PROVING THINGS 263: “IT IS A FUNDAMENTAL PRINCIPLE OF LITIGATION THAT A CLAIMANT MUST PROVE THEIR LOSS… THEY MUST ALSO SATISFY THE COURT AS TO THE AMOUNT OF ANY LOSS WHICH THEY HAVE SUFFERED”

This series has now covered hundreds of examples where litigants have failed to prove their case. We are looking at another example here where a counterclaiming defendant adduced no substantive evidence of a claim said to be worth nearly £500,000.  Unsurprisingly that aspect of the counterclaim failed.

“It is a fundamental principle of litigation that a claimant must prove their loss. In order to do so, they need to establish that they have, in fact, sustained recoverable damage. They must also satisfy the Court as to the amount of any loss which they have suffered.”

KEY PRACTICE POINTS

The short passage set out above should, perhaps, be on a plaque on the wall of every litigator’s office. Damages have to be proved.  Asserting a loss is not the same as proving it.  Care has to be taken in relation to considering how each element of a claim is going to be established by evidence at trial.

THE CASE

Notus Group Ltd v British Engineering Services Holdco Ltd [2025] EWHC 1391 (Comm) HHJ Beever, sitting as a Judge of the High Court.

THE FACTS

The claimant sold a business to the defendant.  It brought a claim for the balance due on the sale. The defendant denied liability to pay the balance and counterclaimed for breach of warranties. It was alleged that the claimant’s then employees had been involved in bribery of certain individuals involved in a contract.   The judge found that the defendant’s assertions were proved in some respects, but not in others.  The defendant counterclaimed for breach of warranty and also claimed for the costs of the investigation into the allegations of bribery.

THE FINDINGS ON PART OF THE COUNTERCLAIM

The judge found that there had been a breach of warranty and invited further submissions in relation to the consequences of that.  However the defendant also claimed the costs involved in investigating the bribery positions.  The judge found that this claim was not established on the evidence, indeed there was scant (if any) evidence to prove it.

THE JUDGMENT ON THE CLAIM FOR THE COSTS OF THE INVESTIGATION

“(ii)          The parties’ respective positions

532. Mr Zaman KC says that the professional costs incurred by BES in investigating the allegations of bribery are properly recoverable as damages (rather than legal costs) and that they flow from the Notus Parties’ breaches.

533. He notes that the invoices are in the trial bundle and are, therefore, in evidence. They are supported by the Project Pimlico report, which has been disclosed in this litigation. He also notes that the costs have been verified by Mr Rowe.

534. As to the absence of the invoices’ narratives, Mr Zaman KC asserts that they were not disclosable because they relate to an ongoing criminal investigation in which NHLS is itself a potential target. In other words, they are subject to legal professional privilege.

535. He tells me that he expressed concern at the CCMC about what BES was able to disclose and he asserts that, for that reason, the Order for Disclosure (at paragraph 2.5) provided:-

“Without prejudice to the parties’ usual rights regarding objecting to disclosure and inspection, the parties have the specific right to object to disclosure and inspection of documents on the basis that disclosure itself may be unlawful.”

536. In his closing submissions, Mr Zaman KC’s primary position was that the Court should not engage in a costs assessment exercise and that these are direct costs which are recoverable in full.

537. Otherwise, he submits that it is my duty to make an award of damages as I think appropriate.

538. He referred me again to the “broad axe” principle and to the Supreme Court ruling in One-Step(Support) Ltd v Morris-Garner and another [2018] UKSC 20 (please see above).

539. Mr Zaman KC also refers me to McGregor on Damages (22^nd edn) at paragraph 11-02:-

“where it is clear that some substantial loss has been incurred, the fact that an assessment is difficult because of the nature of the damage is no reason for awarding no damages or merely nominal damages. As Vaughan Williams LJ put it in Chaplin v Hicks, the leading case on the issue of certainty: “The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages.” Indeed, if absolute certainty were required as to the precise amount of loss that the claimant had suffered, no damages would be recovered at all in the great number of cases. This is particularly true since so much of damages claimed are in respect of prospective, and therefore necessarily contingent, loss. Of course, as Devin J said in Biggin v Permanite:

“Where precise evidence is obtainable, the court naturally expects to have it, [but] where it is not, the court must do the best it can.”

Generally, therefore, although it remains true to say that “difficulty of proof does not dispense with the necessity of proof”, the standard demanded can seldom be that of certainty. Even when it is said that the damage must be proved with reasonable certainty, the word “reasonable” is really the controlling one, and the standard of proof only demands evidence from which the existence of damage can be reasonably inferred and which provides adequate data for calculating its amount. The clearest statement of the position is that of Bowen LJ in Ratcliffe v Evans, where he said:

“in all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produced the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist on less would be to relax old and intelligible principles.

To insist on more would be the vainest pedantry.”

540. Mr Chaisty KC resists this head of the claim. He does not accept that the sums contended for by BES can properly be claimed as damages. He suggests that, at best, they could have been said to form part of the legal costs incurred by BES, but that that option is no longer available to BES because they were not included in the costs budgeting exercise.

541. Furthermore, Mr Chaisty KC notes that no evidence, other than invoices without narratives, has been adduced in support of the claim. He complains that, in the circumstances, nothing is known of the work undertaken or the approach to charging. He says that his clients are entitled to particulars of this head of the claim. They asked for it in their Part 18 request and they were told that they would receive it.

542. In essence, his position is that BES has not proved its loss and that it is not open to me to try to arrive at a figure, doing my best on the basis of the material available to me.

543. He does not accept that NHLS is in danger of being prosecuted or that there is any appropriate basis for BES to withhold the bill narratives.

544. Mr Chaisty KC submits that the authorities to which Mr Zaman KC has referred me are not applicable here. In this case, precise evidence is, or should be, available and the assessment of damages is not difficult.

(iii)         Analysis and Decision

545. I accept, in principle, that this head of loss is properly pleaded as a claim for consequential loss and that it would not have been appropriate for it to have been advanced as part of the claim for legal costs arising out of the Counterclaim. This is a freestanding head of loss. The costs of the investigation have not arisen from the Counterclaim or the defence of the claim.

546. I also accept that the investigation costs arose from the breaches alleged by BES, although, of course, not all of those breaches have been established.

547. It is a fundamental principle of litigation that a claimant must prove their loss. In order to do so, they need to establish that they have, in fact, sustained recoverable damage. They must also satisfy the Court as to the amount of any loss which they have suffered.

548. I agree with Mr Zaman KC that there are cases where the assessment of loss is difficult because of the nature of the damage sustained. A good example would perhaps be where the loss claimed is prospective.

549. However, that is not the case here. The amount of the professional costs associated with the investigation and incurred by BES has crystallised. That loss is capable of precise calculation and indeed has been claimed in an exact sum. It is not contingent on some future event. It is not a case of the Court having to make as fair and accurate assessment as possible of the extent of that loss.

550. Mr Zaman KC focusses on the observation of Devlin J in Biggin v Permanite [1951] 1 KB 422 at 438:-

“Where precise evidence is obtainable [my emphasis] the court naturally expects to have it, [but] where it is not, the court must do the best it can.”

551. In this case, precise evidence is obtainable. BES has disclosed the relevant invoices. It could also have disclosed the full narratives attached to those invoices, subject to its argument on legal professional privilege. If further evidence were required, it was open to BES to call relevant witnesses.

552. It seems that Mr Zaman KC’s point is that the narrative statements are not obtainable, because they are privileged and have properly been withheld.

553. I am not able to accept that argument as a basis for assessing this head of the claim on the strength of the invoices alone.

554. There is no direct evidence that that is the reason why the narrative statements have not been disclosed. For example, the point is not addressed in BES’s witness statements (or, as far as I am aware, in correspondence between the parties’ solicitors).

555. Moreover, there was no reference to privilege in BES’s response to the Notus Parties’ Part 18 request.

556. The argument did not feature in Mr Zaman KC’s/ Mr Perrin’s Skeleton Argument ahead of the trial, or indeed in their written closing submissions. It was first raised by Mr Zaman KC in his oral closing submissions, when I was raising questions about the absence of the bill narratives.

557. Whilst the issue of privilege was raised in BES’s disclosure statement, it only appeared in a rather generic provision. BES’s solicitors did not communicate separately to the Notus Parties’ solicitors that the narratives were being withheld on the grounds of privilege.

558. Lastly, BES has disclosed its Project Pimlico report. Whilst Mr Zaman KC is correct to say that it is a matter for BES to decide on which documents it waives privilege, I am surprised that it was able to disclose that comprehensive analysis and yet withheld the bill narratives.

559. Even if I accept that the bill narratives have been properly withheld, I would have expected to see witness evidence to substantiate the claim. All that I have been provided with is evidence from Mr Rowe, informing me that the costs have been incurred. That does not tell me, for example, whether the invoices raised related solely to the investigation, nor does it reveal who was involved in the investigation and the nature of the work which was undertaken.

560. Mr Chaisty KC makes a fair point when he says that this evidence could have come from one of the solicitors involved in the investigation.

561. Moreover, this is not a new point. The Notus Parties expected BES to provide evidence to substantiate this head of the claim. That was a reasonable expectation. It could have been that they wanted that information to help them to construct a Part 36 Offer, or simply to put them in a position to decide whether, and to what extent, to challenge the quantum of this head of the claim at trial.

562. In their Part 18 Request the Notus Parties, therefore, asked for further particulars of, and information about, this head of the claim. Not only was no further information provided at that stage, but BES indicated that it would be addressed in its disclosure, witness evidence and expert evidence. That did not happen.

563. In terms of disclosure, BES only provided the supporting invoices, and not the accompanying bill narratives, without which they proved nothing other than the amount of the bills.

564. It was presumably open to BES to disclose the fee estimates which they received from their solicitors relating to the costs of the investigation. Those estimates would not have been privileged and, to the extent that there was scope to argue otherwise, they could have been redacted. They would have given an indication of the level of costs which the solicitors anticipated BES would incur as the matter progressed.

565. In terms of witness evidence, Mr Rowe simply confirmed that the costs had been incurred and paid. His trial statement did not address the issues which were put to BES in the Notus Parties’ Part 18 Request, despite BES’s indication that it would address those matters in its witness evidence.

566. No expert evidence was served by BES on the quantum of the investigation costs claim, save that, in his report, Mr Pocock stated that a buyer would have considered that any investigation costs should be borne by the seller and would have sought an indemnity in the sale contract. The experts now appear to agree that any request for an indemnity may not have been accepted by the seller and this head of claim is pursued separately from the principal head of the Counterclaim.

567. In any event, without further evidence, I cannot be satisfied that the invoices which have been disclosed by BES solely covered the costs of the investigation.

568. For example, it may be that the invoices included work which was unrelated to Project Pimlico, such as, for example, work done in connection with Mr Nisbet and his Employment Tribunal claim. It may also be that the work undertaken included time spent by the solicitors advising BES generally on issues of compliance.

569. In the absence of evidence confirming the nature of the work encompassed by the invoices, I am not able to assess whether the time charged for was exclusively undertaken in connection with the investigation and the extent to which the costs were reasonably incurred. At the very least, the Notus Parties were entitled to ask BES about these issues, and indeed they did so in their Part 18 Request.

570. The supplementary trial bundle does contain one bill narrative (referred to above). I am not sure whether this has been disclosed inadvertently or whether BES has waived privilege in relation to it. That narrative does not reassure me that all the work claimed for is properly recoverable. For example, it largely relates to a presentation provided to the Police by two solicitors. It also refers to a review of the “latest Garrick Nisbet employment claim” albeit in connection with the presentation. These are the types of issues which the Notus Parties would inevitably have wished to explore further, if they had had an opportunity to do so.

571. BES has invited me to assess its loss in relation to the professional charges which it has incurred by allowing the claim in full or by doing the best I can with the assistance of a “broad axe”.

572. For the reasons I have set out above, I cannot fairly do so. This head of the claim has been capable of precise quantification. It has simply been a question of whether the supporting evidence is adequate and enables me to arrive at a reasoned conclusion.

573. In their closing written submissions, Mr Zaman KC and Mr Perrin contend that the investigation costs claimed by their clients are “proportionate and reasonable”. I could not fairly reach such a conclusion on the basis of invoices submitted and Mr Rowe’s evidence that they have been paid. For example, the invoices (with the exception of the one invoice to which the narrative is attached) do not reveal hourly rates, grades of fee earner and the time spent by each fee earner.

574. This is a very substantial claim. Even if I were minded to do my best to assess the loss on the basis of the evidence before me, I would not be able to do so in a fair and principled way. I have no basis on which to do so, and my assessment would, in large part, be the product of guesswork. That is not an appropriate way to determine such a substantial claim.

575. I ask rhetorically what supporting evidence would have been made available to me if this consequential loss claim had been advanced as a freestanding claim, with issues of liability having been conceded. It would have been a claim for approaching £500,000. It may well have been a High Court action. I cannot accept that the only evidence available to me would have been the invoices which have been disclosed (without bill narratives), along with a single paragraph in a witness statement from Mr Rowe, informing me that those costs had been incurred.