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OUTER HOUSE, COURT OF SESSION
[2007] CSOH 74
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A2890/02
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OPINION OF LORD McEWAN
in the cause
RONALD M SMITH
&c
Pursuers;
against
HONDA MOTOR EUROPE
LIMITED t/a HONDA (UK)
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: (1) Party; (2) Party
Defenders: Clarke; MacRoberts
19 April 2007
[1] Honda
is an international company. They make
and distribute fine motor cars ranging from the humblest saloon to the fastest formula
one Grand Prix racing car. This case is
all about their relationship with a man who was for many years their dealer in Ayr. Mr Smith, assisted by his wife, ran a
successful garage business known as Doonfoot Garage in Doonfoot
Road in Ayr. For nearly 30 years he was a Honda dealer
from that address selling new Honda cars and servicing them and other
cars. He also sold other cars from time
to time which were not Hondas. He has,
so far as I am aware, enjoyed the highest reputation in the area where he
traded and beyond that. However,
relationships with Honda came to an end in 1997. The reasons for this are not entirely clear
and are not in fact the subject of this case.
I will return to look at that matter in some detail later on, on the
clear understanding that it is not the issue in the case.
[2] Some
21/2 years after Mr Smith ceased to be the Honda dealer, by which time he was
still trading under the name of Doonfoot Garage but this time from an address
in a different part of Ayr at Green Street Lane, Honda
wrote a letter. In the case before me,
this has been known as the offending letter.
It was written in November in 1999 and Mr Smith in this action complains
that the letter purported to tell his customers that his business was
closed. He immediately consulted
solicitors and after sundry correspondence and some pressure being brought to
bear, Honda wrote another letter in August 2000. That letter purports to be an apology for the
offending letter. The offending letter
is number 6/2 of Process and the so-called apology is number 6/4 of
Process. Meanwhile, when all this was
happening, Honda had appointed another agent to be dealer for them in Ayr,
namely Messrs Arnold Clark who traded from Prestwick
Road in Ayr at an address
not far from where Mr Smith now trades.
[3] Mr
Smith and his wife, whom I will now call the pursuers in the case since they
are a partnership, complain that the letter 6/2 amounts to a negligent
misrepresentation and a breach of duty owed to them by Honda. They seek damages of some ฃ45,000 alleging
loss of customers and business damage.
The whole case has to be viewed against the vicissitudes of the motor
trade and such knowledge as the Court received in evidence and from general
knowledge of motor cars. It is well
known, as the evidence disclosed, that as the design and style of cars changes,
that can affect customers. It is also
well known that people change makes of motor cars for no particular good reason
while others remain loyal to one dealer or style all their lives. Customers move, customers die, some stop
driving and others go elsewhere. The
attitudes of the young and of older drivers may be different. The income of the driver may be important in
knowing what his motoring preferences might be and many other factors come into
play, all as the evidence disclosed and indeed the expert witnesses told
me. The pursuers gave evidence in the
following way. They had no counsel to
act for them and Mr Smith presented the pursuers' case calling his wife as a witness
and himself making a statement upon which he was cross-examined. He led two professional witnesses one of whom
gave evidence on matters not in issue and the other who spoke in some detail to
a report. He led evidence from four
different customers of his garage and also from a member of the Scottish
Parliament. The defenders led the
evidence of one customer, the evidence of a forensic accountant, Mr Graham,
who spoke to a report and Mr Crawford who was a senior executive in the Head Office
of Honda in London. The writer of the two material letters was
not called but as it was admitted that customers would have received them,
nothing turns on that. At the end of the
day, what was in issue before me fell neatly into two chapters. The defenders accepted that there was and had
been a relationship of sufficient proximity between the parties for there to be
a duty owed not to make negligent misstatements. They disputed, however, that number 6/2 of
Process properly read and in the context of other correspondence was a breach
of that duty. The second major and most
interesting issue was that relating to any damages suffered. In the first place, I heard argument about
whether there had been any loss caused at all and secondly, whether or not, on
the evidence, the pursuer had proved the loss claimed. Issues of how much had been lost and for what
period were important because it is clear from the evidence that Mr Smith
is claiming loss for a period of 5 years following the offending letter. Even more interestingly, I was given a very
good argument on both sides as to how one proved losses of this type. There was evidence both from customers and
there was the evidence of expert witnesses.
I was referred to a number of cases by both sides including the case of Ratcliffe v Evans [1892] 2QB 524 which is still one of the leading cases in England
on quantification of damages for a business loss.
[4] In
his final submission, Mr Smith began by dealing with a number of matters which
are not truly the subject of the action but on which evidence was led under
reservation and against objection. They
relate to meetings held during 1997 to discuss monies allegedly owing to the
pursuers and also certain disputes about hire purchase payments. Although these matters are touched on in
Article 2 and Answer 2, the pursuers appear to be using these matters to show
that the defenders knew to what new address they were moving. Mr Smith went on to say that he first knew of
the offending letter when one of his customers brought it to him. He consulted his solicitors and an apology
was forced out of the defenders.
[5] The
pursuers did not want to phone their clients even though they had a client
base. The evidence of Mr Kerr on losses
should be accepted. He had checked the
figures. The defenders' expert had not
produced his own report. He accepted
that there could be a loss and agreed with some of the calculations.
[6] He
criticised Mr Crawford's evidence as he did not know who authorised No. 6/2
and 6/4 of Process. These letters would
have been relied on by the pursuers' clients.
The letters amounted to a negligent misstatement and although matters
were corrected, a loss was reasonably foreseeable. The defenders knew the pursuers were still in
business and that the letters would cause customers to go elsewhere. The 27‑year relationship between the
pursuers and defenders created a proximity giving rise to a duty of care. He referred to Caparo Industries v Dickman [1990] 2 AC 605. The letters were on Honda notepaper
and a natural reading of 6/2 showed an intention to get customers for Arnold
Clark. Damages should be assessed
according to the BDO etc report and a "broad brush" used. He referred me to Ratcliffe v Evans. In his brief reply he also asked me to look
at Anns v Merton London Borough Council [1978] AC 728 and Donoghue v Stevenson 1932 SC (HL) 31 but without making any particular point
about either case.
[7] Mr
Clark tendered a full written submission and took me through it. In addition his argument to the Court can be
summarised in this way.
[8] I
was invited to sustain the second and third pleas-in-law for the defenders and
grant absolvitor. The defenders accepted
that many Honda owners in south Ayrshire and elsewhere were the pursuers'
customers or clients and that they received the relevant letters. The letter 6/2 properly understood did not
mean that the pursuers had ceased trading.
It meant that their dealership had ended and was an announcement of the
new dealer. The critical averments of
fact were to be found on Record at 11D.
That said that because of the letter customers had gone to other garages
and a number of customers were specified.
The problem was that the evidence led failed to prove this at all. No other case was suggested and these
averments were linked to the duty at 18C.
Only some of the customers gave evidence and it did not support the
pleadings.
[9] Counsel
referred to some of the matters led against objection about the ending of the
dealership, monies allegedly due and an action in Kilmarnock
Sheriff Court all of which he described as the
"emotional fabric" of the case. None of
these matters had any relevance to this action.
The pursuers were, he said, very properly disclaiming any suggestion
that the defenders sent the letter 6/2 with malice. He then commented on the customers led noting
inter alia that they all showed up the vagaries of the motor trade in
different ways. The pursuers had to lead
evidence to prove their record before any basis for damages existed. A small number even, might be enough to allow
a discriminating global award.
[10] He then moved to deal with the proof on damages. On that, the evidence disclosed all the whims
and vagaries of the motor trade ranging from customers loyal to the Honda make
and the pursuers to others who changed car because of a design change. The evidence simply did not support the case
on Record. The pursuer's report was
flawed. It was, in the first place, not entirely
the work of Mr Kerr. He could not
explain the percentages in years 3 to 5.
A "top down" case was like a global claim based on jobs done. That would work if the defenders were
responsible for all the reductions. That
could never be so when there was a new dealer in the area. Even the pursuers' own report (No. 6/5 of
Process) suggested that most of the pursuers' customers stayed with them. The pursuers had sent out their own letter to
all their customers advising that they were still in business at Green
Street (see Nos. 6/27 and 6/28). A broad approach was simply not possible when
there were so many imponderables. Also
the available figures for years 3 to 5 were ignored. The correct approach would have been to prove
a "bottom up" case by leading customers who had left and then take a broad
approach on the available figures making the necessary allowances for the
Arnold Clark factor and many other things.
Only to take account of Arnold Clark for six months was wrong. Counsel referred me in detail to Ratcliffe v Evans and to John Doyle v
Laing 2004 SC 713; also McGregor on
Damages (cit infra).
[11] In any event, the defenders who admitted they owed a duty of
care to the pursuers were not in breach of that duty. The letters had to be read together. No. 6/2 of Process merely referred to a
dealership and stated a historical fact.
Because the defenders admitted it had been sent to customers there was
no need to call Ruth Brown. He
moved me to grant absolvitor.
[12] It is necessary to say something about events in the spring of
1997 when the franchise ended although it does not affect the real issues in
the case. It does, I think, illustrate
the harsh realities of life in the motor trade and the disappointment felt by
the pursuers at what happened.
[13] The parting of the ways merits a little attention. Much of the evidence about this came from the
pursuers and Mr Crawford and I find the following to be established. The pursuers' business had been profitable up
to 1996 with a large turnover from the Honda franchise. Much of that depended on meeting the
defenders' targets. The targets were
then changed and for reasons which are not entirely clear, but may have had
something to do with finance, the pursuers were unwilling or unable to accept
the new figures. They decided to
downsize and they met representatives of the defenders at Glasgow
Airport (Messrs Saunders and Torrance
- not called as witnesses) to discuss outstanding matters. That was in March 1997 and there was a
further meeting in London in the
summer. Disputes had arisen over monies
due, bonuses, cars and warranty claims.
The defenders said they had a claim for working out of trust to do with
a finance company. There was ultimately
an action in Kilmarnock Sheriff Court
between the parties.
[14] Much of this evidence was led against objection. I am prepared to allow it for the limited
purpose of showing how the dealership came to an end in June 1997. The pursuers clearly expected praise and
thanks to be forthcoming from the defenders.
That did not happen and as far as customers in the local area were
concerned all they received was a letter No. 6/1 of Process - a somewhat cold
document.
[15] I am not concerned to decide who was right and who was wrong in
these disputes. Solicitors became
involved and even Mr Gallie MSP was enlisted (see No. 6/53 of
Process). None of these things is the
substance of the case. I find that it is
more probable than not that in 1997 the defenders knew that the pursuers were
going to continue in business elsewhere, but beyond that the chapter does not
assist me. It was never suggested that
it in any way influenced the writing of the later letters.
[16] I now want to look at the relevant letters, the first is No.
6/1. It is dated 31 July 1997 on Honda notepaper, signed by a
customer relations manager. It reads:
"31 July 1997
Mr M Hawker
30 Main
Street
Loans
TROON
KA10 7EX
Dear Mr Hawker
We regret to
advise you that as of 30 June 1997,
Doonfoot Garage no longer hold the Honda Car Franchise.
In the
meantime the following dealers are the nearest Authorised Honda Franchise
alternatives for your Sales, Service and Warranty requirements and will be only
too pleased to assist you until the new dealership opens. We are pleased to inform you that we have
made arrangements for a collection and delivery service by ATM Honda and
Grierson & Graham.
ATM
Honda Grierson
& Graham
104
Boglemart Street 365
Annan Road
Stevenston Dumfries
Ayrshire DG1
3JX
KA20
3JL
Tel:
01294 468881 Tel:
01387 253405
Service
Manager: Billy Scott Service
Manager: Derek Wright
We
should like to apologise for any inconvenience caused by this change in your
local Honda dealership but feel sure that ATM Honda and Grierson & Graham
will be able to assist you with all your needs.
In
the meantime, we look forward to advising you of a replacement dealer in the
near future.
Yours sincerely,
HONDA (UK)
Claire Sutherland
Customer Relations Manager"
It refers to franchise and dealers.
[17] Next is 6/2 the "so called" offending letter. It reads:
"18 November 1999
Private and Confidential
Mr Ronald Smith
90-92
Doonfoot Road
KA7 4DP
Dear Mr
Smith
Re: Arnold Clark
We wrote to you some time ago
advising that your local Honda dealer, Doonfoot Garage, had closed and offered
alternative dealerships to visit in the meantime.
We can now confirm that we have
successfully completed negotiations with a new dealership and are pleased to
announce that a new Honda approved dealership will be opening in your
area. Details of the new dealership can
be found below.
Arnold
Clark
196
Prestwick Road
Ayr
KA8 8NP Telephone: 01292 288 866
Whilst you are
free to visit your preferred dealer, Arnold Clark will also be more than happy
to assist you with all your sales and servicing needs. However, if you already have an existing
relationship with another dealership for your servicing requirements, please
continue with this arrangement.
Once again, we
would like to thank you for your patience prior to the appointment of your new
local Honda dealership.
Yours sincerely
Honda (UK)
Ruth Brown
Manager - Customer Operations"
Within a month, the pursuers'
solicitors had written to Honda to complain and their letter is 6/3. I need not set it out. On 2
August 2000 Honda wrote a third letter No. 6/4 which states:
"02 August 2000
Private and Confidential
Mr L C
Alexander
6 Savoy
Park
Ayr
KA7 2XA
Dear Mr
Alexander
Re: Doonfoot Garage
We wrote to you some months ago
regarding the opening of a new Arnold Clark facility for Honda on the Prestwick
Road. This
is some two years after our previous franchise holder ceased to represent
us.
Unfortunately, we indicated in
that letter that the previous franchise, Doonfoot Garage, had closed. This is not the case. Doonfoot Garage are still trading and
continue to operate in the local community.
We
apologise for any confusion our initial letter may have caused.
Yours faithfully
Honda (UK)
Ruth Brown
Manager - Customer Operations"
The question to be answered is
whether these letters amount to a negligent misrepresentation and a breach of a
duty of care. In my opinion, in law and on
the evidence, the letters are not a negligent misrepresentation. It is accepted that there is sufficient
proximity between the parties to create a duty of care. However, the words used must be given their
natural meaning. No. 6/1 of Process clearly
relates to the "franchise" and, later, the "dealership". It is very clear in its terms and is
factually accurate. Next is No.
6/2. It refers in many places only to
"dealerships". It is accurate where it
states that as a dealership Doonfoot had closed. The statement is made in the context of the
letter 6/1 where it says "... we wrote to you some time ago ...". Since these letters are true statements there
is accordingly no misrepresentation and no ground of action. Thereafter the letter No. 6/4 does not
matter.
[18] However, the claim also fails on the facts proved. There is simply no proper body of evidence
that customers, who, it is conceded, received the letters, considered them to
be a statement that the pursuers had ceased trading and went elsewhere. Had that been the evidence, then it is
possible that different arguments might apply.
In fact, most of the pursuers' customers remained with them.
[19] I want now to turn to the matter of damages. In this Record, Articles 3 and 5 are linked
in this way. The pursuer alleges and
specifies that a number of his customers left him because of the letter. Eleven are named and four of them gave
evidence for the pursuer. The defenders
led one of them. It is averred that this
caused the pursuer lost business and he goes on to quantify this by taking
number of "jobs done" over a two-year period and then by using an average, then
a discounted figure arriving at a yearly loss.
The loss is projected for five years using decreasing percentages on the
year 2 figure. It is contained in and
based entirely on the BDO Stoy Hayward Report of 1 November 2002 (No. 6/5 of Process).
[20] This report and method of calculation raises a number of
important issues and there was at the proof a dispute between expert accountants
as to how to calculate any loss where the customer base is known, can be
identified and named. The alternative
ways were described as "top down" or "bottom up". The pursuer's approach was to favour the
former approach, the defenders the latter.
I shall explain later what the witnesses meant by these expressions.
[21] However, before dealing with that, there is a more fundamental
point about No. 6/5 of Process. The
Report is the work of an Accountant who is now retired and lives abroad. He was not a witness. His name is Mr McAldowie. Mr Kerr who is an experienced Chartered
Accountant spoke to the Document. He
said that the framework of it was the work of Mr McAldowie but that he had
retrieved the job numbers and made the necessary calculations. He accepted that he and McAldowie had only
looked at job falls for two years, and not beyond, and that they had not looked
at actual customer losses. Mr Kerr was
aware that the pursuer had a database of customers with some 3,000 names and
agreed that it would have been possible, though expensive, to identify a range
of "lost" customers. He agreed that if a
customer left because they wanted servicing done by a dealer that would not be
attributable to any action of the defenders.
He accepted that a business like Doonfoot with good "retention
statistics" (see 6/57) would take customer with them to their new premises and
did so. They might acquire new customers
while others could drop off for no apparent reason. He said that no account was taken of the "Arnold
Clark" factor after 6 months in making his calculations.
[22] Many of these matters are plainly variables and there could be
a range of opinion as to what allowances to make for them. The problem, however, with Mr Kerr's
evidence is that the theory behind the report is not his, albeit he said he
agreed with the theory. There are two
critical, and in my view fatal features within the report which make me reject
it even if the theory behind it is correct (to which I will return). There are basic failings, one relating to the
gathering of evidence and the other the law of evidence. Dealing with that in turn; the report has
only taken actual figures for two years.
Figures for years 3 to 5 were available, would have been the best
evidence and could have been used. It
would have been interesting to see whether the high figure in year 2 could have
been maintained. None of that was done
and I am critical of that. The second
point is more basic. The formula for
years 3 to 5 is simply the application of a decreasing percentage figure (75%
down to 25%) to the cash loss in year 2.
Mr Kerr said that formula was selected by Mr McAldowie but he was unable
to explain why these figures were used.
I cannot accept this evidence without the author to speak to it and it
must be regarded as mere speculation without any clear basis in proper
accounting. No doubt Mr McAldowie could
have explained it but he did not give evidence.
[23] In case a different view is taken about this report, I now
return to look more closely at the methodology.
It is of course still arguable that losses could be proved on actual
figures for two years. To decide about
this, it is necessary to test the theoretical basis in principle for this way
of proving loss. It cannot be done in
the abstract but only against the case actually made against the defenders and
which they have come to court to meet.
The pursuer seemed to criticise the defenders for not having a separate
report on how they would have computed his losses but that criticism is
misconceived. "Top down" or "bottom up"
that is the choice. Both experts, Mr
Kerr and Mr Graham, agreed what was meant.
Top down looks at generalities, work done in different years, pricing
for jobs and discounts for costs and overheads.
It makes the assumption, in this case, that any downturn in business was
caused by the letter 6/2, and that the loss of job means loss of customers who
would have taken their Honda to the new Doonfoot for servicing and other work
but who have gone elsewhere because they believed the garage was closed. The whole downturn in jobs is ascribed to
that set of facts. It does not make any
continuing allowance in the two years for the Arnold Clark factor or the
vicissitudes of the motor trade. There
was no great dispute as a matter of arithmetic as to how the average job prices
were calculated or that correct discounts were made and that the actual totals
were correct. "Bottom up" looks at
individual customers who have left and calculates up from that. That is the case on Record. Here it is necessary to deal with the
evidence of the defenders' forensic accountant, Mr Graham. He did not set out to quantify a loss and
indeed on the assumption (which he did not accept as correct) that a "top down"
approach was right did not seriously disagree with Mr Kerr's arithmetic. I found Mr Graham to be an impressive witness
who was both reliable and accurate. The
opinions in his report No. 7/1 of Process were his own (paragraph 1.4).
[24] Importantly, he criticised, in my opinion correctly, the
failure by the pursuers to take account properly of relevant factors in their
"top down" approach for example the Arnold Clark factor; the failure to take
available figures in years 3 to 5 and the other matters he mentions from 3.9 to
3.20.
[25] I also agree with him that a "bottom up" approach could have
been adopted (3.24). Elsewhere in this
opinion I have shown that no proper evidence to support this was led. Thus Mr Graham has correctly analysed and
shown up the flaws in the pursuers' approach to quantification on the
evidence. In my view his evidence also
accords with the principles enunciated in Ratcliffe
and John Doyle.
[26] However, in my opinion, in principle and on the facts of this
case, the theoretical basis of No. 6/5 is simply wrong. Both sides, as I have said, referred me to Ratcliffe v Evans.
[27] Some care is necessary when relying on English authorities
concerning damages because of the rules concerning general and special damages
which have no place in Scots law. Also Ratcliffe was a case of malicious
falsehood i.e. published intentionally to cause harm to a business and in such
a case general damage would be implied.
The case before me lacks that element, as the pursuers rightly conceded
at the outset. The matter was an appeal
for a new trial by the defendant. He
published a weekly newspaper in Flintshire and adjoining areas and in it was
written words importing that the plaintiff had ceased to carry on business as
an engineer and boilermaker and that his firm did not exist. The plaintiff proved a general loss of
business but gave no specific evidence of the loss of any particular customers
or orders by reason of the publication.
A jury, sitting with a Commissioner at Chester
assizes, awarded damages.
[28] Before looking further at the case, it should be noticed that
it is cited with unqualified approval in the seventeenth edition (2003) of McGregor
on Damages at various places. For present purposes, its importance is
this. It seeks to demonstrate the range
of possibilities where, at one end damages can be calculated almost to a
certainty and with some precision, to the other where it is clear that there
has been a loss but certainty is almost impossible of proof. In the latter cases, the Court must do the
best it can. I quote from what Bowen LJ
said at 532:
"... In all actions accordingly on the case where
the damage actually done is the gist of the action, the character of the acts
themselves which produce the damage, and the circumstances under which these
acts are done, must regulate the degree of certainty and particularity with
which the damage done ought to be stated and proved. As much certainty and particularity must be
insisted on, both in pleading and proof of damage, as is reasonable, having
regard to the circumstances and the nature of the acts themselves by which the
damage is done. To insist upon less
would be to relax old and intelligible principles. To insist upon more would be vainest pedantry
..."
[29] Many cases were referred to and discussed and the judge gave a
number of illustrations. If guests or
customers were a floating and transitory class (580/31) then general evidence
of losses may do. At 533 an example is
given of an auction when it could never be proved who would be bidders or
purchasers. Some businesses have
customers whose names are unknown to them.
In the result, the Court of Appeal allowed the verdict to stand. Other similar examples are seen in McGregor
at pages 309 and 1425/27.
[30] In the present case, the pursuer claims a diminution of his
business and lists a number of customers who went elsewhere. Eleven people are mentioned by name. Indeed it was clear from the proof that the
customer base was known and an extensive list was lodged (No. 7/5 of
Process). This distinguishes the present
case from some of the examples in Ratcliffe. Indeed it was clear from the pursuers' own
evidence that they kept in direct touch with customers and would phone or write
to them to remind them when cars needed servicing. They also went to collect cars for this
purpose and supply courtesy cars. In my
view, proof to some degree of loss of specific customers would be necessary in
a case pleaded in this way. Obviously
not every customer would need to be called but once a pattern emerged, general
losses could competently be proved making proper allowance for other relevant
factors e.g. the loss of the franchise, the Arnold Clark factor etc.
[31] The problem is, that is not what happened in the evidence.
[32] I move now to consider what was the evidence from the customers
who were led. The pursuers led four and
the defenders did not argue that customers did not receive No. 6/2 of
Process. It was intended for them. No dispute about the credibility of these or
indeed any witnesses arises. Mrs Morgan
a lady of 81 years came from Ayr to testify. She had been a customer for over 25
years. She got a letter from the
defenders No. 6/1 of Process. It had
been her impression that the defenders' business was closed but having met Mr
Smith in a shop, she continued to have her Honda serviced at Green Street. She remembered a letter telling her he was at
the new address. Her car is collected
for her as Mr Smith sends a driver. The
witness did not receive No. 6/2 of Process and could not remember No. 6/28 (Mr Smith's
promotion letter to his customers (undated)).
[33] Mrs Harrigan aged 41 lived in Mauchline. She had a racing green Honda Civic which she
bought from Doonfoot Garage at its old premises in 1996. She remembers receiving what she described as
the "closed" letter and thereafter dealt with a garage in Cumnock. She could not say whether she received Nos.
6/2 and 6/4 of Process. However, in
August 1999 she traded in her Honda for a white Rover which she purchased from
a dealer in Cumnock. All of this, of
course, predates No. 6/2 of Process.
Mr Wales, aged 36, lived in Kilmarnock and had
bought three cars from the pursuers. He
used the Green Street
premises when the pursuers moved. He
remembered getting No. 6/2 of Process but no further letters. He did think that the pursuers had ceased
business and went to Arnold Clark. He
was not satisfied with them. He then
moved to live elsewhere and bought a Subaru model. He returned to buy Honda from Arnold Clark in
Kilmarnock. This
was the only witness led by the pursuer who might be considered to be a "lost"
customer during the relevant period.
However, by 2002 even he had bought a different make of car.
[34] The final customer led was Mr Reginald Timlett aged 81, a
former RAF fighter pilot. He had been a
customer since 1973, liked Hondas and was happy with the servicing and repairs
he had from the pursuers. He followed
them to Green Street. He had no memory of getting any of the
relevant letters but said that he had heard from "a source" that the pursuers
"had ceased to be a dealer". He then
bought a Mitsubishi because, as he put it, the "fascia on the new Honda was
white metal" and he did not like that.
His new car was bought in Irvine. The witness emphasised that he thought it was
"as a dealer" that the Smiths closed down.
It is difficult to consider that this witness would qualify as a lost
customer.
[35] The defenders led Mrs Nesta Sheddon aged 70. She lived in Seamill and said she kept
careful files on her car. She received
no letter from Honda. She was a customer
of Doonfoot. The only reason she stopped
using Mr Smith was when she tried to arrange a service. As she still drove Honda she used ATM and
Arnold Clark. Recently she has used the
pursuer at Green Street and
a Honda dealer in Glasgow. The reason she used Mr Smith again was
because he telephoned her in 2005. She
was asked to look at Nos. 6/1, 6/2 and 6/4 and said that she had "definitely
not" seen them. It is impossible to
conclude that she was a lost customer due to any letter sent by the defenders.
[36] Let me conclude by looking briefly at some of the other cases
mentioned to me with one other example which I mentioned in passing in the
debate as it was seen as a footnote in McGregor.
[37] Three of the cases enunciate principles and, of course, are
wholly different on their facts. Donoghue v Stevenson was merely mentioned as was Anns and I need not here discuss them. Caparo is
the leading modern authority about proximity and what is fair, just and
reasonable. The defenders have rightly
conceded here that the necessary degree of proximity exists and in any event it
is clearly proved in evidence. I want to
take note of Ashcroft v Curtin [1971] 3 All ER 1208 which was
noted as the hearing proceeded. It is
only an example. The case had a number
of specialities and it was plain that the basis of proving any losses depended
upon accounts the resolution of which was a "task ... impossible of performance
by any accountant ..." (1212 C). The Court
would have found that there had been a loss but was driven to the
unsatisfactory conclusion that it was impossible to quantify. As Edmund Davies LJ said (1213 H):
"'arithmetic has failed to provide the answer which common sense demands'". The facts of the case are wholly different
from the present but it does show that, before assuming losses, the Court must
have reliable information on which to base an award. That has proved to be a problem in this case
too.
[38] The case of John Doyle
Construction Ltd v Laing Management (Scotland) Ltd 2004 SC 713 was referred to by the
defenders. It is important. The facts were very different from the
present case and before answer a proof was allowed. The importance of the case lies in the
discussion of when and in what circumstances a global claim for loss is
appropriate, when a "jury award" might be appropriate and how and in what
circumstances apportionment can take place.
It has to be remembered that in Scotland
in all cases there has to be evidence which has a basis in the pleadings.
[39] What had occurred was this.
A major insurance company was constructing a new corporate headquarters
in Edinburgh. The project was divided into distinct works
packages. The pursuers who were
contractors on two of the packages claimed an extension of time on the superstructure
contract, a revised completion date and some four million pounds for costs of
delay and disruption. They alleged this
was due to events for which the management contractors (Laing) were
responsible. The delay was alleged to
have been caused by an overrun on the earlier package causing a ten‑week
delay on the start to the superstructure.
They also averred that the delay was caused by late issue of drawings,
design changes and a heavy February snowfall when no work was possible for a
week. It is obvious that these facts
allowed argument that the defenders may have been responsible for some things,
the pursuers for others and neither party for the bad weather.
[40] The pleadings showed in some detail (and by reference to
reports) how the losses were made up. It
was relevant to consider extra hours spent, hours wasted, the need for staff to
attend for the extended period, maintenance of the site all as can be seen from
paragraphs 24 onwards with the added need to avoid double counting. It was alleged that the pursuers were making
a global claim. That could only succeed
where there was no material causative factor for which the defender was not
liable. If there was one, the global
claim was undermined. That, however,
might still leave causative factors leading to individual losses or
apportionment within the global loss (paragraph 7 and 31).
[41] The relevance of all this for present purposes is that in the
delictual claim before me, the pursuers sought to make what really was a global
claim for their losses and yet one where the Record offered to prove that named
customers had stayed away on receipt of the letter. There is the expert report showing the
calculations (as in John Doyle). Some kind of apportionment is made for years
3 to 5 although the percentages are unexplained. The named customers have either not given
evidence or not said what was expected of them.
The vagaries of the motor trade are not the fault of the defenders. The defenders appointed Arnold Clark. That was no breach of any duty owed to the
pursuer. All of these things undermine
the general global claim for five years and without any evidence of discrete
losses based on the pleadings , there is no room to award lesser detailed sums
or to take a "broad brush" jury approach. The fact that proving such losses may be
difficult is nothing to the point (Doyle
paragraph 17). Accordingly, in the
present case, had a number of customers given evidence that the letter had made
them go elsewhere, and had the percentages been explained, then there might
have been room to make a jury award.
That, however, was not the evidence.
[42] For these reasons, the case ably presented by Mr Smith cannot
succeed. The defenders are entitled to
absolvitor and I will sustain their second and third pleas‑in‑law,
and repel all five of the pursuers' pleas.
