INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL
B e f o r e :
| SDL HAIR LIMITED
|- and -
|(1) NEXT ROW LIMITED
(2) RMG LIMITED
(3) UNIL C9 LIMITED
(4) GAVIN RAE
Hugh Jory QC (instructed by Lupton Fawcett Denison Till) for the Defendants
Hearing dates: 13th and 14th May 2014
Crown Copyright ©
Judge Hacon :
Promotion of the Ego Boost to QVC and Alan Howard
Reactions to the threats
(1) Loss of profit caused by the cancellation by QVC of the TSV which was to have been held on 3 July 2012, including sales in the 7-10 days immediately following the TSV.
(2) Loss of profit on orders that QVC would have placed between August 2012 and judgment on 14 June 2013.
(3) Loss of profit caused by the reduction in price charged to QVC which was required to persuade QVC to resume promotion of the Ego Boost.
(4) Loss of profit caused by the reduction in price negotiated with Alan Howard on sales up to judgment in June 2013.
(5) Loss of profit resulting from the reduction in sales to Alan Howard caused by one or more of the Three Letters in the period up to 18 September 2012 (the date of the Alan Howard Email).
(6) Loss of profit resulting from the reduction in sales to Alan Howard in the period 18 September 2012 to judgment on 14 June 2013 caused in particular by the Alan Howard Email.
(7) Loss of profit resulting from the reduction in sales caused by the Three Letters and the Alan Howard Email from 14 June 2013 to the end of 2013.
(8) Loss of profit caused by (a) the reduction of £5 in the price charged to Alan Howard and (b) the payment of £5 per unit to Alan Howard's sales force in relation to sales between 14 June 2013 to the end of 2013.
(9) Loss of profit resulting from the reduction of £5 in the price for the Ego Boost in relation to projected sales in the years 2014 to 2016 caused by the Three Letters and the Alan Howard Email.
The total sum claimed easily exceeds the cap of £500,000 damages which can be awarded in this court.
(10) Interest on any of the heads of loss identified above to which SDL is entitled.
(11) Whether the defendants are jointly liable for the threats. In particular whether Cloud Nine and Gavin Rae are jointly liable in relation to the losses caused by the Three Letters.
(1) A successful claimant is entitled, by way of compensation, to that sum of money which will put him in the same position he would have been in if he had not sustained the wrong, see Livingstone v Rawyards Coal Co. (1880) 5 App.Cas., 25 per Lord Blackburn at 39.
(2) The claimant has the burden of proving the loss, see General Tire and Rubber Company v Firestone Tyre and Rubber Company Limited  RPC 197, at 212.
(3) The defendant being a wrongdoer, damages should be liberally assessed but the object is to compensate the claimant, not punish the defendant, see General Tire at p.212.
(4) The claimant is entitled to recover loss that was (i) foreseeable, (ii) caused by the wrong and (iii) not excluded from recovery by public or social policy, see Gerber Garment Technology Inc v Lectra Systems Ltd  RPC 443, at 452.
(5) In relation to causation, it is not enough for the claimant to show that the loss would not have occurred but for the tort. The tort must be, as a matter of common sense, a cause of the loss. It is not necessary for the tort to be the sole or dominant cause of the loss, see Gerber at p.452.
(6) An inquiry will generally require the court to make an assessment of what would have happened had the tort not been committed and to compare that with what actually happened. It may also require the court to make a comparison between, on the one hand, future events that would have been expected to occur had the tort not been committed and, on the other hand, events that are expected to occur, the tort having been committed. Not much in the way of accuracy is to be expected bearing in mind all the uncertainties of quantification. See Gerber at first instance  RPC 383, per Jacob J, at 395-396.
(7) Where the claimant has to prove a causal link between an act done by the defendant and the loss sustained by the claimant, the court must determine such causation on the balance of probabilities. If on balance the act caused the loss, the claimant is entitled to be compensated in full for the loss. It is irrelevant whether the court thinks that the balance only just tips in favour of the claimant or that the causation claimed is overwhelmingly likely, see Allied Maples Group v Simmons & Simmons  WLR 1602, at 1609-1610.
(8) Where quantification of the claimant's loss depends on future uncertain events, such questions are decided not on the balance of probability but on the court's assessment, often expressed in percentage terms, of the loss eventuating. This may depend in part on the hypothetical acts of a third party, see Allied Maples at 1610.
(9) Where the claim for past loss depends on the hypothetical act of a third party, i.e. the claimant's case is that if the tort had not been committed the third party would have acted to the benefit of the claimant (or would have prevented a loss) in some way, the claimant need only show that he had a substantial chance, rather than a speculative one, of enjoying the benefit conferred by the third party. Once past this hurdle, the likelihood that the benefit or opportunity would have occurred is relevant only to the quantification of damages. See Allied Maples at 1611-1614.
" Where the quantification of loss depends on an assessment of events which did not happen the judge is left to assess the chances of the alternative scenario he is presented with. This has nothing to do with loss of chance as such. It is simply the judge making a realistic and reasoned assessment of a variety of circumstances in order to determine what the level of loss has been."
" As these citations show, despite Allied Maples having been the leading authority for nearly 20 years, this area is one that continues to cause real difficulties of classification and application. What I understand from these authorities can be summarised, with I hope suitable diffidence, as follows:
(1) There is a difference between the question whether a loss has been caused by the wrong complained of, and if it has, the quantification of that loss. The fact that there is a distinction is in principle clear; what is not always clear is where the line is to be drawn.
(2) Sometimes what the claimant has lost was only ever an opportunity to obtain something else, for example the chance to take part in a competition or the opportunity to bring litigation. Such an opportunity is a valuable right in itself, and what the claimant proves (on the balance of probabilities) is that he has lost that right; the assessment of the value of the right then depends on the chances of success. As Patten LJ says in Vasiliou at  this is because what has been lost is by definition the loss of a chance. It would obviously be wrong to value the right to take part in a competition at the value of the prize that might be won as the claimant never had a right to the prize, only the right to enter the competition. It would also be wrong to value the right to bring litigation as if it were bound to succeed, if, as is almost inevitably the case, the outcome of the litigation is uncertain. A claim with a prospect of success has a value, but until judgment has been obtained (and indeed it is clear that it can be successfully enforced) that value is not the same as the amount which would be awarded were it to succeed.
(3) What Patten LJ makes clear, which had not I think been so clear before, is that this is not quite the same type of case as Allied Maples. In an Allied Maples case the claimant has not lost a valuable right, but he has lost the opportunity of gaining a benefit, albeit one which depends on a third party acting in a particular way. In such a case the claimant is not required to prove that the third party would have acted in that way, only that there was a real and substantial chance that he would. This is still a question of causation, not of quantification (see Vasiliou at , and also First Interstate Bank of California v Cohen Arnold & Co  CLC 174 at 182 per Ward LJ, cited in Vasiliou at ); but if the claimant does establish that there was such a real and substantial chance, then when it come to quantification, his damages will be assessed not at 100% of the value of the benefit he would have obtained, but at the appropriate percentage having regard to the chances of his obtaining it. I only add the obvious point that in some cases, where the chance is found to be say 30%, the requirement that the claimant only need show that he has lost a real and substantial chance is beneficial to him (as if he had to prove how the third party would have acted on the balance of probabilities, he would recover nothing); but in other cases, where the chance is assessed at say 70%, it has the effect of only enabling him to recover 70% of the damages he otherwise would. But as I read the authorities, the claimant does not have a choice whether to adopt the Allied Maples approach; if the case is an Allied Maples type of case, this is the appropriate way to approach the issues of causation and quantification.
(4) However, as Parabola and Vasiliou illustrate, there are other cases where the claimant does not seek to establish as a matter of causation that he has lost the opportunity of acquiring a specific benefit which is dependent on the actions of a third party; rather, he claims he has lost the opportunity to trade generally, and claims the loss of profits that he would have made.
(5) It seems that in such a case the Court must first decide whether the claimant would have traded successfully. It is not entirely clear if this is part of the question of causation and a separate exercise from quantification; or whether it is to be regarded as part of the quantification exercise. Toulson LJ in Parabola at  fairly clearly treats the finding of Flaux J that "on a balance of probability Tangent would have traded profitably…" as part of the question of causation as he deals with it in the context of the claimant having first to establish an actionable head of loss, and coming before the "next task" which is "to quantify the loss". On the other hand Patten LJ in Vasiliou at  seems to have regarded the question as part of the exercise of quantification: see his reference to there being "no doubt at all that the breach had caused the loss subject only to the quantification of that loss", and to Mr Vasiliou's competence and the restaurant's prospects of success not being matters that went to causation at all but being relevant at most to the assessment of how profitable the restaurant would have been.
(6) On either view this is clearly a different type of exercise from that undertaken in an Allied Maples case. It does not require the Court to find that there was a real and substantial chance of a third party acting in a particular way; but to reach a conclusion whether trading would have been profitable or not. However the exercise is characterised, I think it must follow that this is a simple yes/no question (would the trading have been profitable?), and hence falls to be decided on the balance of probabilities. I accept that this is so, even though as a matter of strict logic it is not entirely obvious why there should be such a sharp difference of approach from the Allied Maples type of case. The profitability of the restaurant in Vasiliou presumably depended on whether it would have attracted sufficient custom, or in other words whether a number of third parties would have chosen to come to Mr Vasiliou's restaurant; and this does not seem very different in kind, only in degree, from the question in Allied Maples which was whether the third party in question would have chosen to accede to Allied Maples' request for a particular contractual term. It may be that the difference is between one particular third party and a pool of potential customers; in the case of an individual third party, the Court must assess the chance of his acting in a particular way, but in the case of a pool of potential customers, the Court is not concerned with how any individual would have behaved but with whether there would have been sufficient custom generally to make the business a success.
(7) Be that as it may, it is clear from Parabola and Vasiliou that if the Court finds that trading would have been profitable, it then makes the best attempt it can to quantify the loss of profits taking into account all the various contingencies which affect this: see Parabola at . This neither requires any particular matter to be proved on the balance of probabilities (see Parabola at ) nor has anything to do with the loss of a chance as such (see Vasiliou at ). The assessment of the loss will itself include an evaluation of all the chances, great or small, involved in the trading (see Parabola at ). Once the judge has assessed the profits in this way, any further discount is therefore inappropriate (see Vasiliou at )."
The categories of loss in the present case
Dates of delivery of the Ego Boost to SDL
13 August 2012 204 units delivered directly to Alan Howard.
Of these 30 were water damaged.
7 September 2012 1,397 units delivered directly to Alan Howard.
Mid-October 2012 4,500 units delivered to SDL
Late February 2013 Date by which all 20,000 had been delivered to
SDL's Danish parent company.
2 July 2012 204 units delivered (30 damaged).
27 July 2012 1,397 units delivered.
Start of September 2012 4,500 units delivered.
Mid January 2013 Date by which all 20,000 units would have been
delivered to SDL's Danish parent company.
The effect on sales to QVC
The effect on sales to Alan Howard
"… Alan Howard had tasked our sales representatives with heavily promoting the EGO BOOST. From Pro Hair Live, 1 April, to … 14 June, (a period of approximately ten weeks) each of our sales representatives had dedicated in the region of 50% of their time promoting the EGO BOOST to their customers."
In the period between 1 April and 14 June 2012 SDL's costs of promoting the EGO BOOST was in the region of £200,000.
"55. … In June 2012, we had not yet received our first order of EGO BOOST products. I had understood from my conversations with Stuart Laing that these had been due to arrive from China in May. Further, our representatives were becoming increasingly frustrated with EGO BOOST product. They found that their clients reported to them that Cloud Nine sales representatives had already told them that the EGO BOOST infringed the Cloud Nine product.
56. I felt the excitement for the EGO BOOST that we had managed to build up from Pro Hair Live at the beginning of April until around mid-May, had almost completely dissipated by mid-June. …
60. The orders received by Team A in June, and on this basis the total estimated orders set out in the table at paragraph 58 above, show a huge drop-off. I attribute the drop-off in orders in June (and to the failure to meet and/or exceed our target in May) to the combination of the Alan Howard Letter, verbal threats made to our customers, and our lack of stock (and therefore inability to supply products to clients who had ordered them) which created a lack of confidence in the EGO BOOST, both at Alan Howard, and among our sales representatives."
First head of loss – the cancelled TSV
Cost to SDL per unit
Price charged to QVC per unit
Number of units that would have been sold
Second head of loss – profits on lost sales to QVC from TSV to judgment
Third head of loss – reduction in price charged to QVC
Fourth to Ninth heads of loss – Alan Howard
"The underlying concept for joint tortfeasance must be that the joint tortfeasor has been so involved in the commission of the tort as to make himself liable for the tort. Unless he has made the infringing act his own, he has not himself committed the tort. That notion seems to us what underlies all the decisions to which we were referred. If there is a common design or concerted action or otherwise a combination to secure the doing of the infringing acts, then each of the combiners has made the act his own and will be liable."