The owners of the Cadbury brand have won a £4m interim payment from the manufacturers of a fire detection system after a Pontefract popcorn factory was destroyed by a blaze that started with just one piece of popcorn.
Kraft Foods UK Confectionery Production Ltd, which bought the Cadbury brand in 2010, had sought an “interim payment” of £15m from ADT Fire and Security ahead of a damages trial in which it hopes to recover £30m plus interest.
Its initial claim against ADT amounted to £120m, but, in July 2011, Coulson J ruled that The Cadbury UK Partnership had itself been negligent in failing to protect the popcorn manufacturing facility at Monkhill, Ferrybridge Road, Pontefract, West Yorkshire, from the risk of fire.
Though he found that ADT was liable to the claimants, after the fire detection system it installed on the popcorn conveyor failed on the night of 8 June 2005 when the fire occurred, he ruled that the value of the claim should be reduced by 75% to reflect the claimants’ contributory negligence. His ruling was upheld by the Court of Appeal in July.
In his ruling today on an interim award, Coulson J said that the manufacturing unit was “entirely destroyed by fire”, and added: “It is likely that the fire was caused by the ignition of just one piece of popcorn.”
“The claim was originally pleaded in the sum of around £120m, together with interest. Thus, even taking into account the 75% reduction for contributory negligence, the claimants’ claim could still be worth as much as £30m, plus interest. That is the background to this application for an interim payment.”
He said that the claimants spent some £70m reinstating the manufacturing unit and putting back all the equipment, but then sold the entirety of this arm of their business, including other sites, other equipment, and the value of the brands themselves, for just £55m in the Kraft takeover in 2010.
This, he said, “raises the issue as to why the claimant spent so much on a business which, on the face of it, was not worth that level of financial support”.
He said that, while Cadbury’s claim for damages was based on the proposition that they are entitled to the cost of reinstatement of the manufacturing unit, ADT maintains that, in the circumstances, the right measure of loss in this case is the reduction in value of the business at the time of the fire.
He said that this issue will be determined during the damages trial, and that one difficulty ADT will face is that the rebuilding was covered by insurance, and the nature, scope and extent of any insurance arrangements are irrelevant to the court’s assessment of damages.
He said that the case will raise the question: “How, therefore, does the court address a situation where, on the one hand, the claimants took an uneconomic and therefore unreasonable decision but where, on the other, if one factors into the equation the reality that the reinstatement and the re-equipment was going to be free of charge from their point of view, the decision looks rather more understandable?”
However, in setting the interim payment, he was “not prepared to say that the defendant’s argument is fanciful or bound to fail”.
Calculating the figure on that basis, and including £750,000 for loss of profits, he said: “Even on the defendant’s analysis of quantum, I can be confident that the sum of £4m would be recovered by the claimants in this litigation. I would therefore identify that as the sum to be paid on account by way of an interim payment.”
Trebor Bassett Holdings Ltd (in liquidation) and ors v ADT Fire and Security plc Technology and Construction (Coulson J) 28 November 2012
Roger ter Haar QC and Mr. Ben Quiney (instructed by DAC Beachcroft LLP) for the claimants
Nicholas Dennys QC and Ms. Dominique Rawley QC (instructed by Eversheds LLP) for the defendant