Simpson v Simpson

This appeal concerns an order made by His Honour Judge Butler on 22 December 2014. The appellant was the defendant in proceedings brought in the aftermath of the ending of a family business. The business was a small high-technology engineering business, producing specialist products designed by the appellant. The appellant was the sole proprietor, but her brother and parents were involved in the business as well. The business operated from part of the parents’ house. Following a cooling of family relations, the parents retained stock of the business (“the stock”) and, the judge found (§99 of the judgment), thereby wrongfully interfered with the appellant’s goods. He awarded her nominal damages of £500 in relation to this interference. This award was made on the basis that the appellant had “shown a probable loss” but had not been able to adduce any or any sufficient evidence of the amount of that loss (§107 ibid). With permission from Vos LJ, the appellant appealed against the award of only nominal damages, contending that the judge should either have awarded substantial damages on the basis of his own assessment of value based on the evidence of the parties, or ordered an inquiry to establish the appropriate quantum of damages.

In addition to the conversion claim, Judge Butler also dealt with a number of other claims made by the members of the family against each other. There is no need to deal with them all here. In order to show the wider context of the appeal, I will mention, briefly, those which, under the judge’s order, give rise to a liability from one member of the family to another.

It was the appellant’s brother who first began proceedings. He had worked as a general or business manager in the business and sought reimbursement of sums that he had paid on behalf of the business. He succeeded in that claim, recovering damages of £19,392.55. The parents were brought into the litigation as Part 20 defendants by the appellant and made their own claims against her in a number of respects. They successfully claimed reimbursement of certain gas and electricity charges incurred by them in relation to the premises during the period when the business was operating there, and the appellant’s mother succeeded in her claim for reimbursement of loans made for business purposes. The father also partially succeeded in a claim for unpaid salary. The total sum due under the order from the appellant to the parents was £76,703.50. The order included provisions in relation to interest and costs as well.

The appellant’s claim against the parents for wrongful interference with the stock was made in the Defence and Counterclaim dated 20 December 2013 and re-dated 29 January 2014. At the outset, the claim was in relation to both goods and equipment, but the claim in relation to equipment was not ultimately pursued. There was a “Schedule of Goods” provided with the Defence and Counterclaim but it relates to equipment and not to stock. The judge noted (§102) that in the original pleaded formulation of her case, the appellant claimed £185,000 in respect of “Loss of stock value”. This was not refined further in the pleadings, and the appellant’s evidence for the trial did not address the valuation, except that her witness statement asserted that, when returned, the stock had only scrap value, which she estimated at a maximum of 10% of cost.

An important feature of the preparation for the case was the case management hearing which took place on 25 February 2014 before District Judge Rouine. Only the claimant was legally represented. The appellant attended in person, as did her mother on behalf of both parents. There is a long preamble to the district judge’s order. From that it is clear that, by that time, it was apparent to everyone that the appellant was claiming for interference with the stock, including for “loss of stock value”. By paragraph 1 his order, the district judge gave her permission to pursue that claim. Following sundry other directions in relation to the conduct of the proceedings, paragraph 10 of his order provided: “No party has permission to call or rely upon expert evidence, none being necessary.”

A pre-trial review took place before Judge Butler on 9 October 2014. All parties but the appellant were legally represented. It seems that no issue was raised about expert evidence in relation to the claim for conversion of the stock. On 30 October 2014, a further hearing took place before Judge Butler. He gave directions in relation to a witness statement that the appellant had wanted to introduce, on a different topic, excluding it on the basis that it was inadmissible opinion evidence. Again, it appears that the subject of evidence in connection with the conversion claim was not covered.

On 3 November 2014, the trial began, lasting until 7 November, judgment being reserved and given on 22 December 2014.

The judge found that the stock had been wrongfully retained for a period of time, commencing at the start of November 2012, following the business’s final production run which was completed by the end of October 2012. He found that the goods were returned “piecemeal” (§99) and took the date for the final return of all stock as March 2014 (see, for example, §98).

In §91, the judge described the appellant’s claim for damages for this conversion in this way:

“In the present case, the [appellant] does not make her claim for damages on the basis that, if the stock had been returned, she would have sold it or even that she would have been able to use it productively, because in order so to use it she would have needed the equipment and no claim is now pursued in relation to the retention of the equipment. She presents her claim on the basis that whatever value the stock had at the date of conversion, its value had fallen so that after about 17 months when all the goods had been recovered, the stock had no more than scrap value of perhaps 10% of its original value. That “10%” assessment was her own opinion based on her experience of the business.”

Having reviewed the law, the judge concluded that damages could only be awarded to the appellant if she established that the returned goods had lost value and that this meant that the appellant could not succeed “without admissible evidence of value” (§94).

At points in the judgment after §94, the judge referred to the absence of expert evidence. He put it in various ways, for example at §101 he said that the appellant had “adduced no independent expert valuation evidence” and at §103 he commented on the “lack of any admissible independent or expert evidence”. It was argued, on the appellant’s behalf, that these references showed that the judge had, wrongly, proceeded upon the basis that a diminution in the value of the stock could only be established by expert evidence. I do not interpret the judgment in this way. As Ms Sandbach, who represented the respondents both at first instance and on appeal, pointed out, the judgment shows that, although there was no expert evidence, the judge analysed the evidence that was available on the subject of the value of the stock. There would have been no point in him doing this unless he thought that it could potentially serve as the basis for a finding as to the value of the stock at the relevant dates.

What stopped the judge from granting anything more than nominal damages for the conversion was not, as I see it, the absence of expert evidence as a matter of principle, but the fact that, in his view, the evidence that he did have before him was not adequate to establish the value of the stock. In the passage of his judgment devoted specifically to quantum, starting at §101, he considered the following pieces of evidence:

The judge reviewed the variations in the appellant’s case on valuation (§102), starting with an initial claim for £185,000, limited on the first day of the trial to £100,000 which she based on the upper figure in the claimant’s email, then reduced to £90,000 based on her own estimate of a residual scrap value of 10% of market value, finally reduced in written closing submissions to £80,000. He considered that none of the figures sat very easily with the appellant’s concession in oral evidence that a proportion of the components would have become obsolete and unusable in any event because the industry is constantly developing, and that perhaps 40% of the stock would only have been usable for a particular contract which was now not to be fulfilled.

He then said, at §103:

“I regret that the foregoing description of the way in which [the appellant’s] attempted valuation of her claim has changed and the lack of any admissible independent or expert evidence to support it demonstrates that she cannot discharge and has not discharged the burden of proving the market value of the stock at the date of conversion, assuming that to be November 2012, or at final return, assuming that to be March 2014, or at any time in between. I use the word ‘regret’ advisedly, because I have little doubt that if [the appellant] had been legally represented there would have been a professional stock inventory and/or independent valuation report which might have provided the evidential basis for a substantial award. As it is, as Ms Sandbach properly stressed, the court is not even assisted by an informal inventory and so does not know precisely what quantities and types of component are to be valued.” [my emphasis of a passage to which I will return later]

Even making allowances for the appellant as a litigant in person, the judge concluded (§§104 and 105) that she had failed to discharge the burden of proving the amount of damage, establishing neither the value of the stock at the time of conversion nor the residual value of the returned stock. As he summarised the position in §106:

“In the circumstances, I regret that I cannot make an award based on some notional or theoretical scrap value without any evidence. To do so would be not to ‘estimate’ but to ‘speculate’, that is to say would involve the court speculating as to a matter on which the defendant could and should have adduced some admissible independent evidence, without which the court has no basis for estimation or assessment, being unable to apply any inherent knowledge or experience. This is a paradigm example of a case in which expert evidence was required to discharge the burden of proof.”

He therefore considered that he could do no more than award nominal damages which he said (§107) he did “on the basis that [the appellant] has proved a tort and shown a probable loss but has not been able to adduce any or any sufficient evidence of the amount or value of that loss.”

In her helpful and well-argued submissions, Miss Davies argued that the judge did have the material on which to make an award of more than nominal damages. She invited us to set aside his award and substitute our own award of £90,000, taking an original market value of £100,000 (being the upper figure in the claimant’s email) and deducting from it the 10% residual value that the appellant put on the returned stock. This would be justified, on her case, either on the basis that the judge wrongly took the view, in principle, that only expert evidence could support more than a nominal claim or because he failed to make a finding of loss which the evidence available supported.

I have already foreshadowed my view about the first of these arguments. On a proper reading of the judgment as a whole, I do not consider that the judge fettered himself by proceeding on the basis that, as a matter of principle, expert evidence was indispensable. All that he was saying, in my view, was that the evidence produced in this case was insufficient to establish what the appellant’s loss was, leaving him no alternative but to award her only nominal damages. It was the sort of case in which, in the judge’s view, as a matter of practicality, expert evidence was needed to establish the appellant’s real loss.

I turn therefore to the second argument, namely that the evidence available was, in fact, sufficient to support more than a nominal award of damages. I cannot accept this argument. In my judgment, the judge was entitled to conclude that the evidence he had was not enough. His view that the figures in the email from the claimant were an estimate only is very much supported by the terms of the email and was also, no doubt, founded upon the evidence of the claimant himself, whom he had seen in the witness box. The fact that the claimant had knowledge gained from his particular role in the business, was not capable of elevating a genuine estimate into something approaching a valuation. There was nothing, therefore, to assist the judge to fix a value for the goods at the time of the conversion. Accordingly, even if he could have accepted the appellant’s evidence that the residual value was 10% of the original value, he would not have been able to do the necessary calculation. He had no choice, in the circumstances, but to find that the appellant had not established a figure for damages going beyond the purely nominal. What is more, we are in no better position than the judge was and would certainly not be able to substitute our own figure for the judge’s award, as Miss Davies asked us to do.

The appellant’s alternative argument, emerging from the oral permission hearing before Vos LJ, was that the judge should have directed a separate hearing of the issue of damages, pursuant to the court’s general powers of case management, giving such directions as he considered were appropriate, for instance as to the instruction of a single joint expert and the production of a schedule of the stock.

Ms Sandbach resisted this argument forcefully, on a number of grounds. The decision whether or not to stand over the question of damages to a further hearing was, she rightly pointed out, a case management decision. Case management decisions are exercises of discretion and, she said, appeal courts should show an appropriate level of deference to the judge. I agree. There is plenty of authority in this court showing that case management decisions are not easily appealed.

Furthermore, Ms Sandbach submitted, no application was made for the judge to adjourn the damages issue. It would not be right, she said, to expect him to have done it of his own motion. The appellant had failed to prove her case and, even allowing for her status as a litigant in person, it would be overstepping the mark, in Ms Sandbach’s submission, to grant her another opportunity to do so when she had not even provide an inventory of the components so that the court could know what it was dealing with. And, she argued, there was no certainty that there was even any loss suffered by the appellant as a result of the conversion. In this respect, she suggested that the judge was only indicating that there “might” have been more than nominal loss.

Dealing with this last point first, there are significant indicators in the judge’s judgment that he had concluded that the appellant may well have suffered loss greater than the £500 he allowed by way of damages. To demonstrate why I say this, I return first to the passage from §103 of the judge’s judgment that I picked out in italics when quoting that paragraph earlier in this judgment. For ease, I will repeat it here:

“I use the word ‘regret’ advisedly, because I have little doubt that if [the appellant] had been legally represented there would have been a professional stock inventory and/or independent valuation report which might have provided the evidential basis for a substantial award.”

I acknowledge that, as Ms Sandbach pointed out, the judge said that a professional stock inventory and/or independent valuation report “might” have provided the basis for a substantial award. However, the judge would not have expressed the sentiment that he did in this passage were he not persuaded that there was, at the very least, a real possibility of the damages figure being substantial. That that is so is underlined, I think, by the fact that he was of the view that she had “shown a probable loss”. There is no sense that the judge considered that £500 represented the extent of that loss. Rather it was the figure to which he felt he was limited because of the absence of evidence as to the actual amount of the loss (§107).

Given what was at least a very real possibility of a significantly greater damages award being appropriate if better evidence existed, the judge’s view that a professional stock inventory and/or independent valuation report might have provided the necessary evidential basis, and his expectation that there would have been such a report if the appellant had been legally represented, it seems to me that one has to look very carefully at the judge’s decision to press on to decide the damages issue in the way that he did. Bearing in mind, however, that this was a case management decision, and that he was not invited to adjourn the damages question, I am not sure that I would have been persuaded that the appeal should be allowed on this basis, were it not for one further matter.

In the context of his review of the sufficiency of the evidence about the value of the stock, the judge’s attention was not invited to the decision of District Judge Rouine at the case management hearing in February 2014 to the effect that no party had permission to call or rely upon expert evidence “none being necessary” (see §5 supra). I choose my words carefully, in so saying. The respondent pointed out that the judge was aware of the district judge’s order, as can be seen from the judgment. However, to my mind, being aware of the order is not the same thing as being invited to consider specifically how it had shaped the evidence available to him on the question of the stock value and what implications that had for the procedure he should adopt in relation to the damages question. In my view, the district judge’s order was very material to a decision whether or not to direct a separate hearing as to damages. If he had considered the implications of this direction for a litigant who had been in person throughout the proceedings, it seems to me that Judge Butler may well have decided that it would be wrong to conclude the hearing on the evidence as it was, particularly in the light of the regret he expressed in his judgment. In my view, based on the fuller appreciation that we now have of the situation, the right course in all the circumstances would have been to adjourn the issue of damages for a further hearing. Furthermore, in the light of the written submissions made by counsel for the parents following the circulation of the draft judgment, I would add that I consider that the district judge’s order was of such significance that it was incumbent on the judge to deal expressly with its implications in determining the damages question; this he did not do and that is a fatal flaw in his decision. I would therefore allow the appeal against the judge’s decision to conclude the trial there and then with an award of nominal damages only.

Accordingly, I would set aside the judge’s damages award and remit the question of damages to the county court for determination. I have considered Miss Davies’ suggestion that the matter should have a fresh start before a different judge and that it would be suitable for determination by a district judge, but I can see no reason why it should not return to Judge Butler who already knows the parties and the case. It seems to me likely that a single joint expert may ultimately be required to assist in the valuation of the stock and possibly also in cataloguing it. There may be factual evidence from the parties required as well. In the circumstances, it seems to me that the proper course would be for Judge Butler to give his own directions for the management of the rest of the case and no doubt that can be arranged once he knows the outcome of this appeal.

The costs as between the appellant and her parents were dealt with in a composite fashion in paragraph 16 of the judge’s order, whereby the appellant was ordered to pay two thirds of her parents’ costs of the proceedings. At the conclusion of the appeal hearing, we were asked by Miss Davies to set aside the costs order in relation to the conversion claim, but as there is no discrete order in relation to that claim, that is difficult to do. I do consider that there should be a clean slate in relation to the costs of the conversion claim but it is not immediately apparent how that can be managed. The fact that, if my Lords agree, the case is returning to Judge Butler, may make matters rather easier, but I think it would be helpful to have submissions in writing from both sides as to what order this court should make on the subject.

I would end by reiterating what I know will have been said already to the parties. The proceedings must have taken a terrible toll on the whole family. It is all too easy to lose sight of the fact that it is possible to bring them to an end by reaching an agreement. A professional mediator may be able to help with this if the process seems too difficult to embark upon alone. It would surely be worth the attempt, in order to save another round of divisive and hurtful litigation.

I agree.

I also agree.