General overheads – what sums can be taken into account
24.Assuming Nuby is entitled to make a deduction in respect of its general overheads, the next issue is to determine which overheads can be taken into account. In relation to this issue, a list of the sums claimed by Nuby was included at Confidential Annex 4 to the Points of Defence. It appears that, subject to the following exceptions, Bei Yu accepts that these can be the subject of a deduction.Gross wages25.The list included Nuby’s expenses in respect of gross wages. These were broken down into job areas in a further list provided by Nuby’s solicitors. In closing, Mr Hicks accepted that, with one exception, he was not in a position to challenge Mrs Bowman’s evidence that these figures were, in part at least, referrable to Nuby’s dealings in respect of the Nuby Baby Bath and should, therefore, be the subject of a deduction. The one exception was with regard to salaries relating to product development and design (in the sums referred to by Mr Chapman in his report). In this regard, Mr Hicks’ argument was that it was wrong to make a deduction for such costs in 2019, 2020 and 2021 given that any development and design work done in relation to the Nuby Baby Bath would have to have been done in 2017 and/or 2018. I accept that argument. Moreover, as I have no evidence as to the figure for 2017 and 2018 and as it is not clear to me that Nuby would have incurred any development or design costs given that the Nuby Baby bath was a pre-existing third party design, it seems to me that it is not appropriate to make any deduction for this part of Nuby’s salary costs.Consultancy costs26.The list of general overheads also included certain figures in respect of consultancy costs. On behalf of Bei Yu, Mr Chapman queried the inclusion under this head of (i) certain costs in respect of Duelle, (ii) other costs in respect of R2R and (iii) certain improper payments. 27.It is now common ground that items (i) and (ii) identified by Mr Chapman were in no way related to the Nuby Baby Bath and that Mr Chapman was right in saying that no deduction should be made in respect of them. 28.As regards item (iii), however, Mr Hicks argued that improper payments could not be treated as deductible because, by definition, they had not been made in support the business activities of Nuby and he pointed out that “supported” was the word used by Lewison LJ in OOO Abbott [2016] EWCA Civ 27 at [42] in describing the general overheads that are deductible. It seems to me that this reads too much into the word “support”. In my judgment, the court is not required to enter into an inquiry into the extent to which a particular item of expense was justified or was of benefit to Nuby. I cannot, for example, accept that it would be necessary for the court to enquire into the details of an employee’s expense account with the company to see whether an item claimed by an employee had been justified, overstated or even improper. It seems to me that the exercise is to identify Nuby’s actual profit from its wrongful activities. If Nuby did in fact pay out these sums, then they form part of its general overheads and they served to reduce its profits. 29.Mr Chapman’s objection to making a deduction in respect of the improper payments was slightly different – namely that the sums were recoverable. However, when questioned, Mrs Bowman confirmed that these payments had been treated as a general overhead from which it seems probable that they have not been recovered. In my judgment, therefore, a deduction can be made in relation to these improper payments. Bad debt write off 30.The list of general overheads also included a figure by way of a bad debt write off in 2019. I cannot see any reason why the decision to write off a bad debt in 2019 should be attributed in any way to the Nuby Baby Bath given that Nuby only started supplying that product in 2019. In my judgment, there should be no deduction in respect of this item.