OBJECTING TO EVIDENCE BEING ADMITTED CAUSES PROBLEMS ON APPEAL : CLAIMANT GETS BITTEN BY ITS OWN HORSE

In Lifestyle Equities C.V. & Anor v Ahmed & Anor [2021] EWCA Civ 675 the Court of Appeal allowed, in part, an assessment against the assessment of damages.  What is interesting here is the point that the claimants objection to evidence being admitted before the trial judge led to them being unable to refer to it at the appeal.

“… the state of the evidence before the judge did not include the final report and, having successfully objected to it, Lifestyle cannot now rely on it.”

The claimants had been successful in establishing that the defendants had been responsible for infringements of their trade marks in relation associated to the use of the words Polo Club and associated logo.

The judge had assessed damages against the two defendants on the basis that: (i) 10% of their income for a certain period had arisen from the breaches and they should pay that 10% to the claimants by way of damages; (ii) a loan of £635,789 that certain of the corporate defendants had made to Mr Ahmed.

THE APPEAL

The claimants appealed, unsuccessfully, arguing that these defendants should be liable to the whole profits made by a corporate defendant from the breaches.

THE DEFENDANTS’S COUNTER-APPEAL

It is the counter-appeal, however, that is more important.
(i) The Court of Appeal held that the judge in erred in failing to take account of taxation on the 10% of earnings attributed to the breaches.  Damages were reduced to take account of taxation;
(ii) The Court of Appeal overturned the finding that the loan was recoverable as damages.
    1. On appeal counsel for the Ahmeds attacked this reasoning on a number of grounds. They can be summarised as (i) even if the loan had not been repaid, it remained a loan and Mr Ahmed’s obligation to repay it meant it could not be a profit, (ii) there was no allegation Mr Ahmed had acted dishonestly or improperly in taking out the loan, (iii) the judge made no finding that the loan was referable to D11’s infringement or, if he did, it was plainly wrong and inconsistent with the finding that only 10% of the salaries were referable to the infringements. Points (i) and (ii) are aspects of ground 3 and point (iii) is ground 4.
    1. I reject point (iii). The company clearly made substantial profits from the infringements. From the judgment as a whole, it is clear that the judge understood that part of his task was to decide if the sum represented by the loan was derived from the infringements. The judge was entitled to place an evidential burden on Mr Ahmed to explain what the loan was for and put forward at least some evidence that it was not referable to the infringements carried out by the company and he was right that Mr Ahmed had never explained what the loan was for. The judge was entitled to draw the (implicit) conclusion that the sum was referable to the infringement.
    1. I reject point (ii) as well. The absence of any allegation about Mr Ahmed acting dishonestly is irrelevant. The fact that Mr Ahmed had been found to be liable as an accessory for the trade mark infringements committed by the company was sufficient, in terms of improper conduct, to justify him having to account for a profit referable to the company’s infringement. If the loan was indeed such a profit then he was liable to account for it.
    1. However I would allow the appeal on point (i). At trial, and at the date of the order following judgment, the loan remained outstanding and so Mr Ahmed still owed an obligation to repay it to D11. If Mr Ahmed still owed an obligation to pay that sum then it was not, in his hands, a profit at all. For that money to represent a profit in Mr Ahmed’s hands at the time, one way that could be established would be to show that it was not a loan at all, but something like a gift or disguised dividend (Mr Ahmed was a shareholder of D11). However that was not established and there is no basis for making such a finding in this court. Therefore I would allow the appeal on ground 3.
    1. Before leaving this issue however, I should note that since the judge’s order was made, the company has been dissolved and so it could now be said that by today’s date Mr Ahmed no longer does owe an obligation to anyone to repay it. However that did not represent the state of affairs when the order under appeal was made below and so it does not amount to a justification for upholding the judge’s order now.
  1. I would therefore allow the appeal on ground 3 (in part).

THE POSTSCRIPT TO THE JUDGMENT

What is interesting here is the postscript to the judgment. It shows that the claimants’ objection to certain evidence being admitted.  On appeal that evidence would have been favourable to the claimants.  However the claimants successfully objected to the evidence being admitted before the trial judge, they could not seek to rely on it at the appeal stage.

  1. After the draft judgment was circulated counsel for Lifestyle submitted that paragraphs 70-72 above (about the loan) were incorrect. The submission was that while it was correct that the dissolution had not taken place by the time of the judge’s order, after the judgment was handed down and prior to the hearing to determine the final order, the Ahmeds had put the administrators’ final report into evidence before the judge, and that final report recorded that the administrators would not be pursuing any connected parties for monies owed to D11. However as counsel for the Ahmeds points out, Lifestyle objected below to that new evidence being admitted and the judge accepted Lifestyle’s objection, ruling that it should not be admitted. Thus the state of the evidence before the judge did not include the final report and, having successfully objected to it, Lifestyle cannot now rely on it. Treating this as an application to reconsider paragraphs 70-72, the application is refused.
    1. Before leaving this issue however, I should note that since the judge’s order was made, the company has been dissolved and so it could now be said that by today’s date Mr Ahmed no longer does owe an obligation to anyone to repay it. However that did not represent the state of affairs when the order under appeal was made below and so it does not amount to a justification for upholding the judge’s order now.
  1. I would therefore allow the appeal on ground 3 (in part).