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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Barron Industrial Services Ltd v Hargreaves & Ors [2001] EWCA Civ 874 (21 May 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/874.html Cite as: [2001] EWCA Civ 874

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL CIVIL DIVISION
ON APPEAL FROM THE CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
(His Honour Judge Boggis QC)

		Royal Courts of Justice Strand London WC2 Monday, 21st May 2001

Monday, 21st May 2001

1. LORD JUSTICE JONATHAN PARKER: This is a renewed application by the first four defendants in the action ("the applicants") for permission to appeal against an order made by His Honour Judge Boggis QC (sitting as a Deputy High Court Judge) in the Birmingham District Registry on 19th February 2001. By his order, the judge dismissed the applicants' application that the action be struck out, alternatively that summary judgment be given in their favour, on the ground that the claim is hopeless; and he allowed an application by the claimant in the action, Barron Industrial Services Ltd ("Barron"), to amend its pleadings. The judge refused permission to appeal. The applicants applied to this court for permission to appeal, and I refused such permission on the papers on 23 March 2001.
2. The factual and procedural background is briefly as follows. Barron carries on a civil engineering business which includes the fabrication, erection and painting of bus shelters. The fourth defendant, Nu-Weld Engineering Services Limited ("Nu-Weld"), is in the same line of business as Barron. The two are competitors. The first defendant, Mr Martin Hargreaves, was until January 1996 employed by Barron as manager responsible for day to day administration. Mr Hargreaves gave in his notice on 4 December 1995 and in January 1996, on the expiry of the notice, he left Barron and joined Nu-Weld.
3. In April 1994 Barron was awarded a two-year contract by a public body known as Centro for the repair and maintenance of bus shelters in the West Midlands. The contract came up for renewal in 1996, and tenders were invited with a deadline of 6 December 1995. Barron and Nu-Weld both submitted tenders (along with a number of other parties). Mr Hargreaves was involved in the preparation of Barron's tender.
4. The tender documents required a number of prices to be set out, but it is common ground that a key item in the tender process was the proposed cost for fixing polycarbonate sheets on a bus shelter. Barron's price for this item under the earlier 1994 contract had been £29.50.
5. On 5 December 1995 Mr Hargreaves met a Mr Shimwell (a director of Nu-Weld) to put together Nu-Weld's tender. Mr Shimwell is the second defendant in the action. In the result, Nu-Weld's tender was based on a cost of providing polycarbonate sheets of £13.35. The corresponding figure in Barron's tender was £25.00.
6. At about this time, Mr Graham, the general manager of Barron, discovered from listening in to Mr Hargreaves' telephone conversations that Mr Hargreaves and Mr Shimwell were planning a fraud on Centro. The essence of the planned fraud was that Nu-Weld would buy polycarbonate sheets at a discount but arrange with the supplier for Centro to be invoiced for the full cost. The plan was never in the event carried into action because Mr Graham informed the police about it. In consequence Mr Hargreaves and Mr Shimwell were subsequently convicted of conspiracy to defraud Centro, and were each fined.
7. In the event, neither Nu-Weld nor Barron was awarded the renewed contract by Centro.
8. The writ in the action was issued on 17 February 1998. Joined as fifth defendant in the action is a Mr John Hillyer, an employee of Centro. He plays no part in the story for present purposes. The third defendant in the action, one of the applicants, Mr James Anthony Whitehouse, is, like Mr Shimwell, a director of Nu-Weld.
9. By its Statement of Claim, Barron pleads a number of causes of action arising out of the events which I have just summarised, including breach of contract and breach of fiduciary duty by Mr Hargreaves, inducing breach of contract as against Mr Shimwell and Mr Whitehouse and various other economic torts against all defendants.
10. The central issue in the case relates to the tender submitted by Barron. Barron claims that Mr Hargreaves in effect sabotaged its chance of being awarded the Centro contract by tendering at an unrealistically high price. It further alleges that Mr Hargreaves communicated to Nu-Weld trade secrets and/or confidential information relating to Barron's business which had been entrusted to him for the sole purpose of enabling him to put together a tender by Barron. In paragraph 24 of the Statement of Claim it is alleged that, as a consequence of the planned fraud by Mr Hargreaves and Mr Shimwell, Barron lost the opportunity of obtaining any further work from Centro - in other words that it was blacklisted by Centro. Relief of various kinds, including damages, is sought on that basis against all the defendants. Exemplary damages were also claimed. The Statement of Claim puts a figure for general damages for loss of opportunity to obtain the Centro contract at £100,000.
11. In paragraph 26 of the Statement of Claim Barron alleges that the defendants are liable to account to it for the profits which they have made by using its trade secrets and/or its confidential information.
12. The prayer for relief is in the following terms:

"(1)An inquiry as to damages for breach of confidence

(2)Further or alternatively as its option an account of all profits made by the Defendants and each of them by the use of its trade secrets and/or confidential information

(3)An Order for payment of all sums found to be due to Barron

As against the First Defendant:

(4) Damages for breach of contract

(5)Damages for breach of trust and confidence and/or equitable obligations

As against the Defendants and/or each of them:

(6)A Declaration as to what sum(s) in the hands of the Defendants and/or each of them are the assets of Barron

(7) All due accounts and enquiries and payment of the sums found due to Barron

(8)Damages for conspiracy

(9)(A) Damages

(B) Damages for inducing breach of contract and for unlawful interference with contract (the Second to Fifth Defendants inclusive)

(10)Interest pursuant to section 35A of the Supreme Court Act 1981 ...

(11)Costs

(12)Further or other relief".

13. By a letter dated 5 May 1999 the applicants' solicitors requested further information as to the allegations in the Statement of Claim, including the price at which Barron alleges that it would have tendered had it been properly advised. Barron's initial response to this request was that that was a matter which should be put to Mr Hargreaves since Barron was relying on him to prepare the tender documentation. The request was, however, pressed, and by Order dated 28 October 1999 District Judge Owen ordered Barron to answer it. The answer was given in a letter from Barron's solicitors dated 9 November 1999. It was in these terms:

"If Mr Hargreaves had been acting properly under his contract of employment with Barron the figures that would have been submitted would have been identical to those submitted (on Hargreaves' advice) by Nu-Weld in its tender documents of the 5 December 1995."

14. The letter continues:

"This is the only answer that our client can give at this stage in the proceedings and we reserve the right to review that position if documentation disclosed to us in due course leads to a different conclusion. In this regard we are severely hampered by your previous reluctance to agree disclosure voluntarily."

15. On 18 February 2000 the applicants' solicitors served a notice to admit facts, including (under paragraph 2):

"That had Barron submitted to Centro figures identical to those in Nu-Weld's tender dated 5th December 1995 ... Barron would have lost money performing the contract had Centro awarded the contract to Barron."

16. The answer to that was in the following terms:

"Admitted. However following discovery, the Claimant no longer maintains that had the First Defendant performed his contractual obligations in good faith, the figure of £13.35 would have been submitted."

17. This answer reflects the fact that in the meantime disclosure had commenced in the course of which the applicants had disclosed some contemporary notes made by Mr Hargreaves from which it appeared that the figure of £13.35 was not a bona fide figure and that (absent the planned fraud) a higher figure would have been included. In this connection, Barron's solicitor Mr Loyns says this in a witness statement which was before the judge:
18. "It is clear from the disclosure now provided that neither company could have run the maintenance contract at a profit on the figures in the Fourth Defendant's tender. It is also clear from the documents that the Defendants were planning to defraud Centro in the operation of the contract. The Claimant has therefore revised its case on the figures that it would have submitted in its tender (had the First Defendant" [that being Mr Hargreaves] "acted in accordance with his contractual obligations) and has applied to amend its answers to the Part 18 request to take this into account."
19. On 9 January 2000 Judge Boggis QC ordered Barron to serve particulars of its calculation of loss. This document (which goes into considerable detail) appears to be based on a cost of providing polycarbonate sheets of between £17.19 and £25.00.
20. In a witness statement dated 7 December 2000 made in opposition to the applicants' application to strike out and in support of Barron's application to amend its reply to the request for further information, Mr Graham stated as follows:

"15.In 1999 I could not know the actual figures Mr Hargreaves would have recommended had he been acting in good faith in late 1995 rather than assisting a rival company. I believed that such information was likely to come to light when the Defendants were forced to disclose their documents. For example, I was aware that the Police had seized documents relating to the detailed calculations for the fraud on Centro.

16.In reply to the part 18 request it was therefore decided that the only concrete figures the Claimant had access to prior to disclosure were the figures that had been put in by Nu-Weld. This was on the assumption that had the First Defendant given me the same information that he had given the Fourth Defendant then the Claimant's tender would have been at a similar level to the Fourth Defendant's.

17.Upon disclosure it became obvious to me that (among other things) the Defendants had taken into account the profit to be made from the proposed frauds when deciding what prices to put in for the Fourth Defendant's bid. It was therefore wrong to say that the Claimant would have put figures in at a similar level to those in the Fourth Defendant's bid.

18.It is also obvious from the `scam' documents that the First Defendant put the potential cost of fitting each lexan sheet at £17.19. The Claimant in fact tendered at a price of £25 per sheet.

19.The Claimant's position is that now it is impossible say at what level between these figures of £17.19 and £25 the tender figures would have been placed. For example, even if the 25% profit figure suggested by the Defendants is used then the figure of £21.50 would result. It may be that as he knew that the Fourth Defendant's bid would be lower and would therefore probably be accepted in preference to the Claimant's, the First Defendant did not actually artificially inflate the £25 suggested to me. I am unable to say what was in the First Defendant's mind."

21. At this stage therefore Barron was contending for a bracket of between £17.19 and £25.00, with the suggestion that the appropriate figure might have been £21.50.
22. The applicant's application to strike out the claim, or alternatively for summary judgment, is based essentially on the proposition that there is no realistic prospect of Barron being able to recover substantial damages under any of the heads of damage pleaded in the Statement of Claim.
23. At the hearing before the judge on 15th December 2000 (that is to say the hearing which led to the order in respect of which permission to appeal is sought) counsel for Barron initially maintained (consistently with Mr Graham's evidence) that Barron's case was that it would have included a figure in the range £17.19 to £25.00 for fixing the polycarbonate sheets. He suggested that the figure would probably have been about £21.50. When pressed by the court to be more precise he applied to amend the answer to the request for information by alleging a figure of £17.19. The application was opposed by the applicants.
24. As already noted, by his order (which was dated 19 February 2000) the judge gave Barron permission to amend its answer to the request for information by pleading the figure of £17.19, and he dismissed the applicants' application to strike out, alternatively for summary judgment.
25. In his judgment, which was handed down on 7 February 2001, the judge dealt shortly with Barron's application to amend its pleadings as follows:

"Now, before me, Barron seeks to change that answer to say that the figure would not have been Nu-Weld's figure of £13.35, but would have been in the range £17.19 to £25. I asked for a definite figure and was told by Mr Thomas for Barron that the figure relied on was £17.19 The defendants oppose any application to vary the answer already given of £13.35. In answer to a Notice to Admit, Barron has stated if it had obtained the contract at a price of £13.35 for fixing polycarbonate sheet, it would have lost money."

26. Later in the judgment the judge said this:

"... I am prepared to allow Barron to amend its answer as to the figure it would have quoted to £17.19; there is no prejudice to the defendants in such an amendment that costs cannot meet. The defendants will, of course, be able to cross-examine Mr Graham to ascertain whether that figure would indeed have been included in the tender, and if so, what was the likelihood of the tender being accepted."

27. As to the applicants' application to strike out the action, alternatively for summary judgment, the judge said this:

"The basis of the defendant's application to strike out is that none of these heads of claim will yield anything more that nominal damages, and as such, the case should be stopped. The specific arguments are these:

1.Barron would not have won the renewed contract because, at a figure of £25 for replacing a sheet of polycarbonate, its tender was inevitably too high. Further, permission should not be given to allow the figure of £25 to be changed to a range of £17.19 to $25, first because nothing new has come out of disclosure justifying a change of position, and secondly, because the tender did not allow a range to be quoted. Further, even if the change is allowed and is limited to the specific figure of £17.19, Barron would still not have won the contract.

2.There can only be a contribution to overheads if there is a gross profit. If the contract would not have been won, there can be no such loss.

3.The allegation that Barron was `blackballed' is incredible because Nu-Weld has itself done over £1m of business for Centro since 1996, despite Mr Hargreaves and Mr Shimwell still being with the company.

4.The claim for additional finance charges is in effect a claim for interest on the other heads of claim and falls with those other heads.

5.Exemplary damages are not recoverable because

a.they are not pleaded

b.none of the causes of action on which Barron relies was recognised before 1964 as the basis for such an award (AB v South West Water Services)

c.the ground relied on is the `conduct calculated to result in profit' ground. But first, Nu Weld made no profit, and secondly even if it had, disgorging its profit would be its greatest liability.

In my judgment the fallacy in the defendants' argument is that this is not a claim by Barron for what it would have made had it tendered at £17.19 or indeed at a figure between £17.19 and £25 for the polycarbonate work. The claim is for damages for the loss of two chances. The first is the chance of gaining the renewal of the contract and the second is the chance of gaining further work from Centro. The value of those chances will depend on the evidence. In my judgment it cannot be said that Barron was bound to lose the contract; Centro may not have accepted the lowest tender; it may have given special weight to the past performance of Barron. As to the black ball point, evidence will be necessary to ascertain why Centro has not given more work to Barron. Barron is not in a position to advance such evidence because, I am told, Centro will not provide any evidence willingly. I am not prepared to treat this aspect of the case as so speculative as to be unsustainable. In my judgment it is a valid argument which may only be decided after the evidence is in."

28. The judge did, however, strike out the claim for exemplary damages.
29. Mr Tabachnik, who appears for the applicants on this application, submits first that the judge erred in principle in granting permission to Barron to amend its pleadings. He submits that Barron should not have been allowed to resile from the original reply it gave to the request for further information. He draws attention to the substantial time which has passed since the answer was first given, during which time Barron ought to have been able to put its case in order. He also submits that the judge failed to attach any weight to what he would regard as a significant fact, namely that the answer to the Part 18 request for further information was given pursuant to an order of the court in the form of the order of District Judge Owen to which I referred earlier. He points out that there is no reference on the face of the judgment to this factor and suggests that the judge cannot have given it any weight. He submits it ought to have been given some significant weight. Further, Mr Tabachnik submits that it is unfair and highly prejudicial to the applicants that Barron should be allowed, in effect, to tailor its case in the light of the documents disclosed on disclosure, not only the document to which I referred earlier but also a document which has been obtained from Centro pursuant to a witness summons which indicates the corresponding figures tendered by other parties. He submits that this gives Barron an unfair advantage and causes corresponding prejudice to the applicants which cannot be compensated in damages. He submits that the judge failed to have regard to the fact that what is in issue is a tender exercise, in which the tenderer has only one bite of the cherry without knowing how large or small a bite others may be taking. He further submits that, given Mr Graham's evidence to which I referred earlier in this judgment, the figure of £17.19 is on the face of it wholly unsupportable. On that basis, submits Mr Tabachnik, the action in relation to the Centro contract is bound to fail. Mr Tabachnik submits that the judge should in any event have dismissed the claim for loss of profits on the Centro contract since, in the light of Mr Graham's evidence, there is no real possibility that Centro will be able to establish that it would have made a profit on the contract had that figure been included in its tender.
30. Two other matters are raised by Mr Tabachnik in his written skeleton. First, as to the blacklisting claim. Mr Tabachnik suggests that it is inconceivable that substantial damages would be awarded under that head. Second, submissions are directed at a claim contained in paragraph 22(d) of the Statement of Claim to the effect that Barron is entitled to recover part at least of the wages or salary paid to Mr Hargreaves during the period of his notice. In oral submissions this morning however, Mr Tabachnik accepts that if permission to appeal is not granted in relation to the judge's decision concerning the allegations in relation to the Centro contract, then he does not make any separate point on these ancillary claims.
31. So far as Barron's application to amend is concerned, this was of course a matter for the judge's discretion, and, despite Mr Tabachnik's submissions, I am not satisfied that there are any arguable grounds for challenging the exercise of that discretion in this court. It is the case that the judge does not expressly mention that as a factor affecting the exercise of his discretion that the original reply to the Part 18 request was made pursuant to an order of the court. I have no doubt, however, that he had that fact in mind, and in any event it does not seem to me that it can have any overriding significance in the exercise of the judge's discretion.
32. So far as prejudice is concerned, of course the fact that the figure of £17.19 has been put forward after details have been disclosed of the corresponding figures tendered by other parties places Barron in some difficulty in making good its allegation that that figure would have been included in the tender without knowledge of the corresponding figures being tendered by other parties. But that is no doubt a fertile ground for cross-examination and submission at the trial. In my judgment that is not a matter which necessarily means that leave to amend should not be given. As the judge observed, it will be for Barron to establish at the trial (a) that by reason of the applicants' actions it lost an opportunity to win the Centro contract, and (b) that that opportunity was of more than nominal value. The fact that it may face difficulties in so doing is not in my judgment in itself a ground for refusing permission to amend. No doubt counsel appearing for the defendants at the trial will make the most of the difficulties which Barron has encountered in pleading its case in relation to the Centro contract; and Mr Graham will no doubt be cross-examined extensively on that part of his witness statement which I quoted earlier in this judgment dealing with that aspect. However, as I say, this was a matter for the judge's discretion and I am not persuaded that there are any arguable grounds on which this court could interfere with the judge's discretion in allowing the amendment which Barron sought.
33. I turn next to the applicants' application to strike out the claim, alternatively for summary judgment. The application is brought under Parts 3 and 24 of the Civil Procedure Rules. Under rule 3.4.2 the court may strike out a claim if it discloses no reasonable grounds for bringing the claim or the proceedings are otherwise an abuse. This will include an unwinnable case where the continuance of the action would be a waste of time and money. This power overlaps with the power conferred on the court by Part 24 to grant summary judgment to a defendant where a claim has no reasonable prospect of success. As the note to rule 24.2 says in paragraph 24.2.3, at page 395 of the 2001 White Book:

"In order to defeat the application for summary judgment it is sufficient for the respondent to show some `prospect', i.e. some chance of success. That prospect must be `real', i.e. the court will disregard prospects which are false, fanciful or imaginary. The respondent is not required to show that his case will probably succeed at trial. A case may be held to have a `real prospect' of success even if it is improbable."

34. Returning to the instant case, I have already referred to the difficulties facing Barron in proving its loss. Moreover, it is apparent that at the interlocutory stages Barron has been to some extent "on the ropes" on the pleadings. But in my judgment the judge was entitled to conclude that in all the circumstances the case should be allowed to proceed to trial on the basis of the amended pleadings. Whether or not there may be a degree of improbability that the claim will succeed or at least succeed in any substantial amount, it cannot be said in my judgment that the claim is false, fanciful or imaginary. The judge was in my judgment plainly entitled to conclude that it had a real as opposed to a fanciful prospect of success in that damages beyond merely nominal damages may be awarded.
35. The points which Mr Tabachnik has made, both orally before me this morning and in his helpful written skeleton, plainly have force and they remain available to be taken at the trial, whether in the course of cross-examination or by way of submission, and they may or may not prevail. But, despite his submissions, I remain of the view, as I have said, that there are no arguable grounds for the proposed appeal either in respect of the judge's grant of permission to Barron to amend its pleadings or in relation to his dismissal of the applicant's application.
36. I will accordingly refuse permission to appeal.
Order: Application dismissed. (Order does not form part of approved Judgment)