Parabola Investments Ltd and another v Browallia Cal Ltd and Others

Hearing date: 22 May 2009

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 Hon. Mr Justice Flaux:

When I handed down judgment on the 6th May this year there were a number of matters outstanding. Firstly, the assessment of damages to which Tangent were entitled on the basis of the principles set out in my judgment, to the extent those damages could not be agreed; secondly, Man's application for permission to appeal; and thirdly, the issue whether Man should pay costs on an indemnity basis. The hearing was fixed for today, 22nd May, to resolve those outstanding issues. One of those issues has now fallen away, as Man accepts liability to pay costs on an indemnity basis. However, the amount of damages remains in dispute, as does the question whether Man is entitled to permission to appeal, and there is also an application by Man for a partial stay of execution pending any appeal.

This judgment deals with the issues of assessment of damages which have been argued today. At the time of the hand-down of the judgment, Tangent had produced in draft various calculations made by their forensic accountant, Mr Creed, of the damages which essentially produced an overall figure of some £19,750,000, a figure which was intended to reflect the loss of the trading fund during the period of the fraud, the loss of profits and prejudgment interest. That figure was not agreed, and at that stage I made an order for an interim payment by Man of £5 million.

The appendices to Mr Creed's calculations were served in a final form on 8th May, and on 13th May Man served rival appendices, appendices A, B and C, containing alternative damages calculations based upon the work of their forensic accountant, Mr MacGregor. These contain what are described as refinements on the way in which Tangent had calculated its damages which, taken cumulatively, culminated in Appendix C which had the effect of reducing the damages recoverable by some £6 million to £13,651,161.

Appendix B is no longer pursued, and on appendix A there is only one point which remains in issue between the parties. However, that point and Appendix C do remain in issue, and I shall have to deal with them in more detail in a moment.

Before I do so, I should deal with an overall and fundamental objection to the Appendices and the approach of Man raised by Mr Kitchener QC on behalf of the claimants. That is that Mr Brindle QC is seeking to re-open my judgment, in effect to invite me to recall my judgment. Mr Kitchener submits that is not permissible.

Before a judgment is perfected and the order in respect of it sealed, there is a limited jurisdiction in the court to re-open the judgment, exercisable where there are what the authorities variously describe as “exceptional circumstances” or “strong reasons”. The scope of this limited jurisdiction was described as follows by Lord Justice May in paragraph 94 of his judgment in Robinson v Fernsby [2003] EWCA Civ 1820, and I quote:

“Once a judgment has been handed down or given, there are obvious reasons why the court should hesitate long and hard before making a material alteration to it. These reasons have been rehearsed in the cases to which I have referred and I need not elaborate them further. The cases also acknowledge that there may very occasionally be circumstances in which a judge not only can but should make a material alteration in the interests of justice. There may, for instance, be a palpable error in the judgment and an alteration would save the parties the expense of an appeal. On the other hand, re-opening contentious matters or permitting one or more of the parties to add to their case or make a new case should rarely be allowed. Any attempt to do this is likely to receive summary rejection in most cases. It will only very rarely be appropriate for parties to attempt to do so. This necessarily means that the court would only be persuaded to do so in exceptional circumstances, but that expression by itself is no more than a relatively uninformative label; it is not profitable to debate what it means in isolation from the facts of a particular case.”

In fact, since the order reflecting my judgment was sealed on 13th May, this limited jurisdiction is no longer available even if I thought it appropriate to exercise it. The judgment of Mr Justice Jack in the case of The Seventh Earl of Malmesbury v Strutt & Parker [2007] EWHC 2199 (QB) makes explicit what is clearly implicit from the earlier cases, including the decision of the Court of Appeal in Robinson to which I have referred, that once the order has been sealed in respect of a particular matter, the court is functus officio so far as re-opening the judgment is concerned. Any remedy lies in the Court of Appeal, if anywhere.

Having said all of that, however, I am far from convinced that all the refinements in Appendixes A and C necessarily involve re-opening the judgment. Obviously there is a fine line here. Paragraphs 193 and 210 of my judgment expressly contemplated that, to the extent that the parties could not agree the question of damages in the light of the written judgment, there would have to be further submissions, and the order I made reflected that, if not agreed, damages would have to be assessed.

Accordingly, to the extent that Man's submissions arise out of my judgment and the findings which I made, it seems to me they are legitimately put forward. It is only if the calculations and the submissions based on them go beyond my findings and invite me to make further findings inconsistent with the findings which I have already made that it seems to me Man go beyond what is permissible. That is essentially the point which Mr Justice Jack was making in the Seventh Earl of Malmesbury judgment at paragraph 16.

I agree with Mr Brindle that the present case is in a somewhat different category from the Earl of Malmesbury's case, in the sense that I contemplated that in the event the parties couldn't agree, there would be the need to be a further hearing, with submissions made not just on the findings I have made but on the evidence at trial. Appendix A put forward by Man contains two principal refinements on the damages calculated according to Mr Creed's schedule. First, interest is calculated from the relevant 31st March in each year, as set out in paragraph 190 of my judgment. In contrast, Mr Creed had taken the middle of the year. This adjustment, which seems to me to be entirely appropriate, is accepted in principle by Tangent. The other refinement or adjustment relates to withdrawals in the annual period to 31st March 2002 shown in the table in paragraph 192 of my judgment as totalling £605,000, of which £100,000 was the assumed annual withdrawal for expenses.

The calculation made by Mr Creed proceeds on the assumption that the withdrawals are all made at the end of the year. Mr MacGregor has recalculated the figures on the basis of the actual dates of the withdrawals of the £505,000, that is other than the £100,000 assumed expenses, and the dates of those withdrawals were various dates in November and December of 2001 and January 2002. In terms of the overall effect of this point, it makes a difference somewhere in the region of between £175,000 and £200,000.

In effect, what Man and Mr MacGregor are doing is saying that the 50 per cent annual profit percentage for that year should be calculated by reference to a reducing balance from time to time. It is noticeable that this approach entails using an opening balance for the year commencing 1st April 2002 of £4,554,493, a figure which appears nowhere in my judgment. The table in paragraph 192 provides an opening balance of 4,601,250.

Accordingly, on this point it seems to me that, albeit to a relatively limited extent, Man are trying to go behind my judgment. However, I would be reluctant to shut Mr Brindle out on this point on that somewhat technical basis if I thought the point was a good one. Mr Brindle emphasised with some force that where the court knows what actually happened, here the dates when withdrawals were actually made, the court should proceed on the basis of what have actually happened, not on an assumption, which is contrary to the actual fact, that all withdrawals were made at the same time at the end of the period.

It seems to me that there is necessarily a quid pro quo of that submission which Mr Brindle ignores, namely, the increases in the balances which would have occurred as a consequence of profits made in the year to 31st March 2002. In other words, as Mr Kitchener puts it, the Appendix A calculation compounds only in one direction. The correct calculation on this hypothesis would be a very complex one and is completely contrary to the basis upon which I ordered damages to be assessed. It seems to me it is in neither party's interest to go down this particular route which, as I have said, does involve revisiting the opening fund of £4,601,250, and I can see no good reason to do so, let alone a strong reason or...