England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SHEFFIELD DISTRICT REGISTRY

		The Royal Courts of Justice Strand London WC2A 2LL
		20/12/2005

Mr. Justice Field :

1. This is a claim for negligence against a solicitor, Mr. Jack Danaher, who practices in Barnsley under the firm name of WJ Danaher & Co. The claimant is Mr. Leonard Batty.
2. On 8^th September 1998 Mr. Batty retained Mr. Danaher to advise on his rights and obligations under a service agreement dated 29^th August 1997 ("the service agreement") and made between himself and BSB Holdings (Cudworth) Ltd ("BSB"). Prior to entering into this agreement, Mr. Batty had been Managing Director of and controlling shareholder in the BSB Group of Companies. The service agreement was linked to an agreement ("the share buy-back agreement") under which Mr. Batty sold a parcel of shares back to BSB for £1million, thereby leaving the only other shareholder, Mr. Philip Maxwell Smith, with 74.12% of the remaining share capital. The residual 25.88% of the share capital was held by Mr. Batty (4.88%) and his daughters under a trust established by Mr. Batty (21%).
3. The Inland Revenue were prepared to treat the payment of the £1million as a return of capital rather than income on condition that Mr. Batty ceased to have any managerial role in the company. It was accordingly agreed by Mr. Batty and Mr. Smith that following the share buy-back agreement Mr. Batty would cease to be a director and Mr. Smith would be both the controlling shareholder and the managing director. Mr. Batty knew that Mr. Smith agreed to the share buy-back and service agreements on the understanding that in five years' time he too would retire from the company with £1million in the form of a return of capital.
4. Under clause 1 of the service agreement, Mr. Batty was appointed an adviser and consultant for a fixed term of 5 years with effect from 31 August 1997. Clause 2.1.1 and 2.1.2 provided that Mr. Batty should during normal business hours for 37½ hours a week devote his time, attention and skill to the best interests of BSB and use his best endeavours to promote its interests and perform the duties appropriate to his employment as an adviser and consultant to BSB's Board of Directors. Mr. Batty's remuneration under the service agreement was an inflation-proof annual salary of £34,040, although by clause 3.3 BSB were entitled to pay him salary in lieu of notice. Mr. Batty was also entitled to free private health insurance for him and his family and to 50 working days' holiday in the first year of employment, which entitlement was to be increased by 5 days in every subsequent year. Clause 4 provided that he should be paid his remuneration in the first 26 weeks of absence due to ill health in any period of 24 months. By clause 10.2 Mr. Batty agreed that during his employment he would not be engaged in any business which was in direct competition with BSB and by clause 12.1 BSB had a right to terminate Mr. Batty's employment with immediate effect if he committed any serious or persistent breach under the agreement.
5. From the very beginning of the service agreement, there was confrontation and friction between Mr. Batty and Mr. Smith. I shall have later in this judgment to examine in some detail a number of events that occurred in the period 1^st September 1997 to 19^th September 1999. For the present it suffices to say that in the period 24^th December 1997 to 12^th January 1998 Mr. Batty was off work suffering from 'flu and depression. On 16^th April 1998 he was admitted to hospital suffering from viral meningitis and was absent from work for ill health for the next four months. As a result of this illness he became very deaf. He returned to work on 1^st September 1998 and difficulties between him and Mr. Smith and the other directors immediately re-surfaced. Mr. Batty told Mr. Smith that he was going to visit a solicitor for advice on his employment situation. On 7^th September 1998 he was given a letter by Mr. Smith which stated that he "should not attend the company until all matters between us have been satisfactorily resolved." At the same time Mr. Batty agreed that BSB should obtain medical reports from his GP and hospital Consultant on his medical fitness to return to work.
6. It was Mr. Batty's suspension that led him to consult Mr. Danaher the following day. At that meeting Mr. Batty explained how he had come to enter into the service agreement and he complained that BSB were not allowing him to carry out his role as an adviser. In his view they were trying to freeze him out of the company. Mr. Batty told Mr. Danaher that he wanted to return to work and wanted to have the dispute sorted out quickly and cheaply. On 13^th November 1998 Mr. Danaher wrote to Mr. Smith on Mr. Batty's behalf stating inter alia that his firm had advised Mr. Batty that he was entitled to carry out his duties under the service agreement and any action by BSB to prevent him doing so was a breach of that agreement. The final sentence read: "We look forward to hearing from you with proposals which will enable our client to continue his employment with [BSB]." Mr. Danaher had sent a draft of this letter to Mr. Batty on 1^st October 1998 but its despatch was delayed until Mr. Batty returned from holiday and approved it.
7. By letter dated 30^th November 1998, a Mr. Izzard of Drury PSM Limited replied to Mr. Danaher's letter stating that the company were chasing Mr. Batty's doctors for the requested medical reports and proposing that the issues not be considered until the medical reports had been received. Drury PSM Ltd were employment advisers retained by BSB. Mr. Batty and Mr. Danaher agreed that nothing should be done until the medical reports had been received.
8. On 17^th February 1999, Mr. Danaher received a letter dated 15^th February 1999 from Mr. Izzard which was in these terms:

Further to my last letter dated 30^th November 1998, I am sending you a copy of the requested medical report eventually received from Mr Batty's doctor.

As you will see and I think agree, the precautionary action taken by the company last September was sensible in view of the serious illness from which Mr Batty had only recently recovered.

The combination of absence for medical reasons and other causes for a nearly continuous period of 10 months may in itself for Mr Batty have produced a change in the original concept of his continuing role.

The same passage of time for the company without a contribution from Mr Batty has given rise to the view that a review of the whole situation could be in everyone's best interests.

In making this proposal the Company does not intend or purport to interfere with any contractual obligations or authority. It is however a serious suggestion with the intention of avoiding any further repetition of past difficulties.

Please let me know if the proposed review is considered to be of value.

9. As it happened, no medical report was enclosed with the letter. Between 24^th February 1999 and 16^th March 1999, Mr. Batty was at his house in Florida. Mr. Danaher made no attempt to contact him about the letter of 17^th February 1999 until 26^th March 1999 when he wrote to his client asking that he give him a ring. Mr. Batty telephoned Mr. Danaher on 31^st March 1999 and was told of Mr. Izzard's letter and that no medical report had been enclosed. Mr. Batty accepted Mr. Danaher's suggestion that nothing be done until the medical report was received. He told Mr. Danaher that he was due to depart on a month's holiday to the USA. Mr. Batty took that holiday in the period 21^st April to 14^th May 1999. As appears below, no attempt was made to alert Mr. Izzard to the fact that the medical report had not been enclosed with his letter until 25^th June 1999.
10. Shortly after 19^th April 1999 a letter of that date from Mr. Izzard was received by Mr. Danaher's office. However, neither Mr. Danaher nor any of his assistants became aware of the letter's arrival and they remained ignorant of its existence until about mid-June 1999. It is not disputed that the failure in Mr. Danaher's office systems that led to the letter not coming to the attention of Mr. Danaher or his client until mid-June 1999 amounts to negligence. The letter was in these terms:

Dear Mr. Danaher

Re Mr. Leonard Batty and BSB Holdings (Cudworth) Limited

There has been no reply to my last letter dated the 16^th February 1999 that included a copy of a medical report supplied by Mr Batty's doctor.

In that letter was proposed a review of the employment arrangements of Mr Batty since his absence had been continuous for 10 months. Your reply to this proposal is still awaited.

The continuous absence has now been for 12 months during which time his salary has been paid in full even though the Service Agreement only provides for remuneration to be paid for 6 months if the absence is as a result of any incapacity.

Please advise of any restriction preventing Mr Batty from providing the full performance of his general duties under the terms of the Service Agreement and if there is no restriction perhaps we could expect a full resumption on Monday 17^th May 1999.

11. Mr. Batty returned from holiday on 14^th May 1999. Between that date and 19^th May 1999 he heard from three disparate sources, including his daughter and BSB's accountant, that he was expected back to work on Monday 17^th May 1999. On 19^th May 1999 he telephoned BSB's Company Secretary, Mrs. Sugden, who was also a director. He began by talking about administrative problems concerning a company in the BSB Group and a pub he owned jointly with Mr. Smith, "The Fiddlers Inn". He then said that he had heard that he was supposed to start work last Monday. Mrs. Sugden confirmed that this was so and asked who had told him. He replied that three people had told him, including his daughter who lived 100 miles away. Mrs. Sugden then asked him if he had received a letter from his solicitor and Mr. Batty said, "No, I don't want a letter, I'm not getting a letter, you can stick it up your bum, I'm not coming in." He also told Mrs. Sugden that in future he wanted to hear from the company directly rather than hear rumours from non-employees. The entire conversation was good humoured with laughter on both sides.
12. Shortly after 25^th May 1999, another letter from Mr. Izzard was received by Mr. Danaher's office which failed to come to the attention of Mr. Danaher or his assistants and was therefore not mentioned to or discussed with Mr. Batty when it ought to have been. This failure is also admitted to amount to negligence. The letter (which was dated 25^th May 1999) stated:

Dear Mr. Danaher

Re Mr. Leonard Batty and BSB Holdings (Cudworth) Limited

I wrote to you last on the 19^th April 1999 and amongst other matters proposed that subject to being advised of any continuing incapacity of Mr Batty to perform his general duties he be expected to make a full resumption on Monday 17^th May 1999.

No reply was received from you on behalf of Mr Batty to that letter and no appearance either by Mr Batty on the 17^th May 1999.

The absence of any contact whatsoever is of concern and the Company is not prepared to continue with making payment of salary and other financial considerations beyond the end of this month until all matters are satisfactorily resolved.

Please confirm receipt and if I can be of assistance to resolve the situation I would be willing to discuss any matter arising.

13. At the beginning of June 1999 BSB suspended Mr. Batty's entire remuneration package payable under the service agreement, including private health cover. The first Mr. Batty heard of this was when he received a letter on 12^th June 1999 from BSB's insurance brokers informing him that he had been deleted from the company BUPA scheme from 1^st June 1999. He immediately sent a fax to Mrs. Sugden asking her to call him and to inform him in writing if his entitlement to medical insurance under his service agreement was being stopped. On 14^th June 1999 Mr. Batty and Mrs. Sugden spoke on the telephone. She told him that the company would not be paying him anything and asked him if had received a letter from his solicitors. When he replied that he had not, she said a letter had been sent on 24^th May 1999. This conversation angered Mr. Batty; he thought Mrs. Sugden was being evasive.
14. A couple of days later Mr. Batty received a letter dated 14^th June 1999 from Mr. Izzard stating that he had not received a reply to his letters to Mr. Batty's solicitors dated 30^th November 1998, 15^th February 1999, 19^th April 1999 and 25^th May 1999. Mr. Izzard said that to be sure that Mr. Batty was aware of the situation and its implications he was sending him copies of the letters. None of the letters was enclosed, however.
15. Mr. Batty immediately faxed a copy of Mr. Izzard's letter of 14^th June 1999 to Mr. Danaher and having received the missing copies sent these to Mr. Danaher. By letter dated 25^th June 1999 Mr. Danaher wrote to Mr. Izzard asking that copies of the letters and the medical report referred to in the letter of 16^th February 1999 be sent to him. The letter's concluding sentence read: "I would be grateful if you would let me have copies of the above agreements and hopefully agreement can be reached between our respective clients."
16. Once the letters and medical report (from Mr. Batty's GP, Dr Johnson,) had been received by Mr. Danaher, he discussed matters with Mr. Batty. The medical report expressed the view that Mr. Batty was fit to return to work. This came as no surprise to him; I am quite satisfied that the doctor told Mr. Batty that this was his opinion when he examined him shortly before writing the report.
17. Mr. Batty was very angry that BSB had stopped his remuneration under the service agreement. However, he still wanted to return to work and told Mr. Danaher that this was what he wanted to do. But by 23^rd July 1999 he had changed his mind and wanted to sue BSB for constructive dismissal. On that day he sent a long fax to Mr. Danaher setting out what he saw to be the basis of a constructive dismissal claim. He itemised breaches of contract by BSB which included non-payment of remuneration and pension and failure to support him to enable him to carry out his job; he also set out a large number of actions which he claimed had been taken against him by Mr. Smith.
18. At Mr. Danaher's suggestion, advice was sought from counsel, the late Mr. George England. It is not clear whether the letters dated 15^th February, 19^th April and 25^th May 1999 were included in the documents sent at this stage to Mr. England, but it is unnecessary to make any finding on this and I decline to do so. In a short opinion dated 4^th August 1999, Mr. England considered whether BSB's failure to pay salary as from 1^st June 1999 and Mr. Batty's allegations that he had been frozen out amounted to a repudiatory breach of the service agreement. He concluded that the cessation of salary and pension payments coupled with telling third parties that Mr. Batty had retired did amount to a repudiatory breach and that the best way forward was for Mr. Batty to inform BSB that he regarded the agreement as discharged. Mr. England ended his opinion by suggesting that he meet Mr. Batty in conference because the factual background might be more complex than he perceived it to be.
19. Mr. England met Mr. Batty in conference on 10^th August 1999. He confirmed the advice given in his opinion but recommended that before solicitors wrote to BSB asserting repudiatory breach, he check whether an action for breach of contract could now be brought in an Employment Tribunal.
20. Further instructions to advise were sent to Mr. England on 16^th August 1999. Meanwhile, Mr. Batty was worried that the 3 month time limit in which tribunal claims had to be brought was close to expiry and before Mr. England produced a written further opinion, he issued proceedings in the Employment Tribunal without reference to Mr. Danaher.
21. Mr. England's final opinion was delivered on 17^th November 1999. In this document he considered the letters of 15^th February, 19^th April and 25^th May 1999 and said there were two possible situations: if the letters were not sent to Mr. Batty he would not be in breach of contract by not attending for work; if, however, it were held that the letters had been sent, Mr. Batty might be in breach, but it was far from certain that Mr. Batty had been dismissed. Whether BSB had had grounds for terminating the contract it had not done so and had itself broken it by cessation of payment.
22. Mr. Batty also started proceedings for repudiatory breach of the service agreement in the Barnsley County Court. The trial took place before Mr. Recorder Kealy in May 2001. At the hearing it was alleged on Mr. Batty's behalf that the letters of 19^th April and 25^th May 1999 had never been sent to Mr. Danaher. The learned Recorder handed down a reserved judgement on 17^th July 2001. He found that the two letters had been sent to and received at Mr. Danaher's office. He further held, on the basis of Mrs. Sugden's evidence as to the telephone conversation with Mr. Batty on 19^th May 1999, that Mr. Batty was aware that he was required to return to work on 17^th May 1999 and that when he did not do so, BSB were entitled, in accordance with the House of Lords' decision in Miles v Wakefield MDC [1987] ICR 368, to cease paying him without being in repudiatory breach. In his view, the service agreement continued but the obligation to pay was in suspension so long as Mr. Batty refused to attend for work. The service agreement was brought to an end by the issuance by Mr. Batty of proceedings for wrongful dismissal in the Employment Tribunal. That action was a repudiatory breach that was accepted by BSB. Mr. Batty's claim was accordingly dismissed with costs.
23. Mr. Batty's trial counsel, Mr. Cranfield, advised that an appeal had no real prospect of success; it would be throwing good money after bad. Mr. Batty changed solicitors and sought advice from Lupton Fawcett but their view and that of Mr. Waller of counsel was the same as Mr. Cranfield's. Undaunted, Mr. Batty applied in person to the Court of Appeal for permission to appeal. Permission was granted but at the substantive hearing the Court of Appeal (Ward, Sedley and Hale LJJ) upheld the decision and the reasoning of the Recorder and dismissed the appeal with costs.
24. It is accepted very properly by Mr. Danaher that not only ought he to have been aware of the receipt of the 19^th April and 25^th May 1999 letters but also that he should have timeously advised Mr. Batty that in the light of those letters: (i) there should be negotiations with BSB; (ii) he should return to work if necessary; and (iii) his rights under the service agreement would be jeopardised if he neither negotiated nor returned to work when required to do so. In respect of the 19^th April 1999 letter I am of the view that given its importance, Mr. Danaher was under a duty to get in touch with Mr. Batty in the US and deliver the appropriate advice over the telephone. Mr. Danaher knew that his client was on holiday in the US and I am satisfied that he could have found out Mr. Batty's US telephone number by making diligent enquiries of BSB. Even if Mr. Danaher had no such duty he should have ensured that Mr. Batty was properly advised over the weekend prior to the 17^th May 1999.
25. Mr. Batty's case is that if he had received this advice he would have gone back to work and would not have the lost the benefit of his contract; nor would he have incurred the expense of the Employment Tribunal and County Court proceedings and the appeal to the Court of Appeal or the liability to pay BSB's costs of the latter two proceedings. On behalf of Mr. Danaher, Mr. Holtum contends that it is clear from what happened between Mr. Batty and BSB's directors, particularly Mr. Smith, after the service agreement came into force, that Mr. Batty would not have gone back to work and even if he had, the contract would have been lawfully terminated soon afterwards by BSB. Mr. Holtum further submits that: (1) even if Mr. Danaher had not been negligent as alleged, Mr. Batty would still have brought unsuccessful proceedings against BSB in the County Court and the Court of Appeal; and (2) in any event, Mr. Batty ought not to be allowed to recover the costs of the Employment Tribunal because only the costs of the County Court proceedings are claimed in his pleading.
26. I turn then to the history of the relationship between Mr. Batty and BSB's directors in the period 1^st September 1997 -- 9^th September 1999.
27. On 2nd September 1997, two days after the service agreement came into effect and the share buy-back agreement was completed, there was an EGM of BSB's shareholders. At this meeting, contrary to the understanding he had reached with Mr. Smith, Mr. Batty proposed that Mrs. Sugden should be Managing Director rather than Mr. Smith. Feelings ran high. It was an unpleasant meeting. Mr. Batty used bad language. His proposal failed, as it was bound to, given Mr. Smith's majority shareholding, and Mr. Smith was duly appointed Managing Director. Mr. Batty asked what his responsibilities would be and was told that this would be discussed by the directors. The next day he sent a memo to the BSB directors apologising for his bad language. He also said that he was opposed to the employment of a Mr. Tony Richardson on the ground that Mr. Smith's support for the appointment was based on nepotism.
28. On 27^th November 1997 Mr. Batty had a row with Mrs. Charlton, a BSB director, and reduced her to tears. He was highly critical that of the discontinuance of a previous procedure involving the assignment of an order number. Mrs. Charlton said the cost could be allocated through the use of a green time sheet. This made Mr. Batty very angry. He shouted at Mrs. Charlton and went on to complain about the allocation of cost between an associated company and a company called Topdeck Parking Ltd on an insurance schedule. In short, he behaved as if he were still the overbearing Managing Director he had formerly been.
29. On 2^nd December 1997 Mr. Smith sent Mr. Batty a memo stating that he should not approach Mrs. Charlton directly because he had greatly upset her with his aggressive and insensitive manner. He also told Mr. Batty that all business mileage must be recorded on a BSB timesheet before there could be reimbursement at the end of the month. Mr. Batty was quick to respond. In a handwritten memo of the same date he accused Mr. Smith of fraudulently using company funds to pay for a trip to the Continent to buy drink for Christmas and in a further memo to BSB's directors he set out a series of actions he had been told not to take by Mr. Smith and stated that due to these actions and the lack of any response to requests for information he had come to the conclusion the directors either did not wish to listen to his advice or were putting him in an untenable position.
30. Mr. Batty sent another memo to the BSB directors on 8^th December 1997. He claimed that the actions taken against him and the restrictions imposed on his employment were not in the best interests of the company and were frustrating his contract. He said that the restrictions on access to information could result in losses going undetected and in large losses through claims for constructive dismissal and breach of contract.
31. On the same date Mr. Batty sent a notice to Mrs. Charlton and Mrs. Sugden in his capacity as a shareholder purporting to requisition an EGM to consider a number of resolutions including that: (i) the company consider the personal use of assets by directors would be contrary to the long term interests of the company; (ii) the appointment of Mr. Smith be declared null and void; and (iii) the members consider the implications of losses that could be put upon the company by the inability to understand the requirements of the Employment Protection Act. In evidence, Mr. Batty said that he was not trying to embarrass Mr. Smith by this notice but was concerned at the loss by the company of two of its major accounts.
32. Mr. Smith responded with a memo dated 10^th December 1997 addressed to the directors and to Mr. Batty. He said that over the last three months he had found it very difficult working with Mr. Batty. He went on:

I appreciate that with the extra time you have you would like to see all the things done you never had time to do when you were Managing Director. I also understand that it must be very difficult to get out of the habit of being "in charge" with no one to question your actions, but you must try to step back and give me some space to do my job and allow the directors and staff to do theirs. All we seem to do is to reply to memo after memo, this is NOT GOOD for the company or staff and I can see that it is telling on directors and staff.

Maybe you should stand back and think about your new role with BSB and how best to communicate with the rest of us, as we appear to be, quite unnecessarily, at loggerheads with one another.

33. On 12^th December 1997 Mr. Batty was informed by a memo from all of the BSB directors that they wanted him to spend 2 days a week advising the sales manager for Centenary Storage Systems, Mr. Cliff Pearson, sending a brief weekly report to the directors. The board also told Mr. Batty that they would advise him of their requirements for advice as and when required and requested him not to attend the office between these tasks. Mr. Batty did not react well to this memo. He turned up for work and was not told to return home. On 13^th January 1998 he sent a memo of his own to the BSB Board stating that he was driven to conclude that the BSB directors did not like his advice and wanted him out of the way. He did not want to stay at home awaiting requests for information because such a way to earn a living lacked interest and enthusiasm and created a feeling of rejection, lack of worth and loss of self esteem and, as he well knew, caused depressive moods, sleeplessness and illness. He concluded by asking to be informed if the Board did not wish him to carry out his duties.
34. On 20^th January 1998, Mr. Batty wrote to the company secretary, Mrs. Sugden, complaining that an EGM had been fixed for 2^nd February 1998 and seeking once again to convene an EGM to consider a number of resolutions similar to those set out in his previous requisition attempt. And on 3^rd February 1998 he sent a memo to Mr. Smith and Mrs. Sugden in which he raised again the difficulties he had had with Mrs. Charlton in November 1997 and complained about a number of steps Mrs. Charlton had taken concerning himself. He set out seven invoicing problems and stated: "We cannot afford to go on with this method of management and as directors it us up to yourselfs (sic) to rectify what has become an expensive effort to do it my way."
35. As I have recorded, Mr. Batty contracted viral meningitis in mid April 1998 and was off work until 1^st September 1998. However, he sent a memo to Mrs. Sugden dated 4^th June 1998 raising various matters including a complaint about how the company's accountants were handling a VAT overpayment claim. The last paragraph read:

OTHER POINTS

If you are to be successful YOU need to address the issue of share ownership and the need for the directors to take full unimpeded control of the business and not have a company based on hate, ego, or Biotof [boot is on the other foot], ENVY, GREED or the need to act in ones own interest.

36. Also, during August 1998 Mr. Batty took BSB to the Barnsley small claims court for sums said to be due for mileage driven on BSB's business ("business mileage"). BSB defended the claim contending that the entitlement to business mileage depended on claim sheets being submitted and Mr. Batty had submitted no such sheets. The judge upheld BSB's defence and dismissed Mr. Batty's claim, which prompted Mr. Batty to call the BSB directors "lying bastards".
37. On the day that Mr. Batty returned to work (1^st September 1998) he was convinced that the locks had been changed. He spoke to Mr. Smith who told him to return home and stay there until he was given a specific assignment. Mr. Smith also asked Mr. Batty if his doctor "had signed him off the sick". Mr. Batty protested in a memo to the BSB Board stating that whether he should be instructed to stay at home should be a board decision not a decision of Mr. Smith personally. On 2^nd September 1998, Mr. Smith wrote Mr. Batty a long letter dealing with the matters that had come up at the meeting the previous day. He expressed concern at the stress Mr. Batty had been putting himself under for the last eleven months. He also protested at Mr. Batty's attacks on the other directors and staff and accused Mr. Batty of acting against him, for example by challenging his nomination as Managing Director at the EGM in early September 1997. In evidence Mr. Batty insisted that throughout he simply advised the BSB on how to run the company correctly; he had opposed Mr. Smith's nomination as Managing Director because he thought he lacked the necessary business acumen to run the company.
38. On 3^rd September 1998 the Board met to discuss Mr. Batty's position and on the same date Mr. Batty met with Mrs. Charlton and Mrs. Sugden when they discussed, inter alia, concerns Mr. Batty was beginning to have about his and Mr. Smith's pensions and Mr. Batty's claim for business mileage. The following day Mr. Smith insisted that Mr. Batty show him what he had in his brief case. Mr. Batty took great exception to this action by Mr. Smith. He told him he was going to seek advice from a solicitor.
39. Mr. Batty returned to the office on 7^th September 1998 and there was another meeting with Mr. Smith, together with Mrs. Sugden and a Mrs. Farrand, who attended at Mr. Batty's request. Mr. Batty said that he was worried that BSB were trying to get rid of him. He told the meeting that he had arranged to see solicitors at 4.30 pm the next day and talked of a potential claim for constructive dismissal. He agreed that the company could obtain medical reports from his doctors and was given the letter referred to in paragraph 5 above that instructed him not to attend the company until all matters had been satisfactorily resolved. Thereafter, Mr. Batty was suspended on full remuneration until 1^st June 1999.
40. I have dealt with the principal events that occurred after 7^th September 1998. It is necessary only to mention a few additional matters. On 31^st January 1999 Mr. Batty's personal effects were cleared out of his office at BSB and sent to him at home. This upset him; he thought it showed that BSB wanted to get rid of him. In fact, unknown to Mr. Batty, someone else had moved into his office and his possessions had had to be removed.
41. In May 1999, Mr. Batty got his daughters Samantha and Nicola to write to Mrs. Sugden in their capacity as shareholders to propose a number of items for the agenda of the BSB AGM, one of which was designed to question why he was not being allowed back to work. BSB's AGM was held on 8^th July 1999. Mr. Batty had included on the agenda proposals that: (i) the directors be asked why he was not being allowed back to work but was still being paid; (ii) the company be wound up due to mismanagement and lack of profit; and (iii) the company take legal action against the directors for mismanagement of company assets and unexplained loss of profits. The meeting had to be cancelled and an EGM took place on 6^th August 1999 at which Mr. Batty's daughter asked why her father was not being allowed to work, to which she got no substantive reply on the ground that the matter was subject to litigation.
42. To the extent that Mr. Batty is claiming that Mr. Danaher's negligence caused him to lose the benefit of his service agreement, he is claiming for the loss of a chance, viz the chance that he would have returned to work on or shortly after 17^th May 1999 and the service agreement would have continued to the end of its five year term. Pursuant to the decision of the Court of Appeal in Allied Maples Group Ltd v. Simmons and Simmons [1995] 1WLR 1602, I must determine on the balance of probabilities whether Mr. Batty would have declared himself ready and willing to return to work and if that question is answered affirmatively I must then assess the chance of BSB having him back and the contract enduring to the end of its term, or alternatively, the chance that there would have been a settlement that secured to Mr. Batty either the whole or part of his contractual entitlement.
43. Mr. Holtum submits that I should reject Mr. Batty's statement from the witness box that he would have returned to work on 17^th May 1999 if he had been told about the 19^th April 1999 letter and timeously advised that he should return to work if this was what BSB were demanding. In support of this submission Mr. Holtum relies (principally) on: (i) the fact that Mr. Batty opted to sue for constructive dismissal in late July 1999; (ii) the fact that although Mr. Batty knew that his doctor thought that he was fit to return to work he did not press for production of the medical report; and (iii) the telephone conversation on 19^th May 1999 in which Mr. Batty told Mrs. Sugden that he wasn't coming in to work. I reject Mr. Holtum's submission. Mr. Batty's conduct after 14^th May 1999 was conditioned by the lack of the advice that he ought to have received shortly after the receipt of the two letters dated respectively 19^th April and 25^th April 1999. Although at the time Mr. Batty was suffering from a very painful knee, I am quite satisfied on the balance of probabilities that he would have declared himself to be ready and willing to return to work if he had been advised as he should have been that this was necessary to protect his legal position. I say this because I have no doubt that Mr. Batty did not want to prejudice his legal position vis a vis BSB and because Mr. Danaher confirmed in his evidence that: (i) Mr. Batty was telling him he wanted to return to work until shortly before he sent his fax of 23^rd July 1999 setting out his case for constructive dismissal; and (ii) Mr. Batty was amenable to receiving legal advice.
44. Would BSB have taken Mr. Batty back? I find that there is a high probability that they would have done. Mr. Smith, Mrs. Sugden and Mrs. Charlton all gave evidence, albeit under the compulsion of witness summonses issued by the defendant. They were all impressive witnesses. They each said that careful thought had been given to whether Mr. Batty should be required to return to work before the 19^th April 1999 letter was sent. Mr. Batty was difficult to work with but they thought he had a lot to offer the company: another effort should be made at having him back. The request in the 19^th April 1999 letter that Mr. Batty return to work was a bona fide request. It was not part of a cynical manoeuvre aimed at contriving a position where Mr. Batty could be lawfully dismissed.
45. What are the chances of the service agreement remaining in place for the whole or some of the balance of the term? The possibilities range from Mr. Batty remaining employed for the whole of the unexpired term to Mr. Batty being lawfully dismissed within a very short period of time. The principal possibilities lying between these positions are: (i) Mr. Batty being unlawfully dismissed at some later date and recovering full or partial damages or achieving a settlement that secured the whole or part of the remaining value of the contract; or (ii) the parties agreeing that there be a mutual parting of the ways on terms that secured to Mr. Batty the whole or part of the remaining value of the contract.
46. Mr. Holtum argued that it was clear from Mr. Batty's conduct since 1^st September 1997 that if he was taken back he would very shortly thereafter have been lawfully dismissed. This submission I also reject. Mr. Batty had been a difficult employee who found it extremely hard to accept that he was no longer the boss. Throughout his employment under the service agreement there had been conflict and confrontation between him and Mr. Smith. However, as I have found, the BSB directors were nonetheless prepared to have him back. They thought that Mr. Batty could make a valuable contribution. It is also the case that so long as the service agreement continued, Mr. Batty was bound by the no-compete provisions contained in clause 10.2. Further, the company would have been anxious not to be exposed to a successful claim for wrongful dismissal because it would have found it financially difficult to pay large damages in a lump sum. On the other side of the relationship, I have little doubt that Mr. Batty wanted to secure to himself the maximum benefit conferred by the agreement. It was a very valuable contract in all respects, including the very generous holiday entitlement. After the receipt of competent legal advice in the light of the letters, I think Mr. Batty would have been concerned not to give BSB good grounds lawfully to dismiss him. I am also sure that Mr. Batty would have taken the long holidays to which he was entitled, during which he would have been out of the hair of the directors and they out of his. I conclude therefore that there was a reasonable but by no means certain chance that the service agreement would have remained in force until the end of its term.
47. In evaluating this chance I take into account the possibilities that Mr. Batty would conduct himself so as to give BSB lawful grounds to dismiss him before the end of the contractual term and that in this eventuality there would be a settlement of a claim for wrongful dismissal. In the negotiations that actually took place under the auspices of ACAS following Mr. Batty's complaint to the Employment Tribunal he took an uncompromising line: he wanted the whole value of his contract or he would see BSB in court. In the hypothetical situation I am now considering, I think there is a real chance that BSB would agree to settle such a claim for more than a trifling sum payable in instalments and that Mr. Batty would not be as intransigent as he was in the ACAS negotiations.
48. I also take into account the chance – which in my view is a real one --- that BSB and Mr. Batty would mutually agree that the service agreement should end on terms that he should have the full or substantially the full outstanding value of the contract paid on an instalment basis.
49. Weighing all the real as distinct from speculative possibilities, I find that if Mr. Danaher had not been negligent in the manner he was, there is a 70% chance that Mr. Batty would have ended up with the full value of the service agreement.
50. Mr. Holtum contends that Mr. Batty has failed to mitigate the loss he claims he suffered in respect of the service agreement. I do not accept this contention. Mr. Batty was 50 in 1997. He spent the previous 25 years building up the business of BSB and in 1997 wished to move from semi-retirement to full retirement over the term of his service agreement. Since about April 1998 he has been deaf as a result of viral meningitis. In my opinion, his chances of obtaining an employed position which it would have been reasonable for him to accept were slim to the point of being virtually non-existent. Nor do I think it reasonable to expect him to have made anything more than a nominal return by setting up another business as an entrepreneur. He has sought to develop a tax shelter company but he has been hampered by planning constraints and the company is not yet in profit. Investment in a business can be a risky affair. So far as I can see he has invested little capital in the tax shelter venture since 1999. No doubt he could raise a few hundred thousand pounds capital but I do not think that the doctrine of mitigation requires him to have risked his capital by going into a business venture.
51. It is common ground that Mr. Batty must give credit for the tax he would have paid if he had continued to receive the benefits conferred by the agreement. I accordingly award Mr. Batty 70% of the gross value of the remainder of the term of the agreement, less the tax that would have been payable on such a rate of return. I understand there is no dispute that the gross value of the outstanding term of the contract is £212,523.76. The defendant is therefore liable to pay Mr. Batty £148,766.63 less the appropriate deduction in respect of tax. It was agreed at the trial that the amount that would have been paid in tax should be the subject of a subsequent hearing if the matter cannot be agreed. Accordingly, if there is no agreement on the issue I shall give directions after handing down this judgment for the trial of the tax deduction issue.
52. I turn now to Mr. Batty's claim to be reimbursed the costs he incurred in fighting the Employment Tribunal ("ET") and County Court proceedings and the appeal to the Court of Appeal. It is true that in his Particulars of Claim Mr. Batty does not distinctly claim the costs of the ET proceedings but he includes amongst the sums claimed for "action BY001112" sums he paid in respect of those proceedings. In my opinion, Mr. Batty ought to be allowed to claim for the costs of the ET proceedings. Although the point arose late in the day after a draft of my judgement had been sent to counsel the defendant has been able to deal with it without suffering any relevant prejudice.
53. The damages claimed for the costs of the proceedings taken by Mr. Batty are not based on the loss of a chance. Accordingly, he is entitled to these damages if: (i) the costs incurred are the kind of loss in respect of which the duty sued on was owed (see South Australia Asset Management Corporation v York Montague Limited [1997] AC 191); (ii) on the balance of probabilities the defendant's negligence caused the costs incurred; and (iii) the damages are not too remote.
54. This is a case where the duty was to inform and advise in respect of a dispute concerning the rights conferred by the service agreement. The duty was breached not by giving wrong information or advice but by failing altogether to provide information and advice at the appropriate time. In my opinion, consistently with what Lord Hoffmann said in the South Australia Asset Management Corp case at p.214 C-G, Mr. Danaher is responsible for all the foreseeable loss which is a consequence of the failure to provide the information and advice that ought to have been provided at the appropriate time.
55. I find that the costs incurred in the County Court litigation were caused by Mr. Danaher's negligence and were a foreseeable consequence of that negligence. If Mr. Batty had been advised as he should have been he would have declared himself ready and willing to return to work on 17^th May 1999 and BSB would not have caused the letter of 25^th May 1999 to be sent or have ceased paying Mr. Batty on the ground that he was failing to work. Although he seems to have relied on other alleged breaches of the service agreement, the principal breach Mr. Batty relied in the County Court trial was the cessation of payment. If Mr. Batty had returned to work and/or BSB had not ceased payment the County Court proceedings instituted by Mr. Batty would not have been brought. In my opinion it was foreseeable that Mr. Batty would bring an action based primarily on the cessation of payment and that such proceedings would fail. I am also of the opinion that the advices produced by Mr. England do not break the chain of causation or render the costs of the action too remote to be recoverable. Mr. England was dealing with a case where BSB had ceased to pay Mr. Batty any remuneration under the service agreement and where the letters of 19^th April and 25^th May 1999 had not been received by Mr. Batty and appeared not to have been received by Mr. Danaher.
56. The ET costs were incurred in respect of a hearing to decide a preliminary time point and preparation and briefing counsel for a full substantive hearing. These costs bore no fruit because the substantive proceedings were stayed pending the outcome of the County Court action and the issue of constructive dismissal having been decided against Mr. Batty in the County Court action, the ET proceedings have become a dead letter.
57. Mr. Batty launched the ET proceedings on his own initiative because he was worried that unless he acted his claim would become time-barred. Although he sought to rely on many actions taken by Mr. Smith in support of his constructive dismissal claim, the key allegation was the cessation of his remuneration. If he had been advised as he should have been at the appropriate time he would have returned to work and his remuneration would not have been stopped. It follows in my opinion that the losses represented by the costs of the ET proceedings were caused by and were a foreseeable consequence of Mr. Dananher's negligence.
58. Mr. Batty's own costs of the County Court action total £9,236.80 and the costs incurred in the ET proceedings amount to £3,768.75. Accordingly I award £13,005.55 by way of damages.
59. Are the costs of the appeal as pleaded in Mr. Batty's Schedule of Losses recoverable? In my judgement they are not. Mr. Batty was given strong and clear advice by his trial counsel that an appeal had no real prospect of success. That was good advice. In my opinion it was wholly unreasonable for Mr. Batty to seek further advice on an appeal and to mount an appeal in the face of advice he received. He should have cut his losses. The pleaded costs of the appeal are accordingly too remote to be recoverable. They are not a loss for which Mr. Danaher ought to be responsible.
60. Mr. Batty settled his costs liability to BSB by paying the company £25,000. This sum was in payment of BSB's costs in both the County Court and the Court of Appeal. BSB's costs of the appeal represented about £11,000 of the £25,000 paid to them. Accordingly I also award Mr. Batty £14,000 in respects of the costs he has paid BSB.
61. In the result, Mr. Batty's action succeeds and I award him damages in the total sum of £175,772.18 from which must be deducted the equivalent of the tax he would have paid on receipt of remuneration valued at £148,766.63 over the balance of the term of the service agreement.