Tinseltime Ltd. v Eryl Roberts [2011] EWHC 1199 (TCC)

[2011] EWHC 1199 (TCC)

Case No 9MA50096

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

MANCHESTER DISTRICT REGISTRY

TECHNOLOGY AND CONSTRUCTION COURT

Venue Manchester Civil Justice Centre,, 1 Bridge Street West, Manchester M60 9DJ

Date 13 May 2011

Before

HIS HONOUR JUDGE STEPHEN DAVIES

SITTING AS A JUDGE OF THE HIGH COURT

Between

TINSELTIME LIMITEDClaimant

ERYL ROBERTSFirst Defendant

M & JT DAVIESSecond Defendant

DENBIGHSHIRE COUNTY COUNCILThird Defendant

WELSH ASSEMBLY GOVERNMENTFourth Defendant

Martin Budworth (instructed by Gavin Edmondson Solicitors, Northwich) for Claimant

Peter Butler (of GHP Legal, Wrexham) for First Defendant

Wilson Horne (instructed by Barlow Lyde Gilbert LLP, Manchester) for Second Defendant

Karina Champion (instructed by Weightmans LLP, Liverpool) for Third Defendant

Richard Coplin (instructed by Hugh James, Cardiff) for Fourth Defendant

Hearing Hearing dates: 28-30 March 2011

Date of draft judgment: 5 April 2011

JUDGMENT

[1]This is the judgment on the preliminary issue as to whether or not the claimant has a valid cause of action in nuisance or in negligence, and if so on what basis.

[2]The claim as advanced by the claimant, Tinseltime Limited (“Tinseltime”), in the final version of the draft Re-Amended Particulars of Claim (“RAPC”) is that it is entitled, pursuant to an assignment made 1 December 2007 (“the assignment”), to maintain a claim for damages for negligence and/or in nuisance enjoyed by a company, now dissolved, known as Fountain of Youth Limited (“FOY”).

[3]The essential case which is advanced by the claimant is that in February 2007 work was being carried out by the First Defendant (“Roberts”), as part of a road building scheme known as the A5 Pont Melin Rhug Bridge project in Clwyd, which involved the demolition of part of a building known as “The Old Creamery”. The project had been commissioned by the Fourth Defendant, the Welsh Assembly Government (“WAG”), the works had been arranged on its behalf by the Third Defendant, Denbighshire County Council (“Denbighshire”), and had been subcontracted to the Second Defendant (“Davies”), who in turn had instructed Roberts to carry out part of those works. It is said that FOY was the licensee and in exclusive occupation of the other part of the building (“the premises”), which it used for the purpose of its tinsel making business. It is said that when Roberts was engaged in cutting concrete blocks on the adjacent land, to be used to infill existing openings in the dividing wall between the two parts of the building, dust was produced by the cutting operation which was carried into the premises and settled on machinery situated on those premises, owned by FOY and used for the purposes of its business. It is said that this dust caused significant damage to the machinery which had to be repaired and, until repairs could be completed, there was a loss of production resulting in a loss of sales.

[4]In order to determine the preliminary issue, it is necessary to resolve the following questions:(1) Whether or not at the relevant time FOY had a sufficient interest in the premises, so as to be able to maintain a claim in nuisance.

(2) Whether or not at the relevant time FOY owned the machinery at the premises and used the machinery for the purpose of a tinsel making business which it carried on from the premises, so as to be able to maintain a claim in negligence.

(3) Whether or not any claims which FOY had against any of the defendants were effectively assigned by the assignment.

[5]The trial of the preliminary issue was ordered by the court at a hearing on 15 October 2010. At that time the position was as follows:(1) The claimant had made an application to amend the existing Particulars of Claim, seeking to join in Davies, Denbighshire and WAG as additional defendants, and to make other substantial alterations to its existing statement of case, including increasing its claim for loss of profit to a claim said to be "in the region of £1,400,000".

(2) The existing defendant, Roberts, had made an application to strike out or obtain summary judgment on the claim, alternatively for specific disclosure and/or security for costs.

[6]The original Particulars of Claim dated 18 February 2009 had been pleaded on the basis that it was Tinseltime itself which was the occupier of the premises, the owner of the machines and the undertaker of the business from the premises at the relevant time, so that the loss was Tinseltime’s own loss. The draft amended Particulars of Claim dated 24 August 2010, produced in support of the application to amend, continued to assert the claim on the same basis as the original version. However, when all those assertions were contested by Roberts in the context of his application for summary judgment, on the basis that the evidence showed that the licence was held either by FOY or by Mr Peter Ridgway, that FOY was the owner of the machines and the undertaker of the business at the relevant time, the claimant’s solicitors admitted (in a witness statement made by Mr Gavin Edmondson on 17 September 2010) that what Roberts was saying was correct, and that it would be necessary further to amend to reflect this. At this stage it does not appear that the claimant had disclosed the existence of the assignment to Roberts. However at the hearing itself counsel for the claimant said, on instructions, that the admissions made by Mr Edmondson had been wrongly made and reflected a misunderstanding of the position, and that the claimant’s case continued to be that it was Tinseltime which was entitled to claim. It was in those extremely unsatisfactory circumstances that it appeared appropriate to resolve these issues by trying the basis of the claimant’s claims as a preliminary issue.

[7]Even after the order of 15 October 2010 the basis for the claims being advanced by the claimant continued to change. Thus:(1) The further draft amended Particulars of Claim served on 3 November 2010 which was required, in accordance with that order, fully to particularise the claimant's case in relation to the preliminary issue, asserted the claim on the basis that at the relevant time it was the licensee of the premises, the operator of the tinsel making business therefrom, and that it held the machinery on loan from FOY. The primary case asserted was that it was Tinseltime's exclusive occupation as licensee and Tinseltime’s operation of the business which entitled it to advance the claims. The claimant referred to and relied upon the assignment in order to entitle Tinseltime to pursue the claim for damage to the machinery; it also sought to rely on it as a fallback "if the defendants contend and prove that [FOY] was still in occupation of the premises and/or still trading" at the relevant time.

(2) In the Further Information provided on 9 December 2010, in response to a request made by Roberts’ solicitors, it was said that the licence relied upon was a licence in writing made on one January 2007 granted to Mr Peter Ridgway, but that at around the same time it had been agreed between the licensor's representative and Peter Ridgway that Tinseltime could use the premises.

(3) In the Replies to the Defences, served on 21 January 2011, there was a fundamental shift in the case being advanced, so that paragraph 1 of the Reply to Robert’s Defence pleaded as follows:

“In the light of the Part 18 answers the claimant accepts that it was not operating from the premises at the material time. The handover of business from [FOY] to the claimant did not take place until approximately August 2007. The claimant's claim is pursued under the assignment dated 1 December 2007. For the avoidance of doubt, at the time of the damage [FOY] was the owner of and in possession of the machines, was the licensee in exclusive occupation/possession (the licensee was stated as Peter Ridgway of [FOY]) and was trading in the tinsel-making business. Its cause of action in respect of the matters complained of was assigned to the claimant who thereby steps into its shoes." (4) In his witness statement made on 19 January 2011 Peter Ridgway said, at paragraph 6, that "On 1 January 2007, I entered into a licence with the office of Lord Newborough in respect of the property known as ‘The Old Creamery’” and, at paragraph 9, that “ I did not assign or transfer the licence to any other person, I used the licence in accordance with clause 3 ("general storage and manufacture of Christmas goods"), which was through my companies". (5) On the first day of trial, Mr Budworth, counsel for the claimant, produced a revised draft re-amended Particulars of Claim which was broadly consistent with the case pleaded in the Replies to Defences. Following some further objection from the defendants to the detail of that draft, a further version was produced, verified by statement of truth signed by Peter Ridgway, which set out the case as finally being advanced by the claimant. Paragraph 3.1 is in the following terms: “For the avoidance of doubt, at the time of the damage, [FOY] was: (1) the owner of and in possession of the machines, (2) as a matter of construction of the License agreement and as a matter of fact the licensee in exclusive occupation and possession of the premises (notwithstanding the reference to ‘Peter Ridgway of [FOY]’ the licensee was not Mr Ridgway personally) and was trading in the tinsel making business.” (1) the owner of and in possession of the machines, (2) as a matter of construction of the License agreement and as a matter of fact the licensee in exclusive occupation and possession of the premises (notwithstanding the reference to ‘Peter Ridgway of [FOY]’ the licensee was not Mr Ridgway personally) and was trading in the tinsel making business.”

[8]By the order of 15 October 2010 I ordered that the claimant’s application to amend and Roberts’ application to strike out / for summary judgment should be adjourned generally, permission to restore. No specific application for permission to restore was made either by the claimant or by Roberts prior to the hearing. However on 1 March 2011 WAG made an application for summary judgment on the basis that it asserted that the claimant had no realistic prospect of success on the claim against it.

[9]In those circumstances, the parties and the court were naturally concerned to ensure that there was clarity before the hearing began as to what was to be determined at this hearing and on what basis. I ruled that the questions to which I have referred in paragraph 4 above were those which were for final determination as part of the preliminary issue, and that all other issues were ones which could only be determined on a final basis if they could properly be determined summarily. It was common ground that there was one very important issue which could be summarily determined, which was whether or not on the case as advanced by the claimant Denbighshire and/or WAG could as a matter of law have been liable to FOY for the acts and/or omissions of Roberts. (For reasons which I shall explain the same issue does not arise so far as Davies is concerned.) During the course of the hearing a number of other matters were ventilated, specifically the basis of, and evidential support for, the claims for machinery repairs, for loss of profits and for loss of management time. I ruled that although it would be permissible for the defendants' representatives to ask Peter Ridgway questions on these topics, they were not matters about which the court could reach any conclusion unless appropriate to do so on a summary basis, applying established principles applicable to summary judgment applications. It was common ground that questions of breach were not part of the preliminary issue, nor could they be summarily determined at this stage.

[10]What I shall do, therefore, in this judgment, is to address the following issues in the following

[11]It is common ground between the parties that in order to maintain a claim in nuisance it is necessary for the claimant to establish that at the relevant time FOY had a sufficient interest in the premises to do so. I was referred by all parties to the decision of the House of Lords in Hunter v. Canary Wharf Ltd

[1997] AC 655

. As Lord Goff said:

“It follows that, on the authorities as they stand, an action in private nuisance will only lie at the suit of a person who has a right to the land affected. Ordinarily, such a person can only sue if he has the right to exclusive possession of the land, such as a freeholder or tenant in possession, or even a licensee with exclusive possession. Exceptionally however, as Foster v Warblington UDC shows, this category may include a person in actual possession who has no right to be there; and in any event a reversioner can sue insofar as is reversionary interest is affected. But a mere licensee on the land has no right to sue.”

Lord Hoffmann held that it was sufficient to have either a “right to possession based upon (or derived through) title [or] de facto occupation”, but that “in each case, however, the plaintiff (or joint plaintiffs) must be enjoying or asserting exclusive possession of the land”.

[12]As I have already said, the claimant's case as advanced at the trial of the preliminary issue is put fairly and squarely on the basis that as a matter of construction of the licence agreement dated 1 January 2007 it is the licensee. In closing submissions Mr Budworth suggested that it was sufficient for him to establish that FOY was in actual occupation of the premises. However, that is not the case advanced in the draft RAPC, nor is there any evidence to support a case that even if FOY was in actual occupation that amounted to exclusive possession. There is no challenge to the authenticity of the licence agreement which, as was accepted and as I find, was entered into as an arms’ length transaction between the licensor, Lord Newborough, and the licensee. The licensee is referred to as:

“Peter Ridgway, of Fountain of Youth Ltd, 23 Stockport Road, Romiley, Cheshire, SK6 3AA”

. Clause 1 provides that “the licensee may use the large section of the former cold store from the 1 January 2007 to the 31 December 2007”; clause 2 provides for a payment of £1000 per calendar month, payable monthly in advance by standing order; clause 3 restricts the permitted use to general storage and manufacture of Christmas goods; clause 5 provides that the licence is “personal to the licensees It is common ground, and I am satisfied, that the reference to licensees in the plural is simply a typing error. and shall not be assigned or transferred to any other person”; clause 9 gives the licensor the right to resume possession of the whole or part at any time on one months written notice; finally the version produced - apparently from Lord Newborough's estate office - has been signed on his behalf but not by or on behalf of the licensee. The space provided for signature is there to be “signed by Licensee”, with no reference to the signature of a director or company secretary being required.

[13]It is common ground that the established principles of contract construction are applicable to the construction of this license. I was referred by Mr Horne to the decision of the House of Lords in Chartbrook Ltd v Persimmon Homes Ltd

[2009] UKHL 38

for a helpful summary by Lord Hoffmann in paragraph 14 of the relevant principles.

[14]The claimant's contention, as I have said, is that on its true construction the licence was granted to FOY. The defendants' contention is that on its true construction the licence was granted to Peter Ridgway personally. No-one has suggested that the licence was granted to Peter Ridgway and to FOY and, given the wording of the licence, I consider that this would not have been an argument which could sensibly have been advanced.

[15]So far as the relevant factual matrix is concerned, in my judgment a factor of very considerable significance is that there had been a previous licence made on 29 September 2005 between Lord Newborough as licensor and a licensee who was identified in precisely the same terms as in the subsequent version. In that case however the licence had been signed not only on behalf of the licensor but also on behalf of the licensee, by Michael Ridgway, his signature being witnessed by Peter Ridgway. The significance of this is that it was Michael Ridgway who was at all relevant times the director of FOY, whereas Peter Ridgway was neither an officer of the company nor a shareholder, his only formal role being that of consultant. In reality, I am quite satisfied, it was Peter Ridgway who effectively ran FOY, as is clear from the contemporaneous evidence and as was reinforced by the limited knowledge which Michael Ridgway had of events. However that does not matter; what does matter in my judgment is that it is clear that an objective observer, having the knowledge reasonably available to both contracting parties, alert to the potential for dispute as to the identity of the licensee, and aware of the fact that Michael, but not Peter, was a director of FOY, would undoubtedly have concluded that Michael and Peter must have intended, by the way in which they signed the original licence, that FOY would be the licensee.

[16]Furthermore, an objective observer with the background knowledge reasonably available to both contracting parties would also have known that the monthly licence payments had always been made by FOY. FOY’s accounts for the year ended 28 February 2006, produced by accountants, show that FOY had paid rent of £16,322 In addition to the licence fee payable for the premises, FOY also paid the rent or licence fee on a dwellinghouse used by Peter Ridgway and his wife. in that year, and his accounts for the following year, albeit produced by Peter Ridgway himself, also record the payment of rent in a comparable figure in that year. Furthermore, there is no obvious reason why Peter Ridgway should have wanted, or indeed have been able, to have paid the monthly licence payments personally. It is not disputed that the reason why FOY set up in business where it did was to obtain a grant from WAG, which depended on it taking up premises in Wales.

[17]The defendants submit, however, that the description of the licensee as “Peter Ridgway of Fountain of Youth Ltd”, when the address given was undoubtedly the personal address of Peter Ridgway at the time, makes it quite clear that on an objective basis it was Peter Ridgway personally who was intended to be the licensee, and the only reason for the reference to FOY was either to identify him or, at its highest, to clarify that the licensor was aware that the business had been and would be carried on by that company. I do not agree, however, that the use of the word “of” makes it clear that it was Peter Ridgway personally who was intended to be the licensee; in my judgment it could equally signify that Peter Ridgway was simply being identified as the natural person with whom the licensor had dealt on behalf of FOY, and who it might have been intended would sign the licence on its behalf. Furthermore, although it is true I have no doubt that by January 2007 FOY had no continuing connection with the Stockport Road address, it is also clearly the case that in 2005, when the original licence was drafted, it did - see for example the address given on the application for grant submitted to WAG in May 2005. It is quite clear in my judgment that the January 2007 licence was intended simply to replicate the wording of the original licence.

[18]I am therefore satisfied that the claimant has established that on a true construction of the licence it was FOY which was the licensee. Although there was a further submission made by Ms Champion for Denbighshire that the licence did not confer the right to exclusive possession, in my judgment it is quite clear from a fair reading of the licence as a whole, in particular clause 9 - making as it did specific provision for the licensor to have the right to resume possession in cert circumstances - that it did.

[19]In reaching this conclusion I have not overlooked the defendants’ submission that the tenor of the further information supplied by the claimant previously, as well as the content of the witness statement of Peter Ridgway and, indeed, evidence which was given by him in cross-examination by Mr Horne, suggested that he believed that he was the licensee. However it is clear that the subjective belief of one party to a contract as to its effect is of no assistance to the court when construing the contract. Furthermore, since I have not found myself able to place any weight of the uncorroborated oral evidence of Peter Ridgway, or on any assertion by the claimant in the pleadings or otherwise where made solely on his instructions, it does not seem to me that I can really attach any weight to this aspect of his evidence either.

[20]It follows, in my judgment, that the claimant has established that FOY did have, at the material time, a sufficient interest in the premises to bring an action in nuisance. Whether or not at the relevant time FOY owned the machinery at the premises and used the machinery for the purpose of a tinsel making business which it carried on from the premises, so as to be able to maintain a claim in negligence

[21]This was not a point which featured prominently in the defendants' closing submissions. In his cross-examination of Peter Ridgway, Mr Horne had sought to demonstrate that the transfer of the business from FOY to Tinseltime may already have had occurred by February 2007. However, although Peter Ridgway’s evidence on this point was, as with so much of his evidence, so confused and contradictory that I found myself unable to place any weight upon it, nonetheless the contemporaneous documentary evidence upon which I can place reliance tends to support his overall assertion that the transfer did not take place until sometime in or around August 2007.

[22]In particular, it is quite clear that Tinseltime did not have a bank account until August 2007, with the first transaction involving a transfer from RBS Invoice Finance Ltd being recorded on 20 August 2007. That is consistent with the documents obtained from Companies House, showing that Tinseltime gave a fixed and floating charge to RBS Invoice Finance Ltd on 24 August 2007. This is consistent with Tinseltime beginning to carry on business at around the end of August 2007, on the basis that only then did it have access to finance to enable it to do so. It is also the case, from documents obtained from HMRC, that Tinseltime's first VAT return was submitted for the three-month period ending 30 September 2007.

[23]Furthermore, there is no positive evidence to suggest that Tinseltime took over FOY’s business at any earlier time, and certainly not going back to February 2007. Although it is true that FOY failed to produce or file any accounts for the period of trading after 28 February 2007, it is also the case that HMRC records show that it filed returns for the periods up to and including the period ending 30 June 2007, recording activity through this period. Furthermore, although I have not seen the full bank statements for FOY, I have seen statements for part of May, June and July 2007 which show transactions taking place. In particular, on each statement there is a single transfer in of £10,000, making £30,000 in total. This appears to be consistent with Peter Ridgway's evidence in cross-examination that FOY was effectively being kept afloat over this period by payments in from Michael remortgaging his domestic property to provide finance.

[24]So far as the machinery is concerned, it is quite clear that the original grant application was submitted on the basis that the monies would be used by FOY to acquire machinery. There is documentary evidence referred to in Mr Butler’s witness statement to the effect that FOY purchased machinery at a cost of £112,500 in September 2005. This is consistent with FOY’s abbreviated accounts for the year ended 28 February 2006 filed at Companies House, produced by accountants, which record the acquisition of fixed assets in that year in a sum of £123,246.

[25]Still further, when Mr Buckley cross-examined Peter Ridgway to great effect in relation to his original denial that FOY had ever transferred the machinery to Tinseltime, the significance being that it was not in the claimant's interests having regard to the conditions of the WAG grant to admit that this had happened, it became quite clear that FOY had indeed transferred the machinery to Tinseltime sometime in August / September 2007. Whilst this line of cross-examination confirmed my initial opinion that I was unable to place any reliance on Peter Ridgway's uncorroborated evidence, nonetheless it supported the claimant's contention that prior to this transfer FOY was the owner of the machinery.

[26]In conclusion, therefore, I am quite satisfied and I find that FOY was the owner of the machinery and the operator of the tinsel making business at the premises at the relevant time, so as to allow it to maintain a claim for damage to the machinery and for financial losses consequential upon that damage in negligence. Whether or not any claims which FOY had against any of the defendants were effectively assigned by the assignment

[27]The assignment had been sent by Tinseltime to WAG under cover of a dated 14 January 2008, so it was accepted that it was a genuine contemporaneous transaction. Furthermore, although when cross-examined Michael Ridgway admitted that he had signed the assignment of behalf of FOY without having troubled to read it, mistakenly believing that its effect was simply to transfer the trading name of Tinseltime, previously used by FOY, over to Tinseltime Ltd, there is no suggestion, nor would there be any basis for a suggestion, that the document does not take effect according to its terms regardless of Michael Ridgway’s intention, or mistaken belief, as the signatory on behalf of FOY when he signed.

[28]Furthermore, although Mr Butler observed that FOY, by entering into the assignment, might well have placed itself in breach of obligations contained in the debenture which it appears to have given to Regency Finance, the invoice discounting firm used by FOY, and also that by this transaction FOY was disposing of its only remaining asset of any substance for what, on the evidence of Peter and Michael Ridgway, was a nominal payment of £1, none of this appears to me to be relevant in construing the assignment. It is not said, for example, that this affords any basis for having the assignment set aside, or indeed that the defendants would have any standing to argue this point. Finally, the fact that the assignment was not referred to or relied upon by the claimant until a very late stage in the proceedings cannot in my judgment be relevant to its construction.

[29]It is therefore, like the licence, a question of the true construction of the assignment having regard to the relevant factual matrix. The assignment is headed:

“Assignment of claim re National Assembly for Wales A5 Pont Melin Rhug Improvement v Fountain of Youth Ltd”

. The relevant operative terms are as follows:

“The assignor hereby unconditionally and irrevocably assigns and transfers to the assignee all rights and interest in the following: THE FULL CLAIM AGAINST THE WELSH ASSEMBLY GOVERNMENT & ANY SUB CONTRACTORS, FOR DISRUPTION AND DAMAGE TO FACTORY AND MACHINERY, CURRENTLY UNDER NEGOTIATION BY BARLOW ASSOCIATES LTD.”

The relevant operative terms are as follows:

[30]In my judgment it is necessary to consider these words in the context of the history of the claims as advanced as at the date of the assignment. The history can be summarised as follows: 1) On 29 January 2007 WAG served a Notice to Treat on FOY in which it stated its requirement for a licence for working space for the construction of a new gable end. It explained that FOY would be entitled to compensation for injurious affection, and to employ a qualified surveyor as its agent for such purpose. 2) It is clear that FOY instructed a firm known as Barlow Associates (“Barlow”) to negotiate the claim, and there was a meeting on site in March 2007. 3) On 15 June 2007 Barlow served a detailed claim, which referred to a loss of production of some 8 weeks over the period from early January 2007 to early April 2007 due to:(i) interruptions caused by the various sub-contractors required to work at the premises, including interruptions to the electricity supply:

(ii) the cutting of blocks for doorways contributing to dust in the machinery;

(iii) water penetration, including water interfering with the electricity supply. Reference was made to the machinery having to be stripped and repaired to resolve the problem of dust. The attached claim included individual claims for £69,326, being the loss of 40% profit on 8 weeks lost turnover, and for £18,000 odd being the cost of machine cleaning. A production plan was attached, which confirmed what was said about the loss of turnover, and showed turnover returning to close to target from early April 2007. A request for a payment on account of £20,000 was made, and it is common ground that a payment of £18,000 plus interest was made on 20 June 2007. 4) On 10 October 2007 WAG replied to Barlow saying that whilst it would accept liability for damage and disturbance which were the unavoidable consequences of the works, which it considered to be the delay and disruption to FOY due to the demolition of the adjoining section of the premises, it would not accept liability for the avoidable consequences of the works, which it considered included the elements of the claim relating to dust, use of electricity and equipment, and the alleged delay and disruption as a result of any roof leak. It said that the latter claims should be re-submitted to the relevant contractor, being Davies, that contract having been "arranged" by Denbighshire on behalf of WAG. It said that WAG would only consider such claims if the contractor denied liability and the scheme engineer confirmed that the damage was unavoidable. The letter was copied to Peter Ridgway. 5) On 21 November 2007 Barlow submitted a revised claim, excluding those elements identified by WAG as avoidable, and including a revised claim for 28 days lost production as a "direct and unavoidable result of the scheme", amounting to £48,528, and deleting the claim for machinery repairs. The letter concluded by Barlow "reserving the right to amend the claim so that all parts of the previous claim are paid by one party or the other". 6) The letter to WAG dated 14 January 2008 enclosing the assignment said: “Please find enclosed a notice of assignment from FOY … in respect of the current claim for disruption and damage caused to FOY by WAG and its subcontractors". 7) Following a further meeting and some further correspondence in August 2008 WAG offered FOY the sum of £30,000 expressly on the basis that it was without prejudice to any further claim outside the compensation code, and FOY accepted that offer. 8) In the meantime, on 24 June 2008 Barlow submitted a claim to Davies in respect of what were claimed to be the avoidable losses. This related to dust damage and water ingress, and amounted to £162,941.85. It appears that Mr Ridgway first instructed the claimant’s solicitors at around this time, he having been unable to find a solicitor to take on the claim previously. 9) The information obtained from Companies House shows that FOY should have filed its accounts for the year ended 28 February 2007 by 28 December 2007, and should have filed its annual return by 4 March 2008. Although neither was done, it appears that some information was filed in 2008, and it was not until March 2009 that a letter was sent to FOY warning that the company would be struck off within three months. It is clear that this was sent due to FOY’s failure to file accounts and the annual return. As a result of objections received that course was suspended, but eventually the company was dissolved on 27 July 2010.

[31]The defendants’ case is that what was assigned is the claim which was "currently under negotiation", being the claim for compensation for avoidable losses. A subsidiary argument advanced by Mr Coplin is that on any view what had not been asserted, or even conceived, at that time was a claim for loss of profits relating to any period after the transfer of the business from FOY to Tinseltime. A subsidiary argument advanced by Ms Champion is that since Denbighshire was not a "subcontractor", any claim against it cannot have been assigned. Mr Horne submitted that since Peter Ridgway accepted in evidence that it was not until 2008 that he realised that WAG would not accept the full claim, there was no reason for him to have had the avoidable losses claim as a separate claim in mind which needed to be assigned in December 2007. Mr Butler submitted that the reference to "any subcontractors" in the assignment was simply a reference to the subcontractors identified in the revised letter of claim by Barlow as having caused (unavoidable) disruption to FOY’s operations. Mr Butler also advanced as a separate argument a contention that if the assignment did extend to the claims as presently advanced, then it was void for champerty, on the basis that it was the assignment of a bare right to litigate for nominal consideration in circumstances where any underlying business and assets had already been answered by FOY to Tinseltime, and where there was no commonality of directors or shareholders between the two companies.

[32]The claimant's case is that the words "the full claim against [WAG] and any subcontractors for disruption and damage to factory and machinery" should be given their ordinary meaning, and would thus include claims for avoidable and unavoidable damage against all those involved in the project, and for all heads of claim, and should not be artificially limited by the concluding words "currently under negotiation by Barlow".

[33]In my judgment the claimant’s arguments on the primary issue are to be preferred. Ignoring for the moment the concluding words, it is clear from the words used that what was intended to be assigned was the full (i.e. the whole) claim for disruption and damage to factory and machinery, a claim not only against WAG but also against any (i.e. all) subcontractor(s). There would be no obvious reason to limit the scope of the assignment to the limited claim for unavoidable losses against WAG. The reference to subcontractors is more obviously understood as a reference to claims to be directed against subcontractors, rather than a reference to the activities of subcontractors the unavoidable consequences of which WAG was accepting responsibility for. In order for the defendants' primary arguments to succeed, one would have to construe the concluding words as referring only to the limited claim for unavoidable losses against WAG asserted in the letter of the 21 November 2007. However it is clear from the letter itself that Barlow was reserving the right to assert the full claim, i.e. including the claim for avoidable losses, against WAG in the event that it was not fully recovered from the subcontractors. Furthermore, there was no suggestion in that letter that FOY was in any way abandoning the balance of its claim for avoidable losses. It does not seem to me that the claim for avoidable losses was not still "currently under negotiation" at that point in time, even though it was not currently being directed to WAG and even though it had not yet been separately addressed to any others.

[34]What about the subsidiary arguments? Firstly, I reject Ms Champion’s argument that it did not include the claim now advanced against Denbighshire. Whilst I accept that on the evidence it does not appear that Denbighshire was a "subcontractor" to WAG, it does not seem to me that on a proper construction of the assignment it was intended to be limited to those who fell within the narrow legal definition of subcontractors. Instead, it was intended to encompass all those who might, through their relationship with WAG and the works in question, have a liability in tort for the damage to the premises and/or machinery. I do not think that the reference in WAG’s letter to Denbighshire as having “arranged” the contract, in circumstances where there is no evidence that this was accepted as common ground by all parties at that point, can compel a conclusion that any potential claim against Denbighshire was not assigned.

[35]Secondly, I reject Mr Butler's argument based on champerty. This is addressed in the context of assignments in Chitty on Contracts (30th ed) at paragraphs 19-49 – 19-53. The leading decision is of course the decision of the House of Lords in Trendext Trading Corp v Credit Suisse

[1982] AC 679

. In that case Lord Roskill said (at page 703):

‘But it is true today to say that in English law an assignee who can show that he has a genuine commercial interest in the enforcement of the claim of another and to that extent takes an assignment of that claim to himself is entitled to enforce that assignment unless by the terms of that assignment he falls foul of our law of champerty, which, as has often been said, is a branch of our law of maintenance.’

[36]That approach was applied in the subsequent decision of the Court of Appeal in Brownton Ltd v Edward Moore Inbucon Ltd

[1985] 3 All ER 499

, where the Court held that a claimant who had sued its computer installer and its computer supplier had a sufficient commercial interest to accept an assignment from the former of its rights against the latter as part of a settlement of its claim against the former. They held that it was necessary to examine the transaction as a whole to see if the assignee had a sufficient genuine commercial interest, that it was not necessary for the assignee’s interest to extend to ‘every facet of the cause of action’, and that it was not objectionable that the assignee stood to make a profit from the assignment so long as there was no massive disproportion.

[37]I have also been referred by Mr Budworth to the decision of the Privy Council in Massai Aviation Services v Attorney General

[2007] UKPC 12

, where the court upheld the validity of an assignment of a cause of action from the company in whom the claim was vested to a second company formed and owned by the shareholders of the original company, in circumstances where the remainder of the assets of the original company had been sold to a third party who had no interest in prosecuting the claim. Baroness Hale, reading the judgment of the court, said (as relevant to this case):(1) In order to decide whether the particular transaction is permissible it is essential to look at the transaction as a whole and to ask whether there is anything in it which is contrary to public policy [paragraph 19].

(2) The question was whether the transaction was or was not ‘wanton and officious meddling in another person’s litigation for no good reason’. If, taken as a whole, the transaction was a perfectly sensible business arrangement, then it would be held to be void [paragraph 21].

[38]Here, sometime around August 2007, the business previously undertaken by FOY had in effect been taken over and carried on by Tinseltime. Although it is true that the two companies had different officers and shareholders, all were part of the same family and, in the absence of evidence that this arrangement was an illegitimate front to allow Peter Ridgway to be concerned in the management of a company when he was prohibited from doing so (and in this case although he admitted that he had previously been disqualified as a director and made bankrupt, there was no evidence that he was under any relevant prohibition at the time FOY traded), there is no reason why the court should not have regard to the reality that these two companies were connected in that both were owned and controlled by the one family. It is clear that the assignment to Tinseltime simply followed what had already happened, and given that the claims the subject of the assignment as previously advanced were relatively modest, it does not seem objectionable to me that the transfer was, effectively Although the assignment referred to payments already made, there is no evidence of these payments. , for nominal consideration. I find nothing objectionable in the assignment. If the debenture holder and/or the other creditors had wanted to challenge it, they could quite easily have placed FOY into liquidation and put the liquidator in funds to do so; it is clear that they chose not to do so.

[39]Finally, I must deal with Mr Coplin’s argument as to the scope of what was assigned. It is clear, and is common ground, that only claims which FOY itself had were capable of being assigned. The claimant does not advance any claim for its own losses. The question is whether what was assigned is limited to the claim as advanced prior to the date of assignment, or can include the more substantial claims now sought to be advanced, including the claim for a substantially increased loss of profits put on the basis (see paragraph 14.3) of the loss of its chance of profits post cessation of trading. In my judgment the assignment on its true construction extended to all claims for disruption and damage to factory and machinery caused by the works undertaken as part of the road building project. Whatever the merits of the claims as now sought to be advanced, which I will address later, there can be no argument in my judgment that they were not assigned.

[40]Accordingly, I hold that the claims which the claimant now seeks to advance against the defendants were effectively assigned by the assignment. Whether or not on the case as advanced by the claimant Denbighshire and/or WAG could as a matter of law have been liable to FOY for the acts and/or omissions of Roberts

[41]This raises the question whether or not it is open to the claimant to argue that WAG and/or Denbighshire undertook a non-delegable duty to FOY, in negligence and/or in nuisance, so that they cannot rely on the general principle that an employer is not liable for the torts of his independent contractor.

[42]Although in principle it would also have been open to Davies to advance the same argument, on the footing that it is not liable for the negligence of its independent contractor, Roberts, Mr Horne for Davies properly and realistically accepted that this was not an argument on which he could succeed in the context of the present application. That is because Roberts advances a positive case in his Defence to the effect that he was effectively engaged as a labour only contractor, under the control of Davies and, in particular, that he was Instructed by a representative of Davies to continue cutting the concrete blocks notwithstanding the presence of the machines. In those circumstances, Mr Horne realistically accepted that there is a triable issue as to the question of Davies' control over Roberts which can only be resolved at trial, such that it is not possible to determine this point in favour of Davies at this stage.

[43]So far as negligence is concerned, Mr Coplin and Ms Champion place reliance upon the decision of the Court of Appeal in the case of Biffa Waste Services Ltd v. Outokumpu Wenmac AB

[2008] EWCA Civ 1238

. In that case the Court of Appeal subjected the rule that a defendant is liable for the negligence of his independent contractor where the activities of the independent contractor are ‘ultra hazardous’, being the principle derived from the earlier decision of the Court of Appeal in Honeywill v Larkin

[1934] 1 KB 191

, to a searching scrutiny. They concluded, at paragraph 78 that in their judgment the rule is “so unsatisfactory that its application should be kept as narrow as possible. It should be applied only to activities that are exceptionally dangerous whatever precautions are taken”.

[44]Mr Budworth accepts, as he must, this statement of the law as authoritative. Although not formally conceding the point, he was unable to identify any features of the present case which would enable him to submit that the activity of cutting concrete blocks in the open, albeit adjacent to premises in which machinery was located and a business was being carried on, could by reason of the risk of creation of dust be regarded as exceptionally dangerous whatever precautions are taken. In my judgment it is plain that this point is unarguable so far as the claimant is concerned. It follows that the claimant has no basis for asserting that Denbighshire and/or WAG can be liable to it in negligence.

[45]So far as nuisance is concerned, however, Mr Budworth developed an argument that the decision in Biffa had no application to nuisance, and that on the basis of the established authorities in relation to nuisance the claimant was entitled to argue that the cutting of concrete blocks in the circumstances referred to above involved a special danger of nuisance through the creation and passage of dust into the premises occupied by FOY where machinery susceptible to damage by dust was located, so that a non-delegable duty in nuisance arose. His fallback position was that even if the decision in Biffa was applicable to nuisance, nonetheless the claimant was entitled to argue that this case, involving as it did the demolition of the adjacent premises and work to the dividing structure, came within the more limited exception applicable to works involving dividing structures recognised by the Court of Appeal in Alcock v Wraith

(1991) 59 BLR 20

[46]Both arguments were challenged by Mr Coplin and Ms Champion, so that I must consider each in turn.

[47]So far as the first is concerned, it is true that the Court of Appeal in Biffa said nothing expressly about nuisance. That is not surprising in itself, given that Biffa was a case purely about negligence. However Mr Budworth goes further, and observes that in the section of the judgment of the court dealing with the principle in Honeywill, beginning at paragraph 69, the court referred to two of the earlier cases relied upon in Honeywill, namely Dalton v Angus

(1881) 6 App Cas 740

and Hughes v Percival

(1883) 8 App Cas 443

, as being cases of “liability in private nuisance, of interference with an easement, rather than the tort of negligence”. He submits, therefore, that in Biffa the court was expressly recognising the difference between the two torts.

[48]Mr Coplin, in answering this point, relied upon the judgment of Neill LJ in Alcock. In that case, which was a case involving nuisance and negligence, the trial judge had held the house owner liable to the adjacent house owner (the houses being part of a terrace) for the work conducted by his building contractor on the basis that he was under a non-delegable duty. Neill LJ undertook a thorough review of the authorities, including the decision of the Court of Appeal in Matania v National ProvincialBank

[1936] 2 All ER 633

, on which Mr Budworth placed reliance as confirming the general rule in nuisance. He clearly regarded Matania as a decision involving the application of the principle in Honeywill to nuisance (see page 11 of the transcript), and held (at page 12) that both the general rule and the ‘extra hazardous’ or ‘special risk’ exception applied to nuisance as much as to negligence. He concluded that this exception could not be applied to the facts of that case, which involved the replacement of a slate tiled roof with concrete tiles, where the difficulty lay in successfully tying in the replacement tiles with the original tiles across the dividing line between the two houses in the same terrace, on the basis that “it was not work which in the ordinary way involved some special risk”. He went on, however, to hold that the true principle to be established from the line of authorities including Dalton v Angus, Hughes v Percival and Matania, was that (page 15) “where the law confers the right to carry out work on a wall or other division between two properties, and that work involves a risk of damage to the adjoining property, the law also imposes a duty on the party carrying out the work to ensure that it is carried out carefully". Applying that principle, he held the defendant in that case liable for the builder’s failure to undertake the work with proper care.

[49]In my judgment the defendants are right when they submit that it is clear on a proper analysis of the authorities that both the general principle and the “special risks” exception apply both to negligence and to nuisance, and that there is no justification, whether on the authorities or in principle, for holding that the scope of the exception is different in nuisance than in negligence. It follows, in my judgment, that the recent restatement of the exception in Biffa is as much applicable to nuisance as it is to negligence. I consider that it is necessary to keep clearly in mind the fact that the special risks exception is separate from the dividing structures exception as recognised and clarified in Alcock. The rationale for the dividing structures exception is separate and distinct from the rationale for the special risks exception, and the dividing structure exception is particularly applicable to nuisance because it involves cases of interference with easements or activities of a similar nature. As is observed in Clerk & Lindsell on Torts at paragraph 20-31, the law of nuisance can appear uncertain in its boundaries because of its protean character; here it is necessary to keep separate the two exceptions on the basis that they apply to two very different situations, albeit that in some cases both exceptions may apply at the same time.

[50]It follows, in my judgment, that the claimant cannot rely upon the special risks exception in this case in nuisance or in negligence.

[51]So far as the dividing structures exception is concerned, Mr Budworth has argued that since the works generally involved work to the division between the two separate parts of the creamery building, the exception applies. Mr Coplin, meeting that argument, submits that one has to consider not the totality of the work, but the particular work which, it is said, amounted to and caused the nuisance. This was the subject of supplementary written submissions from both of them.

[52]It is not in dispute factually that it was the cutting of concrete blocks at some distance from the dividing wall which created the dust which it is alleged by the Claimant entered the premises and damaged the machines, or that the concrete blocks were, once cut, intended to be used in closing up the existing openings in the dividing wall.

[53]In my judgment Mr Coplin is right in his submission; there is no warrant for taking into account the extent of the works as a whole, rather than the works which are said to amount to or to cause the nuisance. Otherwise it would follow that where a completely new building is erected next to an existing building, the mere fact that the works forming part of the erection of the new building involve some shoring up of the foundations of the old building means that the employer is under a non-delegable duty for all of the works, even those undertaken on the other side of the site from the existing building.

[54]It follows, in my judgment, that both WAG and Denbighshire are entitled to rely upon the independent contractor defence both in negligence and in nuisance, so that they have an insurmountable defence to the claims made against them by the claimant. There is no other sensible basis for suggesting that they could be liable to the claimant other than vicariously for the alleged negligence of Roberts. Accordingly there is no proper basis for joining them into this action, and the application to amend to that effect must fail.

To what extent are the claims advanced against Roberts and/or Davies reasonably arguable?

[55]This is an unusual case procedurally in a number of respects. There is an extant application by the claimant for permission to amend and an extant application by Roberts to strike out and for summary judgment, alternatively for specific disclosure and security for costs, both of which have been adjourned generally with liberty to restore. Although no application to restore has been made, the hearing has proceeded on the basis that I should deal with the case on the basis that the summary judgment application is effectively before the court, and that I should rule on the question as to whether or not the claims sought to be advanced in the RAPC are reasonably arguable. This is obviously sensible since there was before me an application for summary judgment by WAG, which covers the same ground. Although, given the conclusion I have come to in relation to the claim against WAG, that application does not strictly fall for determination, it is obviously sensible for me to state what my conclusions would have been had I held in favour of the claimant on the non-delegable duty point. I have heard Peter Ridgway being cross-examined in some detail about the claims, I have been taken to a number of documents which are material to those claims, and I have heard submissions on the basis for the claims. Mr Budworth has, rightly, reminded me of avoiding the temptation to conduct a mini-trial of the case in such circumstances, and I have not done so. However I consider that I can deal with the issues which arise in connection with the question as to whether or not the claims are reasonably arguable without venturing into areas of disputed evidence. That is particularly so where the argument has concentrated on the merit of the various claims for damages, where the defendants have no factual evidence which might be relevant to those issues.

Machinery repairs

[56]Firstly, the claim for the machinery repairs. This is perhaps the most straightforward of the claims. It is also a relatively modest claim, and would not justify the expenditure of such substantial time and cost as the claim for loss of profits has, understandably received. Assuming the claimant can establish liability, and can also establish that the dust from the concrete block cutting operations was a material cause of the damage to the machines, then in principle the reasonable cost of repairs to the machines is recoverable. It would however appear to be the case that any repairs undertaken after the date of the transfer of the business and/or the machines to Tinseltime would not be recoverable pursuant to the assignment, and there is no other pleaded or viable basis for advancing such claims. Insofar as payment was made other than by or on behalf of FOY for repair costs incurred prior to that date such costs would not be recoverable. I cannot make a final determination on the factual position on the evidence before me.

Loss of profits

[57]The claim for loss of profits, however, raises different issues. Its genesis is as follows:(1) The first claim, advanced in June 2007, was put on the basis of a relatively modest interruption in production up the early April 2007, and there is contemporaneous documentation, produced by Peter Ridgway, which confirms that by mid April 2007 production was almost back up to target levels.

(2) The claim advanced against Davies in June 2008 is more problematic continues to advance the claim primarily on the basis of a production downtime up to 4 April 2007, but with some further claims for lost production based, as I understand it, on downtime whilst further repairs were undertaken.

(3) The claim advanced in the Particulars of Claim as served in February 2009 appears wholly inconsistent with the previous claims, advancing as it did a claim for 2007 for a net loss of turnover of £548,218 and a 65% profit loss of £356,340.40, with a wholly unparticularised further claim for £400,000 lost profit for 2008.

(4) The first draft re-amended Particulars of Claim alleged an unparticularised loss of profits in the sum of £1,400,000. It relied upon the loss of one particular order from a business named Posh Wrap which was evidenced in writing, to which I shall return, and it 23 identified further customers who it was said had to be turned away due to the problems with the machinery, where there is no documentary evidence either of orders or previous sales to those customers, other than what appears to have been a standard pro forma document for each customer produced retrospectively by the claimant itself. It says that the claimant will rely on expert evidence to support this claim. This claim, as with the original pleading, was predicated on a direct claim by Tinseltime.

(5) The version now before the court contains the same pleaded case, but by paragraph 14.3 it is said that the claim is put on the basis of losses incurred by FOY before it ceased business and on the basis of the loss of the chance to earn profits in the future but for the cessation, on the basis that but for the damage to the machinery and the consequences of that damage ‘it cannot be assumed’ that the cessation would have occurred.

(6) The claimant has previously been ordered to and has disclosed an expert accountant’s report from Usher Spilby & Co dated 3 December 2008. Although the expert report is not before me, it has been referred to in the witness statement of Mr Butler made in support of Roberts’ application for summary judgment. It appears that there are a number of significant errors in the report, not least the mistaken belief, generated by the erroneous instructions from the claimant’s solicitors, that FOY and Tinseltime are one and the same company. The report refers to and relies upon an order from the company known as Posh Wrap which Peter Ridgway says FOY had to turn down because it was unable to guarantee it could manufacture the required tinsel due to the ongoing machinery problems. However the order itself is dated 29 May 2007, whereas the internal production plan attached to Barlow’s claim of 15 June 2007 showed production returning almost to normal by early April 2007. Peter Ridgway was unable to explain this production plan when asked in evidence about it. In any event, it is odd that Peter Ridgway would have wanted to decline this order at a time when there was no reference in the claim submitted in June 2007 to there being any or any serious continuing problems with the machinery and when, even if there were, he would have had no particular reason to believe he could not produce sufficient later in the year to supply the order, which bears no stipulated delivery date. Furthermore it appears that Posh Wrap went into insolvent liquidation on 4 June 2008, so that even if FOY had accepted, performed and been paid for that order, there would have been no repeat business the following year.

[58]Moreover there are real problems with the accounts produced by FOY. The management accounts for the year ended 28 February 2006, produced by accountants, record turnover of £39,371 and gross profit of £23,068. The management accounts for the following year, produced by Peter Ridgway, purport to record turnover of £147,351. There was no good explanation from Peter Ridgway as to why FOY did not instruct accountants to prepare accounts for this year before the decision was taken to transfer the business to Tinseltime, and it is clear that FOY failed to file accounts for this year at Companies House, despite Peter Ridgway’s suggestion at one point in cross-examination that he lodged his ‘home-made’ accounts there. Moreover, that recorded turnover is completely inconsistent with the record of VAT returns obtained by Roberts’ solicitors from HMRC, which records declared outputs of only £57,500 in that year. Peter Ridgway was unable to provide any convincing explanation for the discrepancy. Furthermore, the claimant has failed to disclose any of the primary documents from which these accounts were produced. No sales invoices or purchase orders have been disclosed. The explanation given by Peter Ridgway is that they were lost when two computers on which the information was held and backed-up crashed. However there is no evidence as to what, if any, steps have been taken to seek to restore the information (it appears that the computer is still available) or to search for paper copies. Since it appears that the invoices were factored to Regency Finance pursuant to a relationship which began some time in June 2006, one might have expected the claimant to have made enquiry with that company, but that does not appear to have been done.

[59]In addition to the reliance placed on the Posh Wrap order and the 23 individual customers, the claimant also places reliance on statements from two former sales agents, Mr Tenent and Mr Devaney, apparently signed by each of them, both of whom refer to having lost sales in 2007 due to having been told by Peter Ridgway in May or June 2007 to withhold orders due to the production difficulties caused by the machinery damage. The former says that he had achieved sales of £100,000 in the previous year, and lost orders of £110,000 due to the orders being withheld, and the latter suggests that he would have expected to achieve sales of £75,000 to £85,000 in the year. However Peter Ridgway was unable to explain why the historic turnover from Mr Tenent alone was inconsistent with the general trend and the evidence of the VAT returns, or indeed why the 28/2/07 accounts made no reference to the commission paid to Mr Tenent in that year, and why Tinseltime’s subsequent accounts make no reference to the commission on the sales of £40,000 which Mr Tenent appears to have said he did achieve in 2007. No invoices from Mr Tenent or also documentation from these agents has been disclosed. Furthermore, again it is not immediately clear why Peter Ridgway would have given this instruction at a time when according to his production records he was almost back to planned production levels, and when presumably he would not have expected he would be unable to meet any orders at all over the course of the remaining months of the year.

[60]Finally, Tinseltime’s accounts for the 14 month period beginning with its date of incorporation and ending 31 December 2007, produced by accountants, record turnover of £76,784. In the following year, when there has been no suggestion of continuing problems, turnover was only £37,778.

[61]In the circumstances set out above, it is quite clear to me that the claimant faces serious difficulties in establishing that FOY had any substantial claim for loss of profits as claimed in the draft RAPC. Although I do not consider that it would be proper for me to conclude at this stage on this basis that the claimant had no real prospect of success of any part of its claim for loss of profits, these considerations would – but for my finding below on the question as to whether the loss of profits is recoverable in principle – have led me to conclude that the claim for loss of profits is so speculative that the only fair course would be to impose conditions on pursuing it, namely to require the claimant to:(1) serve a schedule of loss of profits which is supported by the complete evidence to be relied on an trial, and explaining in detail what has happened to any missing documents and what steps have been taken to try to obtain them;

(2) pay into court as security an amount equal to the likely costs to be incurred by the defendants in investigating and contesting the claim for loss of profits.

Effect on claim for loss of profits of cessation of business

[62]However, for the reasons I now set out, it seems to me that there is a yet more insurmountable objection to the claim for loss of profits, which the claimant has no reasonable prospect of surmounting, which is the effect of the cessation of business by FOY and its transfer to Tinseltime, sometime in late August / September 2007.

[63]First, it is quite clear that the claim cannot extend to losses actually suffered following the cessation of business by FOY and the effective transfer of the business to Tinseltime. There are two reasons for this:(1) When Peter Ridgway was asked, he stated quite explicitly (and re-stated this on a number of occasions) that the machinery problems were finally resolved once Muller’s technician had come over to site and conducted final repairs in mid September 2007 (as evidenced by the invoice from Muller claiming the cost of this visit). It is clear therefore were no continuing manufacturing problems of any significance after that date.

(2) In any event, since the claim can only relate to losses suffered by FOY and not Tinseltime, a claim for losses suffered by Tinseltime after the transfer of the business cannot be pursued.

[64]Thus the claim can only be advanced on the basis that FOY is entitled, notwithstanding its cessation of business, to claim for losses of profits which it would have made post cessation. However, it appears clear to me that this must depend on the reasons why FOY ceased its business. If it ceased business voluntarily, for reasons unconnected with the alleged machinery damage and consequences thereof, then in my judgment as a matter of causation it cannot recover as damages profits which it would have received but for the cessation. The cessation would be a new supervening cause of the loss of profits.

[65]When I asked Peter Ridgway why the decision had been taken to transfer the business from FOY to Tinseltime, he explained that there were two reasons; the first being to harmonise the trading name with the company name and the second being because FOY had run out of and had no further access to working capital, whereas Tinseltime had secured an invoice discounting facility to provide working capital. It was therefore submitted by Mr Budworth in closing submissions that the loss of profits should not come to an end with the cessation of the business by FOY, on the basis that but for the February 2007 machinery damage and the financial consequences thereof FOY would have had sufficient working capital to be able to continue.

[66]However there are in my judgment the following fundamental difficulties with that argument:(1) Peter Ridgway agreed in evidence, and indeed it has always been the claimant’s positive case, that all of its sales are achieved in the autumn in the run up to Christmas. Its production in the first half of the year is in order to lay in stock to meet the demand in the second half of the year. It follows, as he agreed, that none of the ‘lost’ production in the first half of the year would have been expected to bring in sales in that period, so that the loss of production did not result in a loss of turnover at any point pre-cessation.

(2) This is not just relevant to post-cessation losses, but also to pre-cessation losses, because any profit from sales of tinsel which would otherwise have been manufactured but for the machinery damage would not have produced sales, and hence turnover, until after the cessation of business. It is relevant to post-cessation losses because the claimant’s case, given the cessation of trading, is that Tinseltime was unable to make up the shortfall not just because it was unable to reverse the shortfall in manufacture in the time available but also because by that stage FOY had already turned away orders from Posh Wrap and others.

(3) Insofar as FOY was out of pocket in relation to the cost of machinery repairs, it is clear from the evidence that by June 2007 it had received an interim payment from WAG which was similar in amount to the expenditure on repairs undertaken at that time. Thus it cannot contend that it was the expenditure on machinery repairs which made the difference between being able to carry on and not being able to carry on. That is particularly so when it is the claimant’s case and it was Peter Ridgway’s evidence that prior to the damage occurring FOY’s directors had sold their homes so as to be able to inject £100,000 into FOY to provide working capital for 2007, which they had done. This is notwithstanding that the bank statements disclosed by the claimant show, so far as I am aware, only 3 payments of £10,000 each into the account in this period.

(4) It follows however, in my judgment, that on the evidence currently before the court the claimant has no reasonable prospect of showing that FOY suffered any actual loss of sales and hence profits before it ceased business or of showing that its cessation of business and, hence, its loss of future profits, were caused by the alleged damage to the machinery in February 2007, rather than by the new intervening cause of the decision to cease business for reasons unconnected with that damage or the financial consequences of that damage. If the true reason for the need for Tinseltime to take over was that FOY was unable to obtain further working capital, presumably because it was in default with Regency Finance, then that cannot be laid at the door of the defendants.

[67]It follows that for this reason alone, and without therefore reaching any conclusions based on my assessment of the credibility of the claimant’s witnesses, I am forced to conclude that the claimant has no reasonable prospects of succeeding in its claim for loss of profits at trial.

The claim for loss of management time

[68]The claim as pleaded in paragraph 14.4 of the RAPC is said to be for:

“The wasted management and staff time dealing with the aftermath of the damage to the machines and disruption of its operations, pursuant to Aerospace Publishing v Thames Water Utilities [2007] EWCA Civ 3, and [the claimant] will incorporate a schedule of the same in its expert accountancy evidence. By way of indication, the claimant estimates that the following number of hours were wasted for the following individuals, causing significant disruption to the claimant’s business – Peter Ridgway managing director 504 hours £32 per hour = £21,504 The claimant's loss under this head is limited to the wasted management and staff time of FOY prior to its cessation of trading at the end of August 2007.”

Peter Ridgway managing director 504 hours £32 per hour = £21,504

[69]In his evidence Peter Ridgway confirmed that the only claims advanced were for the lost management time of FOY.

[70]In his closing submissions Mr Coplin submitted that this claim was unsustainable, since it could not be said that Peter Ridgway would have generated any profit for FOY in the relevant period not catered for by the claim for loss of profits.

[71]In the Aerospace Publishing case Wilson LJ undertook a review of the relevant cases in relation to the recovery of management or staff time and held, at paragraph 86, that they established the following propositions:

“(a) The fact and, if so, the extent of the diversion of staff time have to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established. (b) The claimant also has to establish that the diversion caused significant disruption to its business. (c) Even though it may well be that strictly the claim should be cast in terms of a loss of revenue attributable to the diversion of staff time, nevertheless in the ordinary case, and unless the defendant can establish the contrary, it is reasonable for the court to infer from the disruption that, had their time not been thus diverted, staff would have applied it to activities which would, directly or indirectly, have generated revenue for the claimant in an amount at least equal to the costs of employing them during that time.”

[72]In my judgment, it is apparent in this case that the claim for wasted management time must indeed be a duplication of the claim for loss of profits, because the time wasted must have been time when the machinery was not operational. The fact that the loss of profits claim is not sustainable for other reasons cannot be a justification for permitting the claimant to recover wasted management time as an alternative. It follows that I accept the argument of Mr Coplin in this regard, and consider that this claim is not maintainable.

[73]There is also, however, a further point, which is that since Peter Ridgway was at best only a consultant for FOY, it could only be permissible to make a claim based on the costs incurred by FOY in relation to the provision of his services. However there is no suggestion in the evidence, whether in the accounts or otherwise, that Peter Ridgway received any payment from FOY, let alone payment at a rate of £32 per hour. It follows that the claim is not maintainable on this basis as well.

[74]Finally, the claim is open to the objection that it is completely unparticularised. In the absence of some evidence or explanation as to how the claim is arrived at, it falls foul of the first principle identified by Wilson LJ in the Aerospace case. That is particularly so in this case, where as is apparent the claim submitted in June 2007 included a claim for the cost of in house time in the sum of £8,400. Given that the claimant had the benefit of advice and assistance from Barlow from a very early stage, the failure to provide a properly particularised breakdown of time cannot be excused in this case. Indeed it is apparent that there has been no attempt to re-evaluate the claim to reflect the fact that it is only FOY’s management time, not Tinseltime's time, which can be claimed.

[75]For all of those reasons, it seems to me that the claim for wasted management and staff time as advanced cannot be said to have a reasonable prospect of success.

Conclusions

[76]Subject to hearing counsel on the form of order, the answer to the preliminary issue should be that the claimant is entitled to bring a claim in negligence and in nuisance against the First Defendant and/or the Second Defendant in respect of any recoverable loss and damage proved to have been suffered by FOY due to their alleged acts and/or omissions, but that the claimant has no cause of action in negligence or in nuisance as against the Third Defendant or the Fourth Dependent.

[77]Subject again to hearing counsel on the form of order, there should be a declaration that the claimant has no reasonable prospect of success in respect of the claims for loss of profits and wasted management and staff time, which claims are summarily dismissed.

[78]I will deal with the form of order, costs and any other matters arising from this judgment at a further hearing to be convened on the first date convenient to the parties.

order

(1) Whether or not at the relevant time FOY had a sufficient interest in the premises, so as to be able to maintain a claim in nuisance.

(3) Whether or not any claims which FOY had against any of the defendants were effectively assigned by the assignment.

(4) Whether or not on the case as advanced by the claimant Denbighshire and/or WAG could as a matter of law have been liable to FOY for the acts and/or omissions of Roberts.

(5) Whether or not the claims for loss of profits, for machinery repairs and for loss of management time have a sufficient prospect of success to proceed to trial, and if so on what basis. Whether or not at the relevant time FOY had a sufficient interest in the premises, so as to be able to maintain a claim in nuisance

Cited in 1 later judgment

Tinseltime Ltd v Roberts & Ors 2012