the £19 psf figure was "all an artifice" or whether this was "genuine evidence from an impressive expert witness". The Judge did so, in a manner favourable to Capita. Contrary to Mr. Stewart's submission, I do not read [171] – [173] of the judgment as constituting a "straw man". I think instead that the Judge was expressing his view more widely on Mr. Barbour as a witness and his ability to form a view based on experience and expertise in the market in question rather than unthinkingly relying on the CACI report. This view forms a recurrent theme in the relevant passages of the judgment which follow. Furthermore, the judgment is strengthened rather than weakened by the careful and explicit approach adopted by the Judge to the weaknesses – as they emerged – in Mr. Barbour's evidence and the need to approach it with caution. As it seems to me, having regard to the nature of the appeal this Court should be slow to interfere.
42. Secondly, I should mention, if only to dispose of it, one way in which the Drivers Jonas case was advanced. This is the submission (recorded in the judgment at [204]) that once the CACI report fell away so too did the evidence of Mr. Barbour; in short, given the way in which the evidence developed, there was no admissible evidence upon which the Judge could conclude that the Drivers Jonas valuation was incompetent. With respect, I am wholly unable to accept this submission. In light of the matters dealt with by the Judge at [205] and following in the judgment, there was ample admissible evidence upon which the Judge was entitled to conclude that the Drivers Jonas £27.50 figure was unsustainable and negligent – and by a considerable margin. On the facts of the present case, I can see no basis for any suggestion that despite the many Drivers Jonas failures which the Judge recorded nonetheless the conclusion arrived at by Drivers Jonas was not negligent. The real question on this Issue was the very different one: whether, in the light of the "collapse" of the CACI report, there was a proper basis for the Judge reaching a conclusion as to the quantum of loss. It will of course be borne in mind that if the Judge was not entitled to form a view as to the quantum of loss, then the tort claim would necessarily fail and the contract claim would be confined to nominal damages.
43. Thirdly, dealing with this Issue as one of quantum, some initial observations are appropriate as to expert evidence and valuations.

i) It is as well to emphasise that a Judge is never bound by expert evidence (even, though that does not arise here, undisputed expert evidence). While a Judge must have a reasoned or rational basis for a decision – on issues of quantum as on other issues – the Judge is in no way confined to the figures contended for by the experts. This is manifestly so in a typical valuation case where the figure arrived at by the Judge may well lie somewhere in between those advanced by the rival experts. Moreover, having regard to the true nature of quantum disputes and their history as jury questions, a Judge will sometimes find himself needing to do the best he can: see, for example, Dennard v Pricewaterhouse Coopers [2010] EWHC 812 (Ch), at [182]. In her skeleton argument, Ms Carr summarised the task of the Judge in such circumstances as follows:

"The exercise required is not about the Court reaching an immaculate or absolute value, but about reaching the most likely figure on the basis of the evidence it has heard. That evidence may well not be perfect, indeed it is unlikely ever to be so."

I agree.

ii) As is well established, valuation is an art not a science; not every error will amount to a breach of duty and "pinpoint accuracy" in the result is not to be expected: Watkins J (as he then was) in Singer & Friedlander v John D Wood & Co [1977] 2 EGLR 84, at p. 86. In order to establish negligence, it must be shown both that the valuer failed to exercise reasonable skill and care and that the result was "wrong" – i.e., outside the permissible range or bracket. Depending on the property in question, margins of error may be of some degree of magnitude. Once the Court has formed a view of what the correct valuation would have been (the figure it considers most likely that a competent valuer would have put forward), damages will be assessed by reference to that figure. The law is clear in this regard and appears from [140] – [146] of the judgment, together with the authorities there cited. I cannot detect any error either in the Judge's analysis or his application of the relevant principles and did not understand Drivers Jonas to argue the contrary. The very nature of valuation and the inherent imprecision in the exercise underline the intensely factual nature of this Issue – and, for my part, a reluctance to interfere with the Judge's conclusion unless driven to do so.

Informed by these considerations, I turn to the remainder of the present Issue.

44. Fourthly, I am not persuaded that in reaching a conclusion as to the extent of Drivers Jonas' liability, the Judge erred in principle or that the judgment was logically flawed. As it seems to me, the Judge was entitled to conclude that in undertaking the valuation (and giving advice) without obtaining a CACI report (or equivalent), Drivers Jonas was negligent. It does not at all follow as a matter of principle or logic that because no reliance could be placed on the evidence of Mr. Parr, therefore the Judge was precluded from coming to a conclusion as to the quantum of damages for which Drivers Jonas was liable. Whether the Judge was so precluded must depend on where the "collapse" of Mr. Parr's evidence left him – and whether there remained a rational and evidential basis upon which to do the best he could to determine a figure for damages.
45. Fifthly, I am unable to accept that Mr. Barbour's evidence was damaged by the Drivers Jonas demolition of Mr. Parr's evidence to such an extent that no foundation remained upon which the Judge could reasonably and rationally base his conclusion. Accordingly, I would reject Mr. Stewart's assault on the Judge's indisputably important finding at [204].

i) There is no doubt that Mr. Barbour had placed major reliance on the evidence of Mr. Parr. As has been shown, the Judge understood that.

ii) However, as is likewise plain, the Judge formed a favourable impression of Mr. Barbour, in particular as to his experience and expertise. Given Mr. Barbour's immersion in the FOC sector (more than 60% of his time over the relevant years, as emphasised in re-examination), the Judge's conclusion in this regard is, with respect, unsurprising.

iii) Further, it is clear that Mr. Barbour's litany of criticisms of Drivers Jonas – accepted by the Judge at [205] et seq of the judgment and unchallenged on appeal – did not depend on the CACI report. Mr. Stewart urged that these breaches of duty were qualitative rather than quantitative by nature; they did not assist in putting a number on the loss suffered. Viewed narrowly that submission has some force. However, even if matters rested here, in my judgment, Eder J would have been entitled to conclude that the Drivers Jonas valuation had been culpably over-stated and substantially so. Having regard both to these breaches of duty and Mr. Barbour's experience and expertise, the Judge would have been entitled to award substantial damages, doing the best he could as to the precise figure.

iv) But matters did not rest there; in his report, Mr. Barbour had said this:

"14.99 … rents under a turnover lease structure comprised two elements: a base rent generally established at levels of between 70% and 80% of the estimated rental value … and a turnover top up of x% (usually ranging from between 9-11%). Budget rents of £15 per sq ft or £10 per sq ft for units in excess of 5,000 sq ft had been established by the Developer for Dockside and on the basis of the levels outlined above would have provided an estimated total rental value (i.e. including the turnover or 'top up' rent) of between £18 and £19.50 per sq ft. The Developer had attached a rental value of £27.50 per sq ft overall for Dockside to provide the rental guarantee of £4,006,750 per annum (145,700 sq ft x £27.50 per sq ft).

14.100 £27.50 was 83% in excess of the budget base rents of £15 per sq ft, a disparity which is significantly in excess of the norm and one I have not come across before (either prior to 2001 or since). In 2001 I would normally have expected the uplift to be around 20% above the base rent figure. This ought to have prompted serious questions by Drivers Jonas."

Mr. Stewart vigorously submitted that no reliance could be placed on these paragraphs; Mr. Barbour had never described it as an independent valuation. With respect, this submission misses its mark. Plainly, Mr. Barbour had approached the trial, assuming that reliance could be placed on the CACI report. However, neither the £15 psf figure nor the 20% uplift depended on Mr. Parr. That is so, even assuming in Mr. Stewart's favour the correctness of his contention that these paragraphs of Mr. Barbour's report were unsupported by any specific documents. These paragraphs thus provide an evidential basis, in addition to the matters set out in ii) and iii) above, for the Judge's conclusion that a competent valuer would have produced a figure of £19 psf as contrasted with the Drivers Jonas figure of £27.50 psf. Finally in this regard, Mr. Barbour's evidence was clearly to the effect that he would not have stood by evidence, simply because it was to be found in the CACI report.

46. Sixthly, with respect to Mr. Stewart's submission to the contrary, I do think that the Judge's conclusion as to £19 psf representing the most likely figure that a competent valuer would have produced was supported to some extent by the evidence of Mr. Sargent. The short point is this. The Judge (at [239] et seq) rejected the methodology favoured by Mr. Sargent. Methodology, however, is only part of the picture and does not preclude the Judge from having regard to the result arrived at on Mr. Sargent's approach. In terms of result, as demonstrated by the Judge at [247], Mr. Sargent's approach would have yielded rent assessments "broadly similar to (if not lower than) those adopted by Mr. Barbour". While I certainly would not wish to rest my decision on this passage in the judgment, I see nothing illegitimate in the Judge's reasoning and Mr. Sargent's evidence provides at least a cross-check with regard to the choice of £19 psf rather than some other figure (e.g., £18 or £20 psf).
47. Seventhly, I do not think that the Judge overlooked the evidence given by Mr. Woolley (called by Drivers Jonas) or that Mr. Woolley's evidence ought to have led the Judge to a different conclusion. At the relevant times, Mr. Woolley was Finance Director of Freeport Plc ("Freeport"), one of the leading FOC operators (judgment, at [9] – [10]). As the Judge recorded (ibid), in that capacity, Mr. Woolley entered serious negotiations in 1999-2000 with the vendors of Dockside for the purchase, development and running of a FOC at that site. In the event (judgment, at [11]), Mr. Woolley withdrew on the ground of price and did so at a stage prior to obtaining a CACI report. Mr. Stewart placed reliance on Mr. Woolley's figures for target rents – namely, £25 psf for the ground floor and £20 psf for the first floor. He complained that the Judge had overlooked Mr. Woolley's evidence which undermined the case of negligence against Drivers Jonas. I am unable to accept these submissions. First, given the number of references to Mr. Woolley in the judgment, I regard it as improbable that the Judge overlooked Mr. Woolley's evidence. Secondly, putting aside Ms Carr's submission that Mr. Woolley was an accountant not a valuer, his perspective was a Freeport perspective – that of a leading "player" in the market, with strengths that Capita could not have brought to bear and thus not obviously helpful in the context of this dispute. Thirdly, Mr. Woolley's involvement did not proceed beyond an early stage and, therefore, his views do not significantly advance the matter. Fourthly and in any event, it is a cause for reflection that Freeport walked away from this venture (as noted by the Judge, at [230]); had Mr. Woolley's evidence come to the forefront this feature must have loomed large and, at the least, would not have assisted Drivers Jonas.
48. Eighthly, notwithstanding great respect for Mr. Stewart's advocacy, I confess that I reach my conclusion on this Issue without regret. Indeed, I would regard it as startling and itself a cause for regret, if, despite what to my mind are obvious serial breaches of duty, the Court was driven to conclude that no loss had been established. For my part, the Judge was entitled and right to reject a mechanistic, arithmetical approach and to favour the "standing back" approach as he did (at [248]). It is unnecessary to speculate as to the outcome had Drivers Jonas raised a secondary case, admitting substantial damages but in a lesser amount, based on a figure higher than £19 psf; there was no such case for the Judge to consider. I would dismiss the appeal on Issue (I).

ISSUE (II): TAX

49. (1) The judgment: As the Judge observed (judgment, at [310]), it was common ground that the individual investors obtained tax credits by investing through the Trust in Dockside. The question of whether such tax credits should reduce the £18.05 million damages otherwise payable to Capita was addressed only briefly by the parties at trial (judgment, at [312]). In the event, as already foreshadowed, the Judge held that whatever tax credits may have been obtained by the individual investors they did not affect the damages properly recoverable by Capita (ibid).
50. Eder J's reasoning on this Issue was set out as follows:

"312 … I was not referred to any authority. I confess that I have not found it easy. It is, of course, now well established ever since the decision of BTC v Gourley [1956] AC 185 that the incidence of taxation is – or at least may be – relevant in the calculation of a claimant's damages. However, the issue normally arises in the context where the damages are subject to no tax or a different level of tax. The issue here is different i.e. the question here arises because, as is common ground, the original investment attracted a tax credit for the benefit of the individual investors and any damages that would be recovered would (as the Claimants accepted) be held on trust for the individual investor … The issue is further complicated because the nature of the tax credit in effect required the individual investors (through Capita) not to dispose of their investment for a period of at least 7 years and that the Defendants' calculation based on the difference between the purchase price less the likely tax credits and the correct open market value therefore seems artificial in the extreme. Moreover, as I have calculated, on the assumption that the individual investors had, through Capita, paid £44.8m, the net cost to them after relevant tax credits would have been in the order of £29.735m. Thus, it seems to me that the Claimants are right when they say, in effect, that the Defendants are not comparing like with like and that the Defendants' submission is, at best, over simplistic. If the tax benefit is to be taken into account, I can see a possible argument that the damages recoverable are to be limited to the difference between £41,303,506 and £29,735,000, i.e. £11,368,506. However, that was not the submission which was, as I understood, advanced by the Defendants. That possible argument apart, … the short answer is the one advanced by the Claimants viz that whatever tax credits may have been obtained by the individual investors, these do not affect the damages properly recoverable by Capita."

Accordingly, the Judge awarded damages in the sum of £18.05 million without any reduction.

51. (2) The rival cases on the appeal: It was common ground on the appeal that there was no suggestion that the damages would themselves be taxable.
52. For Drivers Jonas, Mr. Stewart submitted that the Judge had fallen into error. Tax was an integral part of the investment. To leave tax credits out of account would offend against the principles of compensation. The critical point was to look at the value of the whole of what investors had bought. The right to the tax credit arose more or less immediately on making the investment. The fact that the tax relief was obtained by investors rather than the Trust was immaterial, by reason of the particular position of EZPUTS; this was a limited and narrow situation and there was no "floodgates" danger. Mr. Stewart's primary submission was that the true measure of loss amounted to the purchase price of £62,850,000 less (the value of the income streams, £34,375,000 + the amount of the tax credits, £21,547,494) = £6,927,506. Mr. Stewart resisted the "possible argument" canvassed by the Judge (at [312] above) that tax credits should be deducted not only from the £62.85 million actual price but also from the £44.8 million value (the correct figure at which, on the Judge's findings, a competent valuer would have valued Dockside). The basis for his resistance was that this was a "no transaction" case: had Drivers Jonas produced the £44.8 million figure, the Claimants would not have proceeded with the transaction at all. If, however, he was wrong about that, then Mr. Stewart adopted this approach by way of a fallback case and argued that at least the tax credit should go to reduce damages even in this more limited fashion ("the secondary case"). As was common ground, if the secondary case prevailed, then the correct figure for damages is slightly different from that given by the Judge and amounted to £11,861,738.
53. For Capita, Ms Carr submitted that the Judge was right, essentially for the reasons he gave. Her principal submissions were developed as follows. First, Drivers Jonas confused legal entities and causes of action. The tax relief was obtained by individual investors; but the party entitled to damages was Capita. It would be quite wrong to go behind structures deliberately chosen, inter alia, for tax reasons, to keep trusts and investors separate. Secondly, it was wrong on the facts; the tax relief did not amount to a freestanding benefit. It would be wrong to take into account tax relief while ignoring other matters such as the cost of funding. Thirdly, the Drivers Jonas approach was "unprincipled". The Judge had awarded damages on a diminution in value basis, tied to the transaction date. On that footing (which Capita did not challenge on the appeal), the clock should stop there. Tax relief could not be introduced without adopting the "locked-in" approach, recognising that the Claimants were bound to retain their investment in Dockside for seven years in order to obtain it – in which case the Claimants' exposure to other continuing risks and losses over the seven years should be brought into account. It was to be kept in mind that the Claimants had swapped a tax liability for a long term investment or property risk. Fourthly, if wrong thus far, then Ms Carr adopted the secondary case as her fallback position. If tax relief was to be taken into account, then she submitted that Mr. Stewart's resistance to the secondary case was ill-founded: as she put it, in every "no transaction" case where a diminution of value measure was adopted, damages were awarded by reference to a "false hypothesis".
54. (3) Discussion: Principle: My starting point is the "general rule" stated, authoritatively, by Lord Blackburn in Livingstone v Rawyards Coal Co. (1880) 5 App Cas 25, at p. 39:

"… where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation."

Plainly, the principle may require adjustment to reflect the difference between contractual and tortious claims; equally, as is clear from the review of authority contained in the speech of Lord Lowry in Swingcastle Ltd v Gibson [1991] 2 AC 223, at pp. 237-238, rigidity is to be avoided – such questions are inevitably fact specific. Perhaps, for present purposes, the guiding principle is, with respect, best encapsulated in the observation of Denning J (as he then was), in Duke of Westminster v Swinton [1948] 1 KB 524, at p.534 (cited, ibid, by Lord Lowry):

"The real question in each case is: what damage has the plaintiff really suffered from the breach?"

55. In the present circumstances, there was no (or no real) dispute that, generally at least, the "diminution in value" approach produced the measure articulated by Pennycuick J in Ford v White [1964] 1 WLR 885, at p.888:

"In the simple case of the purchase of property at a price in excess of its market value as a result of wrong advice, the measure of damage must be the difference between (1) the market value of the property at the date of purchase, and (2) the price actually paid."

56. Deferring for the moment Ms Carr's point as to confusing legal entities, in applying this measure and in determining what damage investors have "really suffered", I accept Mr. Stewart's submission that it is necessary to look at the market value of the whole that was bought. In a complex transaction of this nature a failure to do so risks distorting the picture of the loss really suffered. If this approach is adopted, then it seems to me unreal to ignore that, on making the investment, investors immediately, or almost immediately, became entitled to the tax credits already mentioned – so in practical terms reducing the purchase price; put another way, the "whole" that was bought included the tax relief.
57. Pausing here, it would not be right to describe this investment as "tax driven". Commercial considerations loomed large; while tax relief provided a "buffer" against losses, the Claimants were understandably anxious that the venture should be commercially profitable. Not least, the cost of funding needed to be covered or the Claimants would suffer loss.
58. All that said, I have formed the clear view that this is a case in which the principle in BTC v Gourley [1956] AC 185 is applicable: namely, the incidence of taxation is relevant in the calculation of the investors' damages.

i) On all the evidence, it is manifest that tax considerations were integral to the investment. Underlying the concept of Enterprise Zones were "tax breaks" designed to encourage investment in such areas. Tellingly, the Information Memorandum of February 2001 ("the IM") underlined the attractions of 100% Initial Allowances and is replete with references to tax considerations.

ii) In the circumstances, it would be unreal to leave tax considerations wholly out of account in determining the losses "really suffered" by investors. Adapting Earl Jowitt's observation (Gourley, at p.203), to ignore the tax element here would leave the calculation "out of touch with reality".

iii) As in Gourley (ibid) it could not sensibly be said in the present case that the tax element was too remote so that it should be disregarded. Per contra, while acknowledging the importance of commercial considerations, tax considerations were central rather than peripheral to this investment.

59. It does not at all follow that in every claim for damages the incidence of taxation must be taken into account. The matter is one of fact and degree. In this case, where tax considerations were part and parcel of the scheme, it would in principle be wrong to ignore them.
60. If, however, it is right in principle to take into account the incidence of taxation, the next question is how it should be done. Mr. Stewart's submission, with respect, sought to bring tax into one side of the equation only: reducing the price actually paid but not the true market value of the investment. For my part, I am in no doubt that such an approach is both unfounded and unfair to investors. The unfairness is at once obvious and requires no elaboration; any calculation which focuses on one side of the equation only is bound or at least likely to have such an effect. Mr. Stewart's justification – based on the fact that on the lower, true value of the investment, the transaction would not have gone ahead – is untenable. As Ms Carr rightly submitted, where the diminution of value measure was applied in a "no transaction" case, there was no alternative to comparing the price actually paid with the true market value – regardless of the falsity of the hypothesis.
61. Accordingly, while respectfully parting company with Eder J's refusal to take tax relief into account, I am firmly of the view that the secondary case – to which the Judge was himself attracted – represents the right measure of damages, as a matter of principle. Perhaps unfortunately, that case was not canvassed before the Judge. To spell it out, subject only to Ms Carr's remaining arguments (see below), the secondary case involves deducting tax relief from both the £62.85 million and £44.8 million figures. The upshot would be to reduce the sum awarded by way of damages from £18.05 million to, as is arithmetic common ground, £11,861,738. In my judgment, this measure is fair, involving as it does both sides of the equation, and realistic, in bringing the incidence of taxation into account. It best reflects what losses investors have really suffered. It remains to consider whether we are precluded from adopting this measure by reason of Ms Carr's various other submissions.
62. Parties: At first blush, Ms Carr's submission in this regard had considerable force. Ordinarily, an award of damages hinges on whether the party entitled in law to advance the claim has suffered the relevant damage. Likewise, the question of whether credit must be given involves a focus on the party entitled in law to advance the claim. Losses and credits of third parties would ordinarily be neither here nor there. All the more so, given that the structure of many commercial transactions is deliberately designed to keep (for example) trusts and investors separate; in such cases, there is, again ordinarily, neither need nor justification for looking behind those structures and the consequences of doing so can be far-reaching and unwelcome. Against this background, the Judge's conclusion that the relief available to investors should not reduce the damages properly recoverable by Capita is readily understandable.
63. With respect, however, I am unable to accept that it is correct. The reason can be shortly stated and turns on the particular position of the legislation and the 1988 Regulations applicable to EZPUTs – indeed encapsulated in the judgment, at [17] (set out above). Mr. Stewart submitted, I think rightly, that the Trust existed only in order to make the purchase of Dockside on behalf of the investors. By itself, I doubt that would have sufficed to make good his argument. But here, the effect of the 1988 Regulations is to furnish, as Lloyd LJ put it in argument, a "special statutory look through to enable the beneficiaries to take advantage of the special tax provision[s]", rather than confining those benefits to the trust in question. As already foreshadowed, the object was to provide a favourable tax climate for investment in Enterprise Zones. There was, as the Judge expressed it (ibid) "transparency" between the investors and the Trust. In the circumstances, I agree with Mr. Stewart that, for these purposes at least, the interests of the Trust and the investors were synonymous. Just as investors obtained the benefit of tax credits on the purchase by the Trust, so the tax relief obtained by investors on that purchase should be taken into account in assessing the damages recoverable by Capita. I do not think that investors can properly be characterised as third parties or that the tax credits in question are to be regarded as res inter alios acta. To my mind, this conclusion flows from the scheme of the legislation and regulations in question.
64. For completeness, if, as I understood it, another facet of the same point, I must deal with Ms Carr's submission that the investors would not have had a cause of action against Drivers Jonas. With respect, I am unable to accept that submission. Having regard to the terms and contents of the IM, it is akin to a prospectus, with the consequence that Drivers Jonas owed a duty of care to individual investors who invested on the basis of the information there set out.
65. I would accordingly not be deterred by Ms Carr's submission as to the identity of the Claimant(s), from taking into account, in the manner already outlined, the tax relief obtained by investors in reducing the damages otherwise recoverable by Capita.
66. Stopping the clock: Ms Carr resisted taking into account tax relief on a further ground. The Judge had applied the diminution of value method to assess the Claimants' damages; that method, unchallenged on appeal, involved stopping the clock at the transaction (or investment) date. On that footing, it was "unprincipled" to reduce the damages recoverable by Capita on account of the tax relief received by investors. To do so, resulted in a partial and unfair analysis of the investors' overall post-acquisition position.
67. With respect, I disagree. Ms Carr is right thus far: on the diminution in value approach adopted by the Judge, post-acquisition matters are to be left out of the account and the clock stopped at the transaction date. However, taking into account the tax credits in question does not involve a violation of this principled concern. The reason is straightforward – namely, the "… more or less immediate ability to obtain relief" on making the investment: per Hart J in Ball v Banner [2000] Lloyds Rep PN, at p.570. I am therefore not at all persuaded that taking tax relief into account is "unprincipled" in the manner contended by Ms Carr. This point too fails.
68. Accordingly, for the reasons given, I would allow the appeal on Issue (II), to the extent of reducing the damages recoverable by the amount of the tax relief calculated in accordance with the secondary case. The upshot is that Capita remains entitled to damages from Drivers Jonas but in the reduced amount of £11,861,738.

ISSUE (III): INTEREST

69. In a separate judgment dated 9^th September, 2011, Eder J awarded interest running from April 2001. Mr. Stewart submitted that this ruling over-compensated Capita, in that the trust had not been kept out of its money for 7 years (the locked-in period); interest should therefore only have been awarded from April 2008.
70. In the course of argument, Mr. Stewart acknowledged, rightly in my view, that if his submissions on tax were well-founded, then his argument on interest fell away. The reason is that the Drivers Jonas case on tax proceeds on the premise that the loss crystallises as at April 2001. If so, it follows that the Judge was correct in his conclusion that interest should run from that date. For the avoidance of doubt, the fact that Mr. Stewart's success on Issue (II) has been limited to the secondary case is neither here nor there for these purposes. I would therefore dismiss the appeal on Issue (III) and do not propose to say more on it or to express any view on the other submissions advanced in this connection.

Lord Justice Moore-Bick

71. I agree that the first and third limbs of the appeal should be dismissed but that the appeal on the second limb should be allowed, in each case for the reasons given by Gross L.J. However, having had the opportunity of reading in draft the judgment of Lloyd L.J., I think it right to add a few words of my own in relation to the first limb of the appeal.
72. At trial there was a dispute between the parties about the methods that a competent valuer could properly adopt in seeking to assess the rentals likely to be obtainable in the future at a factory outlet centre ("FOC") of the kind with which the court was concerned. The FOC in this case was to be situated in buildings forming part of the old Chatham dockyard and was given the name "Dockside". Drivers Jonas, who were instructed to value the FOC, contended that a competent and careful assessment of future rental value could be made by having regard to properties of a similar kind, known as "comparables". Capita, the purchaser of the site, contended that comparables were of no practical use in cases of this kind because each FOC has its own unique characteristics and future rentals depend to a large extent on the particular characteristics of its catchment area. Accordingly, it submitted that there was no substitute for obtaining a retail performance analysis, known as a "CACI" report, to provide the essential foundation for an assessment based in part on general experience.
73. The judge held that Drivers Jonas had signally failed to act in a competent manner in valuing Dockside, principally, because they had failed to obtain a CACI report as a basis for their valuation, but not for that reason alone. It was accepted that as a result their assessment of the ground floor rental figure from year 7 onwards, on which their valuation of the reversion was based, was significantly too high.
74. Unsurprisingly, perhaps, attention at the trial was directed primarily to the question whether a CACI report was an essential prerequisite of a competent valuation. The judge held that it was and that Drivers Jonas were therefore in breach of contract and of their common law duty of care to Capita. He also found that Drivers Jonas had committed many other breaches of duty which affected their valuation.
75. In paragraphs 205 - 207 of his judgment the judge made findings about the flaws in Drivers Jonas' method of valuation. In particular he identified a number of important matters which were not reflected in the advice they gave or properly taken into account in providing their valuation. The matters in question were all of a potentially damaging nature with the result that a failure properly to take them into account must inevitably have led to a significant over-valuation. Moreover, in paragraphs 209 - 210 and 213 - 230 the judge identified and discussed other factors (competition, tenant incentives and marketing budgets, location, access, design, letting restrictions and maintenance and operating costs), all of which were detrimental to the prospects of Dockside's commercial success and likely therefore to reduce the rent obtainable in the future. In the light of all those findings it is hardly surprising that in paragraph 231 he found that the base figure of £27.50 psf used by Drivers Jonas to value the reversion was "far too high".
76. The judge then turned to consider what advice a competent valuer would have given as to the level of rental income at year 7. The answer to that question was capable of serving two purposes: it would both prove the causative link between the breach of duty and the loss and establish the measure of that loss.
77. I accept that a claimant who seeks to recover damages from a defendant must prove his loss, but proof of loss has two aspects, causation and assessment. The two are distinct, though closely related. There are cases in which the court can easily be satisfied that the defendant has caused loss to the claimant, but may have great difficulty for want of precise evidence in quantifying that loss. In this case the judge found that the base rental figure used by Drivers Jonas on which its valuation of Dockside turned was far too high. In my view it necessarily follows that the breach of duty caused loss to Capita; the only question was how much.
78. It was the submission of Mr. Stewart Q.C. that, because the judge had found that a CACI report was essential to a competent valuation, and because no CACI report had been produced in relation to Dockside, there was necessarily insufficient evidence available to him to make any finding about the valuation that would have been placed on this FOC by a competent valuer. Therefore Capita could not prove the measure of its loss and must recover nothing.
79. Not only is that an unattractive argument, it is in my view wrong on the facts of this case. I accept that in order to establish a breach of contract or duty Capita had to satisfy the court that the valuation provided by Drivers Jonas fell outside the range of valuations that might be given by a competent valuer exercising reasonable skill and care. In most cases that burden will be discharged by proving what valuation a competent and careful valuer would have given. In the present case, however, the nature and degree of the valuer's shortcomings were so great as to enable the judge to find as a fact that its valuation was far too high. That was sufficient to establish a breach of duty and once that point had been reached the court was concerned only with assessing the measure of the claimant's loss.
80. When it comes to assessing the claimant's loss it is sometimes said that the court must do its best on the material before it. That no doubt reflects a general reluctance on the part of courts to send a claimant away empty-handed, even though he can show that the defendant has caused him loss. The comment of Devlin J. in Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422 at page 438, to which Lloyd L.J. refers, that "... where precise evidence is obtainable, the court naturally expects to have it. Where it is not the court must do the best it can" reflects that reluctance. I do not, with respect, think that it can be taken as justifying the court in rejecting the claim altogether if the claimant has failed to adduce the best evidence reasonably obtainable. Indeed, in the passage immediately following Devlin J. referred to the observation of Vaughan Williams L.J. in Chaplin v Hicks [1911] 2 KB 786, 792 that "... the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract." The assessment of damages is essentially a jury question. The court's task is to make whatever findings it can on the evidence before it, although an obvious failure to obtain better evidence may result in its being unpersuaded of the claimant's case. Having said that, the court cannot conjure facts out of the air. There must be some evidence to support its finding. It seems to me that that was the essence of the enquiry on which Eder J. embarked in paragraphs 232 - 248 of the judgment, however it was expressed. The question, therefore, is not whether a CACI report was an essential requirement for producing a competent valuation, but whether there was evidence before the judge capable of supporting his assessment of Capita's loss.
81. Having made his findings about the manner in which Drivers Jonas had produced their valuation, the judge was clearly aware of the importance of a CACI report. Although he approached this part of the case by asking himself what rental figure a competent valuer would have placed on Dockside at year 7, I think it is clear from what follows that he was in fact asking himself a rather different question, namely, what did the evidence before him suggest was the true rental value of Dockside after year 7. In seeking to answer that question he considered the evidence of Mr. Barbour and Mr. Sargent and came to the conclusion, largely based on Mr. Barbour's undoubted experience in this field, that the figures he had put forward were reliable.
82. It follows that in my view the question for this court is whether the evidence before the judge was capable of supporting his finding that the rental value of Dockside at year 7 was £19 psf. In paragraphs 41 - 48 of his judgment Gross L.J. sets out his reasons for concluding that it was. I agree with them and would only add that the judge's view of the cogency of Mr. Barbour's evidence was formed after seeing him in the witness box where he was subjected to detailed cross-examination. In the light of his evidence as a whole the judge accepted his assessment, based as it was in part on long experience of working in this field. In those circumstances I think that this court should be slow to reject the judge's finding on a matter of this kind and for my own part I am not persuaded that it would be right to do so.

Lord Justice Lloyd

83. Lord Justice Gross has set out the facts, the history of the case and the issues fully, so I need not go over any of that for myself. As appears from what he has said, at the conclusion of the evidence before Mr Justice Eder the Defendants were in an interesting forensic position. As regards the allegation against them of breach of duty, their case was that it was quite wrong to say, in terms of methodology, that they could not have proceeded competently without a CACI report. In relation to proof of loss, if they failed in that contention, they said that there was nothing in evidence, other than a CACI report which had been shown to be fundamentally flawed, on the basis of which the judge could come to a conclusion as to the right level of projected sales densities (i.e. expected retail turnover), so as to be able to form a view as to the anticipated level of the rent receivable from year 8 onwards. Thus, even if the Defendants were shown to have been negligent, no loss had been demonstrated.
84. On this appeal, Mr Stewart accepts that which he vigorously disputed below, namely that a CACI report was essential, but he pursues his argument as to absence of proof of loss with equal vigour and, as it seems to me, a good deal of cogency.
85. As Lord Justice Gross has explained, there were three elements to the value of the proposed development at the material time in 2001: the guaranteed rent for the first seven years, the priority rent for that period, and the anticipated rent as from the eighth year to the end of the 155 year lease. The amounts of the first two rents were known, so essentially all that was at stake for those factors was the appropriate yield. There were differences between the judge's conclusion as to these two elements and those on which the Defendants proceeded but, taken together, the Defendants' figures were within the permissible range of figures as found by the judge for those two elements in aggregate. Accordingly nothing turns on those. The argument has been about the major issue, as to the figure for the third element, for which the Defendants had taken £27.50 as the starting point, whereas the Claimants advanced a figure of £19.00 and the judge adopted that figure. There was argument before the judge as to the right yield factor as well, but that has not been renewed before us.
86. As is clear from the judge's judgment, and that of Lord Justice Gross, this rental figure does not represent a normal rack rent such as one might find for office premises, or a shop on the high street. There would be a base rent, payable in any event, but also a turnover rent based directly on the retail turnover of the particular premises year by year. The rent payable would be the higher of the two figures. As the judge said at the end of paragraph 29 of his judgment: "Self-evidently, as a result of this lease structure the rent earned by the owner of the FOC will depend on the financial performance and success of its tenants and, in particular, the success both of the FOC and its tenants in attracting consumers to the FOC and persuading them to spend money there." Therefore, what the judge needed to be able to do was to identify a figure, as at 2001, for that turnover as anticipated for 2008.
87. In assessing the proper figure for a rack rent of a conventional kind, it would be natural to consider comparables, that is to say figures based on lettings of other premises, as similar to the subject premises as possible, from which a figure per square foot could be derived, with any appropriate adjustments, for the subject premises. The Defendants contended before the judge that this was legitimate in the present case, in order to justify their failure to obtain a CACI report. The Claimant's expert witness, Mr Barbour, explained why he did not accept that as a valid approach. At paragraph 14.88 of his main report he said this:

"I should explain that the methodology of comparing rents quoted in other centres and different locations was appropriate when advising as to the value and viability of a shop on a high street or a full price shopping centre where tenants pay rent on what is known as a "rack" rental basis, as explained above. It was not appropriate in the assessment of turnover income where each FOC draws upon a different catchment, with a different level of available spend, different demographic models dictating the typical shopper in the FOC and a different pool of competition."

88. In turn, summarising his views by reference to the questions posed to the experts, at page 126 of his report, he answered the question: "What were appropriate comparables to adopt when assessing the value, commercial viability and investment prospects of Dockside" as follows: "Comparables are only appropriate in assessing yields and not rents".
89. The judge accepted that proposition in the second sentence of his paragraph 236, quoted by Lord Justice Gross at paragraph 37 above. The main criticism of Mr Barbour's evidence which he had set out just beforehand, and which he described as forceful in the first sentence of that paragraph, was the point that there was a fundamental inconsistency in his evidence, in that "having rejected the use of comparables as an appropriate methodology (at least for rental values), he could not easily cite examples from other FOCs or schemes, without contradicting his own methodology, as in fact he did when justifying his reliance on his experience at" another FOC on which he had worked: see paragraph 235 of the judgment. It was not, and could not be, a question of saying that a given rate per square foot was one likely to have been applied to the particular premises, and that this could reasonably be regarded as right because of the rate payable or paid for other premises of a similar kind. Given that the rent would not be calculated or defined by reference to a rate per square foot, but rather would be the result of applying a given fraction or ratio to the retail turnover actually achieved at the premises, one would have to focus on the comparability of the different premises in terms of their relative attraction to retail customers. It was because that was so much more complicated a process than comparing rack rentals of different premises that Mr Barbour rejected it as a legitimate approach. Equally, that is why the judge said at paragraph 236 that it was "largely unhelpful".
90. Earlier in his judgment, at paragraph 204, the judge had said what Lord Justice Gross has quoted at paragraph 33 above. On this aspect of the case the main dispute is whether the judge was justified in saying, as he did there, that Mr Barbour did not depend exclusively on the CACI report, but used his own experience and expert analysis to reach the views and conclusions that he expressed, at any rate as regards the projected sales densities and therefore the rental level. Mr Stewart for the appellants contended that, at best, the only other possible or discernible support for his views and conclusions on this was comparisons with other FOCs, but that this was excluded as irrelevant by Mr Barbour's own opinion, which the judge accepted. So the first question on this part of the appeal is whether there was any, and if so what, other legitimate basis for Mr Barbour's view that the right figure for the sales densities was £190 per sq ft, giving a rental figure of £19.00.
91. If the answer to that is that there was not, then the second question is whether there was any other legitimate basis for the judge's conclusion that £19.00 was the right figure. It is accepted that the judge is not bound by the views of expert witnesses, even if they are agreed (which, of course, they were not here). However, Mr Stewart argued that, if a judge decides upon a figure which is not explained by the expert evidence, he must explain the basis on which he adopts it. It is not a proper judicial exercise simply to pick a figure out of the air without explanation. So, if the judge's figure is the same as that adopted by an expert witness, and if the judge gives no independent explanation for his conclusion, and if in turn the expert witness is discredited, Mr Stewart submitted that the judge's conclusion cannot stand: it is not supported by the expert evidence and there is no other basis (or at least no other stated basis) for arriving at it.
92. The judge found Mr Barbour to be an impressive witness (see his paragraph 236), and he did so despite having accepted a fair number of cogent criticisms of his evidence (see paragraphs 168 to 173). Because of those valid criticisms he approached the evidence with proper caution. He recognised that Mr Barbour had extensive practical experience of FOCs, to which he referred at paragraph 171. His assessment of the basis of Mr Barbour's conclusions, and their reliability, is not lightly to be displaced. He accepted a great deal of what Mr Barbour said as regards criticisms of the Defendant's valuation exercise, as regards methodology and also more basic points of inadequacy, including as to details of the figures. None of that is in dispute on the appeal. Correspondingly, the fact that Mr Barbour was able to say from his own experience that (for example) a competent valuer would have come to the same conclusion as the CACI report that Dockside would appeal to a mid-market, not an upper-market, catchment so that mid-market potential anchor tenants would have been the focus of the relevant part of a retail audit (see paragraph 14.15 of Mr Barbour's report) does not show that his own experience enabled him to come to an independent view as to the likely sales densities. The issue turns on what he said about the correct valuation though, as Miss Carr submitted, that has to be seen in the light of his report as a whole and his oral evidence. I have taken the opportunity to re-read all the relevant parts of his report and of the transcript of his oral evidence for the purposes of preparing this judgment.
93. Thus, in assessing Mr Barbour's evidence the judge had to bear in mind that his evidence was adduced for two purposes: first, to show that the Defendants' approach had been negligent, which required him to show what would have been the correct approach, and secondly to show what the correct valuation would have been. It seems to me clear that the judge did recognise that feature of the case. By and large his criticisms of Mr Barbour affected his evidence on the latter point, not on the former, and even as regards the latter there was a good deal of his evidence which was not challenged, or not effectively, as the judge saw it. Thus, it is clear that the CACI report and its figures for sales densities only provided a starting point for the necessary calculation. The subsequent stages of the calculation are not in dispute for present purposes, but Mr Barbour gave evidence which was relevant to that as well. Indeed, Mr Stewart's submission virtually accepted, or at least did not challenge, the validity of much of what Mr Barbour had said in that respect. He argued that this was Mr Barbour's expertise (if any, which he had not admitted), and that his expertise did not lie in identifying the figure for projected sales densities, which itself led to the turnover rental figure, the starting point for the remaining calculations. Thus, he would say, an acceptance that there was much of value in Mr Barbour's evidence and, for example, that he did not rely blindly or unthinkingly on the CACI report (see paragraph 173 of the judgment), is nothing to the point as regards identifying the starting figure.
94. It is also relevant, according to Miss Carr's submissions, that the demolition of the Defendants' £27.50 figure for the anticipated rent did not depend on the CACI report. There were a good many factors unaffected by the CACI report which showed that the Defendants' figure was far too high, as the judge said at paragraph 231. This is not a case, such as do occur sometimes, in which the valuer's methodology is hopelessly negligent but he may nevertheless, by chance, have come up with the right figure, or at any rate a figure within a legitimate range. Nevertheless, it was up to the Claimants to prove not only negligence or breach of contract but also the amount of their loss. There may be cases where, for example because of the later loss or destruction of the subject matter of the proceedings, the court has to proceed on what is largely a speculative basis. Here there was no difficulty other than the usual problem of looking back without being too much affected by hindsight. The Claimants had to prove their loss. If they did not do so, so that there was no reliable evidence on which the judge could conclude that the right figure for rent was £X per sq ft per year, and in turn that the right valuation figure was £Y, then the claim must fail. The court would be reluctant to reach such a conclusion, but it is for the parties to litigation to adduce the necessary evidence. If they fail to do so, whether or not they are as well-advised and well-represented as those before this court, the consequences follow.
95. Section 19 of Mr Barbour's report was devoted to the question of valuation. At paragraph 19.2 he said this:

"For all the reasons set out above, including in particular Dockside's location, the lack of certainty in the development of surrounding attractions, the significant level of competition in Dockside's catchment, its layout and design and inadequate tenants' incentives budget, Dockside was over-valued at a totally unrealistic rental level (£27.50 per sq ft overall). CACI in their analysis calculated a projected sales density for Dockside of £190 per sq ft. Applying a turnover percentage of 10%, this would provide a rental value for the ground floor of £19 per sq ft, and a first floor sales density equating to a rent of £9.50 per sq ft. From my experience of the FOC market at the time this level of rent would be considered appropriate by a competent valuer and commercial property investment adviser."

96. I have referred to some other relevant passages in Mr Barbour's expert report, and will refer to others below. He was, of course, cross-examined on this aspect of the case at some length. At the very beginning of his cross-examination he said this [Day 7 page 172-3 bundle 2368-9]:

"A. I think to carry out a valuation, and certainly from both rental and capital values, you have to ascertain turnover levels of a scheme. Factory outlet centres, unlike normal shopping centres, are dealt with on a turnover basis. And therefore to get an accurate reflection of rental value you have to understand turnover levels, so yes.

Q. So your view is that anyone would have been doing that other than on the basis of a CACI type analysis would have been incompetent?

A. You needed turnover information on which to base an assessment, yes."

97. A little later in his evidence he said this [Day 7, page 182 – bundle page 2378]:

"Q. As I understand it, you are not prepared to accept that it is appropriate, so far as rentals are concerned, to look at other centres for comparables; is that right, Mr Barbour?

A. Every scheme is unique. No scheme – I cannot — no schemes can be compared on a like for like basis in my view because the catchment will always be different, the spend will be different and the demographics will be different. So you have to assess it on a one-off basis."

98. Shortly after that he said this [Day 7 page 184, bundle page 2380]:

"Q. Mr Barbour, the figure of £190 per sq ft which is provided by Mr Parr is at the very heart of your report, isn't it?

A. It is certainly one of the elements of my report, but I have used my own judgment in looking at those figures.

Q. If that figure changes, for any reason, do you have any way at all, now, of saying what you consider the value of the centre was back in 2001, so that a figure of £250 per sq ft would be appropriate?

A. No, I think I would be looking at the information that was before me and taking a judgment on that from my experience."

99. Mr Parr had given evidence before Mr Barbour did, the latter being present throughout. Mr Stewart invited him to consider whether he wanted to reconsider any of his own evidence in the light of what had emerged in the course of Mr Parr's oral evidence. He had the opportunity to think about that overnight. Mr Stewart showed us passages from his evidence after that, in which Mr Barbour did not put forward any modification of his own report, though he accepted that if points which had come to light in the course of Mr Parr's evidence were to lead to different figures on the part of CACI, he would need to work out the effect on his own figures from their revised calculation. One of his answers, relevant to this, was [Day 8 page 8, bundle page 2391]:

"Well, I would need to see that calculation, because I'm not an analyst. I would be looking at the end figures from which I would base my assessment."

100. Later he did say "It was not just purely this [i.e. the CACI report], but my assessment of the competition afforded to the centre, it felt from my experience a figure that was in the right range." [Day 8, page 10, bundle page 2393]. The passages quoted by the judge at his paragraph 235 came shortly after this.
101. Then he said this [Day 8 page 16, bundle page 2399]:

"Q. In this case you have resolutely refused, have you not, to accept that it is appropriate to look at comparable properties to see what they're being let for in order to form a judgment on rental values; yes?

A. That is correct. And I will go back to my comments of yesterday. Each centre, in terms of outlet, because you are looking at performance and, hence, rents actually have a relation to that, are unique. The catchment of any centre cannot be the same. The demographics are not the same. And the competition are not the same. And all those elements bring you to a calculation of sales density. And they will be different for all schemes."

102. Then in the course of cross-examination about another FOC at Clacton, where he said that there had been lettings at a base rent of £15 per sq ft, he was asked whether that would have been relevant and helpful evidence to put before the court. He answered [Day 8 page 23, bundle page 2406]:

"Well, I don't believe so, because I would go back [to] the start of our appraisal process of dealing with rents, in that every centre is different. What I've said earlier is that I've purely used this not as a benchmark but just to gauge other schemes and, from my experience, where I felt this rents should or would be."

103. In turn, soon afterwards, and cross-examined specifically about paragraph 19.2 of his report, on the basis that, without any real details of what the actual transactions were the paragraph was based wholly on his understanding of the CACI report, he said he would not accept that as fair, and he continued [Day 8 page 27, bundle page 2410]:

"As I've stated earlier, I certainly used CACI's figures in part and in terms of my assessment. And that's the basis of my valuation on the rental side. But, from my experience, you don't get a number out and actually question the validity or if you feel that's in the right order."

104. Mr Stewart's submission was that all of this shows that Mr Barbour's other experience enabled him to conduct a cross-check on a figure once ascertained by another process (i.e. from the CACI report), and to work from that figure, but it did not give him any independent basis for arriving at a figure in the first place. It seems to me that this is also how the last sentence of paragraph 19.2 of Mr Barbour's report should be read.
105. In the course of the morning of the second day on which Mr Barbour gave evidence (Day 8), Mr Stewart put to him some questions based on what Mr Parr had said under cross-examination about attainment factors, which was part of his Performance Analysis in section 4 of his own report. Mr Parr had described attainment as a measure of performance of a retail centre when looked at on a sales density basis. His report assumed an attainment factor of 35% for Dockside. On page 48 of the transcript [bundle page 2431] Mr Stewart asked Mr Barbour if he understood attainment to be an absolutely critical feature of Mr Parr's evidence, to which Mr Barbour said that it was one of the elements and that it led into the calculation of the sales densities. Then he was asked if he understood the effect of changes in the attainment factor that was adopted. He said that he understood the mathematical part of the calculation, but questioned whether the attainment level was correct, which he did not know. Mr Stewart then asked him this question [Day 8 page 50, bundle page 2433]:

"Q. So you have no idea whether that attainment level is right or wrong?

A. It's a level that CACI provided me with and advised me that is how they dealt with their calculations … for not only this but for other centres."

106. Shortly after that exchange there followed a longer passage on which Mr Stewart relied, as follows [Day 8 page 51 to 53, bundle pages 2434-6]:

"Q. You have placed very heavy reliance on CACI's report in arriving at your evidence in this case, haven't you, Mr Barbour?

A. Yes, I have. But I have made my own judgment looking at that, from my experience also.

Q. You understood that the attainment factor explained in Mr Parr's report is absolutely critical to the end result of £190 per sq ft across the centre as a whole, didn't you?

A. Yes, it is a part of the calculation. Yes.

Q. It is an absolutely critical part of the calculation, isn't it? Because it is directly proportional to the £190 per sq ft?

A. Yes, there are a number of inputs of which that forms part of the calculation, yes.

Q. The difference between £190 per sq ft across the development as a whole and £270 per sq ft across the development as whole is extremely significant; do you agree?

A. I mean it is a significant amount, but I go back to earlier. Without seeing if that data is correct, I can't verify that.

Q. What data?

A. In terms of the production of the figures and the calculation of the attainment level.

Q. Mr Parr explained yesterday that all he had done to get to his attainment level wasn't any analysis at all. It was simply an assumption of 35%. That's your understanding, isn't it?

A. The assumption I think he made was based on the attainment level for a scheme of that size, yes.

Q. I've read out to you the question and the answer. But assume, for the present purposes, that if he had categorised that as a large centre instead of a small one he would have used 50%, 42% more than 35%, yes?

A. I can't comment because I'm not a party that actually deals with the calculation or the inputting of the data.

Q. Would you accept that a figure of £270 per sq ft for turnover across the development as a whole is just as likely to have been right in 2001 as one of £190 per sq ft?

A. I can't comment without knowing if the data is correct or relevant. I believe the figures from Mr Parr were correct. There are a number of points, I think, in terms of the range that I'm now aware which would make a small variation. But without looking at the data and having the benefit of that, I can't comment. It is not my area of expertise."

107. Miss Carr reminded us that Mr Barbour also pointed out the need for a retail audit, which he mentioned early in his report, and discussed in more detail at paragraphs 14.79 to 14.83. He was qualified to assess what might have been the outcome of that, because of his experience as a letting agent for other FOCs. However, it seems clear that a retail audit, albeit a necessary or at least a highly desirable part of the analytical process, is no substitute for a CACI report, and cannot provide a basis for a figure for the projected sales densities, because it would be undertaken with the benefit of figures provided by a CACI report. This is what Mr Barbour said about it at the beginning of section 14 of his report:

"14.1. As explained above, by 2001 it was clearly established that a competent assessment by a valuer and commercial property investment adviser of the likely rents achievable in a new FOC could only be achieved by an approach that included a detailed analysis of the FOC's catchment and a correlation of catchment, spend and competition data. This analysis, together with detailed research as to tenant interest, would provide an assessment of the FOC's sales densities from which turnover rent could be calculated.

14.2 This was of critical importance for a new FOC where there would be no existing information such as a turnover history to inform the assessment.

14.3 As set out at paragraph 8.4 above, the steps that a competent valuer and commercial property investment adviser would have taken to obtain this information would have been a Performance Analysis and through carrying out a Retail Audit.

…

14.9 At the valuation date the Dockside Investment was based on a forward purchase commitment without the benefit of any lettings or trading history. It was fundamental to ascertain tenant interest for a new FOC at an early stage. This formed one of the critical areas of the due diligence and analysis required in order to consider both viability and assessment of risk and was typically carried out as the step immediately following receipt of the catchment analysis report or prior indication of outcome from the research provider. As set out above, I refer to this process as a Retail Audit.

14.10 A competent valuer or commercial property investment adviser would have a list of tenant contacts with whom to carry out their Retail Audit. They would have identified suitable tenants to be contacted based on the conclusions/expected outcome of the Performance Analysis and would have mapped out a suitable tenant mix for Dockside."

108. In the light of this evidence, and of what I have said in paragraph 107 above, I cannot accept Miss Carr's argument that a retail audit was capable of providing an independent basis for assessing the figure for projected sales densities. So to regard it would be to put the cart before the horse, because a retail audit presupposes that one already has a figure for sales densities, such as a CACI report would have provided. Mr Barbour's report was consistent in saying that both a Performance Analysis (such as a CACI report) and a Retail Audit were needed: see paragraph 8.4 as well as paragraph 14.3 just quoted.
109. Miss Carr also showed us a later passage in the long section 14 of the report, where Mr Barbour was criticising the Defendants' approach to the assessment of the lettings and the rental value. At paragraphs 14.99 to 14.101 he said this:

"14.99 In particular, as set out at paragraph 7.11 above, rents under a turnover lease structure comprised two elements: a base rent generally established at levels of between 70% and 80% of the estimated rental value (i.e. the total rent expected to be achieved including the turnover top up) and a turnover top up of x% (usually ranging between 9-11%). Budget rents of £15 per sq ft or £10 per sq ft for units in excess of 5,000 sq ft had been established by the Developer for Dockside and on the basis of the levels outlined above would have provided an estimated total rental value (i.e. including the turnover or "top up" rent) of between £18 and £19.50 per sq ft. The Developer had attached a rental value of £27.50 per sq ft overall for Dockside to provide the rental guarantee of £4,006,750 per annum (145,700 sq ft x £27.50 per sq ft).

14.100 £27.50 was 83% in excess of the budget base rents of £15 per sq ft, a disparity which is significantly in excess of the norm and one I have not come across before (either prior to 2001 or since). In 2001 I would normally have expected the uplift to be around 20 % above the base rent figure. This ought to have prompted serious questions by Drivers Jonas.

14.101 CACI from their analysis calculated Dockside's sales density at £190 per sq ft for the ground floor. Applying a discount of 50% I have assessed appropriate sales density of £95 per sq ft for the first floor. Based on a turnover rent percentage of 10% this would have provided a rental value of £19 per sq ft for the ground floor units and £9.50 per sq ft for the first floor. Plainly, this accords with the budget rents that the Developer set. I have been unable to identify any basis upon which it could have been said that base rent of £15 per sq ft could justify an expected total rent of £27.50 per sq ft. A competent valuer and commercial property investment adviser in 2001 would have shared the view that such a base rent could not justify such an expected total rent."

110. So, Miss Carr submitted, that passage provided one clear source or basis for a figure of £19 which did not in any way depend on the CACI report. That was not identified by the judge as part of the basis for his acceptance of Mr Barbour's figure, and this is not surprising because it was no part of the case made by the Claimants at trial, as Mr Stewart showed us by reference to the written opening and closing submissions for the Claimant. So far from that, the Claimants' case was that a CACI report was indispensable for valuation purposes. Although Mr Barbour included this passage in his report, he never referred to it in the course of his evidence under cross-examination as being any part of the basis for his figure for the rent. Nor had he identified it in his supplementary report, by which he responded to a consent order requiring him to identify any particular document on which he relied. Moreover, this contention did not appear in the Respondents' skeleton argument on the appeal. Accordingly, in my judgment, this feature of the case cannot be taken as providing any justification for the judge's adoption of the figure of £19.
111. Mr Barbour gave evidence of some other FOCs of which he had direct experience, some before and some after the date of the Dockside scheme, in several cases as letting agent. Two are of interest for present purposes. In one, at Ebbw Vale, the promoter was advised to get a CACI report but did not, on grounds of expense. Nevertheless the scheme went ahead with Mr Barbour doing as good a job as he could, as letting agent, in the circumstances. In the other, at Spalding, there was a CACI report but its outcome was modified because of a new factor which could affect the calculation. It was said by Miss Carr that Mr Barbour worked out the impact of this rather than having it re-examined by CACI, but Mr Stewart cast substantial doubt on this in his submissions in reply. It seems to me that, even if Miss Carr were right, the point would prove very little. It does not show that Mr Barbour would have been able to arrive at a proper projection of sales densities without there having been a CACI report at all. If Mr Stewart is right, as seems to me likely [see Day 8, page 55, bundle page 2438, and Day 8 page 172, bundle page 2555], CACI did advise on the effect of the new factor on the figures, so it proves nothing at all.
112. Likewise the example of Ebbw Vale shows that Mr Barbour did what he could as letting agent without a CACI report, but such a report is not primarily aimed at assessing what can be got for rental units once they are ready to be let. That is a very different exercise both from that of valuation in advance such as the Defendants undertook in the present case, and from giving evidence as to the proper valuation figure in court proceedings such as these. Mr Barbour did not carry out a valuation in relation to Ebbw Vale.
113. In no case other than the Ebbw Vale scheme did Mr Barbour act at all, as regards a proposed scheme, without having the benefit of a CACI report. Thus, he did not have to work out the projected sales densities figure for himself in any case. There is no indication that he ever had done so, and several passages in his evidence support the view that he had not done so and neither could nor would do so: see the passages from his cross-examination quoted at paragraphs 98, 99, 105 and 106 (the last answer) above. These seem to me to show reasonably clearly that he was not in a position to undertake any part of the exercise required to get to a projection of sales densities. He was not an analyst, and had to look at end figures provided to him, on which to base his own assessment (see paragraph 99 above), he knew that what Mr Parr referred to as attainment was critical but he was entirely dependent on Mr Parr for the attainment figure and could not himself form a view as to whether a figure given to him was right or wrong (see paragraph 105 above), and while he had used his own judgment in looking at the figures provided to him, he could not comment on whether one figure rather than another for the sales densities was correct (see paragraphs 98 and 106 above).
114. Mr Stewart summarised his case, relevantly, in three points, of which the first two are not in dispute. The judge found that it was an essential component of a competent valuation that there should be a CACI report or (in other words) a performance analysis, but that there was no such document before him on which he could rely in forming a view as to value. As to the matter in dispute, he submitted that the judge was wrong to find that Mr Barbour had performed any independent assessment of the sales densities or the figures for the turnover rent; alternatively, if Mr Barbour had given evidence to that effect, he said that there was no logical basis on which the judge could find that Mr Barbour had done so. Comparables were of no relevance, as Mr Barbour had said and the judge accepted, and there was no other material (besides the discredited CACI report) to support any kind of analysis which could get to £19 per square foot. The judge could have relied on Mr Woolley's evidence for a figure lower than £27.50, but he did not do so.
115. Miss Carr contended that one matter on which the judge could have relied, and did rely, was the evidence of Mr Sargent, the Defendants' expert as to valuation. I do not agree that the judge relied on that evidence. At paragraphs 238 to 247 he demonstrated convincingly that Mr Sargent's evidence was not soundly based, because it depended on comparables as regards the rent figure, which the judge held could not properly be done. What he said at the end of paragraph 247 does not seem to me to show that he regarded Mr Sargent's figures as valid in themselves. Rather he was making the perfectly apt point that, even if they had been reliable (contrary to what he had held), they would not conflict, or not greatly, with Mr Barbour's figures.
116. I accept Mr Stewart's submissions on this point. I respectfully disagree with what Mr Justice Eder said at paragraph 204 of his judgment. I would hold that Mr Barbour did depend entirely on Mr Parr's evidence for his figure of £190 per sq ft for projected sales densities and therefore for his figure of £19 per sq ft for the turnover rent. There was no other basis for those figures, which Mr Barbour did not reach, and could not have reached, of his own accord, despite his knowledge and experience of FOC schemes. In other respects, given a figure for sales densities, I accept that he used his own experience and expertise, and was entitled to do so. In that sense he did not follow the CACI report blindly. But as regards the critical starting point of projected sales densities he had, and could have had, no other basis or source than Mr Parr's evidence.
117. In coming to that conclusion I also respectfully differ from the conclusion expressed by Lord Justice Gross. There is much in his reasoning at the centre of his judgment on this point with which I agree. Most of my reasons for disagreeing with his final conclusion appear from what I have already said. However, it is right that I should address the points set out in his paragraphs 41 to 48.
118. I agree with him that paragraphs 171 to 173 of the judge's judgment have a wider significance than just whether Mr Barbour's evidence was admissible at all. They show part of the judge's assessment of Mr Barbour as a witness. I agree with all he says at paragraph 42, and with much of what he says at paragraph 43. I have said much the same as he does at paragraph 43(i) in the course of my paragraph 91 above but, as I also say there, the question may come to be whether the evidence provides the court with any material on which to come to a conclusion as to the correct valuation and therefore the amount of the loss. I also agree with his paragraph 44.
119. I begin to part company with my Lord at his paragraph 45, but not until sub-paragraphs (iii) and (iv). The last sentence of sub-paragraph (iii) comes back to the question whether the judge had any material on which to come to a conclusion as to the right valuation figure. As appears from what I have said at paragraph 110 above, I do not accept that it is open to the Claimants to rely on the point which he makes at paragraph 45(iv). My view of the relevance of Mr Sargent, set out at paragraph 115 above, is different from that which Lord Justice Gross expresses at paragraph 46. On the other hand I agree with what he says at paragraph 47 about Mr Woolley, but rejecting that evidence does not help to fill the gap as to a figure for retail performance.
120. For those reasons I have come to the conclusion that nothing in the evidence gave the judge the necessary material on which to arrive at a conclusion that the figure for the projected sales densities, as a starting point in the calculation, should be £190 per sq ft, or any other figure. £275 was far too high, but the judge had no evidential material on which he could work out by how much it was too high.
121. That then brings me to the second question which I identified at paragraph 91 above. What I have said at paragraph 94 above is relevant to this point. Miss Carr showed us the judgment of Mr Justice Vos in Dennard v PricewaterhouseCoopers [2010] EWHC 812 (Ch), at paragraph 182, as an example of a case in which the judge had to evaluate what a competent valuer would have taken as a figure, or a range of figures, for two elements in a complicated financial transaction, where the parties had not been able to agree on a "sensitivity model" through which the effect could be worked out of feeding into a very elaborate calculation the assumptions that the judge had held ought to have been made. This was only one stage in the process of reaching a figure for damages in that case, but it is a fair illustration in itself. However, it is quite a long way away from the present case, where what is missing from the evidence is a reliable figure for something that plainly lay at the heart of the case, namely the sales densities, as the starting point for valuation of the third element in the value of what was acquired. Moreover it is also very different from the present case because here the Claimants did seek to put before the court admissible evidence on the point, and they failed because of the deficiencies of that evidence. Nor is this a case in which the difficulty of evaluation arises because of some intervening event which has, for example, destroyed the subject matter of the case, or because the claim is about the value of goods which are missing, as in Armory v Delamirie (1722) 1 Str 505 and Zabihi v Janzemini [2009] EWCA Civ 851.
122. As Mr Justice Devlin said in Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422 at 438, "where precise evidence is obtainable, the court naturally expects to have it. Where it is not the court must do the best it can." (This observation was not invalidated by the Court of Appeal's reversal of the judge's decision at [1951] 2 KB 314.) Of course, this is not a case in which precision can be attained, but the comment shows that the court requires as good evidence as can reasonably be obtained, and should only be forced to "do the best it can", in the absence of evidence, if the evidence is not reasonably obtainable.
123. In my judgment, therefore, it is not for the court to embark on what could be no more than guesswork to make good the failure of the Claimants' attempt to adduce evidence on which the court could rely in order to prove the amount of their loss. I would therefore answer my own second question by saying that, in this case, there was no other legitimate basis on which the judge could conclude that the correct figure for projected sales densities was £190 per sq ft and that, therefore, the right figure for the turnover rent was £19 per sq ft.
124. For those reasons my conclusion is that, on the first issue, Mr Stewart is right to say that the Claimants did not prove the amount of their loss and they are therefore not entitled to more than nominal damages in contract, and to nothing in tort. It would follow from this that the appeal should be allowed.
125. If I had been of a different view on the first point, I would have agreed with Lord Justice Gross on the second point, as to which I do not need to add anything. As he says, on that basis the third ground of appeal falls away.
126. As it is, since my Lords take a different view on the first point, the appeal will only be allowed to the extent that follows from our upholding the second ground of appeal, which Lord Justice Gross has explained at paragraph 68 above.