The Gazette 1975

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] 17

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-