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mercial unit was dead.
Breaches of contract by defendants enumerated
These are the important breaches of contract from
which the damage flowed. The abstraction of the com-
pany's documents and the taking of copies of some, as
well as the representation to outsiders that R.M.B.
was the successor of the company or merely the com-
pany under a different name, are all breaches of con-
tract and the latter is also a tort but they are sub-
ordinate to the main activity of the defendants in seek-
ing to achieve a smooth and effective transfer of busi-
ness and staff to themselves
Damages claimed on total loss of business
The net profit of the company before tax in the first
year of its trading to 30 June 1973 was £15,263. This
figure which appears in the company's audited accounts
is calculated on the basis that the company is now
defunct and that with the loss of staff there may be
considerable difficulty collecting many debts which
otherwise would have been readily recoverable. Adjust-
ing the figure for bad debts to what it would have
been had there been no breach of contract the year's
profit would be £18,314.
In the month of July, 1973, the rate of profit had
increased to just over £2,000 per month. Taking the
company and the Belfast branch of Fogarty Advertising
Ltd. as one business there had been a rapid rise in
annual profits over the years. Overnight that business
has gone. That disappearance is due entirely to the
defendants' wrongful acts.
The company claim damages on the basis of the total
loss of its business and Mr. Wilson, a partner in the
firm of accountants who are the company's auditors,
calculated that the true net annual profit after tax based
on last year's accounts but assuming no artificial in-
crease in bad debts was £8,757. He considered that
a fair value to put on the company's goodwill as at
30 June 1973 was five year's purchase of that figure
or £43,785, which is about half the number of years'
purchase represented by the stock market quotations of
public companies engaged in a similar type of business.
In
Sanders v. Parry
the employee could have
terminated his employment by one month's notice
and yet the damages were calculated as the loss
of profits for one year.
I think one must start from the proposition that the
loss whatever its measure may be has resulted directly
from the defendants' breaches of contract. It is true
that the defendants, had they been less precipitate, and
had they acted on legal advice, might have determined
their contracts without breach and perhaps also might
have set up in opposition quite legitimately
But who is to say what would have happened had
they tendered their resignations in a proper way and
had, during the currency of their notices, been scru-
pulous to make no overtures to either staff or clients?
In the time permitted Mr. Fogarty might well have
negotiated satisfactory contracts entitling the defen-
dants to be paid more generously and so preserved their
services and the business, or he might have been able
to establish the personal contacts with the clients, who
after all were very few in number, which would have
preserved some of their connections; or he might have
arranged to sell the company as a going concern or
merged with another company.
If one applies the principle adopted in
Sanders v.
Perry
one must at least compensate the company for
the loss of the chance of retaining its business. A state-
ment of principle more favourable to the company if it
is applicable is provided by the Mihalis Angeles (1971)
1 Q.B. 164 where in the case of an anticipatory breach
of contract which was accepted as a repudiation of the
contract it was held that if the rights lost could within
the terms of the contract be rendered less valuable and
if it could be shown that at the time of the repudiation
the events producing that reduction in the loss were
predestined to happen or were inevitable then the
damages recoverable must be related to that unavoid-
able future situation.
This principle would seem to be no less applicable
where a repudiation has not been accepted as a re-
scision. As I have indicated there was no certainty as to
what course events would have taken had the contract „
not been repudiated in the present case, that decision
provides no basis for reducing the damages below the
measure of actual loss resulting from the breaches of
contract.
Taking into account that there was no long-term
contract with any of the defendants, and that only Mr.
Mitchell was contractually restricted from setting up
in competition with the company after termination of
his contract, and bearing in mind the personal charac-
ter of the relationship with the clients, I consider that
five years' purchase of the value of the goodwill of the
business overestimates the value of the chance which
the company had of retaining its business.
Miss Ralston in evidence said that her offer in her
mind represented £6,000 for tangible assets and
£14,000 for goodwill, which, she said, could be related
to one year's profits, though she seemed to be thinking
in terms of profits before tax as against Mr. Wilson's
calculations based on porfits after tax; and Mr. O'Boyle
who is obviously very experienced in business affairs
had explained to Miss Ralston on August 1 that in
such a case th« proper value of such a business was "a
number of times the net profit". I have little guidance
from the evidence beyond the facts stated but I con-
sider that two and a half years' purchase of the profits
for the company's first year of trading after tax is a
reasonable estimate of the loss.
Accepting Mr. Wilson's figure of £8,757 and allow-
ing for the trivial value of the business retained I
award £21,700 on the claim. As there is no relevant
distinction between the defendants who have in this
matter acted together and for their mutual benefit the
judgment will be against all three defendants jointly
and severally for that amount. I consider that this is a
case in which I ought to award interest to the company
on the amount found due to it as claimed in the writ
of summons. I therefore award interest from 1 August
1973 to the date of judgment on £21,700 and having
regard to current interest rates I award it at the rate
of £8 per cent, per annum.
Miss Ralston also counter-claims for £2,303 the price
which she has paid or will have paid when she has dis-
charged all hire-purchase instalments on a motor-car
which the company agreed to provide for her. This
sum is agreed and I award £2,303 to Miss Ralston
against the company. Her counter-claim does not in-
clude a claim for interest and in any event this item
is not one where interest should be allowed as the
instalments on the hire-purchase agreement are payable
over a period of two and a half years of which a
considerable part still lies in the future.
I
award the costs of the action to the company against
all three defendants and make no order as to the costs
of the counter-claim.—[Fogarty Advertising Ltd. v.
Ralston and Mitchell—Northern Ireland High Court
(Gibson
J.)—
unreported—26th November, 1973]
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