Aerospace Publishing Ltd v Thames Water Utilities Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Wilson,Lord Justice Pill |
| Judgment Date | 11 January 2007 |
| Neutral Citation | [2006] EWCA Civ 147,[2007] EWCA Civ 3 |
| Docket Number | Case No: 2006 0125 A2 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 January 2007 |
[2007] EWCA Civ 3
[2005] EWHC 2987 (QB)
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Hon Mr Justice Holland
Lord Justice Pill
Lord Justice Longmore and
Lord Justice Wilson
Case No: 2006 0125 A2
SIMON RAINEY Esq QC and PETER McMASTER Esq (instructed by Lane & Partners Llp, London WC1A 2LS) for the Appellants
TIMOTHY YOUNG Esq QC and HENRY BYAM-COOK Esq (instructed by Collyer Bristow, London WC1R 4DF) for the Respondents
Introduction
This is an appeal on quantum. The question is how should one value a private archive which has been damaged or destroyed. The archive was partly lost and partly damaged. Although it is common ground that it is the diminution in value of the archive that constitutes the amount of the claimants' loss, should that diminution, on the facts of this case, be measured by reference to the difference in the sale value of the archive before and after the loss or by reference to the cost of reinstatement?
In the middle of the afternoon of Tuesday 3rd July 2001 a mains water pipe, situated at the junction of Goldhawk Road and Brackenbury Road in Hammersmith, London W6, burst. That caused a rapid and uncontrollable ingress of water into the lower floor of premises at 3A Brackenbury Road then occupied by Aerospace Publishing Ltd (“Aerospace”) and Midsummer Books Ltd (“Midsummer”) (“the companies” or sometimes “the claimants”). Aerospace published, at regular intervals, high quality, lavishly illustrated, formidably researched works on all aspects of aviation and its history. Midsummer brought similar qualities to publications relating to military history and a variety of other topics.
The lower floor of the premises contained the companies' library and archive; this archive consisting of photographs, transparencies, artwork and other reference material was largely contained in a number of four drawer filing cabinets and some chests. The floodwater entered the lower three drawers of each of the cabinets causing considerable loss of or damage to the contents. It is not disputed that the Aerospace archive was a truly comprehensive and historical collection, probably unique in the world in private hands.
The Defendants (“Thames Water”) are and were the water undertakers for the purposes of the Water Industry Act 1991 who owned and operated the burst pipe. By virtue of Section 209 of the 1991 Act, they were liable for any loss and damage occasioned by the resultant escape of water, whether they were at fault or not.
Accordingly there was no dispute about liability at trial. It was only quantum which had to be resolved. The companies contended that they should be entitled to recover the cost of replacing the archive insofar as it could be reinstated (eg by searching out, identifying and paying for copies of photographs and transparencies which had been lost or damaged). They claimed about £3 million on this basis. Thames Water contended that the companies had no intention of replacing the archive and that it would anyway be unreasonable to do so. It followed that the companies could only recover the difference between the undamaged value of the archive and its value in a damaged state in the sum of about £300,000. This issue was tried by Holland J between 24th October and 3rd November 2005. He determined in a draft judgment made available on 11th November 2005 that the companies did intend to reinstate if they had the money to do it and that it was reasonable for them so to do. He was in principle, therefore, prepared to award the cost of reinstatement.
Thames Water's reaction was to ask the judge to respond to a number of specific points made in their closing submissions. The judge replied that he was unwilling to add “paragraphs, each setting out a closing submission and my comment” when the existing judgment had indicated his approach with reasonable clarity.
Thames Water then sought permission to appeal on the basis that the judge had given insufficient reasons for coming to his conclusions. In a skeleton argument of 177 paragraphs and over 50 pages they instanced in particular the following matters:—
(1) there was a considerable body of evidence about the recent history of the claimants' business, in the light of which the judge ought to have concluded that the aviation side of the business was being run down so that it was clear that Aerospace would not reinstate the aviation archive and even if reinstatement did occur, Aerospace would not themselves be able to use it. The judge scarcely referred to this evidence and gave no or no adequate reason for refusing to accept it;
(2) there had also at trial been comprehensive expert evidence about changes in the market for publications relating to aircraft which should have led the judge to conclude that the claimants' plans for further publications (especially a proposal called “WAIF 2”) were so misguided that reinstatement of the archive would be unreasonable. Again the judge had given no or no adequate reason for rejecting this expert evidence; nor had the judge critically evaluated the claimants' loss of profit claim;
(3) the judge had failed to address an argument that, since publication had been able to continue after the flood, reinstatement of the archive was unnecessary.
In the light of these contentions, this court decided on 1st February 2006 that the judge's conclusions were “arguably inadequately supported by his reasons so as to make it possible to say that Thames Water had a realistic prospect of success”. In his short reasons in support of the grant of permission to appeal Rix LJ said:—
“8 In essence, Thames Water had run a case that Mr Morse [Aerospace's managing director] had wanted to sell the Aerospace company and its archive because he was more interested in pressing ahead with other parts of his business and could not do both, that the market had changed and that there was not the room, at any rate in the business and in the profitable sense, for a further publication such as WAIF 2, and they also relied upon other changes in the market and, indeed, in Aerospace's own modus operandi: for instance, in planning to move the site of the archive from its then current position immediately under the hands of the publishers to a different site in Islington, where there was an aim to reposition it as a library, not so much for use by Aerospace as publishers themselves but for the use of third parties upon payment.
9 I can, for instance, illustrate the judge's technique by reference to paragraph 71 where he refers, as a point supporting Aerospace's case, to the efforts by Mr Morse in the months preceding the flood to sell the Aerospace business or its archive. The value put upon the archive was some US$3 million or nearly £2 million. The judge referred to this at paragraph 71 as a plus point and perhaps, on one view of the matter, it was. Thames Water's approach to that episode was, however, to point to the fact that Mr Morse was willing to sell his company and its archive and was yet unable to obtain any bids, for either the company or the archive, at all.
10. There is no discussion of that counterpoint in that context … .”
That then led to an application by the claimants (no doubt horrified by the expense of a full appeal and by the possible prospect of a re-trial) to this court, accepting that the judge's reasons were not as fully expressed as they might have been and themselves asking that the judge be asked to give further reasons for his conclusions. This the court refused to do because as Rix LJ put it:—
“the likely result is either a nil return or a danger of ex post facto rationalisation.”
He recorded that the claimants accepted that, in the light of their position about the judge's reasons, the appeal would have to be conducted on the basis that it was a full re-hearing.
So it is that the appeal before us has been conducted on the basis of being a full re-hearing on the papers and the transcripts of the evidence which was given to Holland J. Understandably, neither party has asked for a re-trial and we have to do the best we can to assess the rival arguments on the material we have. In these circumstances it seems to us inevitable that we have to accept the judge's conclusions about the integrity and bona fides of the claimants' chief witness Mr Stanley Morse. Mr Simon Rainey QC for Thames Water accepted that it would be virtually impossible for us to find that Mr Morse had been intentionally trying to deceive the court but he submitted that the extraneous circumstances set out in the evidence showed that it was wholly unreasonable to seek to reinstate the archive and, whatever Mr Morse's intention as to that was, damages should be assessed not on the basis of reinstatement but on the basis of diminution in the sale value of the archive.
I should now proceed to set out the facts of the matter in more detail. I can use the judge's narrative very largely but I shall supplement it by the further facts relied on by Thames Water.
Facts in Detail
Both the companies were incorporated in 1977, to further the publishing ambitions of Mr Stanley Morse who has an 80% shareholding in each company and they have traded pursuant to his control as managing director. Albeit closely associated, sharing the same premises and subject to the same overall control, these companies have maintained separate corporate identities,...
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