Borders (UK) Ltd and Others v Commissioner of Police of the Metropolis and Another

The issue

The appellant, Ronald Jordan, has been sued by eight major book retailers for their losses on tens, possibly hundreds, of thousands of new books stolen from them by shoplifters and sold by him from his market stalls. Since his overheads and outlays were somewhat less onerous than those of a legitimate bookseller, Mr Jordan made very considerable profits, of which over £600,000 were still in the bank when the criminal law finally caught up with him. Although his operation as a literary Fagin was never fully unravelled, and although one major prosecution failed, he was convicted of conspiracy to steal books and of handling stolen books between November 2001 and July 2003, and sentenced at Southwark Crown Court on 16 January 2004 to a total of 30 months' imprisonment.

An application was made in the criminal proceedings for a compensation order in favour of the booksellers under s.130 of the Powers of Criminal Courts Act 2000. In parallel the present civil action was brought, and while Mr Jordan was in gaol, judgment was entered on the claim for damages to be assessed. The assessment of damages by Master Leslie on 23 June 2004 took place in Mr Jordan's absence because the Prison Service failed to produce him at court, but he had given evidence at a previous hearing and was represented throughout by counsel, so that nothing now turns on his absence. At that point the application for a compensation order was withdrawn.

As part of the criminal process, confiscation proceedings were initiated in the Crown Court under the Criminal Justice Act 1988. These stand adjourned pending the present appeal.

The claim was formulated in two parts. The first part was a claim for the losses incurred by the claimants on the books, approaching 50,000 in number, which had been retrieved from the defendant in the course of a series of raids arising from his unlicensed street trading and from suspected conspiracies to steal. The second part was a claim for exemplary damages. Master Leslie awarded the retailers, on top of compensatory damages under the first limb of £279,594.89, of a sum of £100,000 as exemplary damages. Rix LJ, giving permission to appeal against this award, refused Mr Jordan permission to appeal against the Master's award of indemnity costs, and the latter application is renewed now only as a function of the appeal on the principal issue.

The history

Mr Jordan is a street trader. He has never, at least for present purposes, held a street trader's licence and so was charged on a number of occasions with unlicensed street trading. On these occasions a total of 46,780 books were seized from his stall, his vehicle, his house and his lock-up garage. The claimants, a consortium of national and London booksellers, had begun marking their books, especially the children's books and travel guides in which Mr Jordan was noted to be specialising, and were eventually able by these means to identify themselves as the principal losers. But the books recovered were, as Master Leslie noted, only a fraction of those received and sold by the appellant. The claimants reckoned that they had lost something like a quarter of a million books to Mr Jordan's operation, which the Master took to have been functioning for at least three years into the late summer of 2003. The 2 or 3 per cent 'shrinkage' in shelf stock which is a fact of booksellers' life had risen in this period towards 15 per cent, a level of loss capable of being economically terminal.

The Master disbelieved Mr Jordan's evidence that the bulk of the books seized had been bought legitimately from the claimants' or other shops, but he adopted the investigating police officer's allowance that 5 per cent of them might have been. He also found that it was from the claimants collectively that all but 5 per cent of the books had been stolen. He therefore made a 10 per cent reduction (from 46,780 to 42,102), treating this as the number of books the claimants were entitled to retrieve.

The master assessed compensatory damages in the sum of £233,142.25. He arrived at this figure by discounting the retail value of the retrieved books at the time they were stolen by their resale value when recovered. In this exercise he accepted the entirety of the claimants' estimates, treating the margin of books which, had they not been stolen, would have remained unsold as cancelled out by the proportion of recovered books which would now prove unsaleable. The net loss, necesssarily an estimated one, put forward by the booksellers and accepted by the Master was £259,046.95. Discounted by 10 per cent, this yielded £233,142.25 as compensatory damages for the conversion of the books. To this was added the £46,452.64 claimed by the booksellers as the cost of marking and tracing their books, giving the total compensatory award set out earlier.

The Master then turned to the claim for exemplary damages. He noted that the claim which he had now quantified related only to the difference between the original net value of the books recovered by seizure and their residual value on recovery. This left out of account all the other books which Mr Jordan had received and sold over some three years. The particulars of claim said: "The claimants aver and believe that the second defendant [Mr Jordan] has profited to a greater extent from his selling of stolen books than the level of damages sought by the claimants." The Master found as a fact that it was so. He held that it was not an answer that Mr Jordan had already been punished for this by the criminal courts, because the punishment had left him with a cynically obtained profit at the expense of the claimants, for whom the recovery of exemplary damages would not be a windfall but a recompense for the shortfall in what they had recovered in compensatory damages. (I have paraphrased this part of the judgment because, as recorded, it contains one or two obscurities which it is not useful to spend time on.)

On this footing the Master considered and accepted the calculus put forward in evidence by PC Nicola Fairburn. Averaging the recommended retail price of the lost books at £10.00, and assuming that for each such book Mr Jordan was paying 60% of recommended retail price (£6) and selling it at 80% (£8), his estimated turnover of 700 books a week was yielding him, at £2 profit per book, £1,400 a week or £72,800 a year.

The master, for good reason, was highly sceptical of the assumption that the appellant was paying his thieves as much as 60% of RRP. He considered, too, that the claimants' losses, probably exceeding 250,000 volumes, were consistent with a higher turnover than PC Fairburn had assumed. But he took the appellant at his word, accepting that he had been running his racket for only three years, and he gave him credit for such overheads as maintaining his van and renting a lock-up garage. He then applied the same notional 10 per cent discount as before for legitimate books and those stolen from booksellers other than the claimants, and arrived at round figures of £20,000 as the net proceeds of crime in the first year, £30,000 in the second and £50,000 in the third. The total, £100,000, became the amount of exemplary damages.

The Master finally said this:

"I am confident that he earned a great deal more than that—not least because I think PC Fairburn's figures err very much in his favour, having regard to the purchase price which she had taken. But I also bear in mind that there is an element of punishment here—but it is not really punishment: it is intended to be—and I think I am entitled to say this on the authorities—a deprivation of wholly wrongfully obtained profit. That is the way the claim is put in the particulars of claim and it is the way in which I have attempted to assess these exemplary damages."

The issues

It is necessary first of all to say that the issue with which this court is confronted need never have arisen. The material paragraph of the particulars of claim, which were settled by the claimants' solicitors, reads:

36. Further or alternatively, the Second Defendant has conducted himself in such a manner so as to justify an award by the court of exemplary damages in favour of the Claimants. The Second Defendant has conducted himself, over a period of at least four years, in such a manner that the Claimants believe that the claims set in these Particulars of Claim from only part of the losses caused by him to the Claimants as particularised below.

36.1 The Second Defendant has deliberately persisted in trading in books stolen from the Claimants' stores, despite numerous successful prosecutions and seizures from him by various local authorities who have regularly returned the seized books to the Claimants as the rightful owners.

36.2 The Second Defendant's book selling activities form a significant proportion of the Second Defendant's business activity. The damages claims brought by the Claimants in these proceedings reflect only those books which have been seized from the Second Defendant as described above. The Claimants have and believe that the Second Defendant has profited...