England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		29 January 2010

HHJ DAVID COOKE :

Introduction and issues

1. The claimants bring this claim, which was pleaded in contract and negligence, for damages arising from the defendant's breach of obligation in relation to the renewal of a lease of business premises protected under Part II of the Landlord and Tenant Act 1954. Liability was admitted, and on 27 November 2007 Deputy Master Hoffman gave summary judgment in favour of the claimants "for damages for breach of contract to be assessed" and gave directions which have led to the trial before me. In this judgment, numbers in brackets refer to pages in the trial bundle.
2. The claimants' contention is that the failure to renew the lease has led to extremely substantial losses, ultimately put in closing at approximately £1.8 million although the figures produced by their expert ranged up to approximately £3.5 million. A great part of these losses turns on the contention that the business conducted on the premises, which previously had been principally a retail jewellers apparently turning over approximately £50,000 per annum and minimally profitable, would have developed into a highly successful and lucrative largely Internet-based business. The defendant's position is that the correct measure of loss is the value of the lease and retail business which has been lost (approximately £28,000) plus some relatively small costs directly arising from closure of the shop, and that the anticipated profits of the business are not recoverable. In any event, they dispute much of the factual basis of the damages claim and contend that the claimants' projections of future profits are unbelievable and should be rejected entirely.
3. The background, to the extent that the facts are not controversial, can be briefly summarised as follows. Between about 1975 and his death in June 1999, Abraham Nahome (also known as Abraham Solomon) ran a retail jewellery business known as Dahlia Jewellers from leasehold premises at 71 High Street, Waltham Cross, Hertfordshire. The premises consisted of a shop on the ground floor with an arcaded front, behind which was a showroom, secure storage area and workshop, with a two-storey residential flat above. The lease did not permit subletting, and it appears the flat was used as additional storage and administrative space, although this was not a use permitted by the lease. The first claimant is Abraham's sister, and her evidence is that she worked for her brother Abraham prior to his death, and had done at various times over a number of years, as she also had for the businesses owned by her eight other brothers, all of whom were involved in various aspects of the jewellery trade in London and elsewhere.
4. On Abraham Nahome's death the business was inherited by the second claimants, his daughters. It appears however that they were not interested in being involved in the jewellery business, and the first claimant took over the running of the business from October 1999. It was agreed between them and recorded in a short document signed by all three on 1 February 2000 that the second claimants would sell the business and premises to the first claimant, for a price which was not stated in that document. Their evidence is that the agreed price was £28,000 and that it was paid or partly paid, and the business considered to be sold to the first claimant, from 1 April 2000.
5. The premises were held under a lease expiring in December 2001. The first claimant set about negotiating for purchase of the freehold from the then landlord, but although she thought she had an agreement to buy it, the landlord in fact sold to a Mr Somaia. In June 1991, agents on behalf of Mr Somaia served a notice under the 1954 Act stating that he would not oppose the grant of a new lease, and proposing terms including a rent of £15,000 per annum (increased from £8500). The first claimant instructed a firm of surveyors, Storey Sons and Parker (SSP) who advised her that she should negotiate on the basis of no increase in the rent because of a number of factors adversely affecting trade, although their estimate of the present rental value was approximately £9600. They also advised her to seek some variation to the terms of the lease, particularly permission to use the shop premises otherwise than as a jewellers and permission to sublet the residential flat. No reference was made to obtaining permission to use the flat for purposes other than residential.
6. SSP recommended the defendant firm to the first claimant, and on 6 July 2001 wrote to Ms Lodge at the defendant to tell her that they had done so. It appears that Ms Lodge spoke to SSP on that day, and on 19 July she spoke directly to the first claimant. The content of that conversation is controversial and I will return to it later. What is clear is that Ms Lodge was instructed to serve the required counter notice, and she did so by letter addressed to the landlord's agents the same day.
7. Unfortunately, the notice was incorrectly completed and, having deleted the vital word "not" from the printed form, stated that the tenants "will be prepared to give up possession". On 24 July 2001, the first claimant wrote direct to the landlord seeking a meeting to discuss the "covenants", presumably with the intention of seeking the variations she had been advised to by SSP. At about the same time she informed SSP that she intended to conduct the negotiations herself, which was recorded in a letter of 7 August 2001 from SSP, with which they sent their account.
8. The meeting was held on 8 August 2001, with Mr Robins the landlord's agent. He met the first claimant and, it would appear, at least one of the other claimants, and made a file note recording that the ladies had shouted at him, complaining about the proposed amount of the rent, the loss of some car parking spaces which they had been accustomed to use and the fact that they had not been given the opportunity to purchase the freehold, and had said they were not prepared to accept the terms offered. He told them that none of these matters was relevant any more since they had served notice to give up possession, and terminated the meeting.
9. This of course came as a surprise to the claimants and following this meeting the first claimant telephoned the defendant firm, spoke to a partner (Ms Lodge being away ill) and was told that there had been a mistake in the counter notice sent. The defendant purported to serve an amended counter notice, but the landlord would not accept it and held the claimants to the terms of the original notice. The second claimants brought proceedings seeking a new lease which, inevitably, were dismissed. A possession order was made in favour of the landlord, who consented not to enforce it until 31 March 2002. The first claimant conducted a closing down sale, and left the premises on that day, at which time the retail aspect of the business came to an end.
10. So much of the history is relatively uncontroversial. The remainder I summarise from the claimants' case, much of which is disputed. The first claimant's case is that beginning in 1999 and but particularly from 2000 and she began a process of expanding the retail shop business which had been known as "Dahlia Jewellers" into Internet, corporate and mail-order markets, which she operated under the slightly different name "Dahlia Jewellery". She began work on obtaining a list of corporate clients such as banks with a view to selling jewellery to their staff. She began preparation of a collection of jewellery to be marketed through catalogues, referred to as "look books", by means of product placement in the fashion pages of various newspapers and magazines, and through her own website. This business was starting to grow and showing considerable promise by the time she was obliged to vacate the shop.
11. It is the first claimant's case that the new aspects of the business depended crucially for their success on having the existing retail jewellers premises, and that she explained this to Ms Lodge in their telephone conversation on 19 July 2001. The loss of those premises not only brought the retail business to an end but was catastrophic for the burgeoning Internet/corporate/mail-order business. She was not able to find alternative premises at an affordable rent. She could not afford the cost of fitting out alternative premises as a jewellers shop with the associated security requirements. She could not obtain bank finance for her business because no bank would lend to her even for the Internet and mail order business unless she had retail shop premises.
12. She attempted to carry on the Internet/corporate/mail-order side of the business, but was obliged to use space at her sister's house as the basis of these operations. This was unsatisfactory as she did not have a dedicated workshop area She was forced to pay for storage of items removed from the shop which could not be accommodated at the house, and to pay for additional security measures at the house required because of the valuable stock kept there. She succeeded in building up sales in these remaining areas of the business impressively, but was not as successful as she could have been because of the lack of finance, which particularly meant that she could not afford to stock and trade in more expensive items such as gold and precious stones, which she previously had through the shop, and had to turn away orders she could not afford to supply and business opportunities she could not afford to participate in. The profitability of the business was also affected by additional costs such as extra advertising, diversion of phone calls from the original shop number and provision of mobile phones, all of which she maintains were required because she had to operate from her sister's house rather than retail premises.
13. It was the first claimant's evidence that eventually she was obliged to bring even the remaining parts of the business to an end, because her sister was no longer prepared to put up with the security risks inherent in having jewellery stock at her house. It was her evidence that she ceased to trade in 2006, her final accounts being drawn up to 31 March 2006.
14. The first claimant's case is that she is the owner of the business and but for the negligence the lease would have been renewed for a period of 20 years at a market rent. The capital value of that lease on the expert evidence would have been £5000. In addition, she seeks the amount of additional expenses she says were incurred by reason of having to move the business to her sister's house, set out in the schedule of "special losses" attached to the particulars of claim and amounting to £84,844. She would have continued the retail business, earning profits in that business up to 2010 in the aggregate amount of £102,701 (this estimate being agreed between the respective accountancy experts), and claims this amount as damages. In addition she would have earned very substantial profits through the Internet and mail-order business, which she puts at just over £1,033,000 to date. This amount is supported by expert witness evidence of an accountant Mr Cohen, whose report in turn relies upon that of a branding expert, Mr Gabay, and profit calculations based on a comparison with a separate company John Greed Ltd which, the first claimant says, operates a comparable business. In order to put her in the position she would have been in had the lease been renewed, the first claimant seeks the cost of establishing herself in replacement leasehold premises, being fitting out costs of £120,000, an estimated £250,000 for advertising and other costs associated with relaunching the business, and further losses of profits for a period of 12 months, within which she says she could establish the business at the profitability levels projected. These losses she puts at £215,000, for both the retail and other aspects of the business. The aggregate claim therefore amounts to £1,810,545, plus interest.
15. There was on the pleadings an issue whether the first claimant was properly entitled to any damages at all, given that the legal title to the lease was vested in the second claimants. Ultimately however Mr Hubble took no point on her ownership of both the retail and internet business or her standing to bring the claim and recover such loss as she was able to prove, and accordingly I do not address the arguments on the point raised by Mr Bard. From now on in this judgment if I refer to "the claimant" or "Ms Nahome" without distinction, it is to the first claimant whose claim effectively this is.
16. The defendant's position in relation to the loss of the retail business is that it is wrong in law to seek to calculate all the profits that it would have made over the period of the new lease. Mr Hubble submits that where the loss of a lease causes a business to close, damages should be assessed by reference to its capital value at the date of closure which, on the expert evidence, was £28,000. He challenges the damages claimed for the other aspects of the business as too remote, on the basis that the defendant denies knowledge that there was any such business at all. Many of the "special losses" are challenged as unsupported by the evidence or not genuinely caused by the relocation of the business; he puts forward figures totalling £18,027. So far as the Internet and other new aspects of the business are concerned, the entire factual basis of the projected profits is challenged as incredible. The business made losses in the period in which it operated and, Mr Hubble submits, there is no evidence that can be relied upon to show that its inability to make profits had anything to do with the defendant's negligence or the loss of the retail premises. In particular, the reliance on John Greed Limited as a comparator is rejected as flawed on the basis that the selection of that business was not the product of any expertise of Mr Cohen, but instead was made by the claimant to suit her case. In fact, Mr Hubble contends, the John Greed business is substantially different from that which the claimant was seeking to operate.
17. Mr Hubble produced an alternative calculation based on the submission that on the evidence, had the claimant negotiated reasonably with the landlord it is likely that he would have agreed to renew the lease at the rent he demanded, namely £15,000 per annum, rather than the rent which might have been negotiated of £11,275 if the notice been served correctly, giving rise to a loss over the 20 year period of the lease of £74,500 (no doubt subject to a discount for early receipt). In the further alternative, he submitted that I should conclude on the evidence that had the first claimant conducted a proper search alternative premises could have been located at the same rent as would have been negotiated on a renewal, and that the claimant should be awarded only costs of fitting out such premises and inevitable disruption, amounting to approximately £80,000. All these calculations therefore produce figures vastly less than those contended for by the claimant.

Factual issues

18. I propose to deal first with the areas where the factual evidence was in dispute and make findings on those matters before coming onto questions of law. It is appropriate at the outset to give my views of the claimant as a witness, and the reliability of her evidence. The burden of proof in establishing the losses contended for is of course on her. She was the only witness of fact required to give evidence on the claimants' behalf, the brief statements made by her nieces being accepted without cross-examination. She has served three witness statements and an affidavit in the course of the proceedings, and a further document described as a 'Retrospective Business Plan and Projections as at April 2001', prepared in April 2009 and intended to set out her case as to loss.
19. Her oral evidence in cross examination was extremely lengthy. It was often rambling and argumentative, and on occasions incoherent. She appeared to have great difficulty focusing on and responding to the questions put to her by Mr Hubble. This was not due to any fault in the questioning itself, which was a model of courtesy, clarity and patience. Nor in my view was it due to any inability on her part to understand what she was being asked or what information was required; when asked questions by her own counsel her responses tended to be very much briefer and more to the point and showed a good understanding of the process relating to renewal of a lease and general business matters.
20. Nor was I persuaded by Mr Bard's submission that her manner was due to her creative and artistic temperament and the emotional effect of the claim upon her. I came to the conclusion that it was much more a deliberate strategy to avoid or deflect questioning which appeared likely to lead to answers unfavourable to her.
21. There were a number of areas in which the claimant's disclosure had surprising gaps, for which there was no good explanation. The most obvious of these was that although she produced sets of accounts for periods from 1999 to 2006, she was apparently unable to produce any of the underlying accounting records at all for any of these periods, such as bank statements, VAT records, purchase and sales invoices, orders, delivery records or cash books. In a letter written on 22 October 2009 her former accountants said that the accounting records had been returned to the claimant "many years ago". Those accountants ceased to act in 2004 and it must be assumed they would have returned any papers held soon after that, or passed them to the claimants' new accountants. Nothing at all was produced from the new accountants. Asked where these records were, the claimant's explanation was that after she had left the shop premises she had had to store documents in various different locations and she had been unable to locate the accounting records despite her best efforts. I do not believe this was the truth; while she may have removed from the shop records which existed in respect of periods prior to April 2002 she was obviously able to obtain those records for preparing the accounts for that year, and further records must have been generated in respect of all the subsequent years up to 2006. It is not credible that they should all have disappeared. Furthermore, any records returned to her by either firm of accountants must have been received at a time when she had solicitors instructed in respect of the claim, to whom she was providing information for the purpose of formulating it. She would have been aware of the relevance of these records to the claim, and no doubt advised by her solicitors of the importance of preserving documents for the purposes of her disclosure obligations. I do not believe it is likely that during this period she would have casually stored these documents in a location that she cannot now recall.
22. Further still, the first claimant was required by Master Bowles to swear an affidavit dealing with the searches she had made to locate documents relating to attempts to obtain finance for the business. According to the affidavit, made in March 2009, she searched all the locations in which documents relating to the business were stored without success. If that search was made, it is not credible that it would not have turned up the other business records which she knew were required.
23. Other documents that were produced seemed to be available on a very selective basis. It was her case that the jewellery she produced was very well received by the market and very popular with customers, fashion journalists and potential business partners. In support of this, she was able to produce a large number of faxes and e-mails from such people complimenting her on the jewellery and enquiring for further details with a view to making individual purchases or, in some instances, purchases of larger quantities or entering into a business supply relationship. It was also her case that she had been unable to fulfil many enquiries, or pursue potential business relationships, because of the lack of finance or other difficulties caused by the fact that she was working without retail premises. Her disclosure however did not include any correspondence showing that orders had been turned down, or that she had provided further details to enquirers but they had not pursued matters by reason of the difficulties she claimed. Plainly, the claimant had access to the correspondence records in order to produce the documents that she did. I do not find it credible that, for instance, if substantial numbers of orders had to be rejected, there would be no instance in which this would have resulted in some correspondence, even if only an e-mail or letter expressing regret that the order could not be accepted. If enquiries had been made by potential purchasers or business partners which the claimant was unable to bring to fruition, it would be expected that there would be at least some correspondence in which she either turned down the enquiry or (more likely) tried to explore whether some arrangement could be made that was within her capacity and satisfactory to the other party.
24. There was a particular example of unsatisfactory disclosure in relation to the price which the first claimant says that she paid her nieces to take over the business. In all of her witness statements, and in those prepared by the second claimants, no figure is mentioned and indeed the impression is given by the use of phrases such as "the agreed consideration" that the statements are skating round the issue. At some point before trial a figure of £28,000 was disclosed in correspondence between solicitors, but for whatever reason it was not mentioned directly in the evidence. The first claimant was anxious to demonstrate that she had agreed to acquire the business from her nieces, and in support of that she produced a letter (bundle 2 page 210) dated 6 July 2004 written to her by her accountant which reads "you have asked me to confirm to you the amount that you paid to the estate of Mr A S Nahome on acquiring the above business on 1 April 2000. I can confirm that you initially paid £[blank] to which I understand from you that you added a further £[blank] and that you bought it in its entirety". The information blanked out has been obscured by the first claimant herself, the first blank being short and apparently only a figure, while the second is longer and is obviously a figure and some following words. In her witness statement she said that she had removed some information as being "irrelevant and private". Given that she produced the letter as evidence of her purchase of the business, the price paid is clearly not irrelevant.
25. I asked at the opening of the trial whether a complete copy could be made available, but it was not. This letter was plainly obtained in order to be used in the proceedings, and from the terms of the letter it would appear that it was specifically the amount of the consideration that the first claimant was seeking to have verified, which makes it very odd that she should then have suppressed the figure on the basis that it was "irrelevant". When asked about this letter by Mr Hubble she said that the figure in the letter was £14,000 and that she had probably paid a further £14,000 later on. She admitted however that these figures were guesses. Asked why she had blanked out the figures she gave an extravagantly dramatic response that she felt she was being "raped" by all the enquiries and did not wish to disclose this information.
26. This particular piece of evidence leaves a lot of unanswered questions. Why did the claimant have to guess at the instalments? In doing so, she appeared to me when giving her evidence to be being deliberately evasive. Why did she have to have a figure confirmed by her accountant at all? One would expect either that the claimant would have had her own records, such as bank statements, showing what she had paid. Either she or the second claimants who were the executors would have had available to them the records of the estate to show what it had received. If her accountant was aware of the first payment, why was he not aware of the second? Why should the claimant have to ask him to write a letter confirming information which the accountant was only aware of from what she herself had told him? Why should the nieces have referred (as they did) to the agreed consideration as having been paid in April 2000, if in fact part of it was paid later?
27. I was left with the impression that the first claimant may not have told the whole truth about the arrangement she made with her nieces and that whereas she was anxious to demonstrate the fact of her agreement to acquire the business she was equally anxious to avoid being specific about the price she paid for it, perhaps because she felt that it was, or might be portrayed as being, inconsistent with the claim she was making.
28. In several respects, the claimant's oral evidence went substantially beyond what was set out in her witness statements. One example also concerned the price paid for the business. In cross-examination, she said that although she had agreed to buy the entirety of the business for £28,000, it was worth 'far more' and she had promised her nieces that if the business was successful, she would make a 'substantial' payment to them so that they received a fair share of any increase in value. No such arrangement had been mentioned in any of the witness statements.
29. A second example concerned negotiations with the landlord after the mistake in the renewal notice had been discovered. The claimant was asked in cross-examination whether she had gone back to the landlord to try and negotiate a renewal with him even though the statutory entitlement has been lost. She said that she had done so, and had made him a series of offers working up to an offer of rent of £15,000, which was what he had asked for originally, but did not want to know and would not let it to her. No mention had been made in any of her witness statement about any such negotiations. No documents were disclosed dealing with them. She had not instructed SSP in relation to them. She said that she had the landlord's mobile telephone number, implying that all the discussion with him had been over the mobile phone. She agreed that it was very strange that the landlord would apparently turn down an offer of the full rent he had asked for only to leave the property unoccupied for a further 18 months when it was eventually let at a lower figure. She implied that the landlord may have had some personal reason for not wanting to let to her; if she thought so, why should she not have tried to deal with matters on a businesslike basis by putting her proposal in writing (she had after all written proposing a meeting to discuss the terms of the lease) or having it put through SSP or the solicitors who were conducting the litigation on her behalf? She had said in her witness statement that she had been advised to take proceedings against the landlord to "force his hand"; it would be normal to back that up with an offer of settlement through solicitors if that was what she was seeking. She told Mr Hubble that the idea of making an increased offer to the landlord had come to her "within a few weeks" and "after I took advice" and so presumably while the litigation was continuing, and yet it appears that she did not make her offer through her solicitors.
30. Further, she was asked about attempts she had made to obtain finance from banks for the new business. Her written evidence had been (in her affidavit of 23 March 2009) that throughout its trading period of approximately 30 years, the business had always used Barclays Bank and was well-known to them and "accordingly I was not required to complete any form of business plan or projections in order to be afforded an overdraft facility, being an arrangement which had been ongoing for many years in any event." In cross-examination she said that she had attempted to obtain finance not only from Barclays but from numerous other banks as well, although she was vague as to exactly which. She had not mentioned any such enquiries in any of her written evidence, although it would clearly have been relevant to her case to have done so. Asked about how she could have made such enquiries without producing a business plan, she said for the first time that a document prepared by a Mr Ayres in February 2002, which she had relied on at an earlier stage of the proceedings, was in fact prepared for the purposes of the banks she was approaching. If so, why would she not previously have said so? If her approaches to banks had reached a point where financial projections were being prepared for submission to the banks, how could it be that none of these approaches had resulted in her generating or receiving any other documents at all? None has been disclosed, and she specifically confirmed in her affidavit that none had ever existed.
31. In relation to her evidence of searching for alternative premises, she said for the first time in oral evidence that she had approached all the local estate agents who might have had nearby premises on their books. Her disclosure included particulars obtained from the Internet from a number of agents who were not local, mostly in respect of shop premises far away from Waltham Cross. It would obviously have been relevant to say that she had also searched in the locality, particularly as her evidence was that it would have been unsuitable for various reasons to relocate the shop very far from the existing premises. Nevertheless no mention of any approach to other agents was made in her written evidence.
32. Given the amount of written evidence that the claimant had produced, all of which was designed to make good her claim, I did not find it credible that she would have omitted such significant matters as these, which would have supported her case. My impression was that she was making these matters up as she went along, with a view to filling what, in the light of the cross-examination, she perceived to be weaknesses in her case.
33. There were some significant inconsistencies and unconvincing elements in the claimant's evidence. In relation to her search for alternative premises, she said that she only regarded Waltham Cross as a suitable location, because it was near to her home. In particular, she said she had not looked at premises in Cheshunt as this would not have been "viable" although it is only about a mile and a half away. Pressed for information about how many other shops she had looked at she said she had been to see about eight, in and around Enfield and Waltham Abbey, all of which would be further away than Cheshunt. She had not apparently been provided with particulars of any of them. If she were genuinely seeking to find alternative premises, it would not have been reasonable to confine the search as tightly as she apparently did. If she had apparently ruled out Cheshunt, it would be inconsistent to visit eight shops all in the area of Enfield or Waltham Abbey. It would not be credible that she could have done so without having been provided with particulars of them.
34. The claimant was asked about her family members in the jewellery trade in two different contexts. First, Mr Hubble took her through her CV and her experience and connections in the jewellery trade. In the course of that, she said that in the period 2003 to 2004 three of her nine brothers were involved in the jewellery trade in Hatton Garden, dealing with all aspects from manufacturing to wholesale to retail. She had knowledge of all these areas and worked for her brothers in any of them, as and when she chose. Somewhat later in her cross-examination, in dealing with the availability of premises for holding stock and carrying on such manufacturing operations as were necessary for the Internet business she was then conducting, she was asked whether she could not have made use of space or facilities at any of her brothers businesses, in response to which she said that no such facilities were available to her and in fact that time only one of her brothers had been in the business at all. Apart from the factual conflict about the number of brothers, the claimant sought to give a completely different impression of the extent of her family business connections and her ability to make use of them according to whether it appeared to suit her to play them up or down.
35. The first claimant said that her turnover in the internet business had been restricted by the fact that for lack of finance she had to maintain a limited stock, and in particular could no longer afford to stock gold and precious stone items which would have generated higher turnover and profits than the silver items she was obliged to deal in after the premises were lost. But this was not consistent with the fact that her accounts showed a significant increase in stock value after the shop closed, and her 'look book' and magazine publicity stated that all items were available for purchase in gold.
36. The first claimant's own estimates of the turnover she might have achieved in the new aspects of her business were in my view wildly exaggerated. In her 'retrospective business plan' at para 21 (183) she said that an item made in gold and precious stones would sell for four times the price of the same item in silver, and so her actual figure should be multiplied by four 'to reflect the true potential'. The assumption that every customer would have bought an item four times as expensive as she did, if only it had been available, is absurd. She maintained in oral evidence the view expressed at paragraphs 22-4 of the same document that but for the loss of the shop, her turnover would have increased from a combined £73,000 in the year ending 31 March 2002 to £835,000 in the year ending 31 March 2003, a rate of growth that is simply beyond belief.
37. All of these factors contributed to the view that I came to which was that the claimant was an unsatisfactory witness upon whose testimony it would not be safe to rely unless it was supported by other persuasive independent evidence. Unfortunately, as will become clear, significant parts of the other evidence relied on in support of her claim, including her expert evidence, was not in fact truly independent but apparently largely influenced by suggestions made or information provided by the claimant.

The retail business

38. With that introduction, I turn to consider the issues in the case. It is convenient in my view to approach these by considering separately the two businesses which the claimant regarded herself as operating. The first, which I will refer to as the "retail business" was the business of selling retail jewellery at the shop, for which she used the name "Dahlia Jewellers", which was the business that in fact came to an end when she gave up the premises at the end of March 2002. The second I will refer to as the "Internet business" as a matter of shorthand, although it also included the elements of sales to corporate customers which were made following visit by her to the customer's premises, and also mail order sales which may not all have been generated or conducted through the Internet. This was the business that she attempted to carry on afterwards from her sister's house, under the name "Dahlia Jewellery".
39. I must first make findings of fact about the instructions given to the defendant firm, particularly in the conversation between the claimant and Ms Lodge on the 19 July 2001. This has important implications for the extent of the damages recoverable, turning upon whether Ms Lodge was made aware of the existence of the Internet business and its alleged dependence on the continuation of the lease of the retail premises.
40. The claimants were not existing clients of the defendant firm. They were introduced by SSP in a letter dated 6 July 2001 (224) which evidently followed a telephone conversation between Mr Wilson of SSP and Ms Lodge. The letter was headed "Ms Lily Nahome trading as Dahlia Jewellers". Mr Wilson sent a copy of the lease of the premises, which named the landlord as a Mrs Collins and the tenant as Mr Nahome. He also sent a copy of the landlord's section 25 notice, addressed to the second claimants, Dahlia and Seemah Nahome. He went on to say "the client details are: Ms L Nahome, Dahlia Jewellers, 71 High Street, Waltham Cross" and gave her contact telephone numbers, and then "she currently paying £8500 per annum and the landlord has quoted a revised rental of £15,000 per annum for a 20 year lease."
41. An undated file note appears on Ms Lodge's file (225). She accepted the suggestion that it was probably made by her in response to this letter and examining the documents. In it, she noted the discrepancy between the name of her client and the persons named as the tenant in the lease, and the addressees of the section 25 notice, as well as the change of name of the landlord. There is a further file note (226) dated 16 July 2000 and apparently made by a secretary recording the fact that "Ms Lily Nahome" had telephoned. Ms Lodge thought she had spoken to Ms Nahome on two occasions, firstly on or about the 16th and secondly on the 19th. Ms Nahome said there had only been one conversation, on the 19th. Nothing turns on it, but I proceed on the basis that Ms Nahome is correct.
42. In her first witness statement, the claimant said this (page 151, paragraph 12) "I also informed Ms Lodge of the reasons why I opposed the ending of the tenancy being predominantly due to the length of the occupancy at the premises and that the business goodwill of both Dahlia Jewellers and Dahlia Jewellery depended on the locality of the premises. I further made it clear to Ms Lodge that I owned Dahlia Jewellers… I explained to Ms Lodge that I intended to expand the business of Dahlia Jewellers and that I had already commenced the business of Dahlia Jewellery. Ms Lodge well knew that I was the owner of Dahlia Jewellers and Dahlia Jewellery."
43. Ms Lodge's evidence in her witness statement (566.2) was different. She said "I recall that the claimant's overriding concern at this time related to the landlord's attempt to increase the rent…. I recall the claimant indicating that if the landlord would not accept less than £15,000 per annum in rent, then the business could not continue and the lease would not be renewed. I recall speaking at length about the financial difficulties the business was facing. I recall mention being made of the fact that the business was the only luxury goods retailer amongst a row of grocery shops and that the trade was so poor that it was not worth opening the shop on some days. The claimant's overriding concern was that the renewal did not lead to an increase in the rent. Although the actual ownership of the business was not expressly discussed, I was told by the claimant that the lease had been in the name of her late brother and that it had been vested in his daughters upon his death. I understood the position to be that the claimant was speaking on behalf of her nieces."
44. After the conversation, Ms Lodge served the counter notice, with its fatal mistake, and wrote to the claimant referring to their telephone conversation and confirming that she had served the notice. She also said "I understand that Richard Wilson at [SSP] is negotiating the terms for a renewal of your lease and I look forward to receiving details of the agreed terms from Richard in due course." She referred to the protection under the 1954 Act and the potential need to make an application to the court if terms had not been agreed within four months. She also said "I note that you are interested in acquiring the freehold reversion to the property and no doubt Richard is also aware of this and is to negotiate for a right of pre-emption to be included in the renewal lease. As we discussed I will also resist any attempt by the landlord's solicitors to provide for the provision of an authorised guarantee agreement in the event of you choosing to assign the new lease at a later date. However as we discussed it is unlikely (sic) that the landlord's solicitors will insist on the provision of an authorised guarantee." Finally, she enclosed a copy of a firm's standard terms and conditions of engagement, which she asked to be signed by the first claimant and her nieces.
45. When Ms Lodge was questioned about this conversation, she gave her evidence in a careful and considered way. She acknowledged and apologised for the mistake she had made, and did not seek to excuse it. She was firm about the things she remembered, and acknowledged and did not attempt to speculate where she could not remember, as for instance when I asked her if she recalled what had been said to her to prompt the reference in her letter to discussion of the possible assignment of the lease. There must have been some such discussion or she would not have included that paragraph, but she could not recall it and did not try to guess what it might have been. She was prepared to accept the explanation that Mr Bard put to her of her undated note, although she had no direct recollection of when it was prepared. She accepted that it was apparent from the letter that Mr Wilson had written to her that her client was to be Ms Lily Nahome, but denied that there had been any discussion about her owning the business. As she pointed out, had she been told that Lily Nahome owned the business trading from the premises there would have been a potential problem renewing the lease because the statutory right to renew was only available if the tenant (ie the nieces) was occupying the premises and carrying on the business there. Ms Lodge was experienced in the renewal of business leases and well aware of the point. She accepted that she had written her confirmatory letter to the first claimant noting that "you are interested in acquiring the freehold premises" but said that this was consistent with her being told that the first claimant was speaking on behalf of her nieces and dealing with it as a family matter, which is in my view a plausible explanation of the use of the word 'you'.
46. Ms Lodge was sure that the prime concern expressed by the first claimant was as to the amount of the rent, and that there had been considerable discussion of the financial difficulties the business was in. She distinctly remembered being told that takings were so poor it was not worth opening the business on Sundays. She was sure that Ms Nahome had told her that her shop was the only luxury goods retailer in a row of grocers. It was pointed out that the remaining shops in the row were not in fact grocers, as to which she said that she had no knowledge of it herself and it was not her statement, but one that had been made to her by the client. When Mr Bard put it to her that Ms Nahome had told her that although the business was an old established family jewellers, she had commenced an Internet and mail order business and the two were running together from the premises she said "that does not ring any bells whatsoever".
47. Ms Nahome on the other hand denied having any discussion about the rent or making any mention of financial difficulties or that the business had not been worth keeping open on some days. She made a sarcastic reference to such difficulties being the reason why she had tried so hard to acquire the freehold. She had however prepared a schedule (1469) claiming to show the dates on which the shop had been open and the amount of the takings in the year running up to March 2001, according to which there were many weeks in which the shop was only open for two, three or four days, and its takings were mostly very low on the dates when it was open. She was very vague when asked about the information she had used to compile this, saying that she had kept records from which she was able to do so (although of course no such records had been disclosed), that she had done so at the request of her solicitors, apparently some years later, and that there was no similar schedule for any other period. She tied herself in knots as to how it had been prepared, first of all saying that it had been done on a computer, then denying that she had said that and finally accepting that it had been prepared on the business's computer.
48. She gave as one of the reasons for the closures the fact that she had suffered the death of her brother Abraham and other family members, referring to an extended period of mourning customary in the Jewish faith, although she accepted that these deaths had been some time before the period covered by her schedule and that it was not a requirement of mourning that the business should be closed. She also said that on the days that the business had been closed it was because she had deemed it better to spend time building up contacts with her proposed corporate client base, although this seemed to consist of little more than finding out from customers of the shop where they worked and then attempting to obtain an opportunity to visit the business premises and market her products to other employees of that business. She had no documentary evidence of any appointments to visit any such contacts and no correspondence suggesting that she had been given any particular recognition as having an official relationship with any such business, although she suggested that she was appointed the corporate jeweller to major banks and other institutions, a concept which seems unlikely. There was thus nothing to support the suggestion that she had spent the numerous days the shop was closed in pursuing corporate clients.
49. Ms Nahome said that she had no concern about paying the rent as long as she was advised by professionals that it was a proper price. She would have been well able to pay £15,000 pa if that had been the appropriate figure. She denied any discussion with Ms Lodge about the rent, saying that it was not something Ms Lodge needed to know for the purposes of the renewal. Ms Nahome said that rent values were not her expertise, and why she was paying SSP. That did not fit very well with the fact that a few days later she dispensed with SSP's services and took over negotiations herself, which elsewhere in her oral evidence she maintained had always been her intention. If so, she clearly did not tell Ms Lodge of that intention, since her letter following the conversation is premised on negotiations being conducted by SSP. Ms Nahome denied any conversation at all with Ms Lodge about a possible assignment of the lease.
50. As between these two accounts, I have no hesitation in preferring that given by Ms Lodge. Her account of Ms Nahome's concern about the level of rent and trading difficulties of the business is consistent with what Ms Nahome told SSP when obtaining their advice, and with the attitude she clearly took when negotiating with the landlord's agent. The reference to the takings of the business and it being not worth opening on some days is consistent with Ms Nahome's own schedule, and I did not believe her attempts to explain that schedule away. Although Ms Lodge would not herself had been involved in negotiations about the rent, it would be normal for the level of rent to be among the terms of the new lease which were being negotiated, and not at all surprising that Ms Nahome would have mentioned any concerns that she had about the level of rent to her solicitor.
51. The explanation supposedly given about the establishment of the new business and the goodwill of both businesses being dependent on the locality of the premises on the other hand strikes me as contrived. Had there been any such conversation, Ms Lodge would have remembered it, but as she said it "rang no bells whatsoever". I did not believe Ms Nahome's denial that there had been any discussion about assignment of the lease; it is not credible that Ms Lodge would have included the paragraph that she did in her letter if there had been no such discussion. I do not believe that Ms Lodge invented the reference to the jewellers shop being the only luxury goods shop amongst a row of grocers; although Ms Nahome was at pains to deny having made any such remark and denied that the other retailers were in fact grocers, it is a remark which would fit with the accepted relatively poor trading location, of which Ms Nahome was very conscious, and although a somewhat inaccurate and contemptuous description of her trading neighbours, one which I find it plausible that she would have made. It was suggested that Ms Lodge's memory might have been affected by the onset of the illness that caused her to be away from work when the problem blew up on 8 August 2001, but I do not think that is likely as the relevant conversation took place on 19 July (a Thursday) and Ms Lodge's evidence was that she remembered very well when she began to feel ill, which was on the following Saturday.
52. Where the two accounts differ, therefore, I accept Ms Lodge's account of the conversation. Specifically, I find that in that conversation the first claimant was preoccupied with her concerns about the prospective level of rent, and that she did not make any reference to the existence of the Internet business or its dependence on the availability of the retail shop. I also find that Ms Nahome did not tell Ms Lodge that she, as distinct from her nieces, owned the retail business (still less of course that she owned the Internet business). Mr Hubble has not however, as I indicated above, sought to rely on this as defeating any claim to damages by Ms Nahome in respect of the retail business. It follows that I must go on to consider what the amount of those damages should properly be.
53. It is not in dispute that the removal or closure of the business would have been within the contemplation of the defendant as a potential consequence of its breach of contract. Nor is it in dispute that, had the correct notice been served, the lease would have been renewed for a 20 year period at a current market rent. Mr Bard spent some time in examining the joint valuation expert Mr Shaw as to what this figure would be. In the end in his closing submissions he accepted that it would not make any difference to the way in which he finally put his submissions as to loss, because he abandoned any claim for future loss based on a difference between the rent that would have been negotiated and an open market rent.
54. In case it is relevant however, I find the likely renewal figure would have been £9,800 per annum. Mr Shaw's written evidence produced a higher figure (£11,275), based upon a number of comparables in the area. One of the comparables was the immediately adjoining unit, which was owned by the same landlord and where the lease also fell due for renewal at the end of December 2001. It appears that although the total rent negotiated at that property was £12,500, the rent per square foot "in terms of zone A" (or "ITZA", being a measure used by estate agents for comparing retail premises) was substantially lower than the other comparable properties Mr Shaw had used. Although he expressed reservations about relying on one particular transaction, he accepted Mr Bard's suggestion that the landlord would be likely to have agreed a similar rate ITZA for both properties, and he accepted the calculation put to him by Mr Bard showing that this resulted in a rental of £9800. In his closing submissions, Mr Bard produced a revised calculation coming to a figure of £8617, the difference being in respect of the element of rent attributable to the upstairs flat, on the basis that this was sublet in the adjoining property, but Ms Nahome would not have intended to sublet it, and so would have negotiated a lower rent for it. I do not accept that calculation; it was not put to Mr Shaw and seems to me to have two potential flaws. The first is that Ms Nahome was advised to seek a variation in the lease permitting her to sublet the flat so the renewal may well have been negotiated on that basis. The other is that it would not in my view be safe to assume that the landlord would have been content to accept what was apparently a lower than market rent per square foot for the shop premises by reference to the next door property if the upstairs flat was not also treated in a comparable manner.
55. There is a dispute between the parties as to the principles to be applied in assessing these damages, which I have set out above. Mr Bard's submission that damages should be awarded on the basis of a calculation of loss of profits which would have been earned in periods after the end of the lease was founded on Matlock Green Garage v Potter Brooke-Taylor & Wildgoose [2000] Lloyds Rep PN 935 and Aran Caterers v Stepien Lake Gilbert & Paling [2002] 01 EG 76. Mr Hubble's submission was that the loss of profit calculations were taken into account in those cases as a limiting factor in applying a more general principle, which was that damages were to be assessed at the date of the breach of contract by reference to the diminution in capital value of the business caused by the negligence.
56. For that he referred me to a number of cases beginning with Clark v Kirby-Smith [1964] 1 Ch 506, a decision of Plowman J. His submission was made on the basis that in that case the lease had been renewed notwithstanding the solicitors negligence, and the measure of damages was taken as the difference between the value of the lease actually granted and the lease which would have been obtained but for the negligence. Reading the report however, that seems not to be the case. The plaintiffs had a lease which expired at the end of 1962. It contained options to renew, which by then had expired. The plaintiffs either had dissolved their partnership which was carrying on business on the premises, or were about to do so. They instructed a solicitor to renew the lease under the 1954 Act but he failed to take the necessary steps. It appears that the lease came to an end as the plaintiffs faced a claim for dilapidations. Plowman J summarised the claim as follows, at page 509:

" the plaintiffs claim damages under three heads. First, damages are claimed for the loss of the asset which would have been represented by a new lease granted to them under the terms of the Landlord and Tenant Act 1954 …"

57. The second and third claims arose from the liability for dilapidations, which was held not to be recoverable as it flowed from the default of the plaintiff and not the breach of contract of the solicitor. The first claim was put specifically on the basis of the loss of value of the lease that should have been obtained, and not by reference to comparison between that value and the value of a different lease which was in fact obtained. The plaintiffs had produced no expert evidence as to what the value of the lease would have been, and the judge's conclusion at page 511-12 was:

" the question then arises whether it is possible to put a value on the lease which the plaintiffs would have obtained under the Landlord and Tenant Act 1954, if the application had been made. I have no idea what the rent under the new lease would be. The Landlord and Tenant Act 1954 provides that the rent shall be at the rate obtainable in the open market… I do not know what term would have been granted. It seems to me that on the evidence before me it is impossible for me to say whether the new lease would have had any value at all. "

58. On that basis he gave nominal damages only. This case then was put on the basis of the loss of only one capital asset, the lease. The court looked for evidence of its capital value. It was not suggested that the business or its goodwill had been lost because of the failure to renew the lease, and the judge was not required to consider damages flowing from the loss of the business.
59. In Jolliffe v Charles Colman & Co (1964) 219 EG 1608 the defendant solicitors failed to take the necessary steps to renew the plaintiff's lease, and the plaintiff had to accept a new lease on less favourable terms than he would have obtained had he renewed under the 1954 Act. The plaintiff declined to accept those terms and was evicted from the premises. He claimed the loss arising from the eviction, but it was held that he had acted unreasonably in refusing to accept the terms offered and so he was not entitled to any losses flowing from having to leave the premises. An assessment was made of the difference between the position he would have been in had he accepted the terms offered, and the position he should have been in if the lease had been renewed as it ought to have been, and he was awarded damages based on the difference in rent that would have been paid over the remainder of the term, plus the lost capital value of the lease. This case then also supports the proposition that damages are recoverable for the loss of value of the lease which should have been renewed, but does not take the matter any further in relation to other losses. It is relevant to the issue of mitigation, which also arises in this case.
60. In Hodge v Clifford Cowling & Co [1990] 46 EG 120 the landlord was initially prepared to grant a lease on renewal for a period of 14 years, but his attitude hardened when he learned that the plaintiffs solicitor had not correctly exercised their right to renew, and instead he offered a lease for a period only of five years. It was argued that the lease would in any event have been at a market rent and so have no capital value, but the judge at first instance had awarded damages based on the loss of goodwill of the business by reason of it only having a five-year lease available. The valuers had ascribed a value to goodwill based on the plaintiffs' plans for expansion and development of the business, which would be restricted by the short term lease. The leading judgment was given by Glidewell LJ said this at page 91:

" it is however clear from the evidence of [the valuers] that the major part of the value which they placed on the business with the benefit of a 14 year protected lease was that of the goodwill. In arriving at his valuation, Mr Knowles had expressly taken into account the expansion in trade and thus the increase in the goodwill which he expected to follow if the plaintiffs had been able to carry all their plans… into effect. It was their inability to do so which in his view played a major part in restricting the value of the business…. If… there is evidence which is accepted that at the date of valuation the proprietor of the business has plans which he intends to carry into effect which will in the future increase the trade of the business and thus the value of goodwill, and if by the act of another he is deprived of the opportunity to take those steps and is thus deprived of the increase in the goodwill, I can see no logical reason why an action for damages against the person who by his negligence has prevented him from taking those steps should not result in compensation for the loss of the increased goodwill. The likelihood that the trade and thus the goodwill will be increased is, of course, a matter for evidence…. I am of the view that… the judge was right to base the award upon the difference between the value of the business if a 14 year protected lease had been granted and the value with the five-year restricted lease."

61. That case is therefore authority for the proposition that if negligence in renewing the lease causes losses to the business in addition to the loss of value of the lease itself, those losses are in principle and subject to normal considerations of remoteness, recoverable. It is also clear that the Court of Appeal upheld the calculation of those losses, including the loss of the opportunity to increase the profits of the business by future expansion, as being by reference to the effect on the capital value of the business at the date of the breach. It was not suggested that they should instead calculate an aggregation of profits lost in subsequent periods.
62. In Ricci v Masons [1993] EG 154 the defendant solicitors failed to serve notice in good time under the 1954 Act with the result that the plaintiff was obliged to accept a renewed lease which was outside the protection of the Act and at a slightly increased rent. He was awarded compensation for the substantial deterioration in the capital value of his business by reason of the loss of security, and also an amount representing the aggregate of the increased rentals payable over the period of the lease. Here again the court accepted the date of the breach as being the prima facie date for assessment of damages, although the judge noted that the court could select another date if required to do so to avoid injustice. It is relevant to note that the defendant argued for assessment at a later date, on the basis that the risks inherent in the loss of security of tenure had not in fact materialised and the plaintiff remained in occupation. That argument was rejected.
63. In the Matlock Green Garage case, the plaintiff company carried on business from a number of sites, only two of which were affected by the failure to renew the leases in question. Nevertheless, when those leases came to an end, the directors discontinued the whole business of the company, selling off some parts of it. The plaintiff claimed damages on the basis of the value of the whole business at the date of the breach, which it put at £750,000 based on a multiple of its maintainable earnings, arguing that the loss of the two leases made it inevitable that those parts of the business carried on elsewhere would have to close. Wright J rejected this basis of assessment on two grounds; firstly the solicitors were not aware of and could not be expected to have anticipated the alleged dependence of other parts of the business on the two leasehold sites with which they were dealing, and accordingly the closure of those parts would not have been within their contemplation. Any such loss therefore fell outside both the first and second limbs of the test in Hadley v Baxendale (1854) Exch 341- see the judgment at pages 943-944. Secondly, he concluded that on the facts the directors had "simply given up" in relation to the other parts of the business and failed to mitigate the company's loss. He went on to say (at p 744) "the upshot of all that is that I have come to the plain conclusion that the only loss that the plaintiff company is entitled to recover from the defendant is that relating to the stream of profits which would otherwise have flowed directly from the trading activities on the two Matlock sites. The problem that now arises is how to extract that level of profits from the overall company figures?"
64. Having make findings on the facts as to the proportion of the historic annual level of profits attributable to the Matlock sites (£30,000), Wright J made his award by multiplying that figure by 8.5, representing three years actual loss of profits up to the date of trial, and a multiplier of 5.5 in respect of future losses. This multiplier in turn was calculating by taking the period until the leases would have come to an end even if renewed, and applying a discount for early receipt and other adjustments. He referred to this as establishing the "capitalised value of [the] lost stream [of profits]".
65. In the Aran Caterers case, the claimants had a business making sandwiches in the City of London. It was found that but for the negligence, they would have obtained a lease for 4 years from 1998. Having lost their statutory right they were obliged to accept a lease which was potentially for a longer term, until 2006, but outside the protection of the 1954 Act and subject to a landlord's break clause exerciseable on six months notice. The claimants were thus in a position of considerable uncertainty as to whether this would be exercised. They could not easily have moved to other premises at short notice because they required a particular authorised planning use. They looked around and found alternative premises, in a less favoured trading location, moving out in (apparently) June 2000.
66. I do not find it easy to follow the whole rationale of the calculations the judge made, but it is apparent that his principal figure was based on a calculation of the capital value of the business as at the date on which the renewed lease should have been granted. At page 72 of the report he said this "I ask myself: what would the value of the business at [the original premises] have been if it had been marketed … once the terms of a new lease had been worked out, bearing in mind that there was a level of profitability of £100,000 per annum?" He went on to arrive at a figure based on adjusted historic profits of £95,000 and a multiplier of 2.75 rather than the four years of the assumed lease. This calculation was evidently based on the claimant having effectively lost the capital value of the business they were carrying on and being entitled to be paid that value. He excluded from his assessment (p 73) the costs of moving to the new premises, referring to this as double counting, or an alternative and mutually exclusive way of calculating the same loss which in any event would require the claimants to give credit for the value of the goodwill preserved by relocating the business, as to which there was insufficient evidence to make an assessment.
67. What these cases seem to me to show is principally the flexibility available to the court in assessing damages in cases of this type. To the extent that the claimant is considered to have lost a capital asset, such as a valuable lease or the benefit of a profitable business which could have been sold, compensation will be assessed based on the value of the asset lost as a capital asset at the date the damage was suffered. Credit may be required to be given for the value of any asset acquired in its place, for instance a replacement lease. Alternatively, if the capital asset has not been lost, but its profitability has been impaired, the court may make an award based on the reduction in profitability caused by the breach of contract. On this basis, as is accepted, if the business is maintained but required to move to alternative premises, the costs occasioned by that removal will in principle be recoverable. Similarly, extra costs incurred by having to pay additional rent may be recoverable. In some cases, the court has adopted both approaches, making an award both for loss of a capital asset and for increased rent payable (Jolliffe and Ricci), although in such a case no doubt the court must be careful to avoid double counting.
68. In most cases, the impairment of profits has been by reason of the incurring of identifiable additional costs such as rent or removal expenses, which are readily easily calculated and can be allowed for over the period for which they will arise.
69. The Matlock Green Garage case seems to me to be a case of impairment of a profit stream. Damages were awarded for the loss of the profits attributable to the particular premises concerned, but not for the loss of the whole business. The calculation to be done involved assessing the amount of those profits in the period before the site closed and the period over which they would have continued to be earned. This had to be reduced to a single figure involving an assessment of both past (ie past at the date of trial) and future loss, so to that extent there was an element of capitalisation. It was not however in a conventional sense a valuation of the business carried on at those premises as a separate asset.
70. It is also clear that the court may accept that part of the value of a business which has been lost is represented by its potential to earn increased profits in the future- see Hodge. But the basis on which such future potential was taken into account was relatively cautious, being the increase in its goodwill value at the date of the breach by reason of the future prospects. In other words, what was assessed was not what the profits would have been thereafter, but what a purchaser would have paid at the time of the breach for the business with its prospect of earning those profits and all the uncertainty attendant thereon.
71. Returning to the facts of the present case, and in relation to the retail business, that business in point of fact closed and came to an end at the end of March 2002. As an asset, it was lost at that point. It seems to me that the appropriate way to compensate the claimants for this loss is by reference to the value of the asset they have been deprived of.
72. The following table set out figures taken from the accounts of the business up to the date of closure (687 ff):

	y/e 30 Apr 98	y/e 30 Apr 99	11m to 31 Mar 00	y/e 31 Mar 01	y/e 31 Mar 02
Turnover	53183	55234	41942	49227	72894
Profit before drawings	8744	11604	-17628	3124	-36130
Drawings	n/a	15918	2384	6510	7065
closing stock	28350	28895	9700	21180	29865
Capital introduced	n/a	2060	0	22333	15000
net assets	n/a	33349	12337	18947	9248

73. These figures show a turnover which was modest while Mr Nahome was alive, and declined in the year of his death. There was a small rise the following year, and a greater rise in the final year shown in the above table, which appears to coincide with the Internet business beginning to establish itself. Unfortunately, it is not possible to separate out the turnover and other figures relating to the retail business from that of the Internet business, because the claimant has not disclosed the accounting records required to do so. The level of profit may well have been affected during the year of Mr Nahome's death, but as can be seen it was low in each of the two preceding years, and lower still in the following year. The figures stated above are before allowing anything in respect of the proprietor's drawings. It must I think be inferred that the introduction of capital was required because the business was not generating the cash required to keep it afloat.
74. The claimant's expert Mr Cohen did not give an opinion as to the value of the business, concentrating his evidence on his estimates of future profitability of the retail and Internet business. The defendant's expert Mr Butterworth did express an opinion, contained in section 4 of the joint report (683), as follows: "value of business in April 2002-business generating profits to pay a basic wage to claimant; suggests little or no goodwill; report of Mark Shaw (joint property expert) indicates lease and fixtures worth £22,000 in April 2002; if an allowance is made for some goodwill based on higher sales, the total business might have had a worth of circa £28,000 as it did in April 2000". This evidence was not challenged, and I accept it. The valuation deals with only the fixed assets of the business, namely the goodwill, lease and fixtures.
75. The only other substantial asset of the business was its stock, and in principle if there was evidence of losses incurred on the stock by reason of having to close down the business, these in my view would be recoverable as well. It was the claimant's evidence that she conducted a closing down sale and sold a lot of stock at reduced prices, but it is not possible from the evidence to establish what if any loss in the stock value was suffered as a result. This is because the figures produced do not separate out the retail business from the Internet business. In the year of closure the overall amount of stock held rose rather than falling, and without knowing how much stock was purchased for the Internet business it is not possible to establish by how much the stock of the retail business went down. Nor is there any evidence of what happened to the retail stock after the shop closed which might have shown that the loss was incurred in disposing of it.
76. This valuation is given as at the date the business closed, April 2002. Strictly the date at which the loss falls to be assessed is the date at which the defendant's breach of contract caused the claimant to lose the security of the lease, i.e. October 2001. It was not however suggested that the value of the business was any different at that date, and I therefore adopt a figure of £28,000.
77. It was suggested that the claimant had incurred additional cost in the final year through advertising and promoting the closing down sale, and indeed there is an unusually large charge for advertising of some £26,000 in that year. The claimant's own evidence (172) was that this was expenditure on advertising for the Internet business. She evidently gave the same explanation to Mr Cohen, reflected in paragraph 3.7 of his report (572). Elsewhere she gave (546) a schedule of advertising costs for the sale of stock totalling £2737.30, an amount which was included in her schedule of "special losses". I assume this was part of the £26,000 in the accounts, so the explanation given is somewhat inconsistent but I will allow it as an additional cost to the business occasioned by the closure, taking the amount up to £30,737.30.
78. The claimant incurred a liability of £6,822.45 for dilapidations at the expiry of the lease. Mr Hubble was prepared to accept this as a loss flowing from closure, as arising from the removal of fixtures rather than any breach of covenant. I allow that amount, taking the total to £37,559.75.
79. The claimant also incurred legal costs in her abortive proceedings against the landlord. The amount claimed for her own costs was £4,883, plus £1461 in respect of the landlord's costs she was ordered to pay. The amount of the claimant's own costs was criticised as excessive, on the basis while it was reasonable to issue to seek to force the landlord's hand in negotiation she should not have pursued a hopeless case as far as she did. That criticism has force but I think Mr Hubble's suggestion of £1000 is too low, and award £2500, plus the landlord's costs, taking the total to £41,529.75.
80. Another item in the schedule of special losses was for storage of the fixtures and other items removed from the shop. Having concluded that the claimant should be compensated for the lost capital value of the business if it had been sold, and in light of my conclusion below that it would not have been reasonable to seek to re- open it in other premises, it would not be consistent to award also the costs of indefinite or long term storage of the items removed. On the other hand the claimant was in effect placed in the position of not being able to sell those assets but having to remove and dispose of them, which I assume would have incurred some cost. It was not argued that they had a residual value that should be taken into account. I propose to take this additional cost into account by increasing the aggregate award to £43,000.
81. I reject the submission that the claimant should be entitled to recover the aggregate amount of profits which it was projected that the shop might have produced had it been retained and operated from April 2002 onwards. Mr Cohen made an estimate of approximately £102,000 up to March 2010 and an estimated rate of profit at that date of £16,000 per annum, all before making any allowance for proprietor's remuneration. Mr Butterworth accepted these as reasonable calculations. However that submission seems to me to be wrong in principle; as the authorities cited show, where the breach of contract has resulted in the loss of a capital asset the appropriate measure of compensation is the market value of that asset at the date of its loss. In the case of a profit producing asset such as goodwill, that value depends upon the anticipated amount of future profit, but it is not necessarily the same as a simple aggregate of all of those profits for an indefinite, or any particular, period, and certainly not the same as such an aggregate without making any allowance for the remuneration of the proprietor in running the business.
82. I also reject the submission that the claimant is entitled to recover the costs of now seeking to re-establish the retail business that she has lost. She has not in fact taken that course and so has not in fact incurred these costs. It could not be suggested that such a course would be reasonable mitigation of the loss of the retail business, since on any view of the evidence those costs would greatly exceed the value of the business that would be established. Nor does to concept of putting the claimant in the position she would have been if the contract had been performed require the defendant to pay more to regain a lost asset than the asset was worth in the first place.
83. Having come to this conclusion, it is not strictly necessary for me to deal with the evidence as to what those costs would be, but I will mention it briefly. The claimant's case put forward in her application for an interim payment (witness statement at page 172) was based on a property in Waltham Cross which she contended would be suitable for re-establishing herself. She put forward two estimates of the cost of fitting out that shop, one at £380,000 plus VAT and one at £463,000 plus VAT, and a schedule of running costs approaching £150,000 for the first year.
84. The joint expert Mr Shaw came to a figure of £95,000, based on two estimates that he obtained from a shoplifter with experience in the trade. In cross-examination he accepted that higher costs in the London area and differences in specification might increase this figure somewhat, but to no more than £120,000. He could not understand the two quotations produced by the claimant.
85. The defendant also had evidence from Mr Jonathan Lambert, who had extensive experience in the retail jewellery trade from 1992 to date and was from 2004 to 2006 the chairman of the National Association of Goldsmiths of Great Britain and Ireland, a trade association of retail jewellers of which Mr Nahome's business was itself a member. I was impressed by Mr Lambert's evidence, which in my view was relevant, focused and evidently carefully considered with due regard to his duty to the court. It was unfavourable to the claimant in many respects and took issue with many of the opinions she expressed, but as I have indicated I did not find the claimant a compelling witness, whereas Mr Lambert was. In closing, Mr Bard was obliged to attack Mr Lambert's evidence, suggesting that it was given out of hostility towards the claimant. I entirely reject that suggestion.
86. In relation to fitting out costs, Mr Lambert was critical of the claimant's specifications as excessive. In particular, he said that the alleged requirements for security and a strongroom were excessive, particularly given the low level of stock carried by the business, and would not be insisted upon by insurers, contrary to what the claimant had said. He had recently completely refitted his own retail shop which was slightly smaller, at a total cost of £90,000.
87. On this evidence, I regard the figures that the claimant sought to put forward as massively exaggerated. It is hard to believe she would not have known this with her experience and contacts in the trade, so the inference is either that she obtained inflated quotations, perhaps by giving an excessive specification, or at least she allowed figures to be put forward which she must have known were unrealistic.
88. I would have found, had it been necessary, the reasonable costs of fitting out equivalent replacement premises to be of the order of £100,000. It seems to me clear however that it would not be a sensible business decision to spend that amount of money, or incur running costs of £150,000 pa, in order to re-establish a business which was turning over around £50,000 pa and was at best marginally profitable. A decision to do so would increase rather than mitigate the claimant's loss. It follows that the defendant cannot be required to meet such cost by way of compensation for the loss suffered.
89. The same would be true of the suggested head of loss for costs of re-establishing the business in the market. That was put in very broad terms at £250,000, although the rationale for the expenditure appears to relate mostly to the Internet business. Insofar as it relates to the retail business, in my view it is not an allowable head of loss for the same reasons.
90. It is also not strictly necessary to make findings as to the two alternative bases proposed by Mr Hubble. In case it should be relevant, I find that Ms Nahome did not in fact seek to negotiate a renewal outside the terms of the Act with the Landlord. I do not find it credible that she could have done so while the proceedings were going on without it being referred to in some solicitors' correspondence or other documentation. The landlord appears to have been taking a strong commercial approach to his dealings and could be expected to have taken advantage of his improved bargaining position, but there is no reason apparent why he would not have been prepared to agree a lease at all. Taking account of his additional leverage, I find that he would most likely have granted a new lease on the terms he initially demanded, ie for 20 yrs at a rent of £15,000. Since this would have limited the claimant's losses to the extra rent payable, I will not consider the further alternative as to whether she could have found other premises and if so at what rent.

The Internet business

91. Turning to the losses claimed in relation to the Internet business, an issue arises as to remoteness of damage. Mr Hubble took the point on remoteness in his closing, though I fear I confused matters somewhat, wrongly thinking that he was raising again the issue he had conceded as to the fact of the first claimant's ownership of the internet business rather than Ms Lodge's knowledge of it. Looking at the transcript it is clear that was not the point he was making, which remains open to him and which I now address.
92. I have found as a fact that the defendant through Ms Lodge was not made aware of the existence of the Internet business, let alone its alleged dependence on the leasehold premises. In law, damages are considered to be too remote to be recovered if they were not reasonably foreseeable at the time of the contract as liable to result from the breach of that contract. What is reasonably foreseeable depends in part upon what can ordinarily and normally be assumed to be a consequence of the breach, and in part upon any knowledge that the defendant has about the particular circumstances of the case which make it reasonably foreseeable that some additional loss to the claimant may result.
93. The principle was explained as follows by the Court of Appeal in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 at 540, summarising various authorities following on from the well-known case of Hadley v Baxendale:

"(1.) It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights had been observed … This purpose, if relentlessly pursued, would provide him with a complete indemnity for all loss de facto resulting from a particular breach, however improbable, however unpredictable. This, in contract at least, is recognized as too harsh a rule. Hence,

(2.) In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably forseeable as liable to result from the breach.

(3.) What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.

(4.) For this purpose, knowledge "possessed" is of two kinds; one imputed, the other actual. Everyone, as a reasonable person, is taken to know the "ordinary course of things" and consequently what loss is liable to result from a breach of contract in that ordinary course. This is the subject matter of the "first rule" in Hadley v. Baxendale (2). But to this knowledge, which a contract-breaker is assumed to possess whether he actually possesses it or not, there may have to be added in a particular case knowledge which he actually possesses, of special circumstances outside the "ordinary course of things," of such a kind that a breach in those special circumstances would be liable to cause more loss. Such a case attracts the operation of the "second rule" so as to make additional loss also recoverable.

(5.) In order to make the contract-breaker liable under either rule it is not necessary that he should actually have asked himself what loss is liable to result from a breach. As has often been pointed out, parties at the time of contracting contemplate not the breach of the contract, but its performance. It suffices that, if he had considered the question, he would as a reasonable man have concluded that the loss in question was liable to result (see certain observations of Lord du Parcq in the recent case of A/B Karlshamns Oljefabriker v. Monarch Steamship Company Limited [1911] A C 301)

(6.) Nor, finally, to make a particular loss recoverable, need it be proved that upon a given state of knowledge the defendant could, as a reasonable man, foresee that a breach must necessarily result in that loss. It is enough if he could foresee it was likely so to result. It is indeed enough, to borrow from the language of Lord du Parcq in the same case, at page 158, if the loss (or some factor without which it would not have occurred) is a "serious possibility" or a "real danger." For short, we have used the word "liable" to result. Possibly the colloquialism "on the cards" indicates the shade of meaning with some approach to accuracy."

94. Mr Bard accepted that the possible existence of a business such as the Internet business was not something which the defendant, through Ms Lodge, could be taken to know as part of the ordinary course of things. His case was put on the basis that Ms Lodge had actual knowledge of the existence of the Internet business and its connection with the retail premises, and so could be taken to know that there was a real risk of loss to that business, as well as the retail business itself, if the lease was not renewed. In my view, this was the proper way in which to put the case. It is plain from the evidence that some retail jewellers also sell via mail order or through the Internet, but even if the solicitors could be assumed to have that general knowledge, that is not of itself sufficient in my view. There was no evidence for instance that the proportion that do so is high enough that the defendant in this case ought to have known in the absence of specific information that there was a serious danger of loss to such a business.
95. It follows in my judgment from the finding that I have made as to the content of the conversation between the claimant and Ms Lodge that all losses claimed in relation to the Internet business are too remote to be recoverable in law.
96. In case I am wrong on that point however I will go on to set out my conclusions on the evidence so far as it relates to the separate questions of whether the losses claimed were in fact incurred, and if so whether they were caused by the defendant's breach. I propose to do this relatively briefly, although the bulk of the evidence and submissions were directed to this part of the case which represented by far the greatest part of what was claimed. As for the principles of assessment, Mr Bard submitted that the court should deal with the alleged loss of profits on the basis of a loss of chance to earn them. I do not accept that submission; the loss of chance basis is appropriate where the question whether a loss has been incurred, or its quantification, depends on uncertainties such as the outcome of litigation or the hypothetical actions of an independent third party, particularly in negotiations (see Allied Maples Group Ltd v Simmons & Simmons [1995] EWCA Civ 17, and Abraxas Computer Services v Rabin Leacock Lipman (a firm), transcript 1999 A No 254). In a case such as this, if I were satisfied on the evidence that the loss of the premises had deprived the claimant of the opportunity to earn additional profit through developing the internet business the proper basis of assessment would in my judgment have been by reference to the diminution in the goodwill value of that business at the date of the breach, see Hodge. As to that, there was no evidence.
97. Dealing with the way the case was put as to loss and causation, I reject the claimant's case that the loss of the leasehold premises caused her to be unable to obtain finance to develop the Internet business to its potential. It was suggested that revenues from the shop would have provided a source of finance to support the Internet business, but it was clearly not making enough to give any substantial assistance in that respect. The claimant asserted that she had no available financial resources of her own, but produced little or no supporting documentation, and was vague about her sources of income. Her evidence was that no bank would lend to her for the Internet business in the absence of a retail shop business. It is not immediately obvious why this would be a particularly relevant matter for a bank. Security over the assets of the business would be of little value given its low level of profitability and the low value of a lease the rent of which has just been reviewed to a market rate. It is not obvious that a bank would regard the existence of the shop as contributing substantially to the likely success of an Internet business.
98. The claimant maintained that in the past finance had been made available without any need to prepare a business plan or give security, because of the long connection with the business with Barclays bank. It does appear from the sheets produced that the business had a bank loan of some £25,000 outstanding at the end of March 2002 (695). There were no equivalent liabilities in the two previous years, and no balance sheet is available for 1999 or 1998. But she produced no documentary evidence to support her case that she had sought finance from a number of banks and been rejected for this reason. I find it improbable, as I have already said, that she could have done so without generating or receiving any documents at all. If she obtained a facility in the year 2001-02 it is not I think credible that it would have been given without documentation at all, even if it were only an overdraft facility letter. If such documentation had been disclosed it might show, for instance, whether the bank required any guarantee or security over other assets, as it might have done if relying on the connection of the business with other family members or their assets outside the business.
99. The claimant's case on this point is in my view inherently improbable. For me to be satisfied that it is nevertheless true, I should have to have persuasive evidence in support of it. The claimant's own evidence is not in my view sufficient given firstly my general doubts as to her reliability and secondly the absence without good explanation of documents which might be expected to exist and support that case if it were correct.
100. I also reject the claimant's case that the unavailability of retail premises was a substantial factor holding back the level of sales achieved by the Internet business. This was in my view always a surprising contention as one main feature of internet and mail order business is that the customer does not have to visit the supplier's premises.
101. The claimant pointed to the fact that her chosen comparator for the business, John Greed Limited makes reference on its website to the fact that it has a real and long established retail jewellery business in the historic quarter of Lincoln, and said that such a connection gave Internet customers comfort that they were dealing with a well-established and trustworthy business. I do not doubt that this is a factor which may provide comfort to some potential customers. No doubt every business in its advertising material promotes to the best of its ability those of its own attributes that it expects to find sympathy with some at least of its customers and to distinguish it from the competition. The claimant's own printed material for instance makes the point that "Dahlia Jewellery is an all woman family business that has been designing and selling unique collections to our customers for over 30 years with a service that is second to none." It does not necessarily follow that a competitor that cannot meet the same criteria is at a substantial disadvantage.
102. Mr Lambert's opinion was that it was not necessary for an Internet retailer to have an associated retail shop, and it would not gain substantial assistance if it did. The top five UK Internet based jewellery businesses did not have such a retail presence. What contributed to their success, in his view, was that they were selling products which customers could evaluate themselves without having to go to the seller's premises, particularly branded products which were widely available and so could be seen at shops local to themselves, or those which carried some independent certification, such as certificated diamonds. The John Greed business for instance sold a relatively widely available branded product. That evidence in my judgment not only comes with more authority than the claimant was able to bring, but it also inherently more credible.
103. I did not find the evidence of the claimant's branding expert Mr Gabay persuasive. The claimant has been very successful in obtaining placement of her jewellery in photographs and articles appearing in various newspapers and magazines, some of which featured well-known celebrities wearing the products. She produced a large binder containing copies of these items, which began to appear in the middle of 2001 but are mostly from the middle of 2002 or later. I accept that journalists must have wanted to include her items in such pieces because they were impressed by them and thought they would appeal to their readers. According to the claimant "the media interest just exploded" and her products were "dominating the market".
104. Mr Lambert accepted that this was good publicity for the products and had been "cleverly achieved". In this, in my view he appeared to be slightly grudging in his praise, but this is only a small point which does not in my view detract from the weight I am able to place on his evidence as a whole.
105. Mr Gabay produced a report which was rather more gushing. He emphasised the need for jewellery brands to build up esteem in the marketplace, and said that a key element for success required the jewellery to be valued by notably influential fashion experts, celebrities and rising names. This was difficult to achieve and costly. Building up a good brand name "takes years to achieve (perhaps for or five years of gradual buildup). However thanks to the uniqueness of how its pieces were presented and remarkable branding achieved by Dahlia Jewellery, the company demonstrated exceptional promise to become a global sensation in a relatively short time."
106. He regarded the degree of media representation as "an incredible achievement", and estimated on what he said was an "extremely conservative" basis that "the advertising media cost alone for such a campaign would be £963,000". Mr Gabay was not questioned extensively about this figure, although I would observe in passing that it appears to me to be potentially misleading. It was based on the cost of paid for adverts, which one would assume would feature only the products of the particular advertiser, and feature them and the contact details of the advertiser prominently. The material in the publicity binder typically consists of photographs of a model wearing a number of items of clothing and jewellery, with the name and contact details of the supplier of each of the various items indicated in small print or a reference elsewhere in the publication. This, good publicity though it no doubt is, does not seem to me to be easily comparable to a dedicated advertisement.
107. In relation to the effect of the defendant's negligence, Mr Gabay said this: "in terms of sales, the brand was about to reach a 'tipping point'. It showed all the classic brand indications of turning a modest balance sheet into a notably profitable set of accounts. Yet, sadly as I understand it, right at this point, the negligence of [the defendant] led to a sudden loss of premises and so storage, workshop space as well is vital creative time and space to concentrate fully on developing further pieces. In essence, from a branding perspective, Dahlia Jewellery's story of growth and success was suddenly cut short."
108. Asked in cross examination when this "tipping point" was reached, Mr Gabay became vague. He did not give a date, and referred to a number of "mini tipping points" over a period. The implication of his report is that he was referring to the autumn of 2001, but the media exposure had by then only been going for a few months so a suggestion that a "tipping point " had already been reached would not fit with his opinion that four or five years of building up a brand were required. His opinion that the branding success had been "suddenly cut short" at that point is not consistent with the fact that most of the brand publicity he so highly valued was achieved well after that date. He said he had seen documents evidencing a substantial amount of orders for the products, although no such documents had been disclosed in these proceedings, and he could not recall the details of them. When pressed, he had no basis other than information from the claimant for his comments about loss of potential orders.
109. In the end, it seemed to me that Mr Gabay's evidence showed only that the publicity he rightly praised was not sufficient to produce any more orders than had actually been achieved. It did not show that the defendant's actions had been the cause of any reduction in the ability of the business to market itself, or that the business had lost any sales through any change in marketing resulting from the defendant's actions. His evidence seemed to me to be overly dependent upon information provided by the claimant and more aimed at advocacy of her interests than presentation of independent expertise to the court. His conclusion was that in order to get back to a level of brand awareness that the business had achieved by its own efforts it would be necessary to spend an 18 month campaign by media consultants at £4-10,000 per month, a website at £25-80,000 plus annual costs of £20,000 and up to three fashion shows at a cost of £25-50,000 each. Given the sales actually achieved, and the fact that there could be no guarantee of any better performance if the claimant got back to that point, expenditure on this lavish scale would not in my view be remotely reasonable.
110. The claimant's projection of profits from the Internet business relied on figures produced by Mr Cohen. His report was substantially based upon a comparison with the business of John Greed. He said that it was his preference in matters such as this to present his evidence in terms of a comparator, because it made it easier to understand. It emerged in cross-examination however that in selecting the comparator he had not himself conducted any review of other businesses that might be available to be used as a comparator. He had not selected John Greed himself, but adopted the claimant's suggestion that it be used. He was not himself an expert in the jewellery market and therefore not in a position to judge how likely it was that the claimant's products could achieve the same results as the products marketed by John Greed.
111. In my judgment, the comparison with John Greed was fatally undermined by Mr Lambert's evidence. The John Greed products are a branded range called Pandora. Pandora was a substantial brand before John Greed began to sell its products on the Internet. It has a market presence independent of the John Greed business, through sales outlets in this country and abroad (including Mr Lambert's own business). Mr Lambert's evidence was that John Greed has succeeded in exploiting this market presence to achieve sales over the Internet. In his opinion there was no comparison at all to be made between that business and the claimant's business. He also cast substantial doubt on the claimant's opinion as to the marketability of her products, saying that her principal range was not unique as she had claimed but consisted of charm bracelet components which were readily obtainable from wholesale sources, and other jewellery specifically designed by the claimant was of an Eastern style which was not popular in the UK. None of it, he thought, would require any substantial manufacturing work by the claimant, the items being bought in from overseas and requiring no more than a small amount of soldering to attach the charms to bracelets. I accept that evidence.
112. Other aspects of Mr Cohen's report which caused me concern were his attribution of the difficulties of the business to the absence of retail premises, and his readiness to accept that this resulted in a loss of available finance and loss of orders. All of this, it emerged, was based solely on what the claimant said to him and did not appear to have been verified in any substantial way. It was presented as his own opinion but was not in any meaningful sense the product of his own expertise.
113. In relation to the use of a comparator, in my view it was a highly dangerous methodology for Mr Cohen to adopt to base his report on one comparator only. There are bound to be differences between one business and another, and selecting one comparator only runs the risk of distortion in that its results may be markedly higher or lower than a sector average. It also gives rise to the obvious risk that each side could choose a comparator with a strong or weak performance, as required to suit their case. These risks are magnified where the selection is effectively performed by a party rather than the expert. Mr Cohen in my view allowed himself to be too influenced by the party instructing him in making the selection, with the result that his report also ended up being little more than advocacy for the views of the claimant.
114. The defendant's accountancy expert Mr Butterworth refused to accept the validity of the comparison with John Greed, for the reasons given above. He had tried extensively to obtain financial information and records about the claimant's business, but nothing meaningful had been produced to him at all. He expressed the opinion that in the complete absence of relevant information it was impossible to make any sensible projection of what the internet business's performance might have been. He was criticised for refusing to engage in the process, but I reject that. He refused to be drawn into the process of piling speculation on assertion that the claimant and her experts engaged in, but in my judgment he was entirely justified in so doing.
115. The bald facts in relation to the sales performance of the Internet business are these. Despite the supposedly dominating market position and favourable publicity, it failed to sell in sufficient quantities to make a profit, since the claimant's accounts show that she incurred an overall loss of just over £12,000 in the four years of trading to 31 March 2006. The bulk of this was incurred in the final year and may therefore represent costs associated with closing it down, although there was no evidence specifically to that effect. In the earlier years, there were two years of very small profits and one year in which a small loss was made. There is in my view no evidence from which it could be concluded that the sales position would have been any different if the claimant had been conducting the Internet business from the retail premises that were lost, or any similar alternative premises.
116. The Internet business is said to have come to an end in 2006. The claimant's evidence was that this was because of the security risks inherent in carrying it on from her sister's home, which of course she would not have had if she had been running it from retail premises. Accepting this for present purposes, the closure would not appear to have caused the claimant any identifiable loss, because of the irregular and at best highly marginal profitability prior to the closure.
117. Had I not reach the conclusion set out above in relation to remoteness, I would have allowed a claim for the additional costs incurred in running the Internet business from the home of the first claimant's sister, but not costs which the business would have incurred in any event, wherever it traded from. These "special losses" were set out in the schedule to the Particulars of Claim, amounting to some £86,000. I would not however have accepted the whole of this amount, which was subjected to substantial criticism. An earlier version of the same schedule came to a total of some £26,000. The explanation for the increase (that the claimant did not have all the documents to hand when the original was done) was in my view poor; the first version of the schedule had been prepared at a time when all of the alleged costs had been incurred so that there was no reason in principle why they could not have been included. Many of the items on the increased schedule were still not supported by documentary evidence, or were criticised as being excessive, or expenses that would have been incurred in any event in operating the business. There was considerable merit in these criticisms in my view. Mr Hubble produced a schedule with his closing submissions setting out the figures originally contended for, those which Mr Bard had adopted in closing, and those which he accepted (totalling some £18,027), with brief notes of the reasons for his criticism.
118. Certain of these amounts I have allowed above as costs relating to the closure of the retail business. In respect of the reminder which relate to alleged increased costs to the Internet business by virtue of the move of premises, I would have allowed the following:

i) Establishment of office £1404.29

ii) New alarm system £5313.94

iii) Telephone lines £396

iv) Royal Mail redirection charge and PO box £261.05

119. I would have disallowed or reduced the following amounts claimed:

i) Secure perimeter wall £5,000. There was no invoice or documentary evidence of this expenditure and no evidence other than the claimant's assertion that it was incurred to increase security at the house

ii) Maintenance for CCTV £3,099.76. There were no invoices and in any event the business would have incurred this expenditure as part of its running cost in the original premises.

iii) Call diversion £11,488.45. Invoices supported only £3991.24 of this. I would have allowed a nominal £1,000 only since in my view once it became clear the line could not be transferred it would be reasonable for the business to have adopted and publicised a new telephone number.

iv) Line rental £2676. This was not documented and in any event a normal running expense.

v) Mobile telephones £8155.74. Only £1794 was documented and in any event I was not satisfied that the business's need for mobile telephones had any connection with the change of premises, given that the new premises had a land line.

vi) Advertising and photography £7660.99. Save for £2737.30 allowed above as advertising for sale of the retail stock, this was an expense the business would have incurred in any event.

vii) Computer consultancy £5504.79. Only £2368 was documented. The claimant's evidence was that in the old premises she had this available to her free of charge from a person she would not name but whom she would not allow into her sister's home for security reasons. This explanation appeared to me to be made up on the spot, and even if true would not show a reasonable inference that the business would have continued to have the benefit of free computer consultancy indefinitely. I would not have allowed it.

viii) Printing costs £8740.12 I would have disallowed as ordinary running expenses.

ix) Removing fixtures and fittings £2737.30 is a duplication of the advertising cost allowed above.

x) Transport £8236.40. Only £572 is documented. It is not clear what the claimed figure represents but it appears to be the total spending of the claimant on transport. I would accept Mr Hubble's suggestion of £1,000 as a reasonable allowance for any extra amount required by reason of the change of premises.

120. The total of these items is £9338, part of which includes recoverable Vat. Taking all of these items together, but for the issue of remoteness of damage, I would have assessed the claimant's loss relating to the Internet business at a rounded up amount of £9,000.

Conclusion

121. The result therefore is that I assess the damages recoverable by the claimant at £43,000. There will no doubt be interest as well.
122. I will list a hearing in Birmingham at which this judgment will be formally handed down. They need be no attendance if the parties are agreed as to the order resulting. If it will be necessary to have a longer hearing to deal with matters arising, the parties should contact my clerk so that it can be arranged at a later date.