Case No. HT-11-503

for the relevant period (being the £167,688 less the savings of £146,910). Thus, if there were no other savings, Mr Isaac’s calculation shows a net loss of profit of £20,779. It seems to me that this was referable to the second inundation (and therefore the responsibility of the defendants).247.Mr Isaac then identified two further potential savings. One, in relation to various miscellaneous items, was in the sum of £16,667, which would reduce the net loss of profit to about £4000 odd. The other is the saving in relation to the alleged £8,000 per month rent which amounted to £59,077 over the relevant period (7 ½ months x £8,000). These two figures, when added to the agreed savings, mean that the savings outweighed the loss of profit, so that the business would never have made a profit at all. 248.I was not persuaded by Mr Isaac’s analysis that a further miscellaneous category of savings could be introduced in the sum of £16,667. Whilst I accept that there was a possibility that some of these items, in relation to maintenance, motors, entertaining and recruitment, might have generated possible savings, the evidence was too flimsy to suggest that they should be brought into account for the purpose of assessing the net loss of profit over this period. I am inclined to agree with Mrs Rawlin that they were better treated as one-off savings which were not relevant to the calculation of loss of profit. For the purposes of the calculation of loss of profit, therefore, I put them to one side.249.That leaves the question of rent. The evidential position relating to this element of the story was entirely unsatisfactory. 250.Any consideration of rent starts from the premise that, according to Mr Barber, the intention was that Brit Inns would pay Mrs Lawless and himself the sum of £8,000 per month by way of rent. It is certainly right, as Mr Miller pointed out, that the various forecasts produced by Brit Inns indicate this intention. But no agreement to this effect was ever drawn up and there is no other documentary record of any such intention. Furthermore, although Mrs Lawless and Mr Barber did advance a claim for loss of rent, in the second action, as an alternative to the loss of profit claim, that claim was abandoned during the trial. 251.Mr Plewman maintained that, if the rent figure was a saving to be taken into account in the calculation of the loss of profit on the part of Brit Inns, then it was properly the subject of the claim (currently stayed) by Mr Barber and Mrs Lawless for loss of rent in the Brit Inns action. He maintained that although their claims in that action had been stayed, the stay could be lifted to allow them to make this claim. He argued that this would follow, notwithstanding the abandonment of the loss of rent claim in the other action, because it was clarified at the start of the trial that the abandoned rent claim related to a different, later period, and not the 7 months between October 2007 and May 2008. Mr Plewman argued that, if the rent was classified as a saving to Brit Inns then – in fairness – it was a liability which Mr Barber and Mrs Lawless were entitled to claim. He went on to say that the only way in which the rent could be taken into account as part of the savings, but not made the subject of a separate claim by Mr Barber and Mrs Lawless, would be if the liability to pay rent on the part of Brit Inns was waived by Mr Barber and Mrs Lawless, and there was no evidence of that.252.In my view, in order to achieve fairness, the possible loss of rent should be discounted on both sides of the balance sheet. I say that partly because I am not persuaded that there was ever any such agreement between Mr Barber and Mrs Lawless on the one hand, and Brit Inns on the other. And if I was wrong about that, and there was such an agreement, so that the rental was legitimately a saving on the part of Brit Inns then, on the face of it, it would give rise to a liability on the part of Brit Inns to Mr Barber and Mrs Lawless which could not fairly be ignored. For these reasons, therefore, I consider it much better for the loss of rental to be discounted entirely, both as a liability and as a saving.253.Whilst dealing with the question of rent, I should add this. At one point in his closing submissions, Mr Plewman sought to argue that the loss of profit claim in the form advanced by Mrs Rawlin was real and significant because it could be compared with what might have happened if Mr Barber and Mrs Lawless had decided to rent out the property instead. I consider that this suggestion was much too speculative. They were never advised to rent out the premises; they never considered renting out the premises; they never did rent out the premises; and they continue to operate a (presumably successful) business from the premises. Thus there was nothing in this point, and it only confirmed my view that all questions of rent were properly left to one side in the assessment of the loss of profit claim. c) Summary 254.On that basis, therefore, I do not allow either the miscellaneous savings, or the rental savings, put forward by Mr Isaac. As I have noted at paragraph 246 above, that means that there is a potential claim for loss of profit in this case, but in the modest amount of £20,779. In my view, that is a much more realistic figure. It acknowledges that a 7 month closure probably led to a loss of profit, but it also reflects the difficulties of starting up a new restaurant business in a competitive market. Furthermore, I accept that there is nothing put forward by the defendants to explain this loss of profit in any other way or by reference to any event other than the second inundation. On that basis it is a sum for which they are liable. 6.6 Was The King’s Head An Appropriate Comparator? 255.Although I have concluded that the loss of profit claim should be addressed by reference to the actual figures, I ought, for completeness, to set out my views on the separate issue as to whether The King’s Head was an appropriate comparator in any event. 256.The King’s Head was not identified as an appropriate comparator by Mrs Rawlin, or any independent expert. It was apparently suggested by Mr Barber, although there was very little evidence from Mr Barber, or anyone else, about how or why it was a good comparator. The only independent expert who had considered the question fully and gave evidence about it was Mr Isaac, and he was firmly of the view that it was not a good comparator. I agree with him for the reasons noted below.257.First, The King’s Head was in a much better location than The Oak. It was in the main part of Teddington High Street, and next door to major shopping outlets like Marks and Spencer. The Oak was further away from the heart of the High Street and was not in a purely retail area: as Mr Barber noted by reference to one of the photographs, it was “all residential opposite us”. 258.Secondly, the facilities at The King’s Head were different to, and better than, those available at The Oak. In particular, The King’s Head had both a beer garden and a car park, neither of which were available at The Oak.259.Thirdly, and perhaps most important of all, The King’s Head is an established business. It appears to have been established at least 12 years ago. It is so successful that it is now part of a chain. It serves upmarket French food. In these respects, it was completely different to the new business venture at The Oak. Although Mrs Rawlin said that she had used profit figures calculated by reference to earlier years of The King’s Head trading life, it must be remembered that, even by those early years (2002, 2003), The King’s Head was an established business. And it was a time when the general economic picture was better than five years later.260.Finally, there is the point that the business on the site owned by Mr Barber and Mrs Lawless would have been closed for a year or more, even if The Oak had opened as originally planned in December 2006, whilst The King’s Head had had no such interruption to its business.261.For all of those reasons, therefore, I find on the facts that The King’s Head was not an appropriate comparator for The Oak. In my judgment, it was inappropriate to assess the potential profitability of a new business by reference to an established business, particularly one with so many obvious advantages over the business advancing the claim. I therefore reject any claim based on figures referable to The King’s Head. 6.7 Conclusion On The Loss Of Profit Claim 262.For the reasons set out above, I find that there was no good reason not to calculate the loss of profit claim by reference to the actual figures generated by Brit Inns when The Oak went into business in October 2007. On that basis, the experts are agreed that the figures demonstrate that The Oak would not have made a significant profit.263.Mr Isaac’s conclusion that The Oak would have made no profit at all assumes various savings figures which would outweigh the profit that would have been made. Whilst most of these savings figures are agreed, I accept Mrs Rawlin’s evidence as to the miscellaneous items, and, for the reasons given above, I do not make an allowance or saving in relation to the rent. On this basis, a modest sum of £20,779 is identified as the net loss of profit over the 7 month period. In the absence of any evidence to suggest that this loss of profit during the relevant period was caused by anything other than the second inundation, I find that the defendants are liable for this amount. 7. THE OTHER CLAIMS 7.1 Remarketing Of The Oak 264.At the outset and during the trial, the claimants maintained a claim for £136,000 in relation to the alleged remarketing of The Oak following the works caused by the second inundation. Mr Barber gave evidence in support of this claim. So too did Mr Greig, who authorised the payment to Brit Inns of £45,333 under this head of claim. That payment therefore comprised part of the subrogated claim. Mr Barber and Mrs Lawless maintained their claim for the difference (in other words, the money Mr Greig did not pay out) in the sum of £90,677. 265.The evidence in relation to these costs was extremely sketchy. The £136,000 figure came from an estimate/forecast prepared on one sheet of paper by Mr Barber. He himself said that “I just cobbled this together”. He accepted that no part of these figures related to actual expenditure. In addition, Mr Greig said that the £45,333 which he had authorised was by way of a gratuitous payment to Brit Inns. It was not at all clear that these sums could be justified. 266.In his closing submissions, Mr Plewman wisely concluded that the subrogated claim could not be sustained and it was abandoned; in addition, the separate claim for the sum not authorised by Mr Greig had itself been abandoned at the start of the trial. In those circumstances, no element of the alleged remarketing claim now gives rise to any liability on the part of the defendants. 7.2 Increased Accountancy Costs 267.At the commencement of the trial, the insurers claimed £2,159 that they had paid out by way of increased accountancy costs, whilst Mr Barber and Mrs Lawless pursued an uninsured claim for £116. The latter claim was subsequently abandoned by Mr Evans, leaving the subrogated claim for £2,159. 268.The evidence did not establish how the claimed sum of £2,159 was broken down: Mr Barber accepted that he could not provide such a breakdown. Mr Greig appeared to suggest that Mrs Rawlin was the person to deal with that but she gave no evidence on the point.269.More importantly, it was wholly unclear how the second inundation had led to these or any increased accountancy costs. Although the suggestion was that, in some way, these costs had been incurred in providing assistance to Brit Inns for the purposes of their insurance claim, it was not easy to see what that assistance might have consisted of. It appears that the accountants provided some basic payroll information but, for the reasons set out in paragraph 222 above, that documentation was fundamentally flawed. Furthermore, the accountants cannot have provided information relating to Brit Inns’ trading for the purposes of the claim for loss of profit, given that the insurance claim was based on Mr Barber’s own forecast, and paid out on the basis of Mrs Rawlin’s use of the data in respect of The King’s Head. Accordingly, no causal link between any work by the accountants and the second inundation was made out.270.Finally, although this might not have been decisive on its own, I am bound to note that the absence of evidence of payment of this sum is of some significance, in circumstances where it appears that the accountants were creditors in the liquidation of Brit Inns. It is not clear whether this sum was paid to the accountants or whether it formed part of their unpaid claim in the liquidation.271.In the round, therefore, I consider that for the reasons set out above, this claim for additional accountancy costs has not been made out. On the face of it, it was a head of claim that should not have been paid out by Mr Greig, although it was not unique in that. 7.3 Increased Costs of Working 272.The original claim was in the sum of £31,406. Of that, the insurers paid Brit Inns £21,486, leaving an uninsured claim of £9,920. Both sums are still pursued.273.The sums claimed were set out in a two page schedule prepared by Mr Barber and in the trial bundles at I3/841. They related to marketing, recruitment and training costs. On the face of it, these were business expenses of the sort which one would have expected a business like The Oak to be incurring on a regular basis. In other words, there was nothing on the face of these individual items to indicate that they were somehow an additional expense referable to the second inundation.274.It appears that Mr Barber was aware of that potential flaw in this head of claim. Thus, in his witness statement, he made plain that these expenses were, as he put it, the result of “repeat exercises”. That is also reflected in the pleadings. Of course, to the extent that an exercise had to be repeated because of the second inundation, in circumstances where, had it not been for that second inundation, the expense would only have been incurred once, the cost of such an exercise would be recoverable in principle. For the same reason, in the absence of such evidence as to the repeated nature of the expenses, the claims would be likely to fail, as ordinary business expenses in connection to the defendants.275.Since this head of claim depended on the credibility of Mr Barber, the absence of any other corroborative evidence means that, because of my concerns about the truthfulness of his evidence, noted above, I find that it has not been made out. But in addition, I am in no doubt that these expenses were not the result of repeat exercises. They were not duplicated costs. I consider that Mr Barber admitted as much in his cross-examination. One further reason for reaching that same conclusion is that many of these invoices relate to expenses incurred in 2008, long after The Oak had reopened following the reinstatement fit-out works.276.Furthermore, in relation to the items of claim which were not paid out by the insurers, I consider that these were not recoverable for a number of additional reasons. First, 5 out of 8 of them were incurred some time after the opening of The Oak in October 2007 and were therefore nothing whatsoever to do with the re-launch. Again they were on their face straightforward business expenses. Secondly, it is worth noting that the insurers refused to pay these items principally because they were, in the insurers’ words “too remote from the opening [of The Oak]”. Given the over-generous approach of the insurers to the claim generally, it seems to me that the court is entitled to give considerable weight to their stated reasons for refusing these particular items of claim. Thirdly, I accept the specific points made in paragraph 223 of Mr Miller’s closing submissions.277.The two biggest items within the list of uninsured claims perhaps illustrate these difficulties most clearly. The first was a claim in relation to a holiday with Enduro India which Mr Barber booked and then cancelled. The claim is for £2,866. On analysis, it became apparent that Mr Barber only committed himself to this holiday, and paid the bulk of the £2,866, in December 2007, before cancelling it in January 2008. It is impossible to see how the second inundation in January 2007 could be said to have caused Mr Barber to go back on his commitment a year later. By December 2007, the reinstatement fit-out works were completed and the business was up and running again. Obviously, in December 2007 Mr Barber felt able to commit to this endurance holiday. He changed his mind in January 2008, but there is nothing in the evidence or the documentation to indicate that this was in any way related to the second inundation in January 2007. This claim therefore also fails as a matter of causation.278.The other large claim is in respect of 130 Litho Printing. Although £1,468 was paid by the insurers, £3,212 was not. The insurers made plain that this was because the unpaid element related to the cost of printing business cards, which they considered to be a normal cost. There was no evidence before me which could contradict that suggestion. The claim again therefore fails as a matter of causation. 7.4 Increased Costs of Insurance 279.This is a claim made solely by Mr Barber and Mrs Lawless in the sum of £15,300. The claim in that sum was unsustainable. However, Mr Evans seeks the smaller sum of £4,138.78. He justifies this lesser claim by taking the insurance premiums for 2010, 2011 and 2012 and claiming, in each case, the amount by which the insurance premium was in excess of the sum of £4,328.63, which was the insurance premium in 2007. 280.In my view, notwithstanding Mr Evans’ ingenuity, this claim was fundamentally flawed. First, there is nothing to indicate that in 2010, 2011 or 2012, Mr Barber and Mrs Lawless had to pay higher insurance premiums than they would otherwise have done because of the second inundation in January 2007. The amount of the insurance premiums 3, 4 and 5 years later was simply too remote from the consequences of the second inundation and there was no credible evidence to suggest to the contrary. There was a vague assertion as to this connection by Mr Barber, but for the reasons that I have given, that is just not enough.281.Secondly, the eventual claim, albeit carefully reduced by Mr Evans to get it to a more acceptable level, suffers from a second flaw. It presupposes that 3, 4 and 5 years after the base date of 2007, the insurance premiums would not otherwise have gone up at all. Such an assumption is unwarranted. Insurance premiums across the board have gone up over those periods, so that the mere fact that there was an increase in 2010, 2011 and 2012 could not be ascribed to the second inundation in any event.282.Thirdly, I agree with Mr Miller that the insurance being taken out is not like for like across the relevant years. And fourthly, the claim is artificial because it ignores the rebate for 2007-2008 which, on its own, was more than the (reduced) amount of the claim.283.For those reasons, the claim for the increased costs of insurance must fail. 7.5 Wasted Costs of Employing Staff 284.This is the claim for the wasted costs of employing staff for the opening in December 2006, who had to be let go because that was cheaper than retaining them until October 2007, when The Oak finally opened. It is not part of the subrogated claim, although it was not clear why this head of claim was not made to the insurers; on its face, it carried with it an impression of reality that so many of the claims actually made (and paid) appeared to lack. At all events, it was a direct claim by Mr Barber and Mrs Lawless in the sum of £39,637.73. 285.As with so many of these ‘other’ claims, there is no breakdown for the pleaded figure. However, in his closing submissions, Mr Evans produced a calculation, by reference to the staff employed between September 2006 and February 2007, which totalled £39,490.81. This claim was put forward on the basis that these staff had to be let go no later than February 2007 as a result of the second inundation and that therefore the costs of employing these people was wasted as a result of the second inundation. 286.Mr Miller had two generic complaints about this claim. The first was that the way in which this claim was put in Mr Evans’ submissions, and the method of calculation, was not foreshadowed in the pleadings or the evidence. He complained that the subsequent claim was therefore an ambush. Secondly, he pointed out that the discrepancies between the payroll documents (already noted in paragraph 222 above) made the entire documentary basis of this claim suspect. 287.I have sympathy with Mr Miller on both these counts. However, as to the first complaint, it seems to me that, whatever the confusion and muddle in relation to this head of claim prior to Mr Evans’ closing submissions, those submissions do pull together sufficient documentation and references in the evidence to justify the presentation of the claim in this way. It may be new, but it is not based on material which could be said to have come as any surprise to the defendants. 288.As to the second point, I agree that the payroll documentation is suspect, because different documents, containing different figures, have been produced in relation to the same months. I have refused to accept the alleged employment of Mr Tattersall on that basis. The discrepancies obviously create a general doubt as to the reliability of the figures. But that needs to be offset by a certain amount of common sense: plainly, staff were engaged at The Oak in December 2006 who were readying themselves for the opening of the business but who, because of the first and second inundation, had to be dispensed with. As a head of claim, it seems to me to be legitimate, notwithstanding the problems with the documents showing the figures.289.As I have indicated, Mr Evans’ calculations claims all of the staff employed in September, October, November and December 2006 and January and February 2007. I consider that to be excessive. I do not know why staff were engaged in September and October 2006. Given that, on Mr Barber’s own evidence, The Oak could not open until mid-December 2006 at the earliest, I consider that it was unreasonable to engage staff so early on. Indeed, in my view, if staff were engaged so early on, that is another reflection of the point that I have made in paragraphs 25-26 above, namely that even in relation to the original fit-out works, Brit Inns, who had prepared no schedule of work and had done no programming, had no real idea of when they were going to open. It is not for the defendants to reimburse Brit Inns for their failure to programme the original fit-out works properly.290.In those circumstances, I reject the claim for staff in relation to September and October 2006. However, it seems to me that – subject to one further point – the staff engaged for November, December, January and February 2007 were engaged because, but for the second inundation, Brit Inns were preparing to open in mid-December. The first inundation does not seem to me to be a separate cause of this loss because, given that the damage that it caused was much less and the remedial period much shorter, it was not likely that staff would have to be let go prior to the anticipated reopening in March.291.This conclusion is subject to one qualification. At paragraph 222 above, I have rejected the alleged employment of Mr Tattersall during the relevant period. Accordingly, no claim can be made in relation to his wages. I note that all other members of staff for whom a claim is now made can be found on both versions of the payroll document, so the discrepancy difficulty that affects the claim for Mr Tattersall does not apply to them.292.Accordingly, on Mr Evans’ figures, and deducting the sum claimed in respect of Mr Tattersall, I allow the claim for wasted staff costs for November and December 2006 (£1443.66 and £6,653.76) and January and February 2007 (£6750.26 and £1,555.56). That produces a total figure of