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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> AB v CD (Rev 2) [2014] EWHC 1 (QB) (03 January 2014) URL: https://www.bailii.org/ew/cases/EWHC/QB/2014/1.html Cite as: [2014] EWHC 1 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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AB |
Claimant |
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- and - |
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CD |
Defendant |
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Terence Bergin (instructed by Kemp Little LLP) for the Defendant
Hearing date: 31 December 2013
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Crown Copyright ©
The Honourable Mr Justice Stuart-Smith:
Introduction
The Factual Background
The eMarketplace
The Licensing Agreement
"Within ninety (90) days of the Effective Date of this Agreement and by 1 September during each calendar year of the Term , [The Claimant] will, for the purposes of Marketing Services and Sales Services, develop a marketing and sales plan for the ensuing calendar year identifying potential participants in the Primary Countries together with its projections as to revenue and expenditure to complete the Marketing Services and Sales Services for that year."
The Claimant's Business
The Termination
Section 44 of the Arbitration Act 1996
Is there a serious issue to be tried?
i) The first ground of termination is the failure to comply with the Sales and Marketing Plan. However, as I have said, no Sales and Marketing Plan as contemplated by Clause 5.1 has been prepared at least since about 2010 and this state of affairs has not been the subject of complaint by the Defendant at any stage. In those circumstances it appears to be well arguable that it should not be open to the Defendant to rely upon failure to comply with a Sales and Marketing Plan where no such plan exists and no objection to its absence has been made. It is not necessary for the purposes of this judgment to go into any further analysis of the potential arguments on either side;
ii) The second ground alleged is that the Claimant's business has developed in a different direction from the Defendant's. However, it appears to be well arguable that the Claimant's core business has not changed from that contemplated by the Licensing Agreement. That is so whether or not the Claimant were to be able to demonstrate that, despite a lack of obvious success to date, it has been continuing to attempt to attract more customers as well as servicing the X contract.
Are Damages an Adequate Remedy?
" in no event will either Party be liable to the other Party or any third party for ... lost profits, or any indirect, special, consequential or incidental damages , under any cause of action and whether or not such Party or its agents have been advised of the possibility of such damage. either Party's total liability in contract, tort, negligence or otherwise arising out of or in connection with the performance or observance of its obligations, or otherwise, in respect of this Agreement shall be limited to a sum equal to the total amount RevShare entitlement of that Party during the previous six (6) calendar months prior to the calendar month in which such damages accrued. This limitation will apply notwithstanding any failure of essential purpose of any limited remedy provided herein."
" the governing principle is that the court should first consider whether, if the plaintiff were to succeed at trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable would be [an] adequate remedy and the defendant would be in a financial position to pay them, no interim injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage."
"The standard question in relation to the grant of an injunction, "Are damages an adequate remedy?", might perhaps, in the light of the authorities of recent years, be rewritten: "Is it just, in all the circumstances, the plaintiff should be confined to his remedy in damages?"
This observation highlights that American Cyanamid provides guidance to the exercise of a discretionary equitable jurisdiction rather than a straightjacket of rigid criteria: see also R v Secretary of State for Transport, ex p. Factortame Ltd [1991] 1 AC 671-674 per Lord Goff. A similar point was made in Bath and North East Somerset DC v Mowlem PLC [2004] EWCA Civ 115 where Mance LJ said at [12] that "Lord Diplock's speech in American Cyanamid is not itself a statute."
"15. Secondly, and assuming for this purpose that the damages are viewed as an attempted measure of the full loss likely to be suffered or recoverable at common law by the Council, apart from the agreement, Mowlem's case treats the parties' quantification of such loss as conclusive not merely in the context of a claim to recover damages, but also in the context of a claim to an injunction which is designed to avoid any further financial loss and any cause for a claim to such damages. The Council accepts indeed it asserts that it would be bound in any claim for damages by its contractual agreement regarding liquidated and ascertained damages. The Council is not seeking to avoid that agreement, but to rely on it. It is the reason why the Council seeks an injunction, and why the Council submits that interlocutory injunctive relief is appropriate. Mowlem is not entitled to breach its contract. The agreement on liquidated and ascertained damages is not an agreed price to permit Mowlem to do so, and it does not preclude the court granting any other relief that may be appropriate. In my view, the Council's case is right in principle.
16. I would only add that the fact that difficulty of quantification is an acknowledged basis for treating damages as an inadequate remedy means that the court recognises, when deciding whether to grant an interlocutory injunction, that it can be unjust to leave a party to a claim to damages which the court would if necessary have to quantify. The court may in other words be sufficiently lacking in confidence about its own ability fairly and adequately to quantify damages after the event to prefer to grant an injunction. The court ought not to discourage parties from agreeing liquidated and ascertained damages. But it ought to recognise that the assessment of the totality of any likely loss before the event is an even more rough and ready and difficult exercise than after the event; and that such an assessment may prove in the event not to give rise to adequate compensation, so that to leave a party to a claim in damages may mean that it will suffer loss which the grant of an interlocutory injunction would completely avoid."
At [20], Mance LJ concluded that "it is open to the Council, despite the liquidated and ascertained damages clause, to rely on the probable higher level of the actual loss that it would suffer without an injunction, in order to show that it would not be adequately compensated if it were left to a claim in damages." It therefore appears from [16] and [20] that Mance LJ was using the phrase "adequate compensation" as meaning full compensation for what had been lost.
"49 These sophisticated parties included in their contract clause 11 which excludes liability for loss of profit, loss of contract and loss of goodwill and imposes a cap on each party's liability in the aggregate sum of £12 million. Of course there will be issues as to the proper construction and applicability of these provisions and Vertex also contends, somewhat implausibly as it seems to me, that they are unfair and as such unenforceable. However that may be, it is not immediately obvious to me that it would be unjust for Vertex to be confined to such remedy in damages as is determined to be the extent of the bargain which it struck. In view of my earlier conclusion I do not need to grapple with the question what is the precise ambit and extent of the decision of the Court of Appeal in Bath and North East Somerset District Council v. Mowlem plc . That was an extraordinary case on the facts where the contractor, Mowlem, sought indefinitely to delay completion of the high profile Millennium Bath Spa project, a project which was intended and expected to confer significant benefits upon the local economy. At paragraph 15 of his judgment Mance LJ said, in relation to that contract:
"The agreement on liquidated and ascertained damages is not an agreed price to permit Mowlem [to breach its contract], and it does not preclude the court granting any other relief that may be appropriate."
50 I have already concluded that other relief is not here appropriate and I do not have to decide whether the approach of the Court of Appeal in that case precludes the court from concluding in this that it is not unjust that Vertex should be confined to its remedy in damages."
"39 The next stage is to consider whether damages will be an adequate remedy. In broad terms, Ericsson puts forward evidence and a number of arguments to the effect that, if it is refused an injunction to prevent termination, termination will have a seriously adverse effect on its business around the world and in the UK, and in particular in relation to the CoordCom software, that up to 300 staff working on this project may have to be made redundant and that it will be "muzzled" by the confidentiality clauses from explaining its position to the commercial world at large even though it is firmly of the view that it is not in any way to blame.
40 I am not satisfied that damages will not be an adequate remedy as between commercial parties in this commercial context. Both parties are in commercial terms very substantial entities. They entered into a contract which mutually prevented them from recovering most types of economic loss such as loss of profit or production. That contract contained termination clauses which could impact upon the commercial reputations of the parties. The damages which are recoverable and have not been excluded by Clause 19 are presumably not difficult to quantify; indeed it has not been argued that such damages would be difficult to quantify. I do accept that difficulties in quantification of damages can support an assertion that damages are not an adequate remedy. To answer the question posed by Lord Justice Sachs in the Evans Marshall case, I cannot see that it is unjust that a party is confined to the recovery of such damages as the contract, which it has entered into freely, permits it to recover."
The Balance of Convenience
Conclusion
Postscript
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