Aerospace Publishing Ltd v Thames Water Utilities Ltd

[2007] EWCA Civ 3, 110 ConLR 1, [2007] All ER (D) 02 (Jan)

Court: CA

Judgment Date: 11/01/2007

Case History

Cases considered by this case

Catchwords & Digest

The defendant was a water undertaker for the purposes of the Water Industry Act 1991. One of its mains water pipes burst. A considerable quantity of the escaped water entered premises occupied by the claimants, both of which were publishing companies, and caused loss and damage. That damage occurred principally to the claimants' archives, and in particular to the first claimant's extensive archive of photographs, artwork and reference material relating to aviation. In proceedings brought by the claimants, the defendant admitted liability pursuant to s 209 of the 1991 Act. Quantum remained in issue, and a trial was held to determine the extent and nature of the loss and damage. The claimants argued, inter alia, that they intended to reinstate the archives and that, given that the market or resale value was unlikely to be adequate for that purpose, the computation should begin with the assessment and award of a sum representing the cost of replacement. It also sought to claim for the diversion of staff time, and the retention of two ex-employees on a freelance basis, as a consequence of the flooding. The defendant argued, inter alia, that whether or not the claimants really intended to restore the archive (which it doubted), the cost involved bore no adequate relationship to the prospective resultant financial return; that viewed objectively, it would be wholly unreasonable to seek to restore the archive; and that accordingly damages were to be assessed by reference to market value. It opposed the claim in respect of the diversion of staff time, and argued that some of the work undertaken by the freelancers was an item of costs, rather than damages. Both parties called experts to provide valuations of the archive. The judge found that (i) the claimants had an intention to restore so much of the archive as was constituted by photographic images and reference material, funds permitting; (ii) any award reflecting diminution in value would be inadequate for that purpose; (iii) the cost of restoration as intended by the claimants was reasonable in itself; and (iv) viewed objectively, it was reasonable to expend such amounts on restoration. He accepted the claimants' case regarding the diversion of staff time and the retention of freelancers. He ordered that the claimants were entitled jointly to £2,628,663. However, he refused, inter alia, to order that interest be paid on the whole sum, on the basis that no loss had been incurred for the archival restoration, and that the award did not represent the chattel, but had been given for a specific future exercise. The defendant appealed. The claimant cross-appealed against, inter alia, the judge's refusal to order the payment of interest on the whole sum.
The defendant submitted that the judge had (i) failed to give an adequate reason for rejecting a considerable body of evidence on the recent history of the claimants' business in relation to the question of whether the claimants would reinstate the archive, and whether such reinstatement would be objectively reasonable; (ii) failed to give adequate reasons for rejecting the defendant's expert evidence; (iii) erred in upholding the claim in respect of the diversion of staff time; and (iv) failed to address the defendant's objections in relation to the referable to the freelancers.

Held - (1) The claimants were entitled to recover damages on a reinstatement basis as the judge had found. The fact that the judge's reasoning could have been fuller made no difference to the ultimate outcome.
(2) The fact and, if so, the extent of the diversion of staff time had to be properly established and, if in that regard evidence which it would have been reasonable for a claimant to adduce was not adduced, he was at risk of a finding that they had not been established. A claimant also had to establish that the diversion had caused significant disruption to its business. Even though it might well be that strictly the claim should be cast in terms of a loss of revenue attributable to the diversion of staff time, nevertheless in the ordinary case, and unless the defendant could establish the contrary, it was reasonable for the court to infer from the disruption that, had their time not been thus diverted, the staff would have applied it to activities which would, directly or indirectly, have generated revenue in an amount at least equal to the costs for employing them during that time. In the instant case, the diversion of the time of a significant number of the claimants' employees, particularly their senior employees, had been set out in detail and adequately established, and there could be no sensible challenge to a conclusion that their business had thereby been disrupted, indeed substantially so. The judge had therefore been entitled to draw the inference that the employees had been diverted from revenue-generating activities. The judge would, however, have upheld the defendant's contention as to the work done by the two freelancers, since some of the work appeared to be an item of costs, rather than of damages, and the onus had been firmly on the claimants adduce clear evidence that the other items had not been analogous. It followed that the defendant's appeal failed, save in relation to the sum allegedly incurred in respect of the two freelance ex-employees.
(3) The fact that the judge had favoured a computation of most of the loss by reference to the cost of a restoration not yet conducted did not alter the date of the loss. It followed that there was a flaw in the judge's refusal to award interest on the entire figure of £2,328,144, and in that regard the cross-appeal would be allowed. It followed that the claimants' cross-appeal substantially succeeded.

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