INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL
B e f o r e :
| COLIN LINDRIDGE HARMAN
|- and -
|HENRY JOHN BURGE
Marc Wilkinson (instructed by Tedstone, George & Tedstone) for the Defendant
Hearing dates: 10-11 June 2014
Crown Copyright ©
Judge Hacon :
History of the dispute
"Doone Valley Holidays. Announcement. Doone Valley Holidays at Cloud Farm Look forward to seeing you in 2010".
The heading thus implied that the DVH business would continue at Cloud Farm. The announcement went on to say that Mr Harman and his wife would be moving to new premises which "will only have limited facilities and availability for this season from mid July 2010" and gave some details about their new holiday business and a contact number.
Judgment on admissions
Damages claimed by Mr Harman
(1) Loss of profit, as a consequence of lost turnover caused by the disruption to the Website.
(2) The wasted cost of cancelled listings and subscriptions. These were promotions for the DVH business on other websites. The links to the Website had been rerouted to Mr Burge's 'Announcement' page, so the listings and advertisements had to be cancelled, even though Mr Harman had paid for them.
(3) Mitigation costs. These were incurred by way of the cost of new links to directories and listing sites, the cost of a Google adwords campaign (sponsored advertising on Google) to recover the profile of the website and fees paid to Mr Cartwright to carry out this work.
" I derive the following principles from authorities in relation to an inquiry as to damages:
(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."
Mr Harman's case on damage as calculated by Mr Forbes
(1) No lost sales were taken into account before the move to Hallslake Farm.
(2) Mr Forbes ignored accommodation and tea room income because these were not offered at Hallslake Farm. The loss of profits was calculated only in respect of the businesses in camping and trekking.
(3) He calculated losses in the financial reporting period of the DVH business, ending on 31 August. The first was therefore the period ending 31 August 2010.
(4) He assumed that the move from Cloud Farm to Hallslake Farm would have caused a loss of business in any event. He assumed that had there been no Website disruption the turnover in camping and trekking, after the move, would have been 60% of that achieved "for the prior period." I take that to be the equivalent period in the previous year.
(5) Likewise Mr Forbes made an assumption that the move from Hallslake Farm to Caffyns Farm on 17 June 2011 would have caused a further reduction in turnover. He assumed that the turnover for camping and trekking after the move would have been 70% of that achieved in the prior period.
(6) The financial periods ending in 31 August did not coincide with the moves of the business to Hallslake Farm on 18 July 2010 and to Caffyns Farm on 17 June 2011. So Mr Forbes made adjustments in relation to the weeks after those dates to the end of the accounting year, such that the 40% and 30% successive reductions in hypothetical turnover applied from the respective dates of the two moves. This was necessary because then Mr Forbes could give hypothetical figures for turnover in each of the relevant financial years, ending on 31 August, which could be compared with the actual figures for turnover in the relevant financial years.
(7) In this calculation of hypothetical turnover of the DVH business (absent any disruption to the Website) Mr Forbes assumed a staged recovery from the effect of the successive moves to Hallslake Farm and Caffyns Farm after June 2011, such that by late July 2013 turnover would have been back to level of the equivalent period in 2009.
(8) All the foregoing was done separately in relation to the hypothetical turnover in the DVH business in (i) camping and (ii) trekking. Mr Forbes then subtracted the actual figures for turnover in each of those two parts of the business in the relevant successive financial years to give the losses of turnover for each financial year caused by the disruption to the Website.
(9) Mr Forbes assumed that the gross profit margin for both parts of the business was 85% in all of the financial years he had to consider. That gave him the figures for lost profits.
(10) He assumed that the effect of the disruption to the website had continued until the year ending 31 August 2013, i.e. for a period of 3 years. He also assumed that the effect diminished with time. He therefore introduced a discount of 20% on the calculated lost profits for 2010/11, 40% for 2011/12 and 60% for 2012/13. There was no discount thereafter, i.e. from September 2013 onwards the actual and hypothetical profits from the DVH business were treated as having re-converged.
Ex turpi causa
Discussion of loss of profits
(1) The calculations are based wholly on surmise. There was no evidence that the alleged cause of the loss, the reduction in the Website's Google profile and the removal of links, had any effect at all. There were alternative explanations for the reduction in profits since the DVH business moved to Hallslake Farm and then Caffyns Farm, which had been disregarded.
(2) The figures adopted by Mr Forbes to take into account the inevitable reduction in turnover caused by the business moving first to Hallslake Farm and then to Caffyns Farm. The assumed successive reductions to 60% and then 70% of the preceding year's turnover were based on a false analogy with other businesses owned by Mr Harman.
(3) Both Hallslake Farm and Caffyns Farm were less attractive sites than Cloud Farm. This by itself would give rise to a significant reduction in turnover.
(4) Other factors would also have caused a reduction in turnover when the business moved to Hallslake Farm, also ignored by Mr Forbes. These were:
(a) the move in July 2010 was at the peak of the holiday season;
(b) there was an unreliable phone system at Hallslake Farm;
(c) online and print directory listings continued to show that DVH was at Cloud Farm for some time after it had moved; this was through no fault of Mr Burge's;
(d) records of the meteorological office showed that the weather in the summer of 2010 was dull, cold and wet;
(e) the UK was experiencing a recession;
(f) there had been a disinclination on Mr Harman's part to pay for much marketing and advertising in the period leading up to the move from Cloud Farm.
(5) Further factors were ignored by Mr Forbes which would have led to a reduction in turnover when the business moved to Caffyns Farm in June 2011 were:
(a) the relocation was in mid-season;
(b) weather conditions in the summer of 2011 were cool, dull and wet; the summer of 2012 was particularly bad;
(c) there was an error on Google maps which continued to DVH as being located at Cloud Farm until March 2012;
(d) there was a recession;
(e) the name of the business was changed in January 2013 to 'Exmoor Coast Holidays', which would have affected re-bookings.
(6) The gross profit margin of 85% adopted by Mr Forbes was overstated.
(7) The discounts for the reduction in the effect of the disruption to the Website over time were arbitrary and irrational.
Percentage reduction in turnover caused by relocation
Gross profit margin for the camping and trekking businesses
Discount for reduction in the effect of Mr Burge's intervention over time
Conclusion on lost profits
Losses from cancelled listing and advertising
Costs of mitigation
Fees paid to Mr Cartwright for work done 25 June to 12 July 2010
Cost of new links to directories and listing sites and Mr Cartwright's time
Cost of Google adwords campaign
Fees paid to Mr Cartwright for work done 13 July to 30 September 2010
Fees paid to Mr Cartwright for work done September 2010 to September 2012