Browning v Messrs Brachers

This is an appeal by Mr and Mrs Browning, the claimants in a negligence action against their former solicitors Messrs Brachers (“Brachers”), from an order made by Jack J in the Queens Bench Division on 5 April 2004.

In the action, Mr and Mrs Browning allege that Brachers were negligent in acting as their solicitors in an earlier action (“the original action”) brought against them by a Mr Gilham; and that as a result they lost the chance of pursuing a substantial counterclaim in that action. They claim damages representing that the value of that lost chance.

Brachers admit that Mr and Mrs Browning’s inability to pursue their counterclaim in the original action was caused by their negligence, but they contend that the counterclaim had no real prospect of success and that the value of Mr and Mrs Browning’s lost chance is accordingly nil or negligible – a contention which lies uneasily with the fact that at no stage while they were acting for Mr and Mrs Browning did Brachers advise them to that effect. As the judge pertinently observed (in paragraph 9 of his judgment):

In saying that, the judge may well have had in mind a passage in the cross-examination of Mrs Browning by Mr Ian Croxford QC (for Brachers), when Mr Croxford put to her that at all times Mr Wilson of Brachers (who had the conduct of the matter within Brachers) was being very cautious about Mr and Mrs Browning’s chances of success in the original action. Mrs Browning’s response was as follows:

In the result, by paragraph 1 of his order dated 5 April 2004 the judge entered judgment for Mr and Mrs Browning against Brachers in the sum of £76,873.03 (inclusive of interest). By paragraph 2 of his order he ordered Brachers to indemnify Mr and Mrs Browning against three quarters of their liability under an order for costs made against them in the original action and against the whole of their liability under a further order for costs made against them in a later action which they brought against Mrs Gilham in her capacity as Mr Gilham’s sole personal representative (Mr Gilham having died) but which they subsequently discontinued. By paragraph 10 of his order the judge granted Mr and Mrs Browning limited permission to appeal.

The original action arose out of the purchase by Mr and Mrs Browning from Mr Gilham, in March 1991, of a herd of goats (“the Gilham goats”) together with the goodwill and machinery of the business of goat farming carried on by Mr Gilham at Bowyers Court Farm, West Sussex.

Mr and Mrs Browning had, since 1986, been carrying on a goat farming business on their farm at Lower Basing Farm, Cowden, in Kent, supplying home-made goats’ milk products to local retail outlets. In purchasing the Gilham goats they were pursuing a strategy of expanding their business. Following the purchase, the Gilham goats remained at Bowyers Court Farm until they were removed to Lower Basing Farm on 27 April 1991. Later in 1991 Mr and Mrs Browning purchased additional goats from Reading University (in evidence, these additional goats were referred to as ‘the Shinfield goats’).

It was subsequently established that Mr and Mrs Browning’s (expanded) herd had become infected with a disease called Johne’s disease.

Paragraph 10 of the judge’s judgment contains the following description of Johne’s disease:

On 24 September 1991 Mr Gilham commenced the original action in the Staines County Court, claiming £8,778.80 as representing the unpaid purchase price of certain stores which (he alleged) were included in the sale at cost, together with water, telephone and electricity charges incurred between the sale and 27 April 1991. Mr and Mrs Browning obtained legal aid to defend the action, and they instructed a Mr J. Hinchliffe, a sole practitioner, to act for them. In or about October 1991 Mr Hinchliffe served a Defence on behalf of Mr and Mrs Browning, alleging that the stores were included in the overall sale price of £27,000 (which Mr and Mrs Browning had paid), and that they had tendered payment for the full cost of services but that their tender had been refused. By a Re-amended Defence and Counterclaim served in June 1992, while Mr Hinchliffe was still acting for them, Mr and Mrs Browning added a counterclaim for damages for alleged non-delivery of 39 goats and (more significantly for present purposes) for breach of contract, alternatively for misrepresentation, on the ground that a number of the Gilham goats were infected with Johne’s disease. The pleading stated that the damages counterclaimed were estimated to exceed £120,000.

In July 1992 Mr and Mrs Browning instructed Brachers in place of Mr Hinchliffe. In September 1992 Mr and Mrs Browning paid £5,000 into court to the credit of the original action.

The subsequent procedural history of the original action, and of the action subsequently commenced by Mr and Mrs Browning against Mrs Gilham as sole personal representative of Mr Gilham, is set out by the judge in paragraphs 2 to 6 of his judgment, as follows:

The trial of the present action occupied some 12 court days between 26 November and 15 December 2003. In the course of the trial, the judge heard evidence from five witnesses of fact and no less than eight expert witnesses (four on each side).

It was common ground before the judge (and it remains common ground) (a) that but for Brachers’ negligence the trial of the original action (“the notional trial”) would have taken place in December 1996; and (b) that in considering what the outcome of the notional trial would or might have been the court should proceed on the assumption that Brachers had properly discharged their duties to Mr and Mrs Browning; in particular, that they had taken all proper steps to prepare for the notional trial, including serving witness statements and expert reports (a direction for 5 experts on each side having been given in October 1993). The corollary of the latter assumption, one would think, is that Barlows (Mr Gilham’s solicitors) would likewise have prepared fully for trial, and would have served the witness statements and expert reports on which Mr Gilham wished to rely. (In the course of the appeal, an argument to the contrary was abandoned by Mr David Blunt QC, appearing for Mr and Mrs Browning.)

In the event, as we know, the only expert evidence which had been prepared on either side were the two reports by Mr Measures on behalf of Mr and Mrs Browning (the later report superseding the earlier). So not only was the judge concerned with a notional trial taking place some 7 years earlier and relating to events which had taken place some 12 years earlier; he also had to reach conclusions as to the evidence (both oral and documentary) which would or might have been adduced at the notional trial, including the expert evidence.

As to damages, the judge was faced with a task of considerable difficulty in assessing the value of Mr and Mrs Browning’s lost chance to prosecute their counterclaim. His lengthy and detailed judgment is a testament to the care with which he approached that task.

In the event, Mr Measures did not give evidence before the judge. By the time the trial of the present action took place he had retired, and (as the judge noted in the course of his judgment) most of his working papers had been lost.

The judge handed down judgment on 13 February 2004. I shall turn to the detail of the judgment below; at this stage, I merely summarise the judge’s findings and conclusions.

So far as the factual evidence was concerned, the judge concluded that the recollections of Mr and Mrs Browning (who gave evidence before him) would have been fresher at the notional trial, and that their oral evidence would have been given by reference to witness statements taken from them at an early stage in the original action and subsequently updated. As to the documentary evidence, the judge concluded that Mr and Mrs Browning’s evidence would have been supported by more complete and comprehensible records than were, in the event, available. These conclusions are not challenged on this appeal.

As to the expert evidence which would or might have been available at the notional trial, the judge considered that he could get some help as to the points which might have arisen from the further reports which were before him, but he concluded that it would be wholly wrong to take any course approaching a trial of the issues in the original action on such further evidence.

As to the expert evidence which would or might have been adduced at the notional trial by Mr and Mrs Browning, the judge’s starting-point was Mr Measures’ later report (I will refer to it as his 1996 report). As it stands, Mr Measures’ 1996 report assesses Mr and Mrs Browning’s claim for loss of profits by reference to a period from and including 1991/2 up to and including 2008/9 (a period of some 18 years). It computes the claim for loss of profits over that period at £1,308,215, to which is added a capital loss of £261,180 representing the reduction in the value of Mr and Mrs Browning’s herd, business and farmland caused by the presence of Johne’s disease. The total claim as computed in Mr Measures’ 1996 report is therefore £1,569,395. However, the judge concluded that the 1996 report would in all probability have been checked and possibly improved before it was served, and that such a process would probably have led to a reduction in the amount of Mr and Mrs Browning’s claim.

The judge also concluded that expert evidence would have been available to Mr and Mrs Browning from Professor Steele-Bodger, but he had no means of knowing what that evidence would have been.

The expert evidence adduced before the judge on behalf of Mr Gilham raised a number of issues as to the quantification of Mr and Mrs Browning’s loss (both in relation to loss of profits and in relation to the claimed capital loss). It also raised an issue as to whether some part of the claimed loss was avoidable – in other words, as to whether Mr and Mrs Browning had failed to some extent to mitigate their loss.

As to liability, the judge found that negligence on the part of Brachers in the preparation of Mr and Mrs Browning’s counterclaim was established “over a wide front”; and that had the counterclaim been properly prepared and presented at a trial of the notional trial it would have had a 70 per cent chance of success in establishing Mr and Mrs Browning’s entitlement to an award of damages. There is no appeal against those findings.

Turning to damages (on the assumption that the counterclaim had succeeded on liability) the judge took the figures for loss of profits in Mr Measures’ 1996 report as the basis for Mr and Mrs Browning’s claim in that respect, albeit he awarded damages in respect of a substantially shorter period than that proposed by Mr Measures, and in respect of the shorter period he applied a discount of 40 per cent to Mr Measures’ figures. As to the claimed capital loss (reduction in value of capital assets) the judge awarded £15,000.

In the result, he valued Mr and Mrs Browning’s counterclaim, after bringing into account the value of Mr Gilham’s claims, at £46,357. To that sum he added interest from 1 January 1997 to judgment in the sum of £30,516.03, making a total award of £76,873.03 (as referred to earlier).

In arriving at the judgment sum of £76,873.03 as representing the value (as at the date of judgment in the present action) of Mr and Mrs Browning’s lost chance of pursuing their counterclaim in the original action, the judge reasoned as follows (references to paragraphs are to paragraphs in his judgment):

Stage 1: The general approach. In paragraph 20 of his judgment the judge directed himself that in addressing the issue as to the amount of damages which Mr and Mrs Browning would or might have recovered at the notional trial the correct general approach was to determine the sum which it was “most probable” that they would have been awarded had their counterclaim succeeded on liability.

Stage 2: Damages for loss of profits. Stage 2.1: As to the period in respect of which damages for loss of profits would most probably have been awarded, the judge concluded that the judge at the notional trial would have taken the period from the start of 1992 to the end of 1998. i.e. a period ending some two years after the notional trial (paragraphs 75 to 77). In reaching that conclusion the judge rejected Mr Measures’ opinion (as set out in his 1996 report) that damages for loss of profits should be awarded in respect of each year from 1991/2 up to and including 2008/9. Stage 2.2: As to the amount of profits lost in each year during the relevant period, the judge took Mr Measures’ figures for each year in the period 1992-1998, as set out in his 1996 report, but discounted those figures by 40 per cent (paragraph 78). Mr Measures’ figure for the total lost profits during that period was £182,228; sixty per cent of that sum is £109,337.

Stage 3: Further adjustments. The judge then made two further adjustments. Stage 3.1: The chance of infection from another source. The judge applied a 25 per cent discount to reflect the possibility that Mr Gilham might have succeeded in establishing that Mr and Mrs Browning’s herd was infected with Johne’s disease from another source. That gave a figure of £82,002 (paragraph 79). Stage 3.2: The chance of a finding of failure to mitigate. The judge went on to make a deduction of £21,231 to reflect the possibility of Mr Gilham succeeding in establishing that Mr and Mrs Browning had failed to mitigate their loss, thus reducing the £82,002 to £60,771 (paragraph 80).

Stage 4: Diminution in capital values. To the figure of £60,771 the judge added a sum of £15,000 representing the sum which would most probably have been awarded to reflect the diminution in value of the goodwill of Mr and Mrs Browning’s business and in the value of the farm, due to the presence of Johne’s disease in their herd and on their land, giving a figure of £75,771 (paragraph 84).

Stage 5: Adjustment to reflect the percentage chance of success on liability. The judge then took 70 per cent of that figure to reflect the chances of Mr and Mrs Browning succeeding on liability, giving a figure of £53,039 (paragraph 86). (As noted earlier, there is no appeal against this element in the judge’s calculation.)

Stage 6: Adjustment to reflect the value of Mr Gilham’s claims. From the figure of £53,039 the judge deducted a sum of £6,682 representing the value of Mr Gilham’s pleaded claims, giving the final figure of £46,357 (paragraphs 39 and 86).

Stage 7: Interest. As already noted, the judge then added interest in the sum of £30,516.03, thus arriving at the judgment sum of £76,873.03 (paragraph 92).

Following the handing down of the judgment it was pointed out to the judge that in making a deduction to reflect the value of Mr Gilham’s claims (Stage 6 above) credit should be given to Mr and Mrs Browning for the £5,000 which they had paid to compromise those claims (paragraphs 3 and 87). On the judge’s figures, that left £1,682 outstanding as the unsatisfied balance of the value of Mr Gilham’s claims.

The judge granted Mr and Mrs Browning permission to appeal on three grounds, but refused permission on a number of additional grounds. Permission to appeal on the additional grounds was granted by Latham LJ on 9 July 2004.

Brachers have served a Respondent’s Notice in relation to the judge’s award of £15,000 in respect of capital losses (Stage 4 above), contending that the award is over-generous to Mr and Mrs Browning. There is, however, no cross-appeal against that award.

At this stage it is convenient to see how Mr and Mrs Browning pleaded their loss and damage in their counterclaim in the original action.

The pleaded particulars of loss allege (among other things) that 58 goats were suffering from Johne’s disease “to date” (i.e. as at March 1992), and that Mr and Mrs Browning were suffering loss of milk production at a current rate of £5,850 per month and increasing. The particulars also include the cost of a report by Mr Measures dated 30 April 1992 (his first report), together with the estimated cost of a further report, veterinary costs and interest. The particulars continue as follows:

The final item in the particulars of loss is loss of goodwill, against which no figure is placed.

Barlows sought further information as to the alleged loss of milk production, to which Brachers’ reply (dated 19 July 1995) was: “An expert’s report is awaited”. In the event, as we now know, the report which was awaited was Mr Measures’ 1996 report.

Asked for further information as to the date or dates on which the herd was culled, and as to the period during which the farm was shut down, Brachers responded as follows:

Asked for particulars of the claim for loss of goodwill, Brachers responded:

For reasons which will now be apparent, it is necessary to read the pleaded claim for damages in conjunction with Mr Measures’ 1996 report.

As already noted, Mr Measures’ total figure of £1,569,395 is made up of revenue losses (i.e. loss of profits over a period from and including 1992/3 up to and including 2008/9) in the sum of £1,308,215, together with capital losses (i.e. the diminution in value of Mr and Mrs Browning’s capital assets, viz, the land, the herd and the goodwill of their business) in the sum of £261,180.

In the introduction to his 1996 report, Mr Measures describes himself as an agricultural consultant. In section 3 of his report he describes the rapid expansion of commercial goat farming since the 1980s. In paragraph 3.06 of his report he says this:

In section 4 of his report he considers the effect of Johne’s disease on Mr and Mrs Browning’s herd. In paragraph 4.05 he concludes that its effect had been to cause an abnormally high incidence of mortality, an abnormally high rate of culling of young milking goats reduced to a poor condition, and severely reduced milk yields. In paragraphs 4.08 to 4.10 he says this:

In section 5 of his report, Mr Measures reviews the events of 1990 to 1994. In Table 4, annexed to his report, he sets out in tabular form the number of adult milking goats in the herd over the period from accounting year 1988/89 (the accounting year ended on 30 June) up to and including 1994/5, and the numbers which had been sold or culled, or which had died, in each of those years. According to Table 4, the number of female milking goats increased from 180 in 1990/1991 to 356 in 1991/1992. Table 4 also shows that whereas in 1990/1991 no female milking goats were sold or culled and only 13 died, in 1991/1992 93 were sold or culled and 112 died. In 1992/1993, according to the Table 4, none were sold or culled but 34 died, out of herd which had been reduced to 160 female milking goats by the beginning of 1992/1993.

Table 5 in the report sets out the figures for milk sales, purchase and production for the period 1990/1991 to 1993/1994 inclusive. The table shows a steady decline in total milk production from Mr and Mrs Browning’s herd from 81,706 litres in 1990/1991 (from 210 milking goats) to 48,511 litres in 1993/1994 (from 137 milking goats). Table 5 also shows that in each of the years 1990/1991 to 1993/1994 Mr and Mrs Browning bought in goats’ milk from other sources in order to meet demand from their customers.

Table 6 in the report contains an analysis of the trading accounts of Mr and Mrs Browning’s business for the accounting years 1989/1990 to 1993/1994. The analysis shows that the business made net losses in each of those years after bringing bank and interest charges into account, and without bringing into account any drawings by Mr or Mrs Browning. Commenting on the ‘bottom line’ (net profit/loss), Mr Measures said this:

In section 6 of his report, headed ‘Losses as a consequence of the disease’, Mr Measures identifies the direct effects of Johne’s disease on Mr and Mrs Browning’s herd as being increased goat mortality, leading to loss of milk production and loss of kid sales. He identifies indirect effects as follows:

“the severe immediate losses caused Mr and Mrs Browning financial embarrassment. Bank funding became limiting [sic].

only limited supplies of milk were available to purchase and consequently where Mr and Mrs Browning had expected to be expanding sales they found themselves rationing supplies to buyers, despite buying as much as they could. The effect was to halt until about 1994/95 any serious attempt to boost sales and even then the sales effort was relatively low key. They also re-directed milk from local deliveries to small outlets to the multiples to protect the market outlets of most value in the long term.”

In Table 18 he summarises Mr and Mrs Browning’s losses as follows:

The judge heard oral evidence from five witnesses of fact. For Mr and Mrs Browning, the judge heard evidence of fact from Mr and Mrs Browning themselves, from Mr Baird (their local veterinary surgeon), and from Mr William Squire (who was employed by Mr Gilham as manager of his goat herd prior to 1991, and who visited Lower Basing Farm from time to time to purchase or deliver goats’ milk).

Mr Baird’s evidence included expressions of professional opinion, but the judge treated him primarily as a witness of fact (see paragraph 16 of the judgment). Mr Baird nevertheless impressed the judge as a witness (ibid.).

For Brachers, the judge heard evidence of fact from Mr Alan Mowlem. In 1991 Mr Mowlem was carrying on a goat consultancy practice known as The Goat Advisory Bureau. He came to know Mr and Mrs Browning through a trade association called The Goat Producers’ Association. He was retained by Mr and Mrs Browning to value the Gilham goats prior to their purchase.

No one from Brachers was called as a witness.

I turn first to the evidence of Mrs Browning. In paragraph 16 of her first witness statement she says this:

In paragraphs 86 and 87 of her second witness statement Mrs Browning describes Mr Baird’s visits to Lower Basing Farm, as follows:

Turning to the possible methods of minimising the effect of the disease, she says this:

Referring to the situation as it existed in early 1993, Mrs Browning says this (paragraph 238):

It is noteworthy that despite the fact that, as this last paragraph shows, Mr Wilson was aware at the time of the requirement that Mr and Mrs Browning take reasonable steps to mitigate their losses, there is no evidence that Brachers at any stage advised Mr and Mrs Browning that they were failing to meet that requirement.

Mr Browning’s evidence did not add materially to the evidence given by Mrs Browning.

I turn next, therefore, to Mr Baird’s evidence. In the first of the two reports annexed to his witness statement he says this:

In his second, supplemental, report, Mr Baird says this:

In cross-examination, Mr Baird was asked by Mr Croxford about his experience of Johne’s disease, as follows:

The fact that you did not know and do not know by the time you came in about 1991 to suspect Johne’s was not because you were lazy about finding out?

There was not much information to find out from.

You conscientiously went about trying to make sure that you were fully informed

Later in his cross-examination, Mr Baird was asked about his dealings with Mr and Mrs Browning, as follows:

Yes.

Mr Squire was asked in cross-examination about the possible presence of Johne’s disease in Mr Gilham’s herd in 1990. He said that little was known about Johne’s disease at that time; that a few goats became ill; and that Johne’s disease was one of the possibilities that were mentioned but that the presence of Johne’s disease in Mr Gilham’s herd was not confirmed.

I turn next to the evidence of Mr Mowlem (called by Brachers). In paragraph 7 of his witness statement Mr Mowlem says this:

In the course of Mr Mowlem’s evidence in chief, the following sequence of questions and answers occurred:

In re-examination, Mr Mowlem was asked by Mr Croxford about the state of the Gilham goats when he carried out his valuation. He replied:

I can now turn to the expert evidence. Notwithstanding the fact that Mr Measures was not called as an expert witness, there was (as already noted) no shortage of expert evidence before the judge. He had before him written reports from no less than eight experts, each of whom gave oral evidence and was extensively cross-examined.

The eight experts were as follows:

In addition to the reports of the two valuation experts, the judge also had before him, as part of the documentary evidence in the case, two historical valuations of Lower Basing Farm, each of which valued the farm on the alternative bases that Johne’s disease was, or was not, present on the farm. In other words they attempted to assess the diminution in value of the farm by reason of the presence of Johne’s disease. The earlier in time of these two valuations is an undated valuation by Mr Michael Bax, of Messrs. Bax Standen, chartered surveyors and agricultural valuers, prepared on the instructions of Brachers as solicitors for Mr and Mrs Browning. That means that it must have been prepared at some time before 12 November 1996 (when Brachers ceased to act for Mr and Mrs Browning). The later valuation, which is dated 25 February 1999 (that is to say it postdates the notional trial), is by FPDSavills on the instructions of Lloyds Bank, Mr and Mrs Browning’s bankers.

Since both the Bax Standen valuation and the FPDSavills valuation formed part of the evidence before the judge, notwithstanding that the authors of them were not called as witnesses, I will return to them below, under the heading ‘Valuation evidence’.

It would be neither practicable nor appropriate to attempt to summarise the entire contents of each of the experts’ reports, but the following (inevitably selective) references will serve to give at least a flavour of the expert evidence and of the various issues raised.

The first report of Professor Morgan (Mr and Mrs Browning’s veterinary expert) is directed to the physical manifestations of Johne’s disease in Mr and Mrs Browning’s herd. In that report, he reaches the following principal conclusions:

that the first diagnosed case of Johne’s disease was one of the Gilham goats, and that its infection with Johne’s disease could not be attributed to transmission of infection after arrival at Lower Basing Farm;

that there was no evidence the goats at Lower Basing Farm were showing symptoms of Johne’s disease prior to the arrival of the Gilham goats;

that the evidence showed that Mr Gilham’s herd had shown clinical signs consistent with Johne’s disease, that the disease was suspected by the attending veterinary surgeon and that it had reached epidemic proportions within the herd; and

that the Shinfield goats came from a herd in which Johne’s disease was a recognised problem.

In the course of his first report, Professor Morgan expresses the view (in paragraph 2.14) that once Johne’s disease is present in a herd it is difficult to control it. He continues (in paragraph 2.15):

As to vaccination, Professor Morgan says this (in paragraph 2.18):

Later in his first report, Professor Morgan expresses the opinion that there was “a high probability” that the ill health in Mr and Mrs Browning’s goats was associated with Johne’s disease.

As to the Shinfield goats, Professor Morgan accepts (in section 6 of his first report) that they came from a herd in which Johne’s disease was a recognised problem. He continued:

In paragraphs 8.1e and 8.1f of his first report, Professor Morgan says this:

Mr Matthews (the veterinary expert called on behalf of Brachers) reaches the following principal conclusions in his first report:

that the high incidence of disease and death of adult goats at Lower Basing Farm during 1991 and 1992 was never properly investigated;

that there is no post mortem or laboratory evidence to support Mr and Mrs Browning’s claim that their herd is infected with Johne’s disease;

that the presence of Johne’s disease has never been demonstrated in any goat in Mr and Mrs Browning’s herd by means of a comprehensive post mortem examination carried out by a specialist veterinary pathologist;

that the high mortality rate of goats in Mr and Mrs Browning’s herd in 1991-1993 was unlikely to be due to Johne’s disease; and

that Mr and Mrs Browning appeared to have taken no consistent action to control either Johne’s disease or gastro-intestinal parasites in their herd.

In the course of his first report, Mr Matthews, whilst accepting that there is no treatment for Johne’s disease, identifies a number of what he describes as ‘control measures’ designed to control the spread of Johne’s disease in a herd, including vaccination. In paragraphs 55.6 and 55.7 of his first report he says this:

Later in his first report, in a section headed ‘If the Brownings’ herd was infected with Johne’s disease after April 1991, could that infection have been successfully managed? And if so, how?’, Mr Matthews says this:

Isolate goats that are losing weight and establish a diagnosis

Cull goats with progressive weight loss before they kid

Remove clinical cases from the herd as soon as possible

Remove the offspring of infected goats from the herd

Use generous amounts of clean straw bedding

Burn the straw litter from infected herds or allow long term manuring [greater than 1 year] to occur before spreading it onto land used to produce food for animal consumption.

Isolate goats at kidding into clean kidding pens in an area separate from the main herd

Clean and disinfect kidding pens between goats and use generous amounts of straw bedding

Remove kids from their dams soon after birth

Pasteurise the colostrum and milk fed to young kids

Do NOT feed pooled colostrum or milk

Provide young kids with access to hay and clean straw to discourage them from eating the straw bedding

Rear kids in small groups for the first 4-6 months in an area isolated from the adults

Record the identity of the kids in each rearing group

Vaccinate kids as soon after birth as possible

Breed replacements from older animals in the herd

Test the herd routinely for Johne’s disease

In paragraph 202 of his first report, Mr Matthews reverts to the topic of vaccination, saying this:

Following exchange of their first reports, both Professor Morgan and Mr Matthews provided further reports. Thereafter they met, with a view to identifying areas of disagreement. That led to the provision of a joint statement dated 4 December 2003, which I should quote in full. It reads as follows:

Epidemiology of Johne’s disease

The disease status of both herds prior to amalgamation

Timing of the reported goat deaths

Post-mortem report of Johne’s disease

Parasitic gastro-enteritis

Epidemiology of Johne’s disease

The disease status of both herds prior to amalgamation

Timing of the reported goat deaths

Post-mortem report of Johne’s disease

Parasitic gastro-enteritis

In the course of his re-examination by Mr Blunt, Professor Morgan was asked about the prevalence of Johne’s disease in 1991/2, as follows:

Mr Brookes’ first report is dated February 2003. As the starting point for his analysis of the effects of Johne’s disease on Mr and Mrs Browning’s herd, Mr Brookes takes the goat numbers as set out in Table 4 of Mr Measures’ August 1996 report.

In section 3.3 of his report, under the heading ‘Trading with the Disease’, Mr Brookes forecasts that, allowing for the presence of Johne's disease in the herd, by 2008/9 the herd will number 225 goats and milk yield will be 495 litres per head (giving a total yield of 111,323 litres) for that year. By contrast, in section 3.5 of his report, under the heading ‘Trading without the Disease’, he forecasts that without the presence of Johne’s disease by 2008/9 the herd would number 400 goats and the milk yield would be 665 litres per head (giving a total yield of 266,052 litres for that year).

In section 4 of his report he summarises his conclusions as follows:

Mr Marshall, in his report (dated 30 April 2003), concludes (in paragraph 64) that there were no clear and identifiable control systems in place to deal with disease on Lower Basing Farm. He reaches the following conclusions:

Their production system is atypical with access permitted to grass fields all year round.

Their buildings are not ideal for the goats with ventilation likely to be a problem at certain times of the year.

There are no basic management records on the farm. Management operates by coping with each crisis as it comes along. This is not what would usually be found on a commercial dairy goat farm.

Benchmark figures indicate milk yields well below average and low veterinary input compared to what would usually be required to ensure proper health for reasonable milk yields (above 500 litres).

Goats were purchased from 6 sources prior to the Bowyers Court purchase.

Despite the health problems experienced the system in operation appears to be exactly the same now, and the Claimants’ practices appear to be large unchanged before, during and after the problem period.

The system has major areas of concern for me in terms of hygiene and cross infection. In particular no proper worm control programme is in operation and there is a total lack of grazing management to control worms.

All adult females are kept together with no grouping for stage of lactation. All milking females are fed the same ration and no allowances is made for stage of lactation. Kidding females and milking goats are kept in the same pen, with a damp environment for young kids.

Both Mr Measures and Mr Brookes, despite being asked to consider the technical aspects of this case, appear to have chosen not to look at the system in operation on the farm as a whole. They have not made any attempt to review and assess all the potential reasons why the sudden dramatic number of deaths during 1991/1992 could have occurred. They have simply concluded that the problem was Johne’s disease without have this substantiated by proper veterinary investigation. They make reference to a 5-year quarantine period for the land when the literature suggests 12 months for cattle or up to 2 years for goats. The figure for 5 years is unsubstantiated.

The predictions and calculations on milk yields and goat numbers ignore the additional goat purchases made by the Brownings from other sources and do not consider the environmental impact on generic potential, the dilution factor on the milk quality by increasing the milk yield or the effect nutrition has on milk quality and milk yields. On this basis without I am unable to agree with the assumptions made in the Laurence Gould reports.”

Mr Brookes replied to Mr Marshall’s report in a short second report, and thereafter they provided a joint statement. The joint statement records that Mr Marshall remained of opinion that the poor performance and problems encountered at Lower Basing Farm resulted from “poor management practice”.

In his report dated May 2003, Mr Handley values Lower Basing Farm as at December 1996 at £120,000 with the disease, as compared with £240,000 without the disease: a difference of £120,000. He considers the land (extending to some 38.5 acres) to be of relatively poor quality and liable to flooding. He also takes account of the fact that the property is (and was at the material time) subject to an Agricultural Occupancy Condition, the effect of which was to restrict its use to agriculture.

In section 16 of his report he concludes that if the property were offered for sale and the presence of Johne’s disease was disclosed, it is unlikely that the purchaser would be a person who had arrived at a figure by means of a detailed study and analysis of all the facts. He continues:

Mr Hampton, in his report dated 30 July 2003, concludes that the value of the property as at October 1996, on the assumption that the land was infected with Johne’s disease and that in order to eliminate the infection it would be necessary to keep ruminant livestock off the land for two years, was £257,000. He values the property as at December 1996 on the assumption that the land was not infected with Johne’s disease at £263,000 (a difference of only £6,000).

In paragraphs 87 and 88 of his report he says this:

In paragraph 90 of his report he says this:

Following a meeting on 2 September 2003, Mr Handley and Mr Hampton produced a joint statement. In a section of the joint statement headed ‘Key Issues’, they identify the areas of agreement and disagreement between them as follows:

The valuers recognise that the key valuation date is likely to be December 1996, and are in complete agreement that the value they propose at that date is reasonable.

The valuers had some difficulty in reconciling their figures in respect of the 1991 valuation. EH [Mr Handley] had proposed £170,000 and DH [Mr Hampton] £214,000. The difference between them lies entirely in the value of the house, where EH was at £88,000 and DH at £150,000. The valuers were hindered by the fact that they had no evidence of open market transactions in that period, as they had not retained their records for over 12 years. On the basis of indexation back from the present day the house should be worth about £150,000. The market was very depressed in 1991 following the property crash of 1990, and EH feels that at that time the price of properties with Agricultural Occupancy Conditions would have been more depressed that the general residential market, hence the lower figure he adopted. In the circumstances the valuers believe that a ‘mid-point’ figure is reasonably realistic and the best figure they can provide without better market evidence.

The valuers are not agreed on the diminuation of value that would apply to the uncontaminated value referred to above. EH considers that the diminuation would be the order of 50% on the basis of his ‘damaged goods’ argument as set out in paragraphs 38 to 44 of his supplemental report and Section 16 of his original valuation. DH considers that the hypothetical purchaser would approach the property on a reasonably logical basis and would take account of the loss of flexibility to use the property for animals susceptible to Johne’s disease for a limited period. EH understands the valuation principles that DH has adopted but does not think the hypothetical purchaser would adopt that approach. Neither valuer has any market evidence of sales of land with Johne’s disease.

If the relevant methodology is applied to the agreed figures set out above, the table set out in paragraph 103 of DH’s original report would be amended as follows:-

I now return to the Bax Standen valuation and the FPDSavills valuation.

Mr Bax valued Lower Basing Farm, absent Johne’s disease, at £210,000, as compared with a value of £100,000 taking account of the presence of Johne’s disease: a difference of £110,000. He described the farm buildings as “well adapted and suited to the dairy goat enterprise” and as providing ideal facilities for that enterprise. He continued:

He described the land as being “all productive pasture, and well suited for most livestock enterprises”. Addressing questions of valuation, his report reads as follows:

FPDSavills valued the farm on the basis that Johne’s disease could not realistically be eradicated from the farm in less than 5 years. They also noted that the local planning authority had a reputation for taking a “robust” view of applications to remove an Agricultural Occupancy Condition. Section 5 of their report reads as follows:

Valuation Approach

Open Market Value

Estimated Realisation Vale

Suitability for Security

Mr Shelton’s first report (dated 13 June 2003) is directed primarily to the loss of profits claim. On that element of the claim, his instructions were “to calculate the quantum of losses based on the impact of the disease on milk yields, mortality and other physical factors as assessed by [Mr Brookes] in his report dated February 2003”.

In section 2 of the report Mr Shelton summarises his conclusions as follows:

The business was financially sound prior to the purchase of the BCF goats in 1991;

The observed trends in turnover since 1991 are consistent with factors that have been attributed to the purchase of the BCF goats;

The losses suffered since the purchase of the BCF goats have resulted in the financial position of the business deteriorating from being sound to one where, without a significant and rapid turnaround in trading performance, or the receipt of a significant capital sum, the Claimants would be unable to meet approximately 35% of the business debts.

I consider that it is appropriate to calculate interest on past losses, discount in respect of future losses and interest on delayed receipt of damages at the business’ cost of capital which is deemed to be the average rate of interest on the business’ borrowing (3.25% over bank base rate). I also consider that, if it were appropriate to apply a discount in respect of the possible mortality of the Claimants, the amount of any discount is unlikely to be material.

Had this matter gone to trial in December 1996 I calculate that the losses that the Court might have awarded at that date were as follows:

I calculate the total loss of profits as at the Current Trial Date (December 2003) as follows:

In section 5 of the report Mr Shelton considers the pattern of sales achieved by the business. He notes that sales were increasing rapidly over the year to August 1991. He regards this as consistent with the increase in herd numbers to the point where “there were 300 healthy goats prior to [the Gilham goats] arriving”. He goes on to note that the increase in sales slowed in the following year and that in the year after that (1993) sales declined. He concludes that that is consistent with the Gilham goats lacking in energy and producing low milk yields and with infection with Johne’s disease spreading to the whole herd. He notes that during the period 1993 to 1998 sales showed a gradually increasing trend, but that in 1999 sales dropped away almost completely, partly as a result of the loss of a contract to supply Waitrose (a contract which had accounted for £75,000 to £125,000 per annum in turnover). Finally he notes that thereafter sales recovered significantly, and that in the autumn of 1999 Mr and Mrs Browning started supplying Unigate.

In paragraph 5.4 of the report Mr Shelton says this:

In section 6 of his report Mr Shelton explains his general approach, as follows:

the losses that would have been claimed had the case gone to trial in December 1996 (“the Notional Trial Date”); and

the additional losses suffered as a result of the delay in receiving the compensation that would have been claimed in December 1996.

As to the loss of profits claim (as December 1996, the date of the notional trial), Mr Shelton’s approach is to take the actual past profits and to estimate expected future profits, on a ‘with disease’ basis, to arrive at a total profit figure for the period 1991-2009 (the period taken by Mr Measures in his 1996 report), and then to compare that figure with the estimated profits for that period on a ‘without disease’ basis. He explains that in respect of the period from December 1996 to the date of his report he has had regard to the accounting information currently available. In relation to the period up to December 1996 he has applied interest in order to arrive at a figure for loss of profits as at December 1996; and in relation to subsequent years, he has discounted the estimated figures back to December 1996. He also takes into account that had the counterclaim succeeded Mr and Mrs Browning would have received an award of damages some seven years earlier than would be the case if an award were made in the present action. He concludes that that factor caused additional losses consisting not merely of interest charges which would not otherwise have been incurred, but also of “losses suffered as a result of the inability of [Mr and Mrs Browning] to invest in, and to develop the business as they would have done had the compensation been received immediately following the Notional Trial Date”.

As to the claim for capital losses, Mr Shelton says this:

In section 7 of his report Mr Shelton turns to ‘with disease’ profits, explaining that he has taken actual figures for profits/losses for the period to August 2002 (by reference to the latest accounts) and estimated the figures for profits/losses from August 2002 to 2009 (the end of the period taken by Mr Measures in his 1996 report); and that his calculations are based on the figures for goat numbers, milk yields and sales in Mr Brookes’ report. In paragraph 7.8 he explains that he has excluded interest costs from his analysis since that aspect is considered separately in section 90 of his report. He calculates the profits for the period 1991 to 2009 ‘with disease’ as amounting £75,199.

In section 8 of his report he turns to profits/losses over the relevant period ‘without the disease’, once again basing himself on Mr Brookes’ projections of goat numbers and milk yields. He estimates such profits as amounting to £811,252: a difference (representing loss of profits resulting from the disease) of £736,053.

He then adds interest on past lost profits (as at December 1996) at actual overdraft rates, amounting to £11,591; and applies a discount to future lost profits (as at December 1996) amounting to £268,978. The result, as set out in paragraph 10.8 of his report, is a final figure for loss of profits as at December 1996 of £478,666.

In section 11 of his report he turns to the claimed capital losses. As to the claimed capital loss in respect of the farm, basing himself on Mr Handley’s valuation he estimates the reduction in value of the farm in 2009 due to the disease as amounting to £225,000. As to the claimed capital loss in respect of the business, he values the business as at the date of judgment in the present action at £84,000 ‘with the disease’ as compared with £308,000 ‘without the disease’ (a difference of £224,000). His method of valuation of the business on a ‘without the disease’ basis is to average the price/earnings ratios for four quoted dairy companies and then to apply a discount of 60 per cent to take account of the fact that Mr and Mrs Browning’s business is in private ownership. The resulting difference of £224,000 gives a total capital loss of £449,000. He then discounts that loss back to December 1996, and reaches a final figure of £151,179.

Adding the loss of profits figure (£478,666) to the capital loss figure (£151,179) gives a total figure for the entire claim (as at December 1996) of £629,845. To that figure Mr Shelton adds interest over the period from December 1996 until the trial of the present action in the sum of £324,560, giving a total figure for the entire claim (as at the date of trial) of £954,405.

Mr Aspell’s report is dated 26 August 2003. In that report he concludes, in summary:

that Mr and Mrs Browning’s business was not soundly based in 1991;

that, given the fact that the lack of profitability of the business up to 1991 had contributed to “unsustainable” borrowing levels, it was doubtful whether the business would have been able to finance the expansion required to make it profitable;

that both Mr Measures’ calculation of the loss at £1,569,394 and Mr Shelton’s calculation of the loss at £629,845 significantly overstate the loss suffered by Mr and Mrs Browning in that Mr Measures and Mr Shelton have (a) failed to take account of obstacles to business expansion (i.e. lack of available finance), (b) used assumptions which have neither been explained nor justified, (c) included a significant element representing loss of goodwill which cannot be justified, and (d) have ignored mitigation; and

that, assuming that Mr and Mrs Browning had taken action to mitigate their losses, such losses would have fallen within the range £72,692 to £112,693, excluding interest.

As to the claimed loss in respect of goodwill, Mr Aspell challenges Mr Shelton’s methodology by reference to price/earnings ratios, on the ground that it is inappropriate to the valuation of a farming business. He also criticises Mr Measures’ 18-year period as the basis for computing loss of profits. His own calculations of the loss are set out in section 5 of his report. He records (in paragraph 5.2 of the report) that in making his calculations he is proceeding on the assumption, which he was instructed to make, that Mr and Mrs Browning “should have taken action to mitigate their loss at the earliest practical opportunity and in accordance with advice given to them by Mr Measures”. He goes on to refer to a letter from Mr Measures to Mr and Mrs Browning dated 30 June 1992 in which Mr Measures “advised them to consider culling the herd immediately or in Spring 1993 and to start with a new herd on a new site”.

In paragraph 5.3 of his first report he says that he has prepared his calculations on four different bases, as follows:

The Claimants closed the business on 31 August 1992 and ceased trading.

The Claimants suspended trading for two years, on 31 August 1992, until it was considered free of Johne’s disease.

The Claimants ceased trading from Lower Basing farm on 31 August 1992 and relocated to other premises.

The Claimants ceased trading from Lower Basing Farm on 31 August 1992 for two years, until it was considered free of Johne’s disease but purchased milk from other farms in order to continue processing and selling milk and related products.

On the first basis of calculation (cessation of trading) Mr Aspell calculates the loss (as at December 1996) at £155,404.

As to the second basis (suspension of trading for two years), he assumes (see paragraphs 5.38 to 5.41) (a) that “by slaughtering the herd and suspending farming and processing activities for two years, the disease would have been eradicated; and that after two years (i.e. in August 1994) Mr and Mrs Browning could have recommenced business, disease-free; (b) that “at the end of the two year suspension period sales would have returned to historical levels, or higher, due to high customer demand”; and (d) that Mr and Mrs Browning could have supported themselves financially during the two-year period, for example by alternative employment. On the second basis of calculation, he calculates the loss (as at December 1996) at £103,540

On the third basis of calculation (relocation of the business on an alternative site), Mr Aspell calculates the loss (as at December 1996) at £100,242.

On the fourth basis of calculation, Mr Aspell calculates the loss (as at December 1996) at £102,001.

In his second report (dated 22 September 2003) Mr Shelton responds to Mr Aspell’s first report. He rejects each of Mr Aspell’s four alternative bases of calculation as not being feasible in the circumstances of the case. I note in particular his rejection of the second of the four alternative bases (in paragraph 4.23):

It appears likely that the Claimants would have been advised that they should destock the farm for five years rather than for two years;

Sales were unlikely to have returned to the levels prior to the suspension of trading immediately on recommencement;

The Claimants may not have been able to get alternative employment to support them during the period of suspension of trading.”

On 3 October 2003 Mr Shelton and Mr Aspell had a meeting. An agreed note of what transpired at that meeting was in evidence before the judge. For present purposes I need refer only two paragraphs under the heading ‘Mitigation’, which read as follows:

The damages claim as advanced on behalf of Mr and Mrs Browning at the end of the trial – following certain adjustments which Mr Shelton made to his calculations in the course of his oral evidence – amounted to £985,495 (as compared with the total claim put forward by Mr Measures in his 1996 report of £1,569,395).

The claim of £985,495 was made up of the following elements [the corresponding figures in Mr Shelton’s first report are shown in square brackets] :

Past loss of profits as at December 1996: £72,828, plus interest in the sum of £11,591, giving a total of £84,419 [unchanged].

Future loss of profits as at December 1996: £663,225, less discount of £268,978, giving a total of £394,247 [unchanged].

Loss of capital value of the farm and the business: £405,657 [£449,000], less discount for early receipt of £269,072 [£297,821], giving a total of £136,585 [£151,179]. And

Interest on the total of 1, 2 and 3 from December 1996 to the date of the trial before the judge: £370,244 [£324,560].

I can now return to the judge’s judgment.

In paragraphs 11 to 18 of his judgment, the judge says this:

There is no challenge to the judge’s findings as to the extent of Brachers’ negligence.

In this part of his judgment the judge directs himself as to the general approach to be adopted in assessing the value of Mr and Mrs Browning’s lost chance (Stage 1 above), saying this (in paragraphs 19 to 22):

The judge goes on cite passages from the judgment of Simon Brown LJ in Mount v. Barker Austin [1998] PNLR 493 (“Mount”) (in which he formulated the relevant principles), and to the judgments of Tuckey and Simon Brown LJ in Sharif v. Garrett & Co [2002] 3 All ER 195 CA (“Sharif”). The judge also refers to Harrison v. Bloom Camillin [2000] Lloyds Rep PN 89 (a decision of Neuberger J) (“Harrison”).

In Mount, Simon Brown LJ said this (at p.510):

In Harrison, Neuberger J said this (at pp.96.1 and 98.2):

In Sharif, Tuckey LJ said this (at p.203):

In paragraph 26 of his judgment, the judge notes the last two sentences of the above passage as being of importance in the instant case.

The judge then goes on to cite the following passage from the judgment of Simon Brown LJ in Sharif (at p.206):

In paragraphs 28 to 36 of his judgment the judge says this:

Since, as already noted, there is no appeal against the judge’s finding (in paragraph 60 of the judgment) that Mr and Mrs Browning’s counterclaim carried a 70 per cent chance of success on liability, it is unnecessary to consider this part of the judgment in any detail.

This is the crucial part of the judgment for present purposes. The judge introduces it by setting out, in paragraphs 62 to 65, some further facts about the business carried on by Mr and Mrs Browning, as follows:

In paragraph 66 the judge turns to Mr and Mrs Browning’s perceived need to expand their business, saying this:

In paragraph 67 the judge refers to the purchase, later in 1991, of the Shinfield goats, saying this:

In paragraphs 68 and 69 the judge refers once again to the lack of records, and to the unreliable nature of such records as exist, saying this:

The judge then turns (at paragraph 70 of the judgment) to Mr Measures’ 1996 report, summarising its approach and its conclusions as follows:

In paragraph 71 the judge compares Mr Measures’ approach with that of Mr Shelton, as follows:

In paragraph 72 the judge observes that when it is remembered that in the accounts of the business for the years 1990/1991 and 1991/2 the stock of the business (i.e. the herd) was valued at £13,500 and £17,550 respectively, the magnitude of the figures quoted in the previous paragraph is put in context.

Paragraphs 73 to 80 of the judgment lie at the heart of the argument on this appeal, and I must accordingly set them out in full:

In paragraph 81 of his judgment the judge turned to the question whether (as contended on behalf of Mr and Mrs Browning) it would have been appropriate for the judge at the notional trial to add interest to the annual losses of profit represented by the figure of £60,771. He concluded that it would not be appropriate to do so, since Mr Measures had already included bank interest when calculating the loss of profits.

In paragraph 84 of his judgment the judge turned to Mr and Mrs Browning’s claim for capital losses representing the diminution in value of their herd, of the goodwill of their business and of their land resulting from the alleged fact that Johne’s disease had been introduced into their herd via the Gilham goats, saying this:

The addition of £15,000 for capital losses gave the figure of £75,771 as the judge’s figure for the probable award of damages following the notional trial (Stage 4 above).

In paragraph 85 of his judgment the judge reiterated that in making his assessment of the value of the lost chance he had endeavoured to follow the principles set out in the authorities to which he had referred, in particular Mount and Sharif.

In paragraph 86 of his judgment, the judge takes 70 per cent of £75,771 (reflecting his finding as to the chances of the counterclaim succeeding on liability), to arrive at a figure of £53,039 as the value of the counterclaim (Stage 5 above). From that he deducts £6,682 representing the value of Mr Gilham’s claims, to arrive at his final figure of £46,357 (Stage 6 above).

As noted earlier, it was pointed out to the judge following the handing down of the judgment that Mr and Mrs Browning were entitled to a credit of £5,000 against the value of Mr Gilham’s claims, being the sum which they had paid to compromise those claims. The judge records this in paragraph 87 of the judgment as finally revised.

In paragraph 89 of his judgment, the judge notes that in the event there was no award of damages in December 1996 and no payment was made to Mr and Mrs Browning. He goes on:

In paragraph 90 the judge says this:

In paragraph 91 the judge reverts to the facts that no award of damages was made, and that no money has been received by Mr and Mrs Browning on account of their counterclaim, saying this:

In paragraph 92 of the judgment the judge concludes that the notional damages of £46,357 should carry interest from 1 January 1997 (Stage 7 above). As to the appropriate rate of interest, the judge says this in paragraph 93 of the judgment:

In the final part of his judgment the judge considers the possible incidence of costs at the notional trial. His conclusions are reflected in paragraph 3 of his order, quoted earlier. Since there is no appeal or cross-appeal against those conclusions, I need not consider this part of the judgment further.

By their grounds of appeal, Mr and Mrs Browning contend firstly that the judge erred in law in proceeding on the basis that the dispute as to the damages which might have been recovered at the notional trial is to be resolved by determining the figure which it is “most probable” that the judge at the notional trial would have awarded, on the assumption that liability had been established. They go on to challenge the judge’s findings in relation to mitigation of damage, and his award of only £15,000 in respect of the capital losses claimed. Permission to appeal on these three grounds was granted by the judge.

In addition, pursuant to the permission to appeal granted by Latham LJ, Mr and Mrs Browning advance the following further grounds of appeal (some of which overlap with the grounds referred to above):

that the judge ought not to have valued Mr Gilham’s claims at a sum in excess of the compromise figure of £5,000;

that the judge was wrong to conclude (in paragraph 36 of his judgment) that had Mr Measures’ 1996 report been served timeously the case on behalf of Mr Gilham would have been conducted differently and that it would have been forcibly argued that Mr and Mrs Browning should have taken the steps to mitigate contended for by Brachers;

that the judge was wrong to assess the damages likely to be awarded at the notional trial by reference to Mr Measures’ 1996 report (little attention having been paid to that report in the course of the trial, save in so far as the figures contained in it formed the basis for the reports of Mr Brookes and Mr Shelton);

that the judge’s methodology in deducting £21,231 for failure to mitigate (Stage 3.2 above) was flawed in that he failed to take into account the possibility that the judge at the notional trial might not have found that Mr and Mrs Browning had failed to mitigate or that the mitigation points raised by Brachers might never have been developed at the notional trial;

that the judge was wrong to conclude (in paragraph 75 of his judgment) that the judge at the notional trial would have allowed Mr and Mrs Browning a claim for annual lost profits only up to the end of 1998;

that the judge was wrong (in paragraphs 92 and 93 of the judgment) not to make any separate award of interest in respect of Mr and Mrs Browning’s losses up to December 1996 on the basis that Mr Measures’ calculations of loss of profits in his 1996 report included interest paid by Mr and Mrs Browning on their bank borrowings.

By a Respondent’s Notice, Brachers contend that the judge’s award of £15,000 in respect of capital losses (Stage 4 above) should be upheld on the additional ground that the contention advanced on behalf of Mr and Mrs Browning that they were entitled to damages for diminution in capital value as well as loss of profits was wrong or, at best, extremely weak, such that the award of £15,000 was generous.

As noted earlier, there is no cross-appeal.

Thus the principal issues which fall for decision on this appeal are these:

Whether the judge’s general approach to the assessment of the damages which would or might have been awarded at the notional trial – i.e. his inquiry as to the “most probable” figure (Stage 1 above) – was wrong, either in principle or having regard to the particular circumstances of the instant case (e.g. lapse of time, unavailability of evidence etc).

Whether the judge was justified in concluding (in paragraph 36 of his judgment) that had Mr Measures’ 1996 report been served timeously the case on behalf of Mr Gilham would have been conducted differently, and in proceeding on the basis that the points now taken by Brachers would have been taken on behalf of Mr Gilham.

As to the deduction of £21,231 (Stage 3.2 above): (a) whether the judge was justified in finding (in paragraph 75 of his judgment) that it was probable that the judge at the notional trial would have decided that Mr and Mrs Browning had failed to mitigate in line with the steps suggested by Mr Matthews; and (b) whether the judge was justified in finding (in paragraph 80 of his judgment) that the judge at the notional trial would have reduced the loss claimed in each year to reflect their failure to mitigate.

Whether the judge was justified in finding (in paragraphs 76 and 77 of his judgment) that the judge at the notional trial would have allowed the claim for loss of profits only in respect of the period up to the end of 1998.

Whether the judge was justified in awarding only £15,000 for capital loss (diminution in value of capital assets) (Stage 4 above).

Whether the judge was wrong to value Mr Gilham’s claims in the original action at more than £5,000.

Whether the judge ought to have concluded that the judge at the notional trial would have made a separate award of interest on past losses of profit.

For Mr and Mrs Browning, Mr Blunt (leading Miss Kate Livesey) submits that having regard to the lapse of time since December 1996, the unavailability of evidence and the numerous uncertainties in the instant case it was appropriate for the judge to apply a “broad brush” approach to the various issues, coupled with the application of a discount to reflect the uncertainties; and that he had failed to do so. He submits that the judge ought not to have attempted to make firm findings as to what would have transpired at the notional trial in circumstances where firm findings were impossible; and that, despite his self-direction to the contrary (see paragraph 36 of the judgment) he had fallen into the trap of attempting to retry the original action.

Further or alternatively, relying on a passage from the judgment of Potter LJ in Channon v. Lindley [2002] Ll Rep PN342 at 353 para 42 (an authority which was not cited to the judge), he submits that the judge ought to have inquired as to “the best order reasonably likely to have been achieved” by Mr and Mrs Browning rather than “the figure representing damages which it is most probable that [Mr and Mrs Browning] would have recovered if they had succeeded on liability” (see paragraph 20 of the judgment).

Turning from the general to the particular, Mr Blunt submits that in addressing the expert evidence before him the judge ought to have taken Mr Shelton’s report as his starting-point, rather than Mr Measures’ 1996 report. As it was, the judge made little reference to Mr Shelton’s report, whilst subjecting Mr Measures’ 1996 report to the criticisms made by Brachers’ experts. Mr Blunt submits that that was contrary to the approach laid down in the authorities and unfair to Mr and Mrs Browning.

For Brachers, Mr Croxford (leading Mr Stephen Worthington) submits that the judge’s general approach was entirely in line with the principles established by the various authorities to which the judge himself referred. In particular, he submits, the judge appreciated that he was not trying the original action, neither was he seeking to make definite findings of fact as if he had been the judge at the notional trial. In so far as he came to clear conclusions and made firm findings, he was fully entitled to do so (see Sharif at p.207 per Simon Brown LJ). Channon, Mr Croxford submits, lays down no new principle. On the contrary, it is entirely consistent with the other authorities.

Mr Croxford submits that the judge was fully entitled to take Mr Measures’ 1996 report as his starting-point, given that it was overwhelmingly probable that that report would have formed the basis of Mr and Mrs Browning’s case at the notional trial.

Mr Blunt submits that in the absence of any evidence as to the way in which Mr Gilham might have run his defence to Mr and Mrs Browning’s counterclaim had he found it necessary to address the increased claim based on Mr Measures’ 1996 report, the judge was wrong to regard it as inevitable, or certain, that he would have responded by raising the arguments as to mitigation advanced by Mr Matthews in the present action. He points out that the list of mitigation measures in Mr Matthews’ report on which the judge relied is derived from the list contained in Professor Morgan’s report on behalf of Mr and Mrs Browning. In any event there was, he submits, no clear evidence that such comprehensive techniques would have been known to whoever might have been instructed to advise Mr Gilham in the original action. Further, he submits that there was no evidence before the judge that Mr or Mrs Gilham had instituted any of the suggested mitigation measures themselves when confronted by Johne’s disease on their own farm; and that it would have been more difficult for the Gilhams than it was for Brachers to argue that there were measures to control the disease which Mr and Mrs Browning could reasonably have taken but had failed to take.

Mr Croxford submits that it was “inevitable” (to use the judge’s word when refusing permission to appeal on this issue) that Mr Gilham, properly advised by Barlows, would have raised mitigation arguments at the notional trial; and that the judge was fully entitled to recognise that fact. There was, he submits, no scope for a “broad brush” approach on that issue: the judge’s conclusion was no more than common sense required.

Mr Blunt submits that on the evidence there were too many imponderables to enable the judge to make a firm finding as to whether Mr and Mrs Browning had failed to mitigate their loss and, if so, as to what might have happened had they taken additional steps to control the disease. In particular, he submits, the judge ought not, consistently with the approach established on the authorities, to have found that the mitigating steps would have gradually eliminated the annual losses of profit over a 6-year period: a finding which led directly to his conclusion that the judge at the notional trial would have awarded damages for loss of profits only in respect of the 6-year period to the end of 1998.

Mr Blunt relies on the evidence of Mrs Browning and Mr Baird that Mr and Mrs Browning at all times acted on Mr Baird’s advice, and that much less was known to goat farmers (and, for that matter, to local vets) about Johne’s disease in the 1990s than was known in 2003. He points out that it was not put to either Mr Browning or Mrs Browning in cross-examination that they had unreasonably failed to adopt the various control techniques suggested by Mr Matthews. He further points out that it is common ground that there is no known cure for Johne’s disease. He submits that it is not clear when the full range of techniques suggested by Mr Matthews became generally known; nor is it at all certain how effective they would or might have been. Nor, he submits, was there any serious analysis at the trial as to how much the implementation of such control techniques might have cost; still less as to the financial feasibility of Mr and Mrs Browning incurring that cost. Mr Blunt points out that Mr Matthews made it plain in his report that testing for Johne’s disease is expensive, and that the effectiveness of vaccination is, even now, difficult to assess. He relies in particular on paragraph 158 of Mr Matthews’ report (quoted in paragraph 77 above). By contrast (submits Mr Blunt) it is clear from paragraph 8.1e of Professor Morgan’s report (quoted in paragraph 74 above) that the cost of recurrent vaccination of an infected herd will continue to be incurred even if or when disease in the herd is considered to be under control. He submits that the judge’s award of damages fails to take account of this ongoing cost, which (he submits) Mr and Mrs Browning would be entitled to recover by way of damages.

Mr Blunt also relies on the evidence of Mr Baird (whom the judge described as an impressive witness) to the effect that Mr and Mrs Browning’s herd was well-managed; and that although he was himself no expert on Johne’s disease he did what he could to inform himself about the disease with the assistance of such text books as were available. Further, in cross-examination Mr Baird said that he did not press Mr and Mrs Browning to adopt a vaccination programme because it was an extra cost, and there was no evidence that it would be effective on goats.

Mr Blunt points out that the fact that Mr and Mrs Browning had limited financial means was not in dispute (indeed, it was positively relied on by Brachers in support of their case that the Mr and Mrs Browning’s business was financially unsound). He submits that the judge ought to have taken that fact into account in addressing the question whether Mr and Mrs Browning had failed to mitigate their losses. He also points out that there was no evidence before the judge that the control techniques suggested by Mr Matthews had been taken by Mr Gilham.

As to the more radical mitigation proposals of Mr Aspell, Mr Blunt first points out that the failure to mitigate was not pleaded by Mr Gilham. He further submits that it is established by the authorities that a Court should take into account the claimant’s means and available cash flow when deciding whether he has acted reasonably in mitigation. Mr Blunt submits that the financial circumstances of the Brownings as well as the information and guidance available to them at the time leads to the conclusion that the Gilhams would have had an uphill struggle had they sought to establish in 1996 that the Brownings had unreasonably failed to adopt any of the alternative courses put forward by Mr Aspell.

Mr Croxford submits that, whilst it is not in dispute that Mr and Mrs Browning followed Mr Baird’s advice, the effect of his evidence was that he knew very little about Johne’s disease. Further, he submits that had Professor Steele-Bodger been retained by Mr and Mrs Browning as an expert witness (as, admittedly, he should have been) it is overwhelmingly probable (a) that he would have known about techniques of controlling Johne’s disease and that appropriate measures would have been taken prior to the notional trial. As to alleged lack of general knowledge about Johne’s disease at the material time, Mr Croxford points out that Mr and Mrs Browning knew or suspected by no later than 21 October 1991 (when the Counterclaim was served) that the disease was present in their herd, suggesting that there is every reason to suppose that over the ensuing period prior to the notional trial they would have made it their business to become more knowledgeable. He further suggests that even if Mr and Mrs Browning’s knowledge about the disease remained limited, their employees (in particular Mr Squire and Ms May) may well have had greater knowledge about it.

In any event, Mr Croxford submits, there is no basis in the evidence for the suggestion that there was any lack of relevant knowledge in the 1990’s. He relies in support of this submission on the fact that Mr and Mrs Browning said that they implemented a system of snatching young goats from their mothers shortly after birth.

As to the financial constraints under which Mr and Mrs Browning were operating, Mr Croxford submits that their lack of money was no excuse for their failure to get to grips with the disease. He acknowledges that vaccination is costly, but he points out that there is no evidence that any cost/benefit analysis was carried out. He submits that Mr and Mrs Browning never made any comprehensive or sustained effort to manage the disease (or for that matter any other parasitic problems from which their herd may have been suffering) and that, in consequence, the instant case cannot be regarded as a case in which attempts at mitigation can be shown to have been ineffective.

Mr Croxford accordingly submits that on the evidence the judge was fully entitled to conclude that Mr and Mrs Browning had failed to mitigate their loss; and that had they taken reasonable steps to do so, the disease would have been brought under control gradually over a period of six years.

Miss Livesey, who addressed us on this issue, submits that the judge’s reasoning in paragraph 84 of his judgment is highly unsatisfactory, in that it focuses primarily on the claim in respect of the reduction in the goodwill of the business (which the judge regarded as a doubtful claim) and does not contain any review of, or indeed reference to, the valuation evidence which was before the judge as to the diminution in the value of the farm in consequence of the presence of the disease.

She submits that there is no inconsistency or error of principle in awarding damages under this head in addition to an award of damages representing loss of profits, given that as a direct result of the presence of Johne’s disease in Mr and Mrs Browning’s herd not only has the profitability of their business suffered but the capital values both of the business and of the farm itself have been substantially reduced.

Miss Livesey took us in some detail through the valuation evidence (as summarised earlier in this judgment: see paragraphs 86 to 95 above), including the Bax Standen valuation and the FPDSavills valuation, in support of her submission that an appropriate base figure for the diminution in the value of the property as at December 1996 would be Mr Handley’s figure of £126,000 (i.e. the figure contained in the joint statement referred to in paragraph 91 above), subject to some relatively small discount to allow for the possibility of the judge at the notional trial being impressed by Mr Hampton’s evidence.

Nor, she submits, does the judge provide any reasons for his decision to award only £15,000 under this head.

Mr Croxford submits that it would be contrary to principle to make any award of damages representing reduction in the value of the goodwill of Mr and Mrs Browning in addition to an award representing loss of profits, since the goodwill of the business is in substance no more than the capitalisation of future profits. He accordingly submits that the judge fell into error in this respect.

In any event, he submits, even if a claim for damage to goodwill is sustainable in principle, it cannot amount to much on the facts of the instant case, given that the business had consistently run at a loss prior to the purchase of the Gilham goats. He also submits that allowance must be made for the possibility that the herd might have been infected from some third party source, since if that were the case the claim for damages under this head would fail altogether.

As to the claim in respect of the value of the farm, Mr Croxford points out that neither Mr Handley nor Mr Hampton had any direct market experience of the effect of Johne’s disease on property values. He submits that the evidence of Mr Hampton is to be preferred, on the footing that Mr Handley’s valuation was obviously speculative on the facts. He accordingly submits that the judge was entitled to conclude (in paragraph 84) that the claims for damages under this head “faced difficulties in law and fact (including valuation), which mean that I should put a modest value on them”; and that his award of £15,000 was, in all the circumstances, generous.

Relatively little turns on this issue in terms of money, but Mr Blunt submits that it is a good example of an aspect of the case where the judge plainly failed to follow the correct approach.

Mr Blunt submits that the judge was in error in proceeding on the footing that if Brachers had not been negligent Mr Gilham’s claims would not have settled; and in failing to discount Mr Gilham’s chances of success so as to allow for the possibility of settlement. He submits that the fact that Mrs Gilham chose to settle the claims for £5,000 (Mr Gilham died prior to the settlement) at a time when Mr and Mrs Browning were in procedurally weak position with regard to their counterclaim suggests that the settlement of the claim reflected Mr and Mrs Gilham’s estimate of their value. He notes that (in paragraph 39 of the judgment) the judge recognised the “very real possibility” that Mr Gilham’s claims might in any event have settled prior to trial, but he submits that, having recognised that possibility, the judge failed to take proper account of it in valuing the claims at £6,682.

Mr Blunt further submits that in any event the judge’s assessment of the chances of Mr Gilham’s claims succeeding at 75 per cent is ungenerous to Mr and Mrs Browning, particularly since at any trial of the Gilham claims Mr and Mrs Browning would (as Mrs Browning confirmed in evidence) have been in a position to adduce evidence from a Ms Samantha May (the joint manager of the Gilham goats at the time of the sale) to the effect that the sale price of £27,000 included the additional items which were the subject of Mr Gilham’s claims.

Mr Croxford reminds us that the settlement figure was equal to the sum in court, and that the settlement occurred soon after Mr Gilham’s death. He submits that it is doubtful whether the original action was cost effective from the Gilham’s point of view. He submits that the reasoning and conclusions of the judge on this issue were amply justified on the evidence. He submits that Mr Blunt’s submission as to evidence which might have been given by Ms May is based on pure speculation.

Mr Blunt asserts that the judge’s approach to the question of interest was not foreshadowed at the trial, and no submissions were made in relation to it, since it was not suggested at trial that the figures in Mr Measures’ 1996 report should form the basis of the award of damages in preference to those of Mr Shelton. In consequence, no issue arose as to whether Mr Measures’ incorporation of interest into his loss of profit figures arose. He submits that the judge (in paragraph 82 of his judgment) misunderstood his post-trial objection on this point. He submits that the judge at the notional trial would in all likelihood have awarded Mr and Mrs Gilham interest to the date of the notional trial on their loss of operating profits in consequence of the presence of Johne’s disease; and that there was no evidence that Mr and Mrs Browning’s overdraft increased by an amount equal to the loss of operating profits and no evidence that the cost of their bank borrowings mirrored the interest which would have been payable on the lost profits.

Mr Croxford submits that the concept of recovering interest as damages is well-recognised, and that the judge’s approach was permissible in principle. He submits that the likelihood is that the judge at the notional trial would have been presented with expert evidence (i.e. Mr Measures’ 1996 report) which included interest in the calculation of lost profits. He submits that Mr Measures’ 1996 report formed the foundation of Mr and Mrs Browning’s case on their counterclaim in the original action, and that they are not entitled to “cherry pick” Mr Measures’ evidence depending on whether or not it suits their case. If Mr and Mrs Browning had wished to disassociate themselves from Mr Measures’ calculations they should have made that clear in the course of the trial, and they failed to do so.

Mr and Mrs Browning’s Appellant’s Notice does not state what order they are inviting this court to make; nor did Mr Blunt enlighten us to that in the course of his opening submissions on the appeal. Accordingly, in the course of his submissions in reply we invited him to commit to paper the terms of the order which he was inviting this court to make. Over the short adjournment on the third and final day of the hearing of the appeal, Mr Blunt prepared a draft document to that effect, which he duly placed before us. However, he stressed that in a number of respects the calculations which it contained required to be “audited”. We accordingly granted him permission to submit a final version of the document after the close of the hearing; and we granted Mr Croxford liberty to lodge submissions in writing in relation to it if so advised.

The final version of the document (which I will call “the calculation document”) reflects Mr. Blunt’s submissions made during the hearing that Mr. Shelton’s report should be used as a starting-point for the measure of damages. The calculation document accordingly adopts Mr. Shelton’s figures for the loss of profit (and interest thereon) up to 31^st December 1996 and for the future loss of profit (discounted for accelerated payments). Future losses of profit are claimed for a period of 7 years and 8 months after this notional trial date. Both these sums are discounted by 25 per cent to reflect uncertainties in the Shelton and Brookes figures and discounted by a further 25 per cent to reflect the finding that the Brownings were likely to have faced a case that their herd had deaths and underperformed as a result of Johne’s disease and parasites affecting the combined herd in any event.

Consistent with Miss Livesey’s submissions on the matter of capital losses, the calculation document is based on Mr. Handley’s valuation of the diminution in the value of the land (contained in the joint statement with Mr. Hampton). This amount is discounted by 15 per cent to reflect the chance that the judge at a notional trial would have been impressed by Mr. Hampton’s lower figure. The amount is further reduced by 25 per cent to reflect the effect of the argument that the herd would have been affected by Johne’s disease and parasites in any event. Additionally, a claim of £5,000 is made for the loss of goodwill.

Pursuant to the liberty which we granted to him, Mr Croxford lodged written submissions in relation to the calculation document.

Mr Croxford takes the preliminary objection that Mr and Mrs Browning ought not to be permitted to advance the case set out in the calculation document. He submits that by the calculation document Mr and Mrs Browning are in effect inviting this court to ignore paragraphs 73 to 84 of the judgment and to replace them with new findings as to the correct factual approach, the appropriate evidence to adopt and the necessary discounts to apply. He submits that that is neither a fair nor an appropriate way of dealing with the appeal, particularly when the new calculation was produced after the conclusion of the hearing.

He further submits that this court is being invited to go far beyond the grounds of appeal. In particular, he submits that there is no ground of appeal which explicitly challenges either the judge’s decision to limit the loss of profits claim to the six-year period ending at the end of 1998, or the deduction of 25 per cent to reflect the possibility of Mr and Mrs Browning’s herd being infected from some source other than the Gilham goats. He submits that had any such grounds of appeal been advanced (a) it would have been necessary for this court to consider the evidence in far greater detail, and (b) there would in any event have been a cross-appeal on the basis that the 25 per cent deduction was too small.

Mr Croxford submits that the case sought to be advanced in the calculation document is completely different to the case contended for in the grounds of appeal, and that the case that there should be no deduction for failure to mitigate represents a volte face by Mr and Mrs Browning.

Mr Croxford takes strong objection to the fact that Mr and Mrs Browning’s “new case” is advanced after the hearing of the appeal. The calculations in the calculation document ought, he submits, to have been put before the court either in Mr Blunt’s written skeleton argument or in the course of his opening submissions. He submits that the procedure adopted is “grossly unfair” to Brachers, not least because Mr and Mrs Browning’s case only crystallised after the conclusion of the hearing, with the result that Brachers have not had a proper opportunity of dealing properly with it. In the circumstances, he submits, Brachers are at a significance disadvantage and cannot deal effectively with the new case by way of written submissions.

Without prejudice to his preliminary objection, Mr Croxford then turns to the calculations in the calculation document. As to the calculation of loss of profits to the end of 1996, he submits that Mr Brookes’ figures (on which Mr. Shelton’s calculations of loss of profit were based) were in a number of respects “demonstrably and obviously flawed”. He further submits that Mr Brookes makes no allowance for the probable existing infection of the Shinfield goats, or for the possibility of Mr and Mrs Browning’s existing herd being infected. Nor does Mr Brookes take proper account of the parasitic infection.

As to the suggested discount of 25 per cent to reflect uncertainties in the figures of Mr Brookes and Mr Shelton, Mr Croxford submits that the judge’s discount of 40 per cent in relation to the figure in Mr Measures’ 1996 report was generous to Mr and Mrs Browning, and that the suggested 25 per cent discount accordingly cannot be justified.

Mr Croxford makes essentially the same submission in relation to the further 25 per cent discount.

As to future loss of profits, Mr Croxford submits that the proposed 7-year period is far too long. He submits that, on the evidence, the disease can be kept under control (albeit not completely eradicated) by means of the various methods suggested by Mr Matthews. He submits that if any award is to be made in respect of future loss (as at December 1996) it should be for no longer than the period of 4 years from 1 July 1995. (For the assistance of the court, Mr. Croxford set out calculations showing various alternative starting dates in an appendix to his written submissions.)

Mr Croxford submits that in any event particular care must be taken in considering the estimates of future losses, since (in particular) instead of basing themselves on reasonable forecasts, such as would have been before the judge at the notional trial, Mr Brookes and Mr Shelton have had recourse to hindsight and in so doing have taken into account at least one major event (the loss of the contract with Waitrose in August 1998) which was unforeseeable in 1996 and the effect of which was to damage the profitability of Mr and Mrs Browning’s business. He submits that the available evidence indicates that but for the loss of that contract Mr and Mrs Browning would have been making quite substantial profits. In any event, he submits, the loss of the Waitrose contract could not and should not be regarded as attributable to any Johne’s disease carried by the Gilham goats. He submits that there was extensive and compelling evidence before the judge that Mr and Mrs Browning’s existing herd was infected with Johne’s disease. He also relies on the passage in the cross-examination of Professor Morgan quoted in paragraph 80 above.

Contrary to the assumption made in the calculation document, Mr Croxford stresses that no concession is made by Brachers that a judge would have concluded at the notional trial in 1996 that on the facts there had been no failure by the Brownings to mitigate. He submits that it is not necessary in this action to consider whether Mr and Mrs Browning were or were not in breach of a duty owed to Mr Gilham to mitigate their loss; nor is it necessary, he submits, to conclude that they had or had not failed in that duty. He submits that the judge did not go down that route. He submits that the material considerations are (a) that the judge at the notional trial would have concluded that Mr and Mrs Browning were under a duty to mitigate by managing their herd; that the figures for damages advanced by Mr and Mrs Browning in the present action are founded on actual and assumed management which had not taken any effective steps to mitigate; and accordingly that such figures must be reduced by the extent to which loss would have been avoided had effective steps to mitigate been taken. Accordingly, he submits that the judge adopted the correct approach to the issue of mitigation, and that his conclusions on that issue are unchallengeable in this court.

As to the claimed capital losses, Mr Croxford stresses that Brachers’ case is that Mr and Mrs Browning’s goats were already infected with Johne’s disease prior to the arrival at Lower Basing Farm of the Gilham goats. He submits that the evidence before the judge to that effect was compelling. He submits that the judge’s discount of 25 per cent to reflect this possibility in the context of the loss of profits claim has no relevance in the context of the claim for capital losses, since if Mr and Mrs Browning’s herd was already infected with Johne’s disease prior to the arrival of the Gilham goats no part of any capital loss could have been be laid at the door of Mr Gilham, and hence at the door of Brachers. He submits that, the judge having expressed the view (in paragraph 79 of his judgment) that there was “a strong likelihood” that Mr and Mrs Browning’s herd was infected from some other source than the Gilham goats, it was inevitable that a large discount should be applied. In addition, he submits, account must be taken of the weaknesses in Mr and Mrs Browning’s valuation evidence which, he submits, grossly overstates the diminution in the value of the land by reason of the presence of Johne’s disease.

In any event, he submits, the evidence of Mr Hampton was logical and persuasive, and is to be preferred to that of Mr Handley.

He submits, therefore, that the judge’s award of £15,000 was excessive (albeit it is not the subject of a cross-appeal).

As to the claim in relation to loss of goodwill, Mr Croxford submits that the claim put forward in the calculation document is different in nature from the claim put forward under this head at the trial. He repeats his submission that it is inappropriate to award both damages for loss of profits and damages for loss of goodwill. In so far as the figure of £5,000 in the calculation document includes vaccination costs, Mr Croxford submits that such cost is not in the nature of damage to goodwill. He submits that vaccination costs may not be a cost in perpetuity, and that in any event the cost falls to be discounted to reflect the possibility that Mr and Mrs Browning’s herd was infected from a source other than the Gilham goats.

As to interest, he queries whether the figure of 58.69 per cent put forward in the calculation document as the agreed rate has been agreed, saying that further inquiries are being made.

In an appendix to his written submissions, Mr Croxford sets out a “corrected analysis of the position upon the basis of [Mr and Mrs Browning’s] new case”. This appendix contains a series of calculations illustrating Brachers’ interpretation of the Brownings’ analysis of the measure of damages, based on either two or four year periods of future losses and the application (or otherwise) of a deduction for failure to mitigate. The calculations assume a discount of 35 per cent (rather than the 25 per cent discount used in the calculation document) to reflect uncertainties in Mr. Shelton’s figures.

In the well-known case of Armory v. Delamirie (1722) 1 Stra 505 the claimant, a chimney-sweeper’s boy, found a jewel, and took it to the shop of the defendant (a goldsmith) to find out what it was worth. The defendant handed it to an apprentice, who, under the pretence of weighing it, told the defendant that it was worth three halfpence. The defendant offered the claimant that sum, but the claimant refused to take it and demanded the return of the jewel; whereupon the apprentice returned only the empty socket. The claimant sued the defendant in trover. The trial of the action took place before Pratt CJ and a jury. The Chief Justice ruled that the claimant was entitled to maintain an action against the defendant in trover. The significance of the case, however, lies in the direction which the Chief Justice gave to the jury as to the measure of damages. In the course of the trial, the jury had heard evidence from witnesses in the trade as to the value of a jewel of the finest quality of the right size to fit the socket. The brief report of the case concludes as follows:

It has been recognised in subsequent authorities that in so directing the jury the Chief Justice was applying a general principle to the effect that, in a case where the defendant has wrongfully deprived the claimant of property of value (be it an item of physical property or a chose in action), the court will, save to the extent that it is persuaded otherwise by the defendant, assess the value of the missing property on a basis which is generous to the claimant.

Thus, in Allen v. Sir Alfred MacAlpine & Sons Ltd [1968] 2 QB 229 (a case where, by reason of the negligence of the defendant solicitors, the claimant’s claim had been struck out on grounds of inordinate delay) Diplock LJ said (at pp.265F-257B):

Similarly, in Mount and Sharif Simon Brown LJ refers to Armory v. Delamirie as establishing a principle to the above effect (see the passages cited by the judge in the course of his judgment).

In Mount, Moore-Bick J (giving the first judgment in the Court of Appeal) rejected a submission by Mr Mount (who appeared in person) that, in the passage in his judgment in Allen v. MacAlpine quoted above, Diplock LJ was referring to the legal, as opposed to the evidential, burden of proof. Simon Brown LJ took the same view. Having stated (proposition 1 at p.510D) that the legal onus is on the claimant to establish that he has lost something of value, Simon Brown LJ went on to say this (proposition 4 at 511B-C, dealing with the evaluation of what the claimant has lost):

To the same effect is paragraph 39 of Simon Brown LJ’s judgment in Sharif (quoted earlier).

I respectfully agree that the principle in Armory v. Delamirie is not directed at the legal burden of proof; rather it raises an evidential (i.e. rebuttable) presumption in favour of the claimant which gives him the benefit of any relevant doubt. The practical effect of that is to give the claimant a fair wind in establishing the value of what he has lost.

Channon is, in my judgment, simply another example of the application of the Armory v. Delamirie principle in the context of loss of a chance. As I read Potter LJ’s judgment in Channon, his approach in applying that principle is entirely consistent with Mount and Sharif. Thus, Potter LJ considered first what would have been “the best order which could reasonably have been hoped for” (paragraph 45), before going on to discount it “on the basis of uncertainty” (paragraph 47).

In the instant case, in my judgment, the judge correctly directed himself by reference to the relevant authorities as to the general approach which he should adopt in valuing Mr and Mrs Browning’s lost chance. His two-stage approach of inquiring as to the amount of damages which would “most probably” have been awarded at the notional trial, and then discounting the resulting sum to take account of the uncertainties on the issue of liability, is in my judgment an entirely legitimate approach, provided of course that in addressing each of the two stages due regard is had to the Armory v. Delamirie presumption.

So I reject Mr Blunt’s submission that the judge misdirected himself in law as to the approach to be adopted in valuing Mr and Mrs Browning’s lost chance.

However, the question remains whether, having correctly identified the approach to be adopted, the judge adhered to that approach when considering the various areas of uncertainty in relation to the assessment of the amount of damages which would “most probably” have been awarded at the notional trial.

In addressing this question I bear the following considerations firmly in mind:

that an appellate court will be slow to interfere with a decision at first instance which derives from a process of judicial evaluation (cf. Welsh Development Agency v. Redpath Dorman Long [1994] 1 WLR 1409 at 1418D-E per Millett LJ and Assicurazioni Generali Spa v. Arab Insurance Group [2003] 1 WLR 577 at 580, para 14, per Clarke LJ), and that the judge’s decision in the instant case is, par excellence, such a decision;

the difficulty of the task with which the judge was faced in assessing damages for Brachers’ admitted negligence; and

the enormous care which the judge has evidently taken in addressing the numerous and complex issues which arise in that context.

Nevertheless, despite making every allowance for those factors, I have come to the conclusion that in three particular respects (two of them major, the third relatively minor) the judge has signally failed to follow the course which he correctly charted for himself by reference to the authorities; and that in consequence his ultimate award of £76,873.03 represents a significant undervaluation of Mr and Mrs Browning’s lost chance to prosecute their counterclaim in the original action.

The two major respects are these:

the judge’s treatment of the expert evidence adduced before him, in relation both to the loss of profits claim and to the capital loss claim; and

his findings (based both on the expert evidence and the factual evidence) as to Mr and Mrs Browning’s failure to mitigate their loss, and his consequential finding that the judge at the notional trial would not have awarded damages for loss of profits in respect of any period after the end of 1998.

The third, and relatively minor, respect is the judge’s evaluation of Mr Gilham’s claims.

I will consider each of these in turn.

Referring to the mass of expert evidence before him, the judge concludes (in paragraph 78) that he should:

Such an approach to the expert evidence is, in my judgment, wholly unobjectionable in principle; but the canvas to which the broad brush is to be applied must in my judgment extend to the entirety of the expert evidence, including the evidence of the experts called on behalf of Mr and Mrs Browning (and in particular the evidence of Mr Brookes and Mr Shelton in relation to the loss of profits claim and the evidence of Mr Handley – largely supported by the Bax Standen and FPDSavills reports – in relation to the capital loss claim).

So far as the loss of profits claim is concerned, the judge, as we know, based his assessment of damages on Mr Measures’ 1996 report, noting (in paragraph 33) that “the particulars of negligence do not allege that, Professor Steele-Bodger apart, Brachers should have instructed other experts”. At the same time, he concludes (in paragraph 78) that:

In the event, the expert reports provided by Mr Brookes and Mr Shelton, which were based on Mr Measures’ 1996 report, represent (as I read them) just the kind of reworking of the 1996 report that the judge had in mind. Yet Mr Brookes’ evidence is not specifically referred to at any point in the judgment, and Mr Shelton’s evidence merits only passing references; and this despite the fact that the judge considered that Mr Measures’ 1996 report (in its unchecked and unimproved form) should be heavily discounted (as noted earlier, he reduced Mr Measures’ 18-year period to 6 years (in paragraph 77), and went on to discount Mr Measures’ loss of profit figures for those 6 years by 40 per cent (in paragraph 78)). Whilst the judge’s selection of the 6-year period is based on his finding as to mitigation (see paragraph 90), he gives no specific reasons for applying a 40 per cent discount to Mr Measures’ profit figures for the 6 years in question beyond saying that it results from his weighing of the expert evidence (which did not, in the event, include any oral evidence from Mr Measures).

At this point in his judgment, the judge, in a passing reference to Mr Shelton’s evidence (see the sentence in parenthesis at the end of paragraph 78), compares the discounted figure of £109,336 with Mr Shelton’s equivalent figure of £155,490 (a difference of £46,154: almost 30 per cent of Mr Shelton’s figure). However, he does not go on to explain what significance he attaches to that comparison, or why he considers it appropriate to arrive at a figure which is so much lower than Mr Shelton’s equivalent figure.

As to the capital loss claim, in arriving at his award of £15,000 (in paragraph 84) the judge makes no reference at all to the valuation evidence on either side beyond observing that the capital loss claim “faced difficulties in law and fact including valuation”. Even allowing for the fact that the judge regarded the claim for loss of goodwill as a doubtful claim, the fact remains that the award of £15,000 represents only 11 per cent of the £136,585 claimed under this head as at the end of the trial (see paragraph 118 above).

In the circumstances it was in my judgment incumbent on the judge to explain, if only in the broadest terms, what valuation difficulties he had in mind so far as the capital loss in relation to the land was concerned, and why he considered that the judge at the notional trial would have effectively rejected Mr Handley’s evidence in support of that aspect of the claim (and for that matter the evidence of the Bax Standen and FPDSavills reports). Absent any such explanation, the clear impression which I am left with is that on the capital loss claim, as on the loss of profits claim, the judge, far from tending towards an approach which was generous to Mr and Mrs Browning, was tending in the opposite direction.

All in all, I conclude that the judge’s treatment of the expert evidence in his judgment fails to do justice to Mr and Mrs Browning’s case, and represents an error of approach which feeds into, and infects, his findings and conclusions in so far as they are based on that evidence.

In paragraph 75 the judge finds:

In paragraph 77 he finds that:

In my judgment, however broad the brush which is applied to the evidence before the judge (and in particular the expert evidence), the effect of his findings as to mitigation of loss – that is to say his finding that Mr and Mrs Browning ought to have taken further steps to mitigate their loss prior to the notional trial and his finding that, had they done so, they would have suffered no ongoing losses after the end of 1998 – is to produce what seems to me to be a harsh result so far as Mr and Mrs Browning are concerned.

Mr and Mrs Browning are not commercial goat farmers on a large scale. Their business was making losses, and at all material times they were operating under severe financial constraints (see paragraph 65 of the judge’s judgment). They needed to expand their production substantially, and in purchasing the Gilham goats their major purpose was to obtain the valuable contracts which Mr Gilham had with Waitrose and with Holland and Barrett (see paragraph 66 of the judge’s judgment). On the evidence, they did their best in difficult circumstances to keep the disease under control, acting at all times on the advice of their local vet, Mr Baird. Mr Baird’s evidence (accepted by the judge) was to the effect that he was no expert in Johne’s disease, but that he did his best to find out what were the most effective measures to take, taking into account Mr and Mrs Browning’s difficult financial position. Whatever the precise state of expert knowledge about Johne’s disease in the early 1990s, I would regard it as extremely unlikely that the judge at the notional trial would have concluded that Mr and Mrs Browning ought to have sought advice from an eminent expert such as Professor Morgan as to the measures which they might take with a view to bringing the disease under control, even assuming that they could afford to take such measures.

Nor does the judge appear to have taken account of the fact that Mr and Mrs Browning’s reasonable costs of mitigating their damage would in any event be recoverable as damages. Indeed, there does not appear to have been any detailed investigation at trial as to what the costs of the measures advocated by Mr Matthews might have been. Moreover, the question whether Mr and Mrs Browning could reasonably have afforded to take all or some (and if so, which) of the mitigating measures recommended by Mr Matthews was, as it seems to me, of direct relevance to the question whether they had failed to mitigate their losses.

Further, although the judge refers (in paragraph 76 of his judgment) to the fact that, due to Brachers’ negligence, no award of damages was made in December 1996, he seems (if I understand the judgment correctly) to have placed this factor on Brachers’ side of the scales, on the footing that payment of the damages would have enabled Mr and Mrs Browning “to mitigate their on-going loss …. and so to earn the profits they would be awarded in damages”. At all events, this is a factor which should in my judgment be placed firmly on Mr and Mrs Browning’s side of the scales, given that Brachers’ negligence deprived them of the benefit of an injection of cash following the notional trial. Such an injection of cash would inevitably have had the effect of easing pro tanto Mr and Mrs Browning’s pressing financial constraints and thus of putting them in a stronger financial position in relation to the taking of palliative measures than was in fact the case.

Next, although the judge correctly observed (in paragraph 32 of his judgment) that the difficulties caused by the fact that Brachers’ negligently failed to retain Professor Steele-Bodger should count against Brachers rather than against Mr and Mrs Browning, he does not appear to have followed that through into his findings as to mitigation. In the context of mitigation, it seems to me not merely legitimate but appropriate to assume that had Professor Steele-Bodger been retained he would have advised Mr and Mrs Browning as to the steps which they ought reasonably to take with a view to mitigating their losses, taking into account their financial circumstances; whereas in the event they received no expert advice apart from that of Mr Baird (in so far as he was able to give such advice). The absence of Professor Steele-Bodger’s advice as to mitigation ought, in accordance with the judge’s observation, to weigh in the scales in favour of Mr and Mrs Browning. The effect of so doing is to render it less likely that the judge at the notional trial would have found that Mr and Mrs Browning had failed to mitigate their loss.

Finally, so far as mitigation is concerned, there was in my judgment no evidential basis for an unqualified finding by the judge that Mr and Mrs Browning had failed to mitigate prior to the notional trial. At best, he should have expressed his finding in terms of likelihood. To my mind, however, the evidence points strongly towards the opposite conclusion.

For all those reasons, I conclude that the judge’s findings as to mitigation of loss are inconsistent with the approach to the assessment of damages established by the authorities, and that such findings accordingly cannot stand. Further, since (for reasons already given) such findings lie at the heart of the judge’s assessment of the overall value of the loss of profits claim, that assessment is itself undermined.

I agree with Mr Blunt that the judge’s approach to the valuation of Mr Gilham’s claims is also inconsistent with the correct approach as established by the authorities. The issue as to whether or not the claims would have been settled for £5,000 had Brachers not been negligent inevitably involves a high degree of speculation, and in addressing that issue the judge ought in my judgment to have given Mr and Mrs Browning if not the entire benefit of the doubt, then at least the lion’s share of it.

Having addressed the three areas where, in my judgment, the judge departed from the correct approach as established by the authorities, I can now turn to the various specific issues.

Before doing so, however, I must first address Mr Croxford’s preliminary objection, forcefully argued in his written response to the calculation document, that the submission of the calculation document (at least in its final form) after the conclusion of the hearing put Brachers’ at a substantial disadvantage and was procedurally unfair.

I reject that objection. The contents of the calculation document in relation to each of the various stages in the suggested calculation of damage were clearly foreshadowed in the detailed arguments which were addressed to us by Mr Blunt and Miss Livesey in the course of the three-day hearing of this appeal. What Mr Blunt had not done, until we invited him to do so in the course of his submissions in reply, was to enlighten us as to the precise form of the order which he was inviting us to make, based upon those arguments. Since, in the event, the document which Mr Blunt handed in was only a draft document, and since there was no time available for any further oral submissions following Mr Blunt’s reply (the appeal having been listed for a three-day hearing), we granted Mr Croxford permission to lodge written submissions in relation to the final version of the calculation document when served, which he duly did.

In my judgment there was no unfairness in that procedure. If, in making his oral submissions, Mr Croxford had regarded himself as being in any way disadvantaged by reason of the fact that in opening the appeal Mr Blunt had omitted to specify the terms of the order sought, I have no doubt that he would have said so in the course of his submissions. As it was, he was given the opportunity to comment on the calculation document, albeit in writing rather than orally.

I turn, then, to the various issues, using the numbering in paragraph 154 above.

For the reasons given in paragraphs 204 to 216 above, I conclude that although the judge correctly directed himself as to the correct approach to the assessment of damages in a case such as the instant case, he nevertheless failed to adhere to that approach in the three respects identified in paragraphs 217 and 218 above.

I agree with the judge that had Brachers prepared properly for trial, Barlows would have ensured that they in turn were properly prepared; and that it was inevitable in that event that at the notional trial issues as to mitigation of damage would have been raised on behalf of Mr Gilham. Any other conclusion would fly in the face of common sense, in my judgment.

After the conclusion of the hearing of the appeal, Mr Blunt and Miss Livesey drew our attention to the decision of this court in Charles v. Hugh James Jones & Jenkins [2000] 1 WLR 1278. In that case the claimant’s personal injury claim had been automatically struck out due to the negligence of the defendant solicitors. Liability was admitted but there was a dispute as to damages. At the trial in 1998 the judge awarded the claimant substantial damages. He found that the personal injuries action would have come to trial in January 1996, but he nevertheless took into account evidence of a medical practitioner (Dr Barrow) which had been obtained subsequently. He did so on the basis that, but for their negligence, the solicitors would have obtained such evidence by January 1996. The solicitors appealed on the ground (among others) that the judge ought not to have admitted Dr Barrow’s evidence, since no medical report by Dr Barrow had in fact been served in the personal injuries action. The Court of Appeal dismissed the solicitors’ appeal. The leading judgment (with which Sir Richard Scott V-C and Robert Walker LJ agreed) was given by Swinton Thomas LJ. In the course of his judgment, Swinton Thomas LJ said this with reference to Dr Barrow’s evidence (at pp.1286H-1287B):

The above passage from the judgment of Swinton Thomas LJ, as I read it, confirms the conclusion which I have reached on this issue. In the instant case competent solicitors acting for Mr and Mrs Browning would have been fully prepared for the notional trial; and their state of preparedness would have been matched by that of Barlows, on behalf of Mr Gilham.

In my judgment, taking proper account (in accordance with the authorities) of the fact that it was Brachers’ negligence which deprived Mr and Mrs Browning of the chance to earn the profits for which they now seek compensation, the following propositions, taken together, provide a fair basis for the assessment of the overall value of their loss of profits claim:

that the chance of the judge at the notional trial finding that Mr and Mrs Browning had failed to mitigate their loss was negligible;

that, accordingly, the period which the judge at the notional trial would have adopted as being the period to which the claim for future loss of profits should be limited would not have been reduced on account of such a failure;

that, subject to proposition 4 below, it would have been appropriate for the judge at the notional trial to have awarded damages for loss of future profits over a period of four years from the date of the notional trial (that is to say a period expiring at the end of 2000, some six years after Mr and Mrs Browning began taking steps to reduce the effect of the disease);

that, given that at all material times prior to December 1996 Mr and Mrs Browning were in difficult financial circumstances, and that that situation was on any view likely to continue for some time after December 1996, it would have been appropriate for the judge at the notional trial to have extended the four-year period referred to in proposition 3 above by a further year, i.e. until the end of 2001;

that, so far as quantum is concerned, the loss of profits claim should be based on Mr Shelton’s figures (including his separate award of interest), but subject to an appropriate discount (as to which, see proposition 7 below);

that Mr Aspell’s criticism of Mr Shelton’s methodology in basing his figures on the average of the price/earnings ratios of four quoted dairy companies (see paragraph 11.10 of his first report, referred to in paragraph 106 above) would appear to have considerable force; and

that in all the circumstances Mr Shelton’s figures should be discounted by 30 per cent to reflect (a) the uncertainty which is inherent in the nature of the calculation, and (b) Mr Aspell’s particular criticism of Mr Shelton’s methodology.

Propositions 1 and 2 above are consistent with the submissions made on behalf of Mr and Mrs Browning.

Propositions 3 and 4 above produce a shorter period than the period for which Mr and Mrs Browning have contended. As to proposition 4, I have well in mind what the judge said in paragraph 91 of his judgment (quoted in paragraph 147 above). However, it remains the case that Mr and Mrs Browning’s ability to take effective mitigating steps before December 1996 was materially restricted by lack of available resources, and that this was likely to continue for some time after that date, even in the event of a successful judgment. I would add that it seems to me that it would have been for Brachers to show both when a judgment sum would have been received, and its mitigating effect on the course of the disease.

So far as proposition 5 above is concerned, I do not accept Mr Croxford’s submission that the figures need to be specifically discounted to take account of Mr and Mrs Browning’s loss of the Waitrose contract in 1998. The presence of Johne’s disease seems to have played no part in this loss: indeed, the immediate cause of the loss seems to have been Mr and Mrs Browning’s failure or inability to buy a more effective processor. Moreover, Mr Shelton’s figures for the profit which would have been earned but for the presence of the disease are based on the reduced volume of milk actually processed in and after 1998, so that the loss of the Waitrose contract appears to that extent to have already been excluded. In any event, absolute precision is never obtainable in a calculation such as this, and the general discount applied in proposition 7 above seems to me sufficient in the circumstances to cover any residual questions arising from the loss of the Waitrose contract.

In my judgment the point raised by the Respondent’s Notice is well taken. On the evidence, the value of Mr and Mrs Browning’s business lay essentially in its potential to earn profits. As Mr Shelton himself says in paragraph 6.15 of his report (quoted in paragraph 102 above):

On that basis, to award damages under this head in addition to damages for loss of profits would, in my judgment, involve double-counting. I accordingly conclude that the judge at the notional trial would not have made any award under this head of claim.

In my judgment no double counting is involved in awarding damages under this head. Mr and Mrs Browning had two distinct assets, their business and their farm. Each suffered loss of value by reason of the presence of the disease. A combination of compensation for loss of profits (revenue loss) and compensation for loss of value of the farm (capital loss) is in my judgment appropriate in the circumstances of this case.

As to the date of valuation, it seems to me that as at the date of the notional trial the only feasible date was the current date (December 1996); and that that is the date which the judge at the notional trial would inevitably have selected. For the judge at the notional trial to have awarded damages on the basis of expert evidence as to the likely value of the farm with and without the disease at some date in the future would have involved such a high degree of speculation that I cannot think that he would have taken that course.

As to the amount of the award under this head, I accept Mr Croxford’s submission that it is inappropriate to apply the judge’s 25 per cent discount in the context of the loss of profits claim (in paragraph 79 of the judgment) – a discount which reflected the chance of Mr Gilham establishing that Mr and Mrs Browning’s herd had been infected in whole or in part from some extraneous source – to the claim in respect of the diminution in value of the farm. In the context of the latter claim, it seems to me that different considerations may arise. For example, if Mr Gilham had succeeded in establishing that the disease was already present on the farm by 27 April 1991 (when the Gilham goats arrived), that would in all probability have proved altogether fatal to the claim for diminution in value of the farm, no matter how minimal the effect of the disease on Mr and Mrs Browning’s herd prior to that date.

In my judgment, in the light of the evidence on this aspect of the case to which we were referred by Mr Croxford (both orally and in his written submissions), there must have been a real possibility of the judge at the notional trial concluding that this head of claim was defeated on the facts. In my judgment a discount of 40 per cent is appropriate to reflect that possibility.

As to the base figure to which that discount is to be applied, I would accept Miss Livesey’s submission that Mr Handley’s figures represent the most realistic valuation of the diminution in the value of the land. Mr Hampton’s evidence is substantially out of line with all the other valuation evidence (i.e. Mr Handley’s evidence, and the Bax Standen and FPDSavills valuations), not least in that he assumes that the disease can be eradicated from the farm in a period of only two years. Nevertheless, Mr. Handley’s valuation of £126,000 should not be accepted without some reduction to reflect the effect in a notional trial of evidence providing lower valuations. A discount of 15 per cent from Mr Handley’s figure seems to me fairly to reflect that position, giving a figure of £107,100.

I would accordingly discount the figure of £107,100 by a further 40 per cent, and not the 25 per cent discount proposed on behalf of Mr and Mrs Browning. This gives a figure of £64,260.

For reasons given earlier (see paragraph 236 above), the judge ought in my judgment to have brought these claims into account in the sum for which they were compromised: i.e. £5,000.

I would allow the appeal to the extent indicated in this judgment. If (as Mr Croxford asserts) the calculation of interest in respect of the period since December 1996 has not been agreed, an inquiry may be necessary. However, I would expect the parties to reach agreement as to interest, if they have not already done so. I would also express the hope that the monetary consequences of this judgment can be agreed between the parties.

I agree.

I also agree.