British Midland Tool Ltd v Midland International Tooling Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hart |
| Judgment Date | 12 March 2003 |
| Neutral Citation | [2003] EWHC 954 (Ch),[2003] EWHC 466 (Ch) |
| Docket Number | Case No: HC0005544 |
| Court | Chancery Division |
| Date | 12 March 2003 |
[2003] EWHC 466 (Ch)
The Honourable Mr Justice Hart
Case No: HC0005544
Mr John Martin QC, Mr Thomas Lowe, Mr Nikki Singla (instructed by Cripps & Shone) for the Claimant
Mrs Jane Giret QC and Miss Tana Kyriakides (instructed by Whitaker Firth) for the Defendants
Hearing dates: 10,11,15,16,17,18,21,22,23,24,25,28,29,30 Oct 2002, 1,5,6,7,8,11,12,13,14,15,18,19,20,22,25,26,27,28 Nov 2002, 16,17,18,19 Dec 2002,
March 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Honourable Mr Justice Hart.
CONTENTS
Mr Justice HartMr Justice Hart:
[Transcript references have been taken in the main from the electronic rather than the printed transcript]
I INTRODUCTION
| I | INTRODUCTION | 1–29 |
| The Claims | 10–17 | |
| The principal personalities | 18–24 | |
| The witnesses for the claimant | 26 | |
| The witnesses for the defendants | 27 | |
| A background of tension | 28–29 | |
| II | THE DEVELOPMENT OF THE PLAN | 30–76 |
| Autumn 1999 | 30–55 | |
| The nature of Mr McGrath's participation | 50–52 | |
| Legal Advice is taken | 53–55 | |
| January February and March 2000 | 56–72 | |
| The recruitment of a workforce | 60–72 | |
| April 2000 | 73–76 | |
| III | LEGAL ISSUES ARISING ON FINDINGS THUS FAR | 77–92 |
| IV | CONCLUSIONS ON LIABILITY | 93–95 |
| V | ELECTRONIC COPYING | 96–141 |
| MIT HP Brio computer ("the Brio") | 96–103 | |
| BMT Eagle Computer | 104–107 | |
| BMT SSC Computer ("the SSC") | 108–109 | |
| Issues on the Electronic drawings | 110–134 | |
| Liability in relation to the Electronic drawings | 135–141 | |
| VI | HARD COPY DRAWINGS | 142–156 |
| 14/15 Hard Copies | 155–156 | |
| VII | CONFIDENTIALITY OF THE DRAWINGS | 157–166 |
| VIII | THE CADDRAUGHT DISC | 167–173 |
| IX | PRICING INFORMATION | 174–177 |
| X | SOLICITATION OF CUSTOMERS | 178–183 |
| XII | CORPORATE OPPORTUNITY | 184–185 |
| XII | DAMAGES | 186–250 |
| Principles | 186–198 | |
| The value of the business | 199–235 | |
| The Claimant's evidence | 199–204 | |
| The Defendants evidence | 203–208 | |
| The main points of difference | 207–210 | |
| What is being valued | 209–214 | |
| How should interest be dealt with | 213–219 | |
| The significance of the Revised Budget | 218–224 | |
| Appropriate Adjustments | 223–233 | |
| Conclusions on Adjustments to maintainable earnings | 232 | |
| The Multiple | 233–236 | |
| Conclusion on value of the business | 235 | |
| Losses | 236–248 | |
| Closure costs | 245–248 | |
| Exemplary damages | 249–250 | |
| XIII | CONCLUSION | 251 |
By this action the claimant (BMT) seeks damages for conspiracy and other torts and breaches of duty against the defendants. BMT was a specialised engineering company which carried on the business of manufacturing and supplying cutting tools to the automotive industry. The business had originally been founded by the third defendant Donald Allen and had traded for many years as Grinding Aids Ltd, which in the late 1980s changed its name to British Midland Tools. That company went into receivership in 1989, but its business was bought from the receivers by BMT, which had been formed for that purpose by M J Allen Holdings Ltd ("Holdings"). Holdings was owned by Michael Allen —no relation of Don Allen —and wholly owned a number of engineering subsidiaries, collectively referred to as the Allen Group. By late 1999 the managing director of Holdings was Michael Allen's son Tim. The board of BMT consisted of Michael Allen, Tim Allen, Alan Gibson (Holdings' recently appointed finance director), Don Allen who was managing director, the fifth defendant Wayne Allen (Don Allen's son) who served as Administrative Director, the fourth defendant Alan Morley who served as Works Director and the sixth defendant Alan Smith who served as Sales Director. Holdings was based in Ashford Kent. BMT was based in Tamworth Staffordshire where it had deep roots in the local community, employing some 30 or so workers on its shop floor, most of whom were highly skilled operators of the various different types of specialist tool-making machinery used in BMT's business and many of whom had been with the business from well before its acquisition by the Allen Group. Don Allen, Wayne Allen, Alan Morley and Alan Smith (to whom it is convenient to refer collectively as "the Tamworth 4" —a soubriquet invented by Mr McGrath (see below) and which I adopt because of the reminder it gives of their geographical location and relative isolation from the rest of the largely Kent based Allen Group) had all been with the business from a period long prior to its acquisition by Holdings.
Dissatisfied with their relationship with Holdings, the Tamworth 4 in late 1999 and the early weeks of 2000 conceived and developed a plan to leave their jobs with BMT and to set up a rival company. Don Allen was in any event due to retire in the course of 2000 (he was to be 65 on March 14th 2000) and in the event did so (with Holdings' consent) on Friday 17th March 2000. The plan was kept secret from Holdings and its representatives on the board. of BMT.
On the Thursday (23rd March) following Don Allen's retirement a small advertisement appeared in the local paper. The Tamworth Herald, inviting applications from "fully skilled personnel" for jobs with a "Specialist Cutting Tool Manufacturer". The advertisement stated that the requirement was "urgent". It gave no name or address for the prospective employer, but invited applications in writing to a box number.
On Friday 30th March 2000, Wayne Allen Alan Smith and Alan Morley gave notice to BMT of their resignation as directors and of the termination of their employments by BMT. The former were with immediate effect and the latter on one month's notice. None of them had written service contracts. The notices (addressed to Mr Gibson as the company secretary of BMT) were delivered to head office in Kent by courier late in the afternoon that day.
Tim Allen travelled up to Tamworth on the Saturday and spoke with Wayne Allen, Alan Morley and Alan Smith with a view to persuading them to change their minds. In this he was unsuccessful. When he met them again in Tamworth on the Monday morning (3rd April) he was presented by Alan Morley with resignations from 12 of BMT's skilled workers. Each gave notice that they would be leaving at the end of that week. Attempts by Tim Allen to persuade the local directors and the resigning workforce to stay proved unavailing. Each time Tim Allen ventured on to the shop floor the seceding elements in the workforce whistled the theme tune from The Great Escape. Tim Allen brought in additional managers from Kent, and made arrangements with a local competitor of BMT (Mercian Toolmaking) to fulfil BMT's order book under sub-contract. Wayne Allen, Alan Morley and Alan Smith were told that they would have to work out their notice (i.e. until the end of April), but were not to be permitted to have contact with suppliers or customers. Alan Smith in fact ceased to come into the work after Friday 7th April, being advised by his doctor to avoid the stress of attendance.
On Monday 10th April, Tim Allen and his new management team learned more of the plans of the Tamworth 4. Premises had evidently been acquired right next door to BMTs own, and members of the resigning workforce could be seen there. During the succeeding week or so a further two BMT employees left to join the new enterprise next door, the first defendant Midland International Tooling Limited (MIT).
A core component of BMT's business was the cutting tools it supplied to Ford Motor Company, either directly or through the medium of one or other of Ford's intermediary suppliers (Cross Hueller, Lamb Technicon and Sandvik being the principal ones). This work made up between 50% and 60°/o of BMT s total turnover of some £2–2.5m per annum. In the event BMT found itself unable to retain this business. BMT continued to retain some of its other customer base, and was able to continue an increasingly limp existence until August 2001 when its business finally closed down.
MIT had, by contrast, some success in attracting custom from BMT customers, including Ford. But major miscalculations of some kind appear to have been made in. connection with the working out of its business plan. The finance for the enterprise had been raised by the local directors from the second defendant Bradford Tool & Gauge Ltd (BTG) and/or BTG's founder and moving spirit the seventh defendant Bill McGrath (in whose wife's name the share capital of MIT was registered). By the autumn of 2000 it had become apparent that MIT had substantial trading losses, and BTG then moved to take control of its management. At the same time Don Allen and Wayne Allen resigned from MIT. Other redundancies followed. MIT continues in existence with a turnover of some £1.2m.
These proceedings were commenced in December 2000. In April 2001 BMT sought and obtained a search order of MIT's premises.
The Claims
The principal pleading (in paragraphs 9, 10 and 11 of the Amended Particulars of Claim) is one of conspiracy to damage BMT, the conspiracy being alleged against all the defendants and involving the following steps:
i) the setting up of MIT as a vehicle to carry on a competitive business with BMT;
ii) the copying and/or taking for use in MIT's competing business of (a) numerous drawings in hard copy and electronic form, (b) CNC computer...
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