PROVING THINGS 54: GETTING £2 IN DAMAGES AFTER CLAIMING £15 MILLION: A MARATHON EFFORT WITH NO JACKPOT
The judgment of Mr Justice Leggatt in Marathon Asset Management LLP -v- Seddon  EWHC 300 (Comm) has already attracted some publicity. It involved an award for £2 in nominal damages after the claimants had sought £15 million. It is a major example of a failure to prove damages.
“In circumstances where the misuse of confidential information by the defendants has neither caused Marathon to suffer any financial loss nor resulted in the defendants making any financial gain, it is hard to see how Marathon could be entitled to any remedy other than an award of nominal damages.”
- The claimants had not suffered any loss as a result of the downloading of commercial information.
- The judge rejected arguments that the claimants were entitled to damages on various hypothetical basis.
- The court would not assess damages on the basis of the actual loss suffered when this approach had been expressly disavowed by the claimants.
- The claimants received nominal damages of £1 from each defendant.
The claimants sought damages for the misuse of information which one of its founders had unlawfully obtained when he left the business.
THE CLAIM: WE ARE OWED £15 MILLION EVEN THOUGH WE SUFFERED NO LOSS
A feature of this case is that the claimants did not allege that they had suffered a loss.
The second main issue is what, if any, damages are payable by Mr Bridgeman and, if he is also liable, Mr Seddon. It is common ground that the files which Mr Seddon shared with Mr Bridgeman were never actually used after they left Marathon’s employment. Mr Bridgeman made some use of a few of the many other files which he copied and removed but it is not alleged that this caused Marathon any financial loss. Marathon’s case is that it does not matter what use was actually made of any of the files or that no loss has been shown: the defendants unlawfully took its confidential information and must pay for the value of what they took – which Marathon estimates at £15m.
Marathon asks the court to assess damages by estimating the price which Marathon could reasonably have charged the defendants for releasing them from the obligations of which they are in breach. Such damages are often referred to as “Wrotham Park damages” after the case of Wrotham Park Estate Co Ltd v Parkside Homes Ltd  1 WLR 798 in which such a measure was first articulated. But, as with “Mareva injunctions” and “Anton Pillar orders”, a label based on the name of the case in which the remedy was originally granted is abstruse. Of the various alternative labels which have been suggested, I propose to use the term “licence fee damages”, which captures the basic idea that the damages represent a fee that would reasonably have been agreed between the parties to license the defendant’s wrongful activity.
THE JUDGE’S CONCERNS – THE CLAIMANT HAD NOT SUFFERED ANY LOSS
The judge considered the position where a claimant had not, in fact, suffered any loss as a result of a breach.
The position in principle
Before I discuss the authorities on which Marathon relies to support its claim for damages, I will start by considering the claim from first principles. It is axiomatic that the general object of an award of damages for a civil wrong is to compensate the claimant for injury caused by the defendant’s wrongful act. Such injury may consist of financial loss; or it may consist of non-financial injury of a kind for which the law provides monetary compensation.
Sometimes when confidential information is misused, injury of a non-financial kind may be caused through, for example, invasion of the claimant’s privacy. The present case, however, is a commercial case brought by a commercial entity whose only interest in maintaining confidentiality in information about its business is financial. Marathon has not alleged or attempted to show that the unlawful copying of confidential information or any subsequent misuse of that information by the defendants caused Marathon to suffer any financial loss. It follows on the face of it that no injury has been sustained for which Marathon is entitled to be compensated in damages.
There are circumstances (which I will consider soon) in which, instead of claiming compensation for financial loss or other compensable injury, a claimant may seek a remedy which requires the defendant to pay to the claimant a sum of money which represents all or part of a gain made by the defendant from its wrongful act. Again, in a commercial case of the present kind, if this approach is available, the relevant gain could only be financial. Again, however, Marathon has not alleged nor attempted to show that Mr Bridgeman or Mr Seddon (or for that matter any business in which they have been involved since leaving Marathon) has made any financial gain by misusing Marathon’s confidential information.
At the level of principle, counsel for Marathon have sought to justify a claim for substantial damages in three ways. First and foremost they have argued that “the principle of law is straightforward: if you take something, the law requires you to pay for it.” They contended that the conduct of the defendants in copying and retaining Marathon’s confidential files is analogous to the conversion or detention of goods and gives rise to a claim for damages representing the value of the information taken.
Far from being straightforward, I do not think that this argument bears scrutiny. The analogy with the conversion of goods breaks down because, by copying electronic data, Mr Bridgeman did not deprive Marathon of anything. Marathon’s employees still had access to all of the information which was copied and their ability to use that information was unimpaired. Nor can I accept that taking away a USB drive on which confidential information is stored is analogous to conversion of a cheque – another analogy which counsel for Marathon sought to draw. If a cheque is stolen and paid into the thief’s bank account, there is a transfer of money from the owner of the cheque to the thief. By contrast, when a record of information which A owes a duty to B to keep confidential is wrongfully copied by A, the act of copying does not make B any poorer or A any richer. It is only if and when A makes use of the information that there may be an impact on the wealth of either or both parties.
Marathon’s case can be tested by asking what the position would be if, after copying Marathon’s files, Mr Bridgeman had thought better of his behaviour and had destroyed the USB drive on which they were stored or if he had put the USB drive in a drawer and never afterwards accessed the files. This is not a purely hypothetical example because it is in effect what happened in the case of the 33 files which Mr Seddon was jointly responsible for copying. In circumstances where these files were never subsequently accessed I do not see how it can be said that Mr Seddon’s wrongdoing made him any better off or Marathon any worse off.
The second justification which Marathon gave for seeking an award of substantial damages was that, even though no actual financial loss or gain has been shown, by copying Marathon’s files onto USB drives which were retained on leaving Marathon’s employment, Mr Bridgeman (and, to the extent of his involvement, Mr Seddon) exposed Marathon to a risk of loss and acquired an opportunity for financial gain.
This argument, in my view, is even more threadbare than the first. The law does not compensate people for being exposed to a risk of injury. If a man drives at high speed the wrong way round a roundabout putting the lives and safety of other people at risk, but by good fortune avoids an accident, he may be prosecuted and punished for dangerous driving; but the people whose safety he endangered cannot claim damages for having been exposed to a risk of injury. If the law were to recognise any such principle of compensation for exposure to risk, it is difficult to see where it would ever end. Equally, acquiring an opportunity to make a financial gain does not justify a remedy, if the opportunity is not in fact taken. Just as the law does not provide compensation for injuries which might have been but were not in fact suffered, courts do not order the surrender of hypothetical benefits which might have been but were not in fact gained.
The third argument advanced by Marathon was an argument based on uncertainty. The point was made that, when files containing confidential information are unlawfully copied, it may be extremely difficult or practically impossible to identify what subsequent use has been made of the information and what, if any, detriment to the claimant or benefit to the defendant has resulted. In these circumstances, it was argued, it is a just solution to require the defendant to pay a sum which represents the value of the information, assessed at the time when the breach of duty occurred on the assumption that the information would thereafter be exploited to whatever extent the defendant chose to do so – without requiring the claimant to prove what use was actually made of the information and what financial consequences actually ensued.
THE JUDGE’S REJECTION OF THE HYPOTHETICAL CLAIMS FOR DAMAGES
The judgment examines in details the various ways in which the claimants presented their claim for damages. Each was rejected.
THE FAILURE TO ADVANCE AN ALTERNATIVE CASE
Should damages be assessed on an alternative basis?
Having rejected the case on damages put forward by Marathon, I have considered whether – despite the fact that no alternative case has been advanced – I should nevertheless attempt to value the use which Mr Bridgeman actually made of Marathon’s confidential information and make an award of damages on that basis. No such award could be justified in Mr Seddon’s case, since the only breach of duty for which I have found him liable consisted in helping to copy some files which were never afterwards accessed. But Mr Bridgeman did make some subsequent use of a few of the many files which he unlawfully copied and removed. There is no scientific way to attribute an economic value to the benefit of such use. But that need not prevent a court from making an assessment by applying what Lord Shaw described in a case mentioned earlier as “the exercise of a sound imagination and the practice of the broad axe”: see Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson  SC (HL) 18 at 29-30. Nicholls J did as much in Universal Thermosystems Ltd v Hibben  1 WLR 840 when, in calculating damages payable to the defendants he deducted an amount on account of the time, trouble and expense which they had saved themselves by making wrongful use of the plaintiffs’ confidential information.
Had Marathon advanced an alternative case of this kind, such an exercise could have been carried out. But Marathon, as I have emphasised, chose not to advance such a case and instead went all out for what the Court of Appeal in a similar situation described as “jackpot damages”: see Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd  2 Lloyd’s Rep 423, 435. I have concluded that, in these circumstances, it would be wrong for me to award damages assessed on a basis which Marathon has expressly disavowed. Apart from anything else, had such an alternative case been advanced, it would have been necessary for Marathon to give Mr Bridgeman an opportunity to answer it in cross-examination and his counsel an opportunity to do so in submissions. It might also have affected what, if any, offer of settlement Mr Bridgeman was prepared to make, not least in order to protect himself against liability for Marathon’s costs. Given the way that Marathon’s case has been presented, I do not think it would be just to adopt any other approach.
In the result, Mr Bridgeman has admitted liability and I have found that Mr Seddon is also liable for breaches of duties of confidence owed to Marathon in contract and under the general law to the extent summarised in paragraph 142 of this judgment. But I have rejected the (only) basis on which Marathon has claimed substantial damages. Marathon has therefore missed the jackpot and is entitled only to nominal damages. Judgment will be entered for Marathon against Mr Bridgeman and Mr Seddon, in each case for a sum of £1.
RELATED POSTS: THE PROVING THINGS SERIES
- Proving things 1: Civil Evidence Act notices will not cut it
- Proving things 2: evidence to support a claim for damages must be pitch perfect.
- Proving things 3: the complete absence of evidence means the court will not speculate
- Proving things 4: Witnesses who just aren’t there.
- Proving things 5: witness statements and failing on causation.
- Proving things 6: “That’s what I always do” & proving causation.
- Proving things 7: If you don’t prove a loss you don’t get an order.
- Proving things 8: a defendant must prove that a failure to wear a seatbelt made a difference.
- Proving things 9: the role of experts
- Proving things 10: “He said, she said”: the difficulties of recollection.
- Proving things 11: Lies, damn lies and…
- Proving things 12: That oral contract is not worth the paper its written on.
- Proving things 13: Loss, there was no loss.
- Proving things 14: proving mitigation of loss
- Proving things 15: damages and evidence: going back to College
- Proving things 16: if you don’t prove it you don’t get it.
- Proving things 17: Heads of damage that were “entirely bogus”
- Proving things 18: Damages; Car hire; Proof & Summary Judgment
- Proving things 19: prove service or you could be caught out.
- Proving things 20: allegations of improper conduct have to be prove
- Proving things 21: when the whole process of investigation is flawed
- Proving things 22: damages, mitigation part 36 (and bundles).
- Proving things 23: serving important evidence late
- Proving things 24: Damages & the “But for test”: when it gets really complexProving things 24: Damages & the “But for test”: when it gets really complex
- Proving things 25: Attempts to smuggle in witness statements do not help (and carry no weight).
- Proving things 26: distinguishing between what you can remember and what you now think you did.
- Proving things 27: Burdens of proof, hearsay evidence and… attempted murder.
- Proving things 28: make unwarranted personal attacks and use a “mud-slinging” expert: that always ends well.
- Proving things 29: Make sure the witness evidence deals with the relevant issues
- Proving things 30: Office Gossip Proves Nothing: The importance of the source of information and belief.
- Proving things 31: witnesses tend to remember what they want to remember.
- Proving things 32: Damages claim struck out as unsustainable: application to amend refused.
- Proving things 33: causation and the burden of proof in claims against solicitors.
- Proving things 34: There is no primer for scuttlers: when your ship doesn’t come in.
- Proving things 35: Reconstruction, documents & memory.
- Proving things 36: credibility and contemporaneous documents.
- Proving things 37: An approach to damages that was “fundamentally deficient throughout”.
- Proving things 38: Proving inability to pay on a security for costs application.
- Proving things 39: You can spend £10 million in costs and still not prove your case.
- Proving things 40: No evidence – no loss.
- Proving things 41: Proving damages – you are not going to get a second bite of the cherry.
- Proving things 42: silence does not prove inducement.
- Proving things 43: How the Court decides: a Primer.
- Proving things 44: Findings of Fact, Walter Mitty and Witness Training.
- Proving things 45: If you can’t prove loss the defendant is going to get summary judgment.
- Proving things 46: Late theories advanced by experts rarely help.
- Proving things 47: Fire in the loft: it wasn’t the mouse man at all.
- Proving things 48: valves, floods, models and causation.
- Proving things 49: it is difficult to prove damages when the opinion evidence in your witness statement has been struck out.
- Proving things 50: to prove breach of contract you first have to prove that there was a contract.
- Proving things 51: No evidence of loss – no damages
- Proving things 52: Solicitor’s negligence action fails on all counts: no negligence and no loss.
- Proving things 53: Because a solicitor was dishonest some of the time it doesn’t mean they were dishonest all of the time.