BSM Marketing Ltd & Anor v Take Ltd

Damages for loss of a commercial opportunity require assessment of both the chance that the opportunity would materialise and the profit that would have been earned if it did. Where products produce different margins and are sold in different quantities, a weighted average is the proper starting point for historic profit margins. An appellate court should not interfere with credibility-based findings or commercial estimates unless the trial judge’s conclusion is shown to be perverse. A projected sales volume may be accepted despite exceeding historic sales where it is supported by evidence and assessed alongside a cautious probability of success.

The appellants appealed against the quantum of damages awarded after liability had been found for breach of fiduciary duty and misuse of confidential information while acting as the respondent’s agent. The damages represented loss of a chance of further orders from Dreams and, in part, Argos. The appeal challenged the historic profit margin, the evidence supporting supplier prices for new products, and the forecast volume of new-product sales. No retrial was sought. The central issue was whether the trial judge’s assessment of lost profits was legally and evidentially sustainable.

The appeal was dismissed and the award of £144,871.54 inclusive of interest was upheld.

1. Basis of assessment. It was common ground that the damages represented the loss of a chance of further orders. The assessment required both the probability that the orders would have been obtained and the profit that would have been made if they had.
2. Existing products. The Court held that a weighted average, reflecting the quantities sold at different margins, was in principle the proper method for assessing the historic profit margin. The judge was entitled to accept evidence that the Highgrove bed had a lower purchase cost than that inferred from a single purchase order, which would otherwise have implied sales at a loss. The credibility finding was not perverse. Keene LJ’s reasoning appears at [9]-[14].
3. The judge was entitled to make a conservative allowance for the prospect that Dreams would negotiate lower prices. Keene LJ accepted the use of 20.68% as an available estimate from an agreed schedule. Pill LJ considered that the proper starting point was 30.17%, followed by a deduction of about one-third, but upheld an award based on approximately 20%; the difference between 20% and 20.68% was de minimis. [15], [28]-[31].
4. New products. The challenge to the evidence of supplier costs and selling prices concerned credibility and did not overcome the high threshold for appellate interference. The same reasoning applied to the corresponding Argos point. [18]-[19].
5. The judge was entitled to accept an estimate of 850 units per month for new products, although it exceeded existing sales, because it was supported by oral evidence, considered against only a 25% chance of new orders, and was not displaced by a lower estimate. [20]-[23].

Sir Paul Kennedy agreed. Pill LJ agreed with the result and added separate reasoning.

• Court of Appeal (Civil Division): dismissed the appeal and upheld the damages award.
• Queen’s Bench Division, High Court: His Honour Judge Toulmin CMG QC found liability on 12 April 2006 and, on 30 October 2007, awarded £144,871.54 inclusive of interest.