A RETAILER. - and - MS B and MS K MR J OWEN (instructed by Shakespeares) appeared on behalf of the Claimant

Transcription

1 Case No: 1UC71244 IN THE OXFORD COUNTY COURT BEFORE: St Aldates, Oxford Oxfordshire, England 0X1 1TLDX Friday, 27 April 2012 HIS HONOUR JUDGE CHARLES HARRIS BETWEEN: A RETAILER - and - MS B and MS K Claimant/Respondent Defendants/Appellants MR J OWEN (instructed by Shakespeares) appeared on behalf of the Claimant MR M HODSON and MR E TOWNSEND (instructed by Baites Wells & Braitewaite LLP) appeared on behalf of the Defendants Proceedings Digital Transcript of Wordwave International Ltd (a Merrill Corporation Company) 8th Floor, 165 Fleet Street, London, EC4A 2DY Tel No: Fax No: Web: courtcontracts@merrillcorp.com (Official Shorthand Writers to the Court) No of Words: 19,668 No of Folios: 273 1

2 Friday, 27 April 2012 JUDGE HARRIS: Yes, Mr Townsend. MR TOWNSEND: I am conscious that we were indulgent in the court yesterday, in terms of time, and I have probably already had my bite of the cherry. JUDGE HARRIS: Well, I have a few minutes more if you need them. MR TOWNSEND: Unless there are particular matters that I have set out in my skeleton agreement or raised in argument. JUDGE HARRIS: No, if you think you have finished, that is fine. I shall not detain you. But on the other hand I did not want you to feel that you were being guillotined at the end of yesterday afternoon. MR TOWNSEND: Your Honour, quite. In those circumstances all I sought to do was just to summarise the overall position to make sure that it had been set out. So that is first, what we say as the second defendant is that on this occasion on these particular facts the court would not necessarily have to draw an inference that there has necessarily been a loss of revenue. Secondly, if the court is minded to draw such an inference, then in those circumstances the Aerospace Publishing Ltd and Midsummer Book Ltd v Thames Water Utilities [2007] EWCA CIV 3 case sets out the principles to be applied at paragraph 86, and what is necessary for the claimant to do is to prove both the facts and extent of any diversion. So on the facts of this case the evidence -- A strong point in your favour is that the staff involved were not staff who would have been doing anything other than security at the material time. What you would say, I imagine, is these were security staff doing security work. In those circumstances, it is not reasonable, you would say, to say, or at least to attribute the fact that they stopped doing one sort of security work, which is patrolling the isles and looking at the televisions, in order to do another aspect of their security work, cannot be said to be diverting or disrupting the provision of the staff in the shop. Is there any point in the fact that the staff were not direct employees of the claimants but came as, I understand it, agency staff under a fixed price package? Allied to that, is there anything material in your submission in the fact that, was it 60 per cent or was it 40 per cent of anything that was going to be recovered was going to go to the security company, rather than to the claimant? You better remind me which it was. MR TOWNSEND: As I understand it the 40 per cent that was being referred to was not to go to the security company, but the civil recovery company, which is a distinct organisation. JUDGE HARRIS: You are quite right, the civil recovery company. But not to the claimants, anyway? MR TOWNSEND: In our -- 2

3 JUDGE HARRIS: I suppose the answer to that is it is a matter for the claimants what it does and what it recovers, and if it chooses to pay a percentage of that to a company that it engages to do this sort of work for it, that is a matter for it. MR TOWNSEND: Well, your Honour, that might be said. In my submission it goes to show that the pre-determined and fixed costs that it claimed in these cases that are arbitrary, it probably goes someway to demonstrating the falsity of those as an accurate reflection of any loss that is claimed, because it is almost enviable that it builds into it. JUDGE HARRIS: But your primary submission, as I understand it is that there is no loss, because what was happening was that the security people employed to do security work were doing security work. Well, that is the way I put it to you, rather than the way you put it to me. That is the heart of your analysis, is it not? MR TOWNSEND: No recoverable loss, because it does not meet the test in Aerospace. It is important to recognise that there is a difference between a diversion and a disruption, it is a two stage thing. The first thing is to assess whether there has been a diversion, and if so, the extent of it. Then to consider whether that is a significant disruption. Now until we had the evidence 14 days before this hearing from the security guards there was no evidence of any specific diversion whatsoever. What was claimed in the schedule was a number of hours, and actually what it boils down to on the evidence that we heard yesterday, the claimant s best case, is an hour to an hour and 10 minutes of Mrs Kent s time and 40 minutes for the other security guard s time. And of that time we say not all of it can be attributed to ameliorating the affects of the tort, if you like, because much of it -- JUDGE HARRIS: Because some of it is costs? MR TOWNSEND: Much of it is involved in the civil recovery, and there was not a huge amount of evidence from the claimant. There is a breakdown between the two. But, your Honour, you have seen the CCTV footage, and you have seen that by 4.07 from a starting time of 3.55 they are in the holding room and they have been there for some time. So that was only a matter of 12 minutes. In my submission, it is really that time that is likely to be the key consideration in cases of this sort. When one goes through the cases, the time that is being spent, for example in Aerospace, is the time trying to salvage the library. It is not necessarily the time afterwards trying to prepare towards legal proceedings. JUDGE HARRIS: Well, in Tate & Lyle Food and Distribution Ltd v Greater London Council [1982] 1 WLR 149 it was put the expenditure of managerial time, remedying an actionable role down to a trading concern. That is, while we are looking at it, and that actually does not involve... It would be a way of getting around the point which I was making in your favour to you a moment ago. That if it is security people doing security work then there has not been any of what was called disruption. Although I have now had a look at the standard chartered case. Disruption, loss of property or increased expenditure there seemed to be 3

4 three possible ways of basing a claim, rather than saying you have to have significant disruption before you can establish your claim. MR TOWNSEND: Well, if there was loss of profit that would be the way the claim would be pitched and brought. MR TOWNSEND: That has not been in this case. JUDGE HARRIS: No. MR TOWNSEND: So that removes that potential. In terms of an increase of cost -- JUDGE HARRIS: And there is not any increased expenditure. MR TOWNSEND: The claimants do not say that they have had any increase in costs. JUDGE HARRIS: So that you say that they really have to show significant disruption, whatever that might mean? MR TOWNSEND: Absolutely so. JUDGE HARRIS: Whatever that might mean, you say it cannot mean getting a security chap to work, or security woman or lady to work at one aspect of her security work rather than another, which is what it amounts to? MR TOWNSEND: Yes. Looking at the amount of time what we say is that at best we have got 1.40 or 1.50 and we must strip away much of that which is building up to legal proceedings. JUDGE HARRIS: Yes, well call it an hour. I mean, the principle, that it is not really determinative on the precise amount of time. MR TOWNSEND: Yes. We would say less than that looking at the CCTV footage and looking at how long it takes to get them in the holding room. JUDGE HARRIS: So what do you say is the answer to the claimant s problem? MR TOWNSEND: With respect -- JUDGE HARRIS: Is there no way, and you would say part of your function, I suppose. But is there no way that a company which suffers considerably as many retailers do from the depredations of shop lifters and thieves, can recover any cost from the shop lifters and thieves? Because there is something intuitively wrong if they cannot. MR TOWNSEND: Well, with respect I would encourage you to focus on the way that this case was brought and the facts of this case-- 4

5 JUDGE HARRIS: I understand that. MR TOWNSEND: It is really beyond my function to start seeking arguments from the claimants as to how they might and ought to have brought these claims. JUDGE HARRIS: I will of course heed your request. But I want to look at this broadly as well as absolutely focused down to this case. Really what the claimant s are saying is, We suffer a lot because there are a lot of dishonest people and we have to employ security staff to limit them and keep them at bay, and deter them and apprehend them from time to time when we can. Now are you saying that there is no way that the costs of doing that can be visited upon the criminals who give rise to the need to do it? MR TOWNSEND: Well, your Honour, my answer to that question is that it is all really an issue to be dealt with on the particulars of any given case. Because what is not being, said by the second defendant at least, is that in no circumstances whatsoever could there be a recovery. It would depend upon the facts. JUDGE HARRIS: No, well, that is what I am asking you. In what circumstances could there be? Given the claimants -- MR TOWNSEND: Where there is a significant disruption, or where particular costs are incurred that are identifiable to a particular tort, rather than, of course in the ordinary way. JUDGE HARRIS: So do you mean, for example my suggestion yesterday, that if you jumped in a taxi to pursue the crook you could recover the taxi fare? MR TOWNSEND: It may well be that on a given set of facts that could be recoverable as a specific item of special damage. If it was shown that it was reasonable and... MR TOWNSEND: And it met the tests, and causation was established. JUDGE HARRIS: So that would be something which you -- MR TOWNSEND: But of course, that is not this case. JUDGE HARRIS: No, I follow that. But that would be something which you would concede might well be recoverable? MR TOWNSEND: Well, your Honour, it is not necessary for me to make any concession of that sort. It may or may not be on any given set of facts. JUDGE HARRIS: Yes, but do not be too political in your answers. If you can attach a specific item of, if you like, special damage, to a particular incident. Say, for example they had fought and torn the uniforms of the security people so that the uniforms had to be replaced. You could recover that from them presumably? 5

6 MR TOWNSEND: Well, your Honour, presumably that would meet the test of causation. It would be a particular specific cost that is attached and attributable to a particular incident. JUDGE HARRIS: Attributable to a particular. Yes. MR TOWNSEND: So, yes, presumably in those circumstances it would be. But you say here, well, really all the security people were doing was what they were employed to do? MR TOWNSEND: Yes, and that is not the way the case has been brought by the claimant. They have not pointed to any specific costs. It has been dealt with in the general. JUDGE HARRIS: Yes, I understand that. But what they seem to have done is to take the total costs of security and divide it by the number of offences, is it not? MR TOWNSEND: In my submission that is not necessarily a correct way to go about it in any event. Because the figure that was taken was a national figure, it was not for this store. JUDGE HARRIS: No, I understand that. MR TOWNSEND: Also to divide by the number of people that are apprehended really ignores the fact that the whole of the claimant s case has been that there is a wider benefit to having the security and that there is a deterrent. The evidence from the claimant is that for every two or three that are apprehended there is ten deterrents. So those deterrents are not accounted for in that calculation. JUDGE HARRIS: You mean they ought to just as much pay the cost attributable? MR TOWNSEND: Well, and also it ignores the fact, the point that my learned friend, Mr Hodson made yesterday, which is it is unrealistic, in my submission, to say, Well, if there were no thieves it would not be necessary to incur these costs because we do not live in that utopian state. The reality is that there is always a risk there for retailers. The reality is that they are going to guard and protect themselves against it. MR TOWNSEND: Going back to the principal point is to the extent of the diversion. We say that on the facts of this case it cannot be a significant disruption. It is important to heed the word significant there. It is not just to say is it disruptive, it has to be significant. JUDGE HARRIS: No, I have your point. You say, (a) it is not a disruption, properly so called, because they are doing the work that they were employed to do; (b) it was very short anyway and would not count as significant. 6

7 MR TOWNSEND: If one were to try and deal in generalities what would be said would be that if this case amounts to a significant disruption then what case would not amount to a significant disruption. In effect, if this case constitutes a significant disruption then the test and the threshold that has been imposed by the Court of Appeal would be meaningless. JUDGE HARRIS: So you would say that to get any money out of apprehended shop lifters the claimants are going to have to adopt a different approach? Possibly the car park approach. MR TOWNSEND: Well, your Honour, not necessarily so. Because there may be factual scenarios where this would be viable. JUDGE HARRIS: Yes, where damage is done. MR TOWNSEND: Where there is a greater disruption and where specific damage is caused. It is just that we say on this occasion the amount of any diversion that is proved is not sufficient to constitute significant disruption. JUDGE HARRIS: Okay. Well, thank you very much that is very helpful. Yes, the first defendant. MR HODSON: Thank you, your Honour. I of course adopt all of Mr Townsend s submissions. In terms of the facts they are now so refined that there is very little left for me to say. JUDGE HARRIS: There is not much dispute about facts really, is there? MR HODSON: Almost none. I think perhaps just a little bit of an interpretative dispute. MR HODSON: In the sense that certainly the evidence is there is an hour, to an hour and ten minute tape. But as Mr Townsend has said, we would say that in terms of the time that you must take into account to consider things like damages, the measure of damages, and the extensive disruption, it has to be less than that because we know that a reasonably significant proportion of that was spent on preparation for litigation. Whether that be criminal or civil. So that is all I really can say about the facts. We are dealing with a very small period of time. Turning then to the law. Well, the three items claimed -- JUDGE HARRIS: You broadly accept the claimant s evidence about how it arrives at its figures by dividing apprehensions into the security bill? MR HODSON: No. I mean, there is not any evidence. There is no documentary evidence. 7

8 JUDGE HARRIS: Well, there is evidence, because there was evidence from the man who came to the witness box to give it. What you are meaning is there is no documentary evidence. MR HODSON: Indeed. JUDGE HARRIS: But then this is only a small claim and the normal stipulations for extensive discovery would not probably be thought to be proportionate. MR HODSON: Yes. JUDGE HARRIS: But you accept that is what they have done? MR HODSON: I do, yes. JUDGE HARRIS: The figures may not be precisely accurate, but that is the basis on which they are operating. MR HODSON: Yes, I certainly feel that that is the basis. I obviously have a number of objections to the basis of the claim. MR HODSON: There are three heads of loss. The first of course is the staff and management time, and that is what we have the most legal argument about. Again, I echo everything Mr Townsend has said. We do come down to the Aerospace test of diversion and disruption. MR HODSON: I think it might be useful, I am sure that my learned friend, Mr Owen is going to take you through the cases. JUDGE HARRIS: Well, I did have a look at them last night fortunately. MR HODSON: Yes. I think it might be useful to have a very quick run through them. JUDGE HARRIS: All right. MR HODSON: The earliest in time is the British Motor Trade Association v Salvadori [1949] CH 556. MR HODSON: Did you have a chance to read that one? 8

9 MR HODSON: This is a Chancery Division case. It significantly pre-dates all of the other cases we have. It is a case about procuring breach of contract. Which is a tort that is actionable only upon proof of damage. MR HODSON: The only damage alleged in that case was the staff time spent unravelling the conspiracy involved in the case. So the case stood or fell on that being the damage. MR HODSON: This case involves, as you will have seen, a conspiracy of a group of people who were buying cars off people who had just bought them and selling them for increased costs. MR HODSON: That was in breach of contract for the people who had just bought them, who promised not to resell them for 12 months. It involved several people and was clearly a complex fraud to some degree. We can see the relevant part of the judgment is at page 569 of the judgment. Yes, I have it. MR HODSON: Okay. This is Roxburgh J. MR HODSON: Down about two-thirds, three-quarters the way through the page your Honour might see the sentence, Starting to resist such a counterattack. JUDGE HARRIS: I have that. MR HODSON: This is what the claimant did in response to a conspiracy. The conspiracy being the counterattack. So: To resist such a counterattack but also counterattacks from various other directions the plaintiffs maintain and must maintain a large investigation department and the money actually expended in unravelling and detecting the unlawful machinations of the defendants, which have been proved in this case before any proceedings could be taken, must have been considerable. I can see no reasons for not treating the expenses so incurred, which could not be recovered as part of the costs of the action as directly attributable to their tort or torts. So that is the relevant part of the judgment that the claimant in this case relies upon. They say of course that that is very similar to the circumstances. My submission is that it is not similar to these circumstances. This was a considerably 9

10 more complex situation. This is not shoplifting, but rather a conspiracy to procure the breach of contract. JUDGE HARRIS: The steps take in Salvadori were particular to the one situation that was going on. Whereas the steps taken by the claimants, of course, are generalised against a general problem of shoplifting, not just the two defendants in this case. MR HODSON: Yes, exactly so. We would particularly say that this case refers, -- and in fact you can see the seed of the legal reasoning in the later cases in this particular passage, because it talks very specifically about a loss that is directly attributable to the tort and it talks about money actually being expended in respect of those defendants that must have been considerable. So that use of the word considerable is the precursor to the significant disruption test that we later see. Well, at least that is my analysis. JUDGE HARRIS: Well, I think your stronger point is what they are saying is costs rather than damages. MR HODSON: Indeed. JUDGE HARRIS: What is being said is costs rather than damages. MR HODSON: Yes, absolutely so. JUDGE HARRIS: Because you do not get your costs unless you have some damages to which you can attach an action. MR HODSON: Quite, yes. That is the first case chronologically. The next case that is before you is the Standard Chartered case. But I think we have probably been over that enough, and I can see you have had a chance to read that. MR HODSON: I mentioned it yesterday and of course it is a strong example of a situation where an employer has been taken away for months, and that is still not enough. The next case is the case of R & V Versicherung AG v Risk Insurance [2006] EWHC 42. I will just call it Risk Insurance. JUDGE HARRIS: The essence of the Standard Chartered I think was that the claimants were paying for time which was to be a benefit to them, and they lost the benefit of the time. MR HODSON: Yes. JUDGE HARRIS: Here I suppose you say that the claimants were paying security people for security services and they did not lose the benefits of security people doing security things, they had them. 10

11 MR HODSON: Well, in fact, of course in the Standard Chartered, the time was not allowed for. The court said, We are not going to give you anything in respect of that. The travel costs, yes, but the time, no. Even though you went to Vietnam for four months that did not result in a significant disruption to the business, and therefore that time cannot be claimed. MR HODSON: So I say that in all respects that supports our case. Showing that you really need to talk about a significant disruption to the business to get anywhere. In the Risk Insurance case, in fact they summarise both of those two cases and the relevant passages are paragraph 77. JUDGE HARRIS: That is the one with the German name? MR HODSON: Indeed, that is right. Versicherung, or Versicherung or something like that. JUDGE HARRIS: Gloster J, as she was. MR HODSON: That is correct. So this is at paragraph 77 of her judgment. MR HODSON: She is considering exactly this type of loss, as she says in the first line: The cost of wasted staff time spent on investigation or mitigation. And concluded that: It is recoverable in principle, notwithstanding the fact that there is no loss of revenue. However, it has to be related to that specific so it is directly attributable. She takes that from the British Motor Trade Association v Salvadori case. MR HODSON: Then goes on to consider the Standard Chartered case and notes that that is just another way of saying that there must be some significant disruption: Staff must have been significantly diverted from their usually activity. Otherwise it will not be directly attributable. MR HODSON: Now that was the principle of the Risk Insurance case. But the facts are worth noting as well. There are two judgments that we have for the Risk Insurance case and I think you have both in your bundle. This is a reference to the second of those two. Gloster J sent the case back to the High Court for a determination of the loss to be made. JUDGE HARRIS: Do I have another one, I do not think I have read a second one. 11

12 MALE SPEAKER: Mr Tomlinson J, is that? MR HODSON: Yes, it is. JUDGE HARRIS: Oh that I have. Yes, I see. MR HODSON: It is at tab 4, I think. JUDGE HARRIS: Yes, Mr Tomlinson J as he was then. Yes. MR HODSON: So it was remitted to Mr Tomlinson J to determine the measure of damages. At paragraph 2 of that judgment, at the very bottom of paragraph 2, he simply repeats the test that Gloster J has laid down. So in the bottom few lines: In order to recover the claimant has to show some significant disruption to the business. In other words, that staff have been significantly diverted from their usual activities. But the facts we then get, and if I can highlight a couple, if I could ask you to turn to paragraph 8. JUDGE HARRIS: Sorry, I would just like to read the whole of that paragraph 2, slightly more carefully. MR HODSON: Yes. JUDGE HARRIS: Gloster J held that in this exercise damages are at large. The court is not over concerned to require a claimant to prove precise quantification of its losses. Such losses are recoverable notwithstanding that no loss by additional expenditure or loss of revenue or profit can be shown. That is however, held Gloster J, subject to the proviso that it has to be demonstrated with sufficient certainty that the wasted time was indeed spend on investigating or mitigating the tort. Yes. So precision is not essential. MR HODSON: Yes, I think that is a theme throughout the authorities that one need not be overall precise. One must be reasonable in the way one calculates the loss. JUDGE HARRIS: But you have to show significant diversion. This is the last line of that paragraph. MR HODSON: Yes. JUDGE HARRIS: From their usual activities. 12

13 MR HODSON: Yes, in fact in terms of the precision of the loss there is quite a nice quote from Bowen LJ. It is just at the bottom of the page and just over the page. Just at the very bottom, sorry, of the first page, it says: 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 the nature of the acts. To insist upon less would be to relax old and intelligible principles; to insist upon more would be the venous(?) pedantry. Quite a nice way of putting it. Of course in the case of the Admiral Management Services Ltd v Para-Protect Europe Ltd & Ors [2002] All ER (D) 23 (Mar) case the claim now is dismissed because the judge came to the conclusion that the witnesses involved could have used a timer to time their times, and they had not done so. So there was no sufficient proof of any loss. So the judgments vary a little bit on that point, but I think that everybody accepts that as long as you have the broad proof then you do not to be -- FEMALE SPEAKER: You do need -- MR HODSON: -- overly particular. JUDGE HARRIS: If in the instant case, the one we are dealing with now, the position had been that the contract with the security people said that if and when there is an actual apprehension we are going to charge you another 25 or 50 or X pounds an hour. In those circumstances it would have been possible, I suppose, for the claimants to say, Yes, your criminal activity, oh shoplifter, has actually caused us a particular lose. Namely, what we have to pay the security company. MR HODSON: Yes, I thought about that exact scenario last night. JUDGE HARRIS: It might be the claimant s way through this. MR HODSON: It might be an option for them, and of course it is a matter entirely for them. But speaking academically it occurred to me that that could be an extremely dangerous course to take, because it is often enough that people bring a claim against store detectives and the like for wrongful arrest. MR HODSON: Now if they were able to refer to a contract in which it was shown that the company were making money out of arresting people then they would be in severe difficulty in such a case. But that is of course just an academic aside. JUDGE HARRIS: That would go to whether or not the arrest was an legitimate arrest, would it not? MR HODSON: It would. JUDGE HARRIS: There would not be any problem if you have got a photograph of somebody stealing something. They walked out of the shop without paying for it. 13

14 MR HODSON: Well, there are a number of technicalities involved in a lawful arrest. JUDGE HARRIS: Of course there are. Actually the claimants were not, as I understand it, arresting people. They were merely inviting people to accompany them to their holding room. MR HODSON: Yes. It is terribly unfortunate -- JUDGE HARRIS: Where the police come along -- MR HODSON: -- that they continue to use the word arrest in the circumstances. JUDGE HARRIS: Yes, because they were not formal arrests. MR HODSON: But nonetheless if you tell somebody that you are arresting them, when in fact you are not, and then you detain them, then it may well be that you are unlawfully arresting them. JUDGE HARRIS: It might be. But I do not think we need to get into that. MR HODSON: We probably need not take that in account. JUDGE HARRIS: But what I was trying to get from you was an agreement or at least your view or your submission on the point that if one could attach a specific financial liability or loss to a particular arrest then it would be much easier, at any rate, to say that you could recover that and should be able to recover that from the person arrested. MR HODSON: I would certainly go as far as your Honour has suggested and say it would be much easier. MR HODSON: Because then we would be talking about a loss of profits or perhaps a directly attributable financial loss. JUDGE HARRIS: A consequential economic loss. MR HODSON: Indeed, yes. Where causation could be easily established. So yes, that is right. Again, that is not our case. JUDGE HARRIS: I suppose you might have points on foresee-ability from the point of view of the tort fees there, but apart from that there would not be a difficulty probably. MR HODSON: Yes. JUDGE HARRIS: All right. But anyway, that is not this case. 14

15 MR HODSON: No. So coming back to the facts of the Risk Insurance case your Honour has just read paragraph 2. MR HODSON: If I could take you across to paragraph 8 on the next page. This shows what the extent of the losses were that were actually being claimed. So staff and management time, personnel time spans over a three year period and came to almost 1.5 million. So this was a very, very significant amount of time. Internal overhead costs, 800,000. Now I am aware that my learned friend proposes from his skeleton to rely upon that as being evidence that administration costs could be claimed in this case, which is similarly described as an overhead associated with personnel time. In fact, apart from mentioning that 800,000 the judgment does not at any point after this touch upon the nature of that 800,000. It would appear that it seems to have been allowed. But my submission is that there must have been before the judge some evidence in support of that. It is inconceivable that such a large amount of money could have been awarded in any other circumstances. That is wholly different to the present case, in which we have no evidence to support the administration cost of at all. So I say that as an aside at this point. So in terms of staff time we are looking at a massive disruption. We can see the details of it. I just want to highlight one or two sentences in the following paragraphs. If I could take you to paragraph 9. MR HODSON: The claimant relied upon a considerable body of evidence. There was a project manager and he was given a project director title just to deal with the incident involved. Then five lines down it says: Significantly he spoke of how certain employees [and there are three names] had been essentially released from their normal work in order to work on risk matters and would form the core of the risk team. The regular work of theirs was delegated to other employees who completed the work on overtime. So far as concerned all of the work, not just that performed by those employees. It was complex and time consuming, required investment of a great deal of resources and had caused disruption to the normal functioning of the re-insurance department. That evidence was not challenged. So again we are a long way from the facts of this case. MR HODSON: If I skip from there down to paragraph 11 we can see straight away that 22 statements were tended in evidence to demonstrate the disruption. So 22 individuals were affected. If I can take you down about eight lines towards the right hand side, there is a sentence starting, The only question of any substance. MR HODSON: It says: 15

16 The only question of any substance which one of the witnesses Michael Eske(?) was asked was why has it taken so many people in this department to handle the run off of the risk business. In addition to pointing out the ink(?) binder which he will discuss later, comprised about 100 contracts. He said, Dealing with this run off requires more effort than other business. In re-examination he said, The data had to be verified in a more complex manner than is normal, and there was uncertainty over what payments had already been made. Then Dr Ulrich(?) gave evidence. He painted a summary picture of the difficulties the legal department had had. Now this is not the legal department preparing this case, this is just the internal legal department: They were dealing with the documentation generated as a direct result of the situation with risk which has been found to be a conspiracy and a direct result of the work we had to do to assess the scope of that and questions that developed out of that. Evidently there were numerous situations in which real and substantial questions arose as to whether the company should or would have to consider itself bound to business to which it had already been committed by risk. This is the last bit that I am going to refer to, the evidence of Bianca Yume(?) follows. Her evidence was effective to describe the scale of the task faced in unravelling a business: There had been 180 lever arch files of underwriting. Claims and accounting material. And some 600 risks which were completely new to the underwriting team. And approximately 400 of those were still active when they took over. The end of the paragraph: This was precisely the kind of fact finding and unravelling exercise the costs of which the law regards as recoverable. MR HODSON: Exactly. JUDGE HARRIS: But you say there is nothing like that here. MR HODSON: No. This is the nature of the kind of claim that this area of law is directed towards. The next point we have in the chronology is the Aerospace case, which being the Court of Appeal judgment is probably the one that we are most bound by. MR HODSON: We have already seen the relevant paragraph, which is paragraph 86. But it is perhaps useful now that we are looking at them in order to quickly review that. 16

17 MR HODSON: He had, in his judgment, gone through all of the cases we have. So the Salvadori case and the Standard Chartered Bank and Risk Insurance v Versicherung and he had distilled the principles at 86: The facts and the extent of the diversion of staff time have to be properly established. To some degree the precision of establishment might be in question, but it has to be established. Then: There has to be a significant disruption, and there is an inference that that will be divert people from revenue producing business. But it is a rebuttable inference. Since we have been looking at the facts of the cases it is useful just to have a very quick glance at this -- JUDGE HARRIS: But you do not actually have to show, either by inference or actually, loss of revenue or profit. MR HODSON: No, you do not. JUDGE HARRIS: That is made clear in the extract from Burnt v Cherry(?) at paragraph 84. MR HODSON: Yes. I think there is no doubt about that, and nobody would argue otherwise. The facts of Aerospace are also instructive and they are all contained briefly within paragraph 76, if could quickly take you there. JUDGE HARRIS: Yes, I have read that. MR HODSON: At paragraph 76 we can see that the claim related to seven employees. JUDGE HARRIS: Well, I have underlined this: Weeks, months and years after the flood... (reading to the words)... the works were salvaged. Delicate and complex. MR HODSON: Yes. In the absence of doing that they would have been dealing with their conventional activities. MR HODSON: So again, the facts of the case are a long, long way from these. Then finally, the last case that I believe is before you is the case of... MR TOWNSEND: Bridge UK.com Ltd v Abbey Pynford plc [2009] Con LJ Vol. 25 No TCC. MR HODSON: Bridge, I am grateful to my learned friend. Tab 5 I am told, in your bundle. 17

18 MR HODSON: Now this case is April 2007 and in fact the Aerospace case was decided in January But Bridge makes no reference whatsoever to Aerospace. So evidentially it simply was not put before them. In the Bridge case however, the conclusion is very much the same and they deal with this particular question from paragraph 121 onwards. MR HODSON: The principles appear to have been applied in much the same way. First of all the facts are looked at. The claim was for just over 7,500. Originally it was based on 128 hours of work by one member of staff, but we can see that actually, just over the page at the bottom of paragraph 124, the judge found that only 100 hours had actually been extended. So this was a judgment based upon 100 hours. We can see then that the judge does look at the Risk Insurance case, which of course refers to Salvadori and Standard Chartered, and takes the principles from that. Therefore, looking at whether or not there has been significant disruption and significant diversion in much the same way, the judge then looks at (from paragraph 126) what the nature of that might be, and states that: The claimants suffered losses due to lost opportunities since he was the new business development director at the time and was unable to attend to responsibilities such as selling and marketing the claimant s business. It was explained that the turnover of the company had increased from 2 million to 10 million and in the judge s view it was therefore clear that his time would have been spent in selling and marketing rather than being occupied and dealing with the problems for which the defendant had accepted liability. He repeats that in paragraph 128, to say he would otherwise have been selling and marketing the claimant s business at the time. So that was the basis of that case. It differs very, very considerably from this case again. Not least because of course there were 100 hours spent, far in excess of this case. But because there was very clearly a marked diversion from usual activities that would be revenue generating. So, those are all of the facts of all of the cases. They are all, without exception, wholly different to the present case. JUDGE HARRIS: If these had been not security people but girls from the checkout or shelf fillers or an executive who happened to be walking through, and their time was diverted to the apprehension of these people then subject to the question of de minimis I suppose, that would be recoverable because they would have been diverted from their normal work? MR HODSON: In my submission, no. Because that would only deal with half of the test. So one half of the test is diversion from normal work and the other half of the test is significant disruption. I would certainly accept that diversion from normal work had been passed. 18

19 JUDGE HARRIS: But Gloster J, as she was, seemed to aligned diversion from normal work with significant disruption. MR HODSON: Well, I think all of the cases consider them both, either together or separately. But what all of the cases do have is diversion from usual work and significant disruption of business. They do all have both of those elements. Well, that is why I said that if you took a checkout girl and a executive, they would be diverted from their usual work while they were chasing shoplifters and bringing them back and processing them. MR HODSON: Yes. JUDGE HARRIS: So leaving the questions of degree apart, there would be a much stronger argument there than there is with a security person who is actually doing the job of a security person at that time. MR HODSON: I agree that that would be a stronger argument. But in my submission it would still squarely fail. I refer again back to the Aerospace case which does set these two elements out separately and this is our Court of Appeal authority: (a) diversion from usual activities; (b) significant disruption to the business. MR HODSON: Yes, diversion from usual activities, but that checkout girl, by being diverted for perhaps an hour, has not given rise to significant disruption to the business. It is not the 100s of hours or the several months away from the job. JUDGE HARRIS: No that is why I said it is a matter of degree. MR HODSON: Yes. JUDGE HARRIS: I mean in a small shop for example with one checkout person. If the checkout person has to spend an hour running down the road to catch somebody, bring them back and no other customers can buy any goods for an hour, that could be said to be a significant disruption for a small corner store or something of that sort. MR HODSON: It could. JUDGE HARRIS: You say that is not the claimant, and of course it is not. But I am trying to get at the principle and then whether or not one gets within the principle is probably a question of degree. MR HODSON: I think I must agree with your Honour. I would say than in that particular scenario what you would almost certainly be able to do would be to show that you had lost profit. 19

20 MR HODSON: Because you would be able to say, Well, I had to stop selling altogether and I manage to make X amount per hour, and I was not able to sell anything for an hour. JUDGE HARRIS: Yes, you might, yes. You would get something. MR HODSON: Yes, you would definitely be getting something there. So pulling everything together I say that this just is nothing like the cases that provide for this kind of award in terms of staff and management time. The level of disruption that we have is so low that (to adopt the proposition put forward by Mr Townsend) if this is significant disruption then everything is significant disruption. There has to be that threshold and it has been laid down by the Court of Appeal. MR HODSON: So those are all of the submissions in terms of staff and management. The other two heads of loss, well the administrative costs, I have already dealt with to a degree by saying it is entirely different, for example, to the Risk Insurance case. But the starting principle is there is just no proof of any caused loss whatsoever. Questions of claiming for a proportion of leased premises and heating and light, well it is beyond optimistic as a claim. MR HODSON: The third and final head, the security costs at 30, well this particular element of the case faces the same difficulty that staff and management time has, but does not have the solution. In other words, it cannot be shown to be caused by these torts at all. It was going to be there whether these defendants went into the shop and did what they did or not. So there is absolutely no causation. Now, that of course is the same with the staff and management time, but there was a way around that through the line of authorities that we have investigated. But even if we tried to apply that line of authorities to this head of loss, which appears to have been done in Risk Insurance, what one still needs would be to show some diversion. There is no diversion for security resources whatsoever. It simply has not happened. For the same reasons that have been put forward in terms of the staff and management time, even if there is, I do not know that could be shown to be, but even if there is there is certainly no significant disruption to the business. So this is a loss that really has absolutely no basis in law. Those are my submissions on all of the heads of loss. Well, I should just mention as an entirely separate point, of course we would like to bring up the question of anonymity again, at your convenience. So I do not know whether you would like to hear from me on that now. JUDGE HARRIS: Well, you better address me about that now. MR HODSON: Yes. JUDGE HARRIS: I did have a look at that Court of Appeal authority last night and I have re-read these notes. Clearly the general principle is that mitigation is not done with anonymity. 20

21 MR HODSON: Yes. JUDGE HARRIS: If you could say that it was in the interests of any party not to have their name publicised when they were a defendant, that would blow a hole completely through the normal basic principle. MR HODSON: Perhaps I can address you in several different ways. First of all the parties have discussed it and the claimant has indicated that if it were a bilateral agreement they would be content with this. We are content with that as well, and so if your Honour were content with it then all the parties would be happy for the identity of both sides to be anonymous so that the claimant were referred to as a major retailer and the defendants were referred to by initials. JUDGE HARRIS: I could do that I suppose, but what is the point? MR HODSON: The point is that there is going to be extremely high degree of prejudice suffered by the defendants as a result of the reporting of this case. Now, one could compare it to the system of convictions. Eventually they become spent and the defendants no longer have to live with them. Now in this case we are talking about a couple of teenage girls who have picked up reprimand. They have now moved on from that, and as you have heard, at least one of them is now in employment. If they are faced with a reputation, shall I say, that is so easily searchable, not even by police check, but just by Goggling their names, then they are potentially going to suffer very, very considerable prejudice for years to come that is out of all proportion to the interest of justice and maintaining the openness of proceedings. Which of course I accept is the principle to be applied. This I say is a classic -- JUDGE HARRIS: If you get judgments say, though, against the landlord on the basis that he has not been behaving as he should and a tenant gets damages against him, it probably could be said to be in the interest of the landlord that you would have anonymity. But I think it would be a bold advocate that submitted in those circumstances you should have anonymity. Should you not suffer the consequences of what you have done? MR HODSON: It is all a question of proportionately. The criminal law says, Here is a reprimand and the consequences of that are that it will appear on your list of previous conviction to the extent that if you get into trouble in the future the back(?) bench of magistrates or whoever is dealing with you will be able to see that and adjust their penalty as they see fit. That is the punishment that the law generally applies to this kind of situation. This punishment is so out of proportion that it would actually interfere with the interests of justice. Because if there are others out there who are similarly concerned about the principles in this case and they see that the names of these people are reported and now well known, then they may very well be reluctant to stand up for themselves knowing that their names could be the next to be all over the internet. JUDGE HARRIS: Or they might be more reluctant to shoplift. 21

22 MR HODSON: Well, I do not think that anyone who plans on shoplifting is going to be looking at these sorts of forums and seeing that kind of thing and therefore adjusting their decision making. I do not think that is as realistic a concern. JUDGE HARRIS: Anyway, you tell me that you are all in agreement? The claimants do not want to be identified and neither do the two defendants? MR HODSON: Yes. We are all content on that point. JUDGE HARRIS: All right, well, if you are all content with it that is slightly different than it would be if you were just asking, as it were, unilaterally. So I will hear from counsel for the claimant in that connection as part of his submissions as well. MR HODSON: I am grateful. JUDGE HARRIS: All right, thank you very much. Yes. MR OWEN: As has rightly been indicated there is not really much factual dispute in this case at all. Certainly no material dispute as far as the shoplifting is concerned itself. No admission from the first defendant as to precisely what she took. The second defendant is not sure that she took all of the items alleged. But insofar as it matters, your Honour, I invite you to find that the claimant s evidence is probably correct. The items taken by the first defendant were told by the police to the claimant, so that is probably correct. As far as the second defendant is concerned, throwing it down on the floor they are collect by claimant s staff -- JUDGE HARRIS: Yes, but this is all immaterial to the claim, is it? MR OWEN: Yes. But insofar as there is any dispute, your Honour, I just invite you to find for that claimant on that. Similarly really with joint and several liability to dispose of that as well. It is disputed by the defendants, but I invite you to find that it is there that they were engaged in a joint enterprise together. They both say they came upon the idea independently of their volition at the same time. But it just seems incredible, your Honour, particularly when one sees the CCTV footage of them all together. Particularly when you have got the first defendant who initially disputes that she had -- But that too is irrelevant to those main principles in this case. MR OWEN: Yes. JUDGE HARRIS: It has a marginal relevance conceivably in connection with enforcement. MR OWEN: With remedy, yes. In terms of loss and damage, you Honour. 22

23 MR OWEN: First of all the diversion of staff time. My Learned friend has already been through -- JUDGE HARRIS: Well, just remind me how you are going to want to put this. We had the evidence of the chap who was in charge of security who set out the basis of those figures. Which was Mr Tennent was it not? MR OWEN: Yes. JUDGE HARRIS: Page 78, I think. The figures are that, I think we agreed in the end it should be 34,000 odd, the individuals, rather than the 32,000. MR OWEN: Yes. JUDGE HARRIS: 34,649 people apprehended in -- this turned out to be the financial year, did it not? MR OWEN: It did, your Honour. JUDGE HARRIS: To 10/11. MR OWEN: Yes. JUDGE HARRIS: Now the figure of 2,500 stores... Then there was the deterred incidents, which as far as I can see meant the security people noticed that when the suspect realised there was a security person in the vicinity he or she put it back -- MR OWEN: Changed his conduct, yes. JUDGE HARRIS: -- or possibly paid. MR OWEN: Yes. JUDGE HARRIS: Or anyway, did not try and steal and did not try and get out of the store. MR OWEN: No. Probably stole it but then changed their mind. JUDGE HARRIS: So if we call that 29,500 odd deterred incidents and then the figure for the cost of security. MR OWEN: Page 85, your Honour, paragraph 31. JUDGE HARRIS: Thank you. It was put at nearly 3.5 million. MR OWEN: Yes, your Honour. JUDGE HARRIS: These figures only need to be approximate, I think. MR OWEN: Yes, your Honour. 23