IF YOU CAN'T PROVE IT YOU DON'T GET IT: CALLING EVIDENCE AT COURT TO PROVE A LOSS: A WORKING EXAMPLE
A party claiming damages must bring evidence to court to prove the losses it claims. This is a simple statement. However adducing evidence which actually proves the losses claimed often gives rise to difficulties in all spheres of litigation. The judgment of His Honour Judge David Grant in Saint Gobain Building Distribution Ltd -v- Hillmead Joinery (Swindon) Limited  EWHC B7 (TCC), provides a useful example of failures to adduce evidence which would have established a loss.
“Surmise is one thing; proof – on the balance of probabilities – is another thing;”
The defendant was counterclaiming damages of £376,408.69 for defects to bonded panels. The judge dismissed the counterclaim but considered issues in relation to damages.
THE JUDGMENT ON THE ISSUE OF DAMAGES
I: The measure of Hillmead’s loss and damage
- Given the conclusions I have reached on issues relating to liability, it is not strictly necessary to consider issues relating to a loss and damage, but I shall do so for sake of completion.
- The various heads of loss claimed by Hillmead are set out in schedule 2 to the defence and counterclaim (page A/24), and I will consider each in turn.
- Item 1: the difference in value of the laminate sheets purchased by Hillmead
The first point is that Hillmead accepts that item 9 in schedule 1 is not recoverable, so the sum claimed for this item reduces to £13,019.27. The second point is that Hillmead accepts that only 246 of the 392 bonded panels were rejected by Railston Design: see the evidence of Darren Selman in cross-examination (transcript 1/172/16-19). That is 62.75% of the total. I would therefore have allowed £8,169.59 in respect of this item.
“…Ms Calver’s evidence suggested that used in other locations the rejected bonded panels may have been acceptable. In the circumstances at least some of the rejected panels must have continued to have value and a further discount should be made accordingly.”
However, the evidence did not indicate the type (if any) of alternative use to which the bonded panels could have been put, and accordingly I would not have reduced the above figure for this reason.
The first point is that Mr Bowers does not deal with this item in his first witness statement. The second point is that while Darren Selman stated in paragraph 21 of his first witness statement (page C/6) that:
“I attach at pages 10-43 of exhibit DS1 a copy of the invoices and the spreadsheet detailing the additional costs and expenses that Hillmead incurred as a consequence of the rejection of the panels”,
none of those pages in that exhibit relate to this item.
- In his cross-examination Mr Bowers stated (transcript 3/176/12-24) that the figure of £27,788.16 claimed in respect of this item related to the cost of the bonded panels which Hillmead purchased from Arnold Laver. He was referred to the calculation sheet at page I/77/407 in the sum of £25,641.92, and indeed Mr Cutting was then able to provide page references to where copies of the invoices referred to in the calculation sheet had been placed in the trial bundles. It is to be noted that the total of the sums shown in those 5 invoices comes to £22,512 rather than the total shown in the calculation sheet. However, neither that calculation sheet, nor the underlying invoices, were produced in evidence by either Mr Bowers or Darren Selman. The position was thus that no witness on behalf of Hillmead produced that calculation sheet, or provided any explanation as to how it had been calculated. In particular, neither Mr Bowers nor Darren Selman provided any explanation of how the “average per panel at £112.96 each” had been calculated, or of how there was a difference between the figures of £22,512 on the one hand and £25,641.92 on the other hand.
- The evidence which Hillmead adduced in support of their claim for item 2 was thus incomplete and lacking in cogency. Had a witness been able to produce the calculation sheet at page I/77/407, and give an explanation as to how the average price per panel had been calculated, it might have been possible for Hillmead to prove either the sum shown on that calculation sheet or some other sum, (ignoring for these purposes the difference between the number of 227 bonded panels referred to in this calculation sheet, and the number of 246 bonded panels claimed in schedule 2, as having been rejected).
- In paragraph 126 of his closing written submissions Mr Cutting identified 6 other invoices totalling £23,435.45, and submitted that Hillmead should recover that sum in respect of item 2. The very fact that there are different figures advanced in schedule 2, in the calculation sheet, in the total of the invoices identified in the calculation sheet, and now in Mr Cutting’s further 6 invoices, all indicate the necessity for a claiming party to adduce complete and cogent evidence to prove such a claim. On the basis of the evidence adduced at trial, I would not have awarded Hillmead any sum in respect of item 2.
- Items 3 – 6: transport costs
These are claims for alleged additional costs incurred by Hillmead in delivering replacement laminate sheets to Arnold Laver, and then of replacement bonded panels to 3 different sites. The evidence as regards these items was as follows.
While Mr Bowers accepted in cross-examination that Hillmead could no longer produce an invoice to substantiate this item, he stated that Hillmead had had such an invoice (transcript 3/193/21-25). This item was also claimed in the same sum in the initial calculation of Hillmead’s loss which Darren Selman carried out, dated 7 May 2009, and which he produced in exhibit DS1 to his witness statement (page C/20). I accept Mr Bowers’ evidence in this regard, and would have awarded £630.59 for item 3.
Mr Bowers stated that the position was the same for item 4 as item 3. A like sum was also identified in the initial calculation of Hillmead’s loss. I again accept Mr Bowers’ evidence on this point, and would have awarded £197.06 for item 4.
Mr Sheehan stated that he would deal with this item in closing submission, rather than in cross-examination (transcript 3/194/19-21). In paragraph 165 of his closing written submissions Mr Sheehan identified two invoices which Darren Selman produced in support of this item. They in fact total £250.55, which is the sum originally claimed for van hire to Galway in the initial calculation of Hillmead’s loss at page C/20. However, those invoices were addressed to MWC Fittings Ltd and “MWC” respectively.
- Of the invoices which Mr Cutting identified in paragraph 128 of his closing written submissions, those at pages H/45/192-193 simply duplicate those at pages H/45/159-160, which in turn duplicate those at pages C/51-52 which Darren Selman produced within the exhibit to his witness statement. The two invoices at pages J/81/423-424 are each addressed to “MWC Ltd”. Hillmead did not adduce any evidence to show that Hillmead was responsible for an apparent liability of “MWC Ltd”. There has been no, or insufficient, evidence of what, if any, inter-company accounting provision which obtained as between Hillmead and either of the MWC companies to enable an award of damages to be made in favour of Hillmead in respect of the sums shown on these two invoices.
- The minor inconsistency in dates which Mr Sheehan identified would not, in my judgement, have been so serious that I would have rejected this claim on that account. However, Hillmead has not been able to explain the basis of its claim for the sum claimed in respect of item 5, particularly as regards its responsibility if any for any apparent liability of either of the MWC companies, and accordingly I would not have awarded any sum in respect of item 5.
- Item 6: £2,700.00; delivery of replacement bonded panels to Newbridge
Darren Selman produced one invoice for £1,750 plus VAT which was addressed to Hillmead. £1,750 was the sum claimed in Hillmead’s initial calculation of its loss at page C/20. While Mr Bowers referred to another invoice which Hillmead had disclosed as part of some late disclosure in these proceedings, he was not able to identify such an invoice in his oral evidence. The additional invoice which Mr Cutting identified at page J/81/425 was again addressed to MWC Fittings Ltd. As a result, I would have awarded £2,056.25 (i.e. £1,750 plus VAT) to Hillmead in respect of item 6.
These are claims to recover what are described as “Contra charge made by Railston” in respect of refitting bonded panels at three separate sites. The first point which thus arises is that the underlying costs are not Hillmead’s, but instead are those of Railston Design.
“The losses that Hillmead are claiming can be separated into three broad categories. Firstly, there are the costs incurred by Hillmead which relate to the cost of delivering and refitting replacement panels, and the cost of handling and storing the rejected panels. Invoices, receipts and other documentary evidence have already been supplied to the Claimant in respect of this element of the claim.”
However, in the remainder of that paragraph, and throughout the following text of that witness statement, Mr Bowers only dealt with the second and third categories of loss which he identified. He did not refer further to the alleged cost of refitting bonded panels in his witness statement.
“I attach at pages 10-43 of exhibit ‘DS1’ a copy of the invoices and the spreadsheet detailing the additional costs and expenses that Hillmead incurred as a consequence of the rejection of the panels”
However he made no further reference to the subject matter of items 7-9 in that witness statement.
- In his cross-examination Mr Bowers stated (transcript 3/184/1-12) that the document a page C/50 contained the details of the claim made by Railston Design on Hillmead in respect of the costs which Railston Design had incurred in fitting replacement bonded panels at Galway and Newbridge (i.e. items 8 & 9). He then stated (transcript 3/184/19):
“These are Railston’s costs and this is where, against this cost, we gave a credit note of £15,000, which is in a separate document.”
That credit note is at page I/74/368.
- The evidence is thus that Hillmead gave Railston Design a credit of £15,000 (plus VAT) in respect of the costs which Railston Design asserted it had incurred in fitting replacement panels at these two locations. I accept Mr Bowers’ evidence that Hillmead gave such a credit in such circumstances. While Hillmead made no attempt to substantiate the underlying costs which Railston Design asserted (e.g. by calling a witness from Railston Design to prove the elements of those costs) I accept Mr Bowers’ evidence that Hillmead sustained a loss of £15,000 plus VAT in respect of the sums claimed in items 7-9.
- Accordingly, I would have awarded Hillmead £15,000 in respect of items 7-9. Hillmead did not adduce any evidence, or advance any explanation, why VAT should be added to that sum, and absent such evidence or explanation I would not have added VAT to the figure of £15,000.
- Items 10-11: costs of handling and storing rejected bonded panels
Neither Mr Bowers nor Darren Selman referred to these items in their respective witness statements. In his cross-examination Mr Bowers was referred to the calculation at page I/77/404 dated 6 October 2011. However, he did not identify its author.
- Item 10 is a claim for handling 15 pallets of rejected bonded panels. Mr Bowers accepted in cross-examination (transcript 3/190/16-23) that this was not a cost which Hillmead had actually incurred (in the sense of being specifically calculated), but instead was a notional calculation of the costs which Hillmead would have incurred in handling such bonded panels.
- Item 11 is a claim for storing three pallets of rejected bonded panels over a three-year period. However, in his cross-examination Mr Bowers accepted that there was no need for Hillmead to store this number of pallets over such a period of time. He stated (transcript 3/189/22 – 3/190/1):
“Q: There was no need to keep as many as three pallets worth of rejected panels for three years before you decided to dispose of them, was there?
A: Probably not, in hindsight.”
Mr Bowers also accepted, as with item 10, that these were not costs which Hillmead had actually incurred, again in the sense of being specifically calculated.
- I accept Mr Cutting’s submission in paragraph 131 of his closing written submissions that Hillmead would have incurred a cost in handling the rejected bonded panels, and I accept Mr Bowers evidence that the costs alleged were “… based on calculations we normally do for handling panels for clients” (transcript 3/190/21-22). However, Hillmead has not established that there was any necessity for it to incur storage costs for such a quantity of rejected bonded panels over a three-year (or any) period of time. Accordingly, I would have awarded £549 in respect of item 10, but nothing in respect of item 11.
- Item 12: diversion of staff time
In paragraph 14 of his first witness statement, at the end of the section headed “diversion of staff time” Mr Bowers stated:
“Throughout 2008, 2009 and 2010 Hillmead staff were engaged initially in dealing with the immediate consequences of the rejection of panels by Railston and rectifying the problems at the various stores. Attention then focused on trying to identify the cause of the problems and seeking to liaise with the claimant to resolve matters. Various Hillmead staff members were engaged throughout this process and attached at pages 15-18 of exhibit DB1 is a schedule detailing the time spent by the various members of staff and how that staff time has been quantified.”
The schedule is dated 6 October 2011 and is at page D/22. Mr Bowers stated (transcript 3/111/5-19) that he had done some of the initial calculations in it, and then passed it on to Hillmead’s accountants for checking. However, he did not state precisely what calculations he had done, or what revisions to them had been carried out by those accountants. In any event those accountants were not called as witnesses at trial. The schedule lists seven persons, including Mr Bowers, Darren Selman and Ellis Greenhill, all of whom gave evidence at trial. The amount claimed in respect of Darren Selman is stated to be £16,100.
- The next page (D/23) is dated later: 29 May 2013. It contains a calculation showing how the figure of £70 per hour was derived. The next two pages (D/24-25) are also dated 29 May 2015 and contain a calculation showing how the total of 230 hours was derived. Mr Bowers initially stated that Darren Selman prepared this calculation, but then stated he was not sure who did, though he recalled discussing it with Darren Selman (transcript 3/113/20 – 3/115/8).
- At the top of page D/23 is the following statement:
“n.b. Darren is employed by MWC Holdings Ltd who are based in Cirencester. His costs are part of an inter-company charge that is made to Hillmead Joinery (Swindon) Ltd who was based in Swindon.”
However, Hillmead did not adduce any evidence about such an inter-company charge, or produce any record of resolutions or other decisions by directors of either company, or accounts to show how such an inter-company charge had been put into effect. In his cross-examination Mr Bowers accepted that Hillmead had not produced any evidence about such an inter-company charge (transcript 3/120/6 – 3/121/8, and again at 3/133/15-21). As a result, there is no, or insufficient, evidence to establish that Hillmead had in fact suffered any loss as a result of the time it asserts Darren Selman, as an employee of MWC Holdings Ltd, spent on its behalf in dealing with these matters.
- In his cross-examination Darren Selman accepted that no contemporaneous record had been kept of the amount of time spent by members of staff dealing with these matters (transcript 1/147/1-25), and so far as the amount of time shown in the calculation, Darren Selman stated (transcript 1/149/6-13):
“Q: … it must have been almost impossible for you to have any kind of accurate recollection about how you spent your time between March 2008 and March 2009 when you were first asked to carry out the task in October 2011. Would you agree?
A: I agree.”
Ellis Greenhill gave evidence to like effect (transcript 2/70/15 – 2/71/5). Mr Bowers also agreed in cross-examination that the calculation at page D/22 was not a detailed account of “… who is said to have been diverted at what times and in what ways” (transcript 3/106/22- 3/107/1).
- The state of the evidence as regards the seven members of staff listed in the schedule at page D/22 is thus as follows:
(1) Darren Selman. He gave oral evidence at trial, and did refer to this topic in his witness statement. A calculation of his hourly rate is at page D/23, and a calculation of his time spent at pages D/24-25. He is however employed by MWC Holdings Ltd.
(2) Ellis Greenhill. He gave oral evidence at trial, but did not refer to this topic in his witness statement. No calculation of his hourly rate has been produced by any witness. A calculation of his time spent is at page C/134, but Hillmead adduced no evidence from him on that topic. He also is employed by MWC Holdings Ltd.
(3) Jon Bowers. He did not give any evidence at trial, and made no witness statement. A calculation of his hourly rate is at page C/136, and of his time spent at page C/135, both within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(4) Mr Bowers. He did give oral evidence at trial; while he referred to the topic of diversion of staff time generally on his witness statement, he did not in fact give any direct evidence about the amount of time he himself spent dealing with these matters, or as regards his hourly rate. A calculation of his hourly rate is at page C/139, and of his time spent at page C/140, both within the material produced by Darren Selman, rather than by Mr Bowers himself.
(5) Keith Honour. He did not give any evidence at trial, and made no witness statement. There is no calculation of his hourly rate. A calculation of his time spent is at page C/137 within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(6) Chris Lewis. He did not give any evidence at trial, and made no witness statement. There is no calculation of his hourly rate. A calculation of his time spent is at page C/138 within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(7) Dave Edmonds. He did not give any evidence at trial, and made no witness statement. A calculation of his hourly rate is at page C/132, and a calculation of his time spent is at page C/131 both within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
- There are significant deficiencies in the quality of the evidence which Hillmead has adduced in support of this item of claim:
(1) There is no direct evidence about any inter-company charge, and thus the claims in respect of time spent by Darren Selman and Ellis Greenhill are not established on this ground alone.
(2) None of Jon Bowers, Keith Honour, Chris Lewis and Dave Edmonds made witness statements, and thus their evidence on these topics was not tested at trial in any way, with the result that the evidence in their respects lacks cogency.
(3) While Ellis Greenhill did make a witness statement, he did not deal with this topic in a witness statement, and thus his position is similar to that of Jon Bowers and the others identified above.
(4) As regards the quality of the evidence about time spent, both Darren Selman and Ellis Greenhill agreed that it was impossible to have an accurate recollection of the time spent dealing with these matters, so the accuracy of the figures claimed in this regard is significantly diminished.
(5) No contemporaneous record of time spent by members of staff dealing with these matters was kept.
- In paragraph 135 of his closing written submissions Mr Cutting referred to the decision of the Court of Appeal in Aerospace Publishing Ltd v Thames Water Utilities Ltd  EWCA Civ 3, and the propositions there identified by Wilson LJ. The first of those was that:
” … the extent of the diversion of staff time has to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established”
That warning rings loud in the circumstances of the present case.
- In my judgement Hillmead has failed to establish, on balance of probabilities, the figures contended for in respect of this head of claim, and accordingly I would not have awarded any sum in respect of item 12. I have little doubt that some disruption to Hillmead was caused by these matters, and at some cost. It may be that the financial cost of such disruption was of the order of the £13,000 which Hillmead identified on 7 May 2009 (page C/20), but that figure derives from an assessment of overhead cost of 15%, and Hillmead adduced no evidence to show how such an overhead cost had been calculated. Surmise is one thing; proof – on the balance of probabilities – is another thing; and Hillmead has failed to establish the latter in respect of item 12.
- Item 13: travel
This claim derives from the one line calculation in the schedule at page D/22. While the figure may itself be reasonable, no witness gave direct evidence to establish the underlying criteria upon which the figure had been calculated, and accordingly I would not have awarded any sum in respect of item 13.
The evidence in support of these claims is to be found in (a) paragraphs 15 and 16 of Mr Bowers first witness statement; (b) the evidence of Gerard O Sullivan, a director of Railston Design; (c) the calculation at page I/77/406, which was not produced by any witness, setting out the arithmetic of Hillmead’s claims, which is then set out in items 14 and 15 of schedule 2; and (d) the “Railston schedule” at page I/75/369 setting out the value of work placed by Railston Design initially with Hillmead and thereafter with “MWC” over the years 2006-2014, which Gerard O Sullivan produced as an exhibit to his second witness statement.
- Hillmead’s claim for the first three year period 2009-2011 is calculated as follows: three contracts per annum with Railston Design with a contract value of £70,000 each; thus £210,000 worth of work with Railston Design per annum for each of those three years; total value of work over those three years thus £630,000; gross profit margin of 26% equates to £163,800 loss of business.
- However, in his cross-examination, Gerard O Sullivan accepted that Primark had placed significantly less business with Railston Design in 2009, namely £1,385,663.63, than it had in 2008, namely £2,184,968.95, with a recovery in 2010 to £2,372,805.64 (transcript 2/162/2 – 2/164/7).
- The Railston schedule shows that Railston Design placed £60,515 worth of work with Hillmead in 2006, and £111,041 in 2007. That is an average of approximately £85,000 per annum over those two years. In 2008 Railston Design placed £506,659 worth of work with Hillmead, and in 2009 only £11,560 worth of work. However in 2010 it placed £72,186 worth of work with Hillmead, and £84,184 worth of work in the following year 2011. Those figures are very similar to the average figure for 2006 and 2007.
- Then during the years 2012-14 Railston Design placed a total of £492,168 worth of business with “MWC”, an average of £164,056 per annum.
- Hillmead’s claim for the second three year period 2012-2014 is calculated in the same way as the first, but discounted by 50% to give credit for “anticipated recovery in future business”: hence a claim for £90,366.90 for this period.
- There are significant deficiencies in the quality of the evidence which Hillmead has adduced in relation to each element of these items of claim:
(1) The period claimed. Hillmead advances a claim for loss of business over a six-year period, but adduces no or insufficient evidence to establish how or why damages should be awarded over such a lengthy period of time. The claims are founded on a single premise, namely that the loss of orders from one customer, Railston Design, would have been the sole cause of all loss of business sustained over such a six-year period. However the evidence fails to take into account Hillmead’s prospects of obtaining work from alternative sources. There was simply no evidence directed to this issue. While I have little doubt that Hillmead suffered a loss of business in the immediate aftermath of Railston Design’s decision not to place any further business with it, Hillmead failed to produce any evidence to show what was – on balance of probabilities – the period during which such loss of business could be shown to have been caused as a direct result of Railston Design’s decision.
(2) The inter-relationship between Hillmead and MWC Fittings Ltd. The Railston schedule shows that in the years 2012-2014 Railston Design placed very significant volumes of work with “MWC”, which Mr Bowers confirms was MWC Fittings Ltd. That opens an entire enquiry as to whether, and if so in what way, any downturn in business placed with Hillmead should be balanced by an upturn in business placed with MWC Fittings Ltd, each being part of the same corporate group. The point was simply not addressed in the evidence; nor did Hillmead make any or any sufficient analysis of the point. The point could, of course, be a complete answer to the claim in respect of the second three-year period.
(3) The value of each contract with Railston Design. Mr Bowers asserts that this was £70,000: see schedule 2. But he produced no calculation to substantiate this figure, or to show how it had been calculated or derived.
(4) Hillmead’s gross profit margin. Again, Mr Bowers asserts that this was 26%: see schedule 2. But again he produced no calculation to substantiate this figure, or to show how it had been calculated or derived. Palpably, Hillmead produced no accounts or any other documents at trial to establish what, if any, was its gross profit margin, achieved over what year or years.
- The consequence of these deficiencies is that there is simply insufficient or inadequate evidence to enable appropriate findings of fact to be made upon which an award of damages in respect of these items could be based. Accordingly I would not have awarded any sums in respect of items 14 and 15.
- There are also further factors, as identified in paragraph 178.5-7 of Mr Sheehan’s closing written submissions, which would have needed to be taken into account in assessing the measure of any such loss of business. However, as Hillmead has not adduced sufficient or adequate evidence to provide the basis for appropriate findings of fact to be made, it is not necessary now to consider those factors.”
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