PROVING THINGS 248: THERE WAS A BREACH BUT THE CLAIMANT PROVED NO LOSS: “BATTLE OF TRAFALGAR” DOES NOT LEAD TO VICTORY

In Jerroms Trafalgars Ltd & Anor v Tilson & Ors [2022] EWHC 1420 (ChD) HHJ Worster found that a claimant had failed to established that breaches by the Defendants led to any loss.  It is a classic example of a failure to establish causation.

“the Claimant fails to prove any substantial loss. In those circumstances the Claimant is entitled to judgment for nominal damages”

THE CASE

The claimant accountant brought an action against former employees and others claiming that the former employees had breached covenants and acted unlawfully in soliciting clients of the claimants when they left its employment.

THE JUDGMENT ON CAUSATION AND DAMAGES

The judge found that there had been some breaches by some of the defendants.  However the breaches were not causative of any loss. The clients that were approached would have instructed the defendants in any event.

Causation

1. 1. I begin by recognising that this is often a problem for claimants in a case like this. They are dependent upon piecing together scraps of evidence obtained from disclosure or information gleaned from people who are either engaged in the wrongdoing, or the clients who are being fought over. Those clients are often unwilling to become involved, and it can be counter productive for a professional firm to seek to involve the clients who remain with it in a dispute such as this. The issue is one of fact, to be determined on the balance of probabilities and on the evidence before the court. The court may draw inferences from the primary facts, but suspicion and surmise are not enough.

1. 1. Put simply, the Defendants’ case is that the clients who were solicited would have followed Mr Tilson to Hayward Wright regardless. In other words Mr Tilson’s unlawful actions in approaching those clients, securing the payroll files and/or his use of confidential information to prepare competitive prices for the work he was to do were not the dominant nor a substantial cause of the loss Jerroms suffered when these clients terminated their retainers.

1. 1. The two accounts Mr Tilson would have been most interested in, and the two where the evidence of solicitation is the strongest, are the MKG and Plastics Plus accounts. They had been clients of the practice for 28 and 20 years respectively. Mr Tilson had been with the practice for 24 years, and had been doing these accounts for a long time. Whatever challenges there were to the evidence of Mr Mayling and Mr White, there is no question but that they had a close working relationship with Mr Tilson. It is not unusual for businessmen to want to keep the professional advisers they know and trust. They did not know Mr Currie or anyone else at Jerroms. There is no evidence that any steps had been taken over the previous 3 years to introduce these important clients, or indeed any of the “Trafalgars” clients, to other members of Jerroms staff, or to gradually involve the Shirley office. The lack of a significant notice period for the relevant employees meant that there was no chance of effecting a gradual and orderly transfer of this work when notice was given. There was no real opportunity for another member of staff to become acquainted with these clients, let alone an opportunity to build up a relationship of trust. Turning the question of causation on its head, it would have been surprising if these clients had not followed Mr Tilson to Hayward Wright when they found out that the Kings Heath office was closing and he and Ms Roche were moving on.

1. 1. As to the other Tilson clients identified on the schedule, the probability is that others were also solicited. But it is of note that no other payroll files were secured, and the only direct evidence we have of any other direct action is the approach by Mr Tilson to Mr Hayes about the Keystone Wood accounts. Consequently, whilst there was conduct on the part of Mr Tilson which amounted to solicitation (for example some encouragement or inducement which crossed the line) none of it is likely to have been as potentially effective in terms of causation as his conduct in relation to MKG and Plastics Plus. There is also Mr Tilson’s use of the confidential information he removed. He used this to price his work competitively, and failed to disclose the updated Excel spreadsheet. These are not attractive features of his case. However, there is no evidence to the effect that the use of this information caused loss to Jerroms. Again that is not uncommon. The difficulty of proving loss in those circumstances is well known, and is often the justification for the grant of an injunction. But whilst that difficulty might justify an injunction, it would not be right to find for the Claimant on the damages claim without some evidence that the wrongdoing caused a loss.

1. 1. Mr Najib submits that the transfer of clients from Jerroms to Hayward Wright is to be seen in a broader context. These were the clients of the firm run by Mr Pate and Mr Bill. As is often the case when a business is purchased, Mr Pate and Mr Bill were retained as consultants by the new owners. But Mr Pate died in 2016, Mr Bills was due to end his consultancy in 2018, and another long standing employee Mr Gilbert had retired in 2017. On 5 March 2018 Jerroms announced the closure of the Kings Heath office. Then on 13 April 2018, about 3 weeks before the closure of the office, Jerroms clients received a letter saying that the person undertaking their work was leaving. Of the staff who decided to leave, Ms Atkin had been with the practice for 26 years, Mr Tilson for 24 years, Ms Roche for 18 years, Mr Bill for 18 years and Mr Qureshi for 15 years. With all this change, it is hardly surprising that so many clients decided that this was the moment to leave. Mr Najib’s analysis of these clients drew out one further and important point, which was that a number of these clients were connected to Mr Bill, either because he was a Director of the client company or these were in reality his clients. I am satisfied that these clients would have been influenced by Mr Bill’s decision to part company with Jerroms, and for that reason alone would have been lost to Jerroms.

1. I understand the suspicions that come from the fact that so many clients defected to one competitor, and that Mr Tilson and to an extent Ms Roche engaged in unlawful conduct. But there is real merit in the Defendants’ case that this conduct was the occasion for Jerroms’ loss rather than the cause of it. The probability is that these clients would have followed Mr Tilson regardless of his unlawful approaches to them, just as Mr Qureshi’s clients followed him, and Ms Atkin’s clients followed her. When I asked Ms Donnelly if she had anything to add in relation to the issue of causation, she submitted that the fact that Mr Tilson considered it necessary to engage in acts of solicitation in order to effect the transfer of this business was indicative of its causative effect. It was a point well made, but it does not persuade me that what he did was in fact the effective or dominant cause of the loss Jerroms sustained.

THE RESULT

The claims against some of the defendants were dismissed.  In relation to the other defendants the claimant was awarded nominal damages.

1. The claims against Mr Tilson and Ms Roche for breach of contract and or breach of confidence succeed to the extent set out above, but the Claimant fails to prove any substantial loss. In those circumstances the Claimant is entitled to judgment for nominal damages against Mr Tilson and Ms Roche. The claims against Mr Qureshi and Hayward Wright are dismissed. The parties wish to argue the issue of costs, and there is to be a hearing for that purpose on a date to be fixed. Any application for permission to appeal may be made at that further hearing, and the date for the filing any appellant’s notice pursuant to CPR 52(2)(b) is extended to 21 days after the date of that hearing.