Gorne v Scales and Others

JurisdictionEngland & Wales
JudgeLord Justice Moore-Bick,Lady Justice Arden,Lord Justice Ward
Judgment Date29 March 2006
Neutral Citation[2006] EWCA Civ 311
Docket NumberCase No: A3/2005/1155
CourtCourt of Appeal (Civil Division)
Date29 March 2006

[2006] EWCA Civ 311






Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Ward

Lady Justice Arden and

Lord Justice Moore-Bick

Case No: A3/2005/1155

HC 1999 02350

Jane Margaret Gorne
(1) Alec Vernon Scales
(2) Philip Mark Taylor
(3) Jonathan Robin Bill

Mr Charles Scott (instructed by Baker Gotelee) for the appellantsle>

Mr Simon Davenport (instructed by Rogers & Norton) for the respondent

Lord Justice Moore-Bick

This is an appeal by the defendants against the judgment of Master Bragge delivered on 1 st April 2005 on an inquiry as to damages suffered by the claimant, Mrs. Gorne, following the trial of an action in the Chancery Division in which judgment was delivered in November 2002. The action arose out of the dissolution in May 1993 of a partnership known as Seeds Direct between Mrs. Gorne and the first two defendants, Mr. Scales and Mr. Taylor, and the formation very shortly afterwards of a new partnership called TGS Seeds ("TGS") between Mr. Scales, Mr. Taylor and the third defendant, Mr. Gill.


The origin of the matter can be traced back to the early 1980s when Mr. Jonathan Stollery started trading in the business of cleaning and dressing farm-saved seed. Some time later he was joined by a Mr. John Wilsdon and together they ran a company known as W&S Agriculture Ltd. That company ceased trading at the end of 1990 when Mr. Stollery set up two complementary partnerships to continue the business, Seeds Processing International ("SPI"), which was formed with his brother Joseph in order to carry on the operational side of the business, and Seeds Direct, which was formed to carry on the marketing and administrative side. Although Mrs. Gorne was a partner in Seeds Direct, she did not take an active part in its affairs but, as the judge found, was representing the interests of Mr. Stollery. The intention was for Seeds Direct to enter into contracts for cleaning and dressing seed which would be performed by SPI as a sub-contractor.


From the time he started out in the seed cleaning business Mr. Stollery kept detailed records about his customers, including their addresses and telephone numbers, the quantities and types of seed he processed for them from year to year and the amounts he charged for the service. He kept this information on a card index which by the end of 1990 contained a continuous record of his business operations stretching over a period of nearly ten years. When SPI and Seeds Direct were formed in 1991 they both continued to make use of the premises previously used by W&S Agriculture. The card index remained in the offices where it always had been but effectively became part of the assets of Seeds Direct.


The business of SPI and Seeds Direct was reasonably successful during 1991, but in 1992 it deteriorated to the point at which SPI was unable to keep up the payments due in respect of its leases of seed cleaning equipment. Eventually during February and March 1993 that equipment was repossessed by the lessors and in April 1993 SPI stopped trading altogether. The financial difficulties and eventual collapse of SPI together with the unwillingness of Mr. Scales and Mr. Taylor to fund any further investment inevitably meant that Seeds Direct could no longer continue to function. Indeed, Mr. Scales and Mr. Taylor had obviously become concerned about the financial stability of the business before the end of 1992 because in December of that year Mr. Scales withdrew his capital without warning from the partnership account and in April 1993 Mr. Taylor followed suit. Unbeknown to Mr. Stollery or Mrs. Gorne they were already making arrangements to set up a new business in collaboration with Mr. Gill, but that only came to light on 17 th May 1993 when Mr. Stollery discovered a printer's proof of a flysheet prepared for distribution to potential customers announcing the formation of TGS.


5. Once their plans were out in the open Mr. Scales and Mr. Taylor had little choice but to give notice to Mrs. Gorne dissolving Seeds Direct, which they duly did the same day. Since Seeds Direct was a partnership at will, the notice of dissolution was effective immediately. A short time later Mr. Scales and Mr. Taylor sent round to all the customers of Seeds Direct a notice of its dissolution together with a copy of the flysheet announcing the formation of TGS. At about the same time he and Mr. Taylor took the card index from the offices of Seeds Direct for use in the new business. At the end of May or the beginning of June TGS bought from the lessors the majority of the equipment previously used by SPI, including seven of its ten seed-cleaning lorries, and took on many of SPI's former employees. It also managed to buy the computer previously used by Seeds Direct which still held some of its business records. Armed with all that, as well as the knowledge of the business that Mr. Scales and Mr. Taylor had previously acquired, TGS was able to set up business on its own account in time for the start of the 1993 season in the latter part of July. TGS was formally established on 22 nd June 1993 with effect from 18 th May 1993.


Attention was then directed to winding up the affairs of Seeds Direct and it was not until some time later that disputes began to arise over the ownership of the card index. Mr. Stollery, who by then had broken off his previous relationship with Mrs. Gorne, started proceedings against the defendants in May 1999 claiming that it belonged to him and the next day Mrs. Gorne started the present proceedings claiming that it was the property of Seeds Direct in which she held a 50% interest. She sought to recover from the appellants damages for misuse of confidential information or an account of the profits made by TGS through its use.


On 29 th October 2002 issues relating to liability in both actions came on for trial before Mr. Kevin Garnett Q.C. sitting as a Deputy Judge of the Chancery Division. In a judgment delivered on 14 th November he rejected Mr. Stollery's claim altogether and held that Mrs. Gorne, Mr. Scales and Mr. Taylor were equal partners in Seeds Direct. He held that the card index and the information it contained, as well as the information held on the computer that had formerly belonged to Seeds Direct were assets of the partnership which they and Mr. Gill had wrongfully taken and used for their own purposes. Mr. Garnett directed that there be an enquiry by the assigned Master as to the loss and damage suffered by Mrs. Gorne by reason of the wrongful interference with the card index itself and the misuse of the confidential information contained in both the card index and the computer.


Thus it was that the matter eventually came before Master Bragge on 3 rd November 2004. After a trial lasting three days the Master reserved judgment which he delivered on 1 st April 2005. He held that Mrs. Gorne was entitled to damages in the sum of £152,341 in respect of her one third interest in the card index together with interest in the sum of £106,638.70 making a total of £258,979.70. It is against that decision that the defendants now appeal.


The notice of appeal in this case contains no less than twenty-two separately identified grounds, but many of them are little more than different reflections of one central point, namely, that the method of valuing the card index put forward by Mrs. Gorne's expert witness and adopted by the Master as the basis of his decision did not reflect the correct approach in law to assessing the value of the confidential information to Seeds Direct in late May 1993. In order to understand that complaint it is necessary to look a little more closely at the evidence that was before the Master and the way in which the arguments developed.


It may help to begin by clarifying three matters. The first concerns the card index itself. Mrs. Gorne made claims in respect of the wrongful interference with the physical property represented by the card index as well as in respect of the misuse of the confidential information it contained. However, by the time of the enquiry before the Master it was recognised by all concerned that the cards themselves had no intrinsic value; such value as they had was entirely derived from the confidential information they contained. Accordingly, attention was directed solely to that information and references to the index, both in the Master's judgment and in this judgment, can be taken as references to that confidential information. The second is that, although TGS obtained the computer that had previously belonged to Seeds Direct, the information it contained was of minimal value and can also be disregarded for present purposes. The third is that Mrs. Gorne elected to seek a remedy in damages rather than an account of profits and it was common ground, therefore, that her loss was to be measured by reference to the value of the confidential information at the time when it was wrongly removed by the defendants from Seeds Direct's offices during the latter part of May 1993. The only dispute that remained, therefore, was how that should be ascertained.


At a case management conference at which directions were given for the preparation of the case for trial both sides were given permission to call expert evidence, but unfortunately insufficient consideration appears to have been given at that stage to the kind of evidence that would be likely to assist the court. In the event Mrs. Gorne called an accountant, Mr. Maurice Land, who had considerable experience of valuing small...

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