Cabo Concepts Limited v MGA Entertainment (UK) Limited

MRS. JUSTICE JOANNA SMITH :

1. In this matter the claimant (“Cabo”) claims damages and declaratory relief against the defendants (“MGA”) in respect of alleged breaches of statutory duty, including abuse of a dominant position and unjustified threats of patent infringement proceedings which are said to have caused the failure of Cabo's business in collectable toys marketed under the “Worldeez” brand.

2. The details of the claim do not matter much for the purposes of the applications before me today, but suffice to say that the background to the claim is fully set out in the judgment of Mellor J following the first case management conference ([2021] EWHC 491 (Pat)), at paragraphs 6-25, which I adopt.

3. For present purposes, I need only point out that it is Cabo's case that MGA's conduct achieved its anticompetitive goal of foreclosing and ultimately excluding Cabo from the relevant downstream markets and that Cabo's factual and expert evidence is to the effect that the demise of Cabo's business occurred in January 2018. That must be taken at face value in the context of the applications before me today.

4. The proceedings are well advanced. Pursuant to the order for directions made at the case management conference (as slightly amended subsequently), the parties have provided disclosure under the disclosure pilot, have exchanged witness statements and have served expert reports. A trial is listed to commence not before 27th June 2022 with a present trial estimate of four weeks. The Applications

5. Against that background, the parties have made various applications which have come on for hearing before me today. A number have been resolved and I shall not need to deal with them. However, there remain outstanding an application by Cabo to amend paragraphs in its Amended Particulars of Claim dealing with damage, together with an application by MGA to strike out paragraphs in the Amended Particulars of Claim dealing with damage. For reasons which will become clear, it makes sense for me to deal with these applications together and they were dealt with together by the advocates during the course of the hearing.

6. The existing pleading of causation and loss on the part of Cabo is to be found in paragraphs 76-78 of the Amended Particulars of Claim: "76. In the premises, the actionable threats of patent infringement proceedings and/or breaches of statutory duty (individually or together) caused the exclusion of the Worldeez product line from the relevant markets and its eventual demise. But for the aforesaid threats/breaches by MGA, the Worldeez product line would have enjoyed a successful launch, initially in the UK and Ireland, and would have gone on to generate significant sales in the UK and globally, including in the United States and other English speaking territories, such as Canada and Australia, not least given the generally close links between toy trends experienced in those markets and the international appeal inherent in the Worldeez design theme.

77. Accordingly, as an intended and/or foreseeable consequence of the conduct on the part of MGA pleaded above, Cabo has suffered loss and damage including in the form of lost profits in respect of: (a) Lost sales to toy traders, including but not limited to the UK Launch Retailers and other toy traders identified at paragraph 53(e) above, which cancelled existing orders and/or declined to take supplies of Worldeez as a result of the infringements and/or threats which form the subject-matter of the Competition Law and Threats Claims, or any of them. (b) Lost sales and licensing revenues resulting more generally from the foreclosure of Worldeez and its ultimate demise. For the avoidance of doubt, this head of claim is not confined to losses in the UK and Ireland but also extends to lost profits in other jurisdictions which were consequent on the foreclosure/demise of Worldeez.

78. Whilst the quantum of losses suffered by Cabo will be the subject of expert evidence, Cabo will say at trial that it would have captured a significant share of sales made by MGA around the world which, according to an article by The Atlantic Magazine of 29 November 20182, amounted to more than 800 million units of LOL products by November 2018 since their launch in late 2016. Cabo currently estimates its losses from lost direct sales alone (excluding licensing revenues) to be in excess of £170 million. Cabo will therefore seek disclosure from MGA as to its sales of LOL products to inform its assessment of the market opportunity that would have been available to Worldeez products but for the infringements pleaded herein."

7. It will immediately be noted that the claim for loss is said to “include” lost profits but that there is no express pleading as to any other loss that may be alleged.

8. In December 2021, in the context of seeking further quantum disclosure from MGA, Cabo indicated that it was intending to pursue a case not just as to loss of profits but also "Loss more generally of the opportunity to develop a valuable business that leveraged the success of the product and the associated intangible assets". Cabo asserted that this already appeared from paragraph 77(b) of the Amended Particulars of Claim. Cabo initially indicated that it wished to seek permission from the court for a new expert to address the issue of business valuation.

9. MGA objected to this development in the strongest terms, pointing out that a case on loss of value of business had not previously been pleaded and objecting to a new expert at this late stage in the proceedings. MGA also raised a legal argument as to the correct approach to loss, which features large in the arguments before the court today and to which I shall return in a moment.

10. In the face of MGA's objections, Cabo backed down on the subject of a new expert, a change of position which led to queries from MGA as to whether valuation evidence would be addressed by Cabo's existing experts and what the basis of any such valuation evidence would be.

11. On 19th January 2022 Cabo served proposed amendments to its Amended Particulars of Claim and on 24th January 2022 it issued an application to amend. In Cabo's words, the amendments are “intended to remove any doubt as to whether a claim for loss resulting from Cabo's loss of opportunity to build a valuable toy business is captured by its pleaded case”.

12. The proposed amendments involve: i) first, the insertion of the following sentence at the end of paragraph 76: "As a result, Cabo would have gone on to become a successful toy business able to leverage valuable intangible assets developed through the success of the Worldeez product line, including the relationships that it would have formed with retailers and the reputation it would have established for the development, production and supply of toys." ii) Second, a new paragraph 77A in the following terms: "In addition, or in the alternative, Cabo has suffered loss in the form of the loss of the value of the business that it would have been able to build but for MGA’s actions (to the extent that this loss is not already captured by paragraph 77 above)." iii) Third, the insertion of a new sentence at the end of paragraph 78 to following effect: "In addition, Cabo will say that it would have gone on successfully to develop and market other product lines beyond Worldeez."

13. Pausing there, I observe that neither the existing nor the proposed amended pleading identifies any period in which the loss of profits are to be assessed or any date at which it is said the loss of business is to be valued (although paragraph 78 of the existing pleading does make it clear that the claim for lost profits extends beyond the date of demise of the business). The question of the date of any such valuation lies at the heart of the complaint that is now made by MGA.

14. MGA objects to the proposed amendment. Originally it did so on case management grounds, but those are no longer pursued at this hearing. MGA now accepts that the amendment application could be granted without endangering the trial date. Instead, however, MGA focuses now on two key points. i) First, the existing pleading in the form of the Amended Particulars of Claim is defective in failing to identify the date of cessation or demise of the business as the date on or before which the alleged loss of profit should be valued. This is said by MGA to be a necessary feature of Cabo's claim for loss by reason of established legal principle. This deficiency has led to MGA's strike-out application. ii) Second, MGA says that the proposed amendments perpetuate this deficiency in failing to identify that any claim for loss of the value of the business must be made as at the date of demise. In the circumstances, says MGA, the amendments have no real prospect of success. MGA also points out that once it took this view in relation to the amendments, a necessary corollary of that approach was to issue the strike-out application.

15. MGA does not now, in principle, object to a claim for loss of value of the business (notwithstanding that it considers it to have been raised somewhat late in the day) but it says that it must be clear when the loss in value is to be measured and that established legal principle prescribes only one possible date; namely, the date of demise of the business. Any pleading seeking a later valuation, or not specifying when the assessment of loss is to take place is, says MGA, overly broad and discloses no reasonable grounds for bringing a claim.

16. Against that background, MGA propose their own amendments to the Amended Particulars of Claim which they say they would be prepared to accept in the event that their strike out application is successful. Ms. Wakefield QC, on behalf of MGA, acknowledged in her oral submissions that it is unusual for one party to seek to tell an opposing party how to plead its case. But she said that MGA's proposals were a feature of the fact that the application to strike out was being made relatively close to trial without substantial notice and that, so as to avoid oppression, it was considered sensible to identify, by way of MGA's contingent amendments, the proper legal basis for recovery of quantum in this case.

17. MGA's proposed amendments are set out in MGA's draft Order at paragraph 1: "The claim for damages shall be struck out unless within seven days of the date of this Order the Claimant files and serves a Re-Amended Particulars of Claim with the following amendments: (1) After 'Cabo has suffered loss and damage' in paragraph 77, omit the word 'including'. (2) After the words 'in the form of lost profits' in paragraph 77, insert the words 'suffered on or before the date of demise of Cabo’s business in January 2018'. (3) After paragraph 77, insert a new paragraph as follows: '77A. In addition, Cabo has suffered loss in the form of the loss of the value of the business (as at the date of the demise of that business in January 2018) that it would have been able to build but for MGA’s actions.' (4) Omit paragraph 78."

18. It will immediately be clear that these proposals are designed to address the two key points that I have already referred to; namely, the perceived failure in the existing pleading to identify the date on which loss of profit is to be assessed and the (accepted) position that a claim for loss of business can be pursued by Cabo, but only if it is clear that it is to be assessed as at the date of demise of the business. Applicable Legal Principles

19. The test the court should apply in considering these applications is not in dispute and was common ground between the parties during the course of the hearing.

20. When considering an application to amend, the court should apply the summary judgment test applicable under CPR 24.2 (see: Quah Su-Ling vGoldman Sachs International [2015] EWHC 759 (Comm), per Carr J (as she then was) at [36]). The court must ask whether the proposed amendment has a real, as opposed to a fanciful, prospect of success.

21. In exercising its discretion, the court will be guided by the overriding objective in striking a balance between injustice to the applicant if the amendment is refused and injustice to the opposing party and other litigants in general if the amendment is permitted. As I have said, however, there is no real issue in the circumstances of this case as to the timing of the application or its impact on the trial. Similarly, there is no issue that Cabo is now entitled to include a claim for lost value of the business. The dispute turns only on the date at which the business should be valued.

22. Insofar as the strike-out application is concerned, the same approach applies where the court is invited to strike out part of a statement of case under CPR 3.4(2)(a) read together with 3.4(1) on the basis that it "discloses no reasonable grounds for bringing the claims." In circumstances where the application gives rise to a short point of law and the court is satisfied (i) that it has before it all the evidence necessary to decide it and (ii) that the parties have had adequate opportunity to address the point in argument, the court may "grasp the nettle and decide it" (see: Global Asset Capital v Aabar Block [2017] 4 WLR 163, per Hamblen LJ at 27(3)).

23. However, the court should not grasp the nettle and strike-out under this sub-rule unless it is “certain” that the statement of case or the part under attack discloses no reasonable grounds of claim (see: Duchess of Sussex v Associated Newspapers [2020] EMLR 21, per Warby J at 33(2)).

24. Here the strike-out application is also brought pursuant to CPR 3.4(2)(b), which confers powers on the court to strike out part of a statement of case if it appears that the part in question is likely to obstruct the just disposal of the proceedings. That provision is broader in scope than 3.4(2)(a) and must be interpreted by reference to the overriding objective of dealing with cases justly and at proportionate cost; including that trials be kept strictly to the issues necessary for the fair determination of the dispute. It enables allegations which it would not be proportionate to permit to be tried to be struck out (see: Duchess of Sussex v Associated Newspapers [2020] EMLR 21, per Warby J at 33(3) and 34). For reasons which will become clear in a moment, this element of the strike out application ceased to have any real relevance during the course of the hearing. MGA’s Arguments

25. In respect of these applications, MGA invites me to grasp the nettle and determine that in the event of a finding in Cabo's favour on liability at trial, damages in this case will be assessed having regard to the principles set out in The Liesbosch [1933] AC 449 HL, a case involving the loss of a ship; i.e. the value of the lost chattel at the time and place of loss.

26. MGA says that this general principle also applies to the loss of a business, in which case the damage is to be determined as at the date of cessation or demise of the business. MGA relies for this proposition on a number of authorities, all of which it contends are consistent with The Liesbosch and all of which it says point towards the fact that the correct measure of damage in circumstances such as this is a question of law which necessarily yields only one right answer.

27. MGA submits that it is clear from the proposed amendments and from the report of Mr. Colley, Cabo’s economics expert, that Cabo intends to advance a broader and legally unsustainable case at trial. It says that no further facts are needed for the court to determine the correct date for the assessment of damages as a matter of law at this stage and that such an early determination would also produce very substantial case management advantages.

28. During the course of her attractive submissions, Ms. Wakefield realistically acknowledged that the amendment application and the strike-out application both stand or fall on the existence of the legal rule on damage for which she advocates. She also acknowledged that a further application made by MGA for the excision of various paragraphs in Mr. Colley’s report was entirely dependent upon the outcome on this point. Discussion

29. Having given careful consideration to the authorities on which MGA relies, I do not consider it would be appropriate or just for me to grasp this particular nettle at this stage of the proceedings. This is because I do not accept that these cases (which I shall consider in more detail in a moment) establish the hard and fast rule for which MGA contends. On the contrary, in my judgment they establish that while (of course) the principles set forth in The Liesbosch may ultimately be applicable at the trial of this case, nonetheless every case must be carefully considered by reference to its own specific facts so as to ensure full compensation to the claimant in accordance with the overarching compensatory principle. This is an exercise that can only be done at trial having regard to the factual and expert evidence. Ms. Wakefield has shown me no authorities in which a court has determined the existence of, or sought to apply, the inflexible rule as to damages for which she contends, in advance of a trial.

30. During the course of her submissions, Ms. Wakefield accepted that it was common ground that the overarching principle in assessing quantum of damage is the compensatory principle. However, she emphasised the following passage from The Liesbosch per Lord Wright at page 463: "In these cases the dominant rule of law is the principle of restitutio in integrum and subsidiary rules can only be justified if they give effect to that rule”.

31. It was Ms. Wakefield's submission that the existence of a dominant rule does not mean that there cannot be subsidiary rules and she asserts that one such subsidiary rule applies here on the facts of this case.

32. The problem with that submission, to my mind, is that it is clear from The Liesbosch that any subsidiary rule will only be justified if it gives proper effect to the overarching principle. An inflexible rule of the type for which Ms. Wakefield contends would, in my judgment, have the potential effect of abrogating the dominant compensatory principle and so doing an injustice to MGA. That may be particularly so in a complex situation such as this, which will be heavily dependent at trial upon analysis of the counterfactual.

33. Nevertheless, Ms. Wakefield says that the fixed rule for which she contends is well-established in the case law and is binding on me. Accordingly, I must next turn to look at the authorities on which she relies and I take them in the order in which they are addressed in MGA's skeleton argument.

34. First, UYB v British Railways Board [2000] EWCA Civ.

265. In this case, the claimant's business would have opened in October 1992 but for a tort and was finally abandoned in November 1993 as a result of that tort. The appropriate measure of damage was held to be (i) lost profits between October 1992 and November 1993 and (ii) an assessment of the value of the hypothetical business in November 1993 on the assumption that the tort had not been committed (iii) less deductions for mitigation.

35. MGA submits that the decision of His Honour Judge Raymond Jack QC at first instance was approved by the Court of Appeal, which held that the measure of damage constituted adequate and proper compensation and that there was no legitimate basis on which the award could be impugned (see Waller LJ at paragraphs 33-34). However, with respect to Ms. Wakefield, to my mind, it is a misreading of this case to suggest that it is supportive of a fixed and immutable rule, as she suggests.

36. Waller LJ began his consideration of the method of assessment of compensation at paragraph 21 by referring to the judge's recognition of the overriding compensatory principle, saying this: "The Judge deals with the authorities from which he obtained the principles that he was to apply from pages 19 to 26 of his judgment. He recognised the overriding principle in the following words: 'The general principle underlying the award of compensatory damages has often been cited from the speech of Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39: the measure is — "that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation."'"

37. Waller LJ went on to consider the competing arguments before the judge and then at 29 said this: "What in my view this case demonstrates is that in relation to the assessment of damages each case depends on its own circumstances, and it is the overriding principle quoted above which is important." This, of course, harks back to the dominant rule identified in The Liesbosch.

38. In going on to find, at paragraph 33, that the judge at first instance was entitled to choose the method of assessment that he did, Waller LJ looked in detail at the factual circumstances of the case. At paragraph 34, he commented that the method used by the judge in the factual circumstances "did fairly compensate UYB for the destruction of their expectations in November 1993." In other words, it was an appropriate application of the compensatory principle.

39. In that context, I note also a passage from the judgment of the judge at first instance which is not available to the court, notwithstanding the best efforts of Ms. Wakefield's junior, but which is set out in the next case to which I shall turn, namely, Crehan v Inntrepreneur Pub Co [2004] EWCA Civ 637, and was drawn to my attention by Ms. Kreisberger QC, acting on behalf of Cabo, in her skeleton. His Honour Judge Jack QC recorded that his approach to loss was "the best reflection of what UYB has been deprived of", an obvious and clear application of the compensatory principle.

40. Despite Ms. Wakefield's best efforts, this case does not, to my mind, support the proposition that there is a rigid principle of law to be applied in every case of this sort.

41. Secondly, Crehan v Inntrepreneur Pub Co [2004] EWCA Civ

637. This was a decision of the Court of Appeal and like the case before me, it was a competition law case which Ms. Wakefield says, having regard to the nature of the issue that was being appealed (which is apparent from paragraph 55(8) of the judgment of Peter Gibson LJ) is on all fours with the situation with which I am concerned. In that case, two leased pubs were closed in 1993 as a result of breaches of statutory duty in the form of infringements of EU competition law. Park J would have awarded lost profits in the period between 1993 and 2003 and the value of the leases in 2003, but Ms. Wakefield's skeleton points out that the Court of Appeal held that Park J's approach was "unduly speculative" given that "the measure of damages involves a hypothesis upon a hypothesis, the hypothetical profits of a hypothetical business", and that it found that damages were therefore to be assessed in 1993.

42. In paragraph 174, of his judgment, Peter Gibson LJ said this about the case of UYB, to which I have already referred: "Mr Milligan relied primarily on the decision of His Honour Judge Raymond Jack QC (as he then was) in UYB Ltd v BritishRailways Board (16 April 1999, unreported), the facts of which must be carefully considered." A clear recognition that it was important to have regard to the particular facts of the case in understanding the grounds for the decision.

43. At paragraph 176, Peter Gibson LJ set out the passage from His Honour Judge Jack QC at first instance in UYB, to which I have already referred.

44. At paragraph 178, he said this: "Mr Brealey submitted that there were important factual differences between UYB Ltd v British Railways Board and the present case, in particular that UYB's night-club business never got off the ground and would in any event have been of a speculative nature. While we fully accept that each case must be judged on its own facts, we do not think that these and other points made by Mr Brealey are sufficient to justify a different approach from that adopted by Judge Jack." (emphasis added)

45. Pausing there for a moment, it is very plain from this that the court was not seeking to apply an immutable principle. The learned judge went on in the same paragraph to consider the specific facts of the case: "The approach adopted by Park J, on the other hand, is immediately suspect on one simple ground. He recognised that there must be some scaling down of Mr. Main's figure of [just over £1 million] in order to take account of unidentified contingencies. However, we agree with Mr. Milligan that a reduction of only 15% was palpably insufficient to take account of all the uncertainties over a ten-year period…”

46. In paragraph 179, Peter Gibson LJ set out the general principles stated by Lord Blackburn in Livingstone v Rawyards Coal Co, and then he said this, a passage which seems to be the high point of Ms. Wakefield's case: "The wrong sustained by Mr Crehan was the loss of his businesses at The Cock Inn and The Phoenix. But, for the purpose of measuring the damages recoverable, they were not actual businesses. They were hypothetical, in the sense that they had to be treated, contrary to the actuality, as having been free of tie. So they had to be treated, though for a different reason, in the same way as UYB's business. On Park J's approach that faces the court with the immediate difficulty that the measure of damages involves a hypothesis upon a hypothesis: the hypothetical profits of a hypothetical business."

47. Ms. Wakefield says that this paragraph articulates the existence of the subsidiary rule for which she contends. However, I disagree. Against the background of an acknowledgment of the general principle and the recognition that each case must be addressed on its own facts earlier in the judgment, this paragraph reflects no more than Peter Gibson LJ making a decision as to the appropriate approach to take to the assessment of damage by reference to the full facts as found at the trial of the action.

48. The next case on which Ms. Wakefield relies is ELO Entertainments Ltd v Grand Metropolitan Retailing Ltd (trading as Clifton Inns) [1999] 1 All ER (Comm) 473, again a decision of the Court of Appeal. This, however, was a case concerning a contractual claim and there was no discussion around the approach taken by the judge at first instance to the question of loss. Ms. Wakefield fairly acknowledged in her submissions before me that the legal question with which she is concerned was not squarely challenged on the appeal. In any event, in circumstances where ELO is addressed in the next case on which MGA rely, I am going to say no more about it.

49. I then come to Salford City Council v Torkington [2004] EWCA Civ. 1646, again a decision of the Court of Appeal with reasoned judgments from Potter LJ and Mance LJ (with both of whom Wall LJ agreed). The case concerned breaches of collateral warranty by the Council involving the establishment of rival businesses which adversely affected the defendant’s grocery and off-licence businesses so as to cause their closure.

50. In its skeleton argument, MGA says that the approach to the assessment of damage for which they contend was preferred by the Court of Appeal in this case and they rely on observations from Mance LJ to that effect at paragraphs 61-64.

51. Mance LJ agreed with Potter LJ, but added “a few words of [his] own”. In doing so, he rejected the approach of the judge at first instance (which had involved measuring the loss on the basis of a continuing assessment extending beyond the date on which the business had been lost) saying this at paragraph 63: "The judge's basis for assessing loss involved in contrast a continuing assessment of loss for a period of years long after the business had ceased. It was inherently speculative, since it depended on an attempt to derive from the figures previously calculated in respect of years when the business was trading and from analysis of actual events after 1988, potential profits in respect of years when the business was not trading at all. It then also involved an attempt, in the light of those entirely hypothetical matters, to assess the value which the business would have had in 1994, six years after the business had definitively ceased."

52. He went on at paragraph 64 to say: “In my view the correct approach would have been to treat both defendants as having suffered the final loss of their business as at February/March 1988…An entitlement to loss measured by reference to the value that the business would have had in 1988, together with interest, is firmly connected with the actual consequences of the council’s breaches on undertaking, namely the demise of the business which the council induced the defendants to take on and continue. It takes into account that it was in 1988 that the defendants were actually deprived of an asset which they could, but for the council’s breaches, either have realised then or have chosen to trade as they wished after that date. It avoids the speculative assessment, relating to their trading over the next six years and their ultimate assumed disposition of the business in 1994, upon which the judge embarked; and it can be rationalised on the basis that such a measure provides compensation sufficient to enable the defendants to have acquired and undertaken any equivalent income-yielding activity they chose after February/March 1988. In my view the judge should therefore have measured loss in this case as at February/March 1988…”

53. Again, Ms. Wakefield says that this is a clear articulation of a fixed rule. However, to my mind Mance LJ is in fact doing no more than applying the compensatory principle to the particular facts of the case. That the Court of Appeal was not intending to go further than this is clear from the judgment of Potter LJ, as Ms. Kreisberger correctly pointed out.

54. In paragraph 29, Potter LJ dealt with the submissions of counsel for the appellant: "First, he submits that the loss should simply have been assessed as at the date of closure of the business, i.e. the difference between the value of the business at that date and its notional value assuming there had been no prior breach of contract. Not only does that represent the loss ordinarily and naturally resulting in such a case; he submits that it is also the fairest and most obvious way to take account of the innumerable uncertainties and contingencies which the business would in any event have faced after February 1988, c.f. the approach of Judge Crawford QC sitting as a judge of the High Court, approved by the Court of Appeal in ELO Entertainments 1 AER (Com) 473."

55. He then set out an extract from the judgment in ELO and then at paragraph 31 went on to say: "Whilst acknowledging that, in that case, the Court of Appeal recognised that, in any given case, a choice is open to the judge as to the most suitable way of assessing the future loss (if any) suffered by a trader who is put out of business by another's breach of contract, Mr. Berragan submits that the uncertainties as to future trading in circumstances of open competition and in a declining neighbourhood, together with all the other factors listed by the judge…. were such that the correct approach was not to embark on the totally uncertain exercise in prediction which the judge effected, but to assess the amount by which the capital value of the business and premises was diminished by the breaches of warranty at the time the defendants ceased to operate it in February 1988."

56. I pause there to note that Potter LJ does not suggest that counsel’s acknowledgement that, as the Court of Appeal recognised in ELO, the judge is free to choose the most suitable way of assessing future loss, was in anyway inaccurate or inappropriate.

57. At paragraphs 47-50, Potter LJ clearly dealt with the case on its own specific facts: "47. In my view, the judge was wrong to deal with the matter as he did, broadly for the reasons advanced by Mr Berragan. The judge was dealing with the claim of defendants who, on the faith of a contractual warranty had acquired business premises as an investment, albeit for operation as a business. They did not rely upon any additional feature, special characteristic, or future intention made known to the council at the time of their proposed acquisition which might lead the council to assume that the business would be continued and/or disposed of on other than ordinary commercial considerations.

48. The damages recoverable were those which were within the reasonable contemplation of parties in that situation. There is nothing to be gained by seeking to analyse the matter in terms of actual or imputed knowledge or the first and second rule in Hadley v Baxendale (1854) 9 Ex

341. The warranty given plainly related to the extent of the competition which the defendants would be likely to encounter in a business which depended upon the sale of food and drink within its catchment area. It was thus to be contemplated that, if the warranties proved false, the defendants would suffer loss of profits to an uncertain extent and over an uncertain period until the defendants either ceased trading or sold on their business. In those circumstances, as it seems to me, so far as remoteness of damage is concerned, the obvious cut-off point for any claim for loss of profits and the point at which damage fell to be assessed on a valuation basis was the point at which it was reasonable for the defendants, fully apprised of the adverse effects of the breach of warranty, to decide to cease trading and dispose of the business.

49. As to the measure of the damages to be awarded, there was simply no reason not to adopt the normal contractual measure based on the value of the benefit of which the defendants had been deprived as a result of the breaches of warranty. Such value could only be measured at that point by evidence of the value of the defendants' business as at that date, as to which the consensus of the expert evidence was plainly that such value was nil. Thus the measure and the ceiling of the defendants' loss at closure was, on the valuation advanced by Mr Cooper, £65,000.

50. It seems to me that, by opting to award damages on the basis that, had the warranties been true, the defendants would have traded on indefinitely, thus giving rise to a large claim for continuing loss, the judge (a) awarded a sum beyond the reasonable contemplation of the parties at the time the warranties were given, and (b) ignored the reality that, as from mid-1987, the defendants contemplated disposing of their business rather than continuing it. In those circumstances the approach of the judge involved compensating the defendants for loss of future trade which the defendants had no intention of carrying on."

58. In doing so, Potter LJ applied what he referred to as "the normal contractual measure" because there was no reason to take any different approach. However, he plainly recognised that there may be circumstances in which a different approach would be appropriate.

59. The last authority on which Ms. Wakefield relied was 2 Travel Group v Cardiff City Transport Services [2012] CAT

19. This was a decision of the Competition Appeal Tribunal in a “follow on” case following a decision of the Office of Fair Trading of abuse of a dominant position by the defendant. The Tribunal was concerned with the question of damage, including loss of profits. At paragraph 339 of the decision, the Tribunal identified that it was required to make a choice as to the date of the claim for lost profits, and at paragraphs 345-346 it proceeded to determine that issue on the facts, deciding that lost profits must be assessed as at the date on which the claimant went into liquidation.

60. In doing so, the Tribunal relied upon Crehan v Inntrepreneur Pub Co, but I do not detect the application of any fixed immutable principle of law. On the contrary, to my mind, the Tribunal was simply having regard to the specific facts of that case and was seeking to identify the result that would best reflect the claimant’s loss.

61. In light of my analysis of the authorities on which MGA relies, I do not consider that the extract from Chitty on Contracts (33rd Edition 2021) at 29-196, to which Ms. Wakefield also referred me, takes matters any further.

62. I agree with Ms. Kreisberger that the authorities all speak in one voice. That is not a voice that says a rigid immutable rule must always be applied in cases of this type, but, rather, that every case must be determined on its own facts so as to give proper and full effect to the compensatory principle.

63. During the course of her very helpful submissions, Ms. Kreisberger drew my attention to a number of additional authorities which, to my mind, confirm that there is no rigid rule as to the approach to be adopted to damages or as to the date of assessment.

64. In light of my decision on the authorities on which MGA relies, I need not deal with these in any detail, but I note in particular the case of Smith New Court Securities Ltd v Citibank NA [1997] AC 254, in which Lord Browne-Wilkinson said this at 265-266: "Turning for a moment away from damages for deceit, the general rule in other areas of the law has been that damages are to be assessed as at the date the wrong was committed. But recent decisions have emphasised that this is only a general rule: where it is necessary in order adequately to compensate the plaintiff for the damage suffered by reason of the defendant's wrong a different date of assessment can be selected."

65. Ms. Kreisberger points out that the House of Lords, in Smith New Court Securities, referred to a number of earlier authorities, including the well-known passage from County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916, at 925-926, per Bingham LJ (as he then was): "While the general rule undoubtedly is that damages for tort or breach of contract are assessed at the date of the breach … this rule also should not be mechanistically applied in circumstances where assessment at another date may more accurately reflect the overriding compensatory rule."

66. Ms. Kreisberger also referred me to the case of Gosden v Halliwell Landau (A Firm) [2021] EWHC 159 (Comm), where, in the context of considering the date at which a property should be valued for the purposes of assessing damage, HHJ Pelling QC said at paragraph 21, that, "each case where this question arises involves a fact-sensitive analysis of the position".

67. Finally, Ms. Kreisberger referred me to Tuke v Hood [2022] EWCA Civ 23, a recent case endorsing the same principles, in which the Court of Appeal relied (at paragraph 31) on Lord Steyn's explanation in Smith New Court as to the method which could be used for determining loss in many cases involving deceit, together with his observation at 284B-C that: "If that method is inapposite, the court is entitled simply to assess the loss flowing directly from the transaction without any reference to the date of transaction or indeed any particular date. Such a course would be appropriate whenever the overriding compensatory rule requires it."

68. This brings me back to the need to give effect in every case to the overriding compensatory principle. I note that Ms. Wakefield did not attempt to address the additional cases relied upon by Ms. Kreisberger in her submissions.

69. In circumstances where the rigid rule for which MGA contends does not, in my judgment, exist, I consider that there is no basis for rejecting the amendment application and no basis for granting the strike-out application. MGA hung its case before me today on the hook of that so-called inflexible rule and in circumstances where I have found that every case must be determined by reference to its own facts, that case must fail.

70. Accordingly, there is no reason for me to consider the case management advantages that MGA puts forward in support of determining the point in its favour at this stage. I note in any event that, as MGA recognises, a determination on the point of law at this stage against Cabo might well result in an appeal which would have the potential to endanger the trial date. However, in circumstances where I am not prepared to determine at this stage that Cabo's case is plainly and obviously bad in law, there is no need for me to address such considerations further.

71. In all the circumstances, I dismiss the strike-out application and I permit the amendment application. The amendments, in my judgment, advance a realistic claim which must be determined on the evidence at trial. The strike out application has not established that there are no reasonable grounds for the damages claim set forth in the existing Amended Particulars of Claim. MGA's suggested amendments to the Amended Particulars of Claim must fall away. While no dates are identified in the proposed amended pleading for the assessment of loss, I accept Ms. Kreisberger's submissions that the correct date will be a matter to be determined by the court on the basis of the expert evidence in due course. Ms. Wakefield did not suggest that any other outcome should eventuate in circumstances where I rejected her arguments on the law. She also accepted that, were I to find against her, MGA's application to excise various aspects of the report of Mr. Colley could not succeed. Accordingly, I also dismiss that application. (After further legal submissions)

72. I am now called upon to deal with an application from MGA following the decision I made earlier at this hearing for permission to rely on the expert evidence of a valuer to address the amended case that will now be in issue at trial.

73. Ms. Wakefield, on behalf of MGA, points out that the point in relation to the value of the business was not a pleaded issue. Had it been, it is likely that the parties would have identified the need for valuation evidence much sooner and that would have taken place perhaps at the first case management conference with appropriate directions put in place, She says that MGA is not to be blamed for the fact that Cabo has only relatively recently identified a need to introduce this head of loss into its pleading.

74. In response to the application, Ms. Kreisberger says that if MGA is to be permitted to have valuation evidence, then Cabo will want to have the opportunity to reply to that evidence, whether by Mr. Colley or by a new valuer. Indeed, as I understood her position, if I accede to MGA’s request for a new valuation expert, she would seek permission for a new valuation expert to assist Cabo.

75. In my judgment, the fair and appropriate order to make (for the reasons identified by Ms. Wakefield) is for MGA to be granted permission to obtain valuation evidence in short order so as not to disrupt the preparations for trial and for a timetable to be set down in order for that to take place.

76. Although I hear what Ms. Kreisberger says about the potential for Mr. Colley to be criticised at trial for advancing valuation evidence which, it may be said, does not necessarily fall completely within the sphere of his expertise, I am afraid that in circumstances where it has been Cabo’s position for some time that Mr. Colley's evidence is sufficient to deal with the question of valuation and where Ms. Kreisberger has made submissions to me during the course of this hearing on the back of that evidence, I do not accept that permission is required for Cabo to rely on the evidence of an additional valuer.

77. However, I will grant permission to Cabo to serve a short report from Mr Colley in reply to any evidence as to valuation that is served on behalf of MGA. (After further legal submissions)

78. I am now called upon to deal with the costs arising from the applications that have been before me today. The lion's share of the time has been taken up with dealing with the application to amend the Amended Particulars of Claim, the application to strike out aspects of the Amended Particulars of Claim, and allied to those, an application to excise paragraphs from the expert report of Mr. Colley on behalf of Cabo.

79. MGA accepted during the course of their submissions on those applications through Ms. Wakefield, as I have made clear in my judgment, that their position today stood or fell on the legal arguments that were being made. They have been unsuccessful in relation to those legal arguments and, on the application of ordinary principles, the appropriate order is therefore that Cabo should have its costs of those applications. This will also apply to Cabo’s disclosure application in relation to management accounts which was parasitic on the outcome of these applications.

80. In circumstances where I have granted the amendment application, there will now be a need for consequential amendments to be carried out by MGA and the normal order is that MGA should have their costs of carrying out those consequential amendments. Ms. Kreisberger does not object to this and so I will make that order.

81. Ms. Wakefield submits that in so far as there were other applications before the court today which have been resolved by agreement, those should be dealt with on a costs in the case basis. Having heard the submissions of the parties and on the basis that each party had points to make on these applications in advance of the hearing, I consider that the order most likely to do justice between the parties is to make no order as to costs on these applications. – – – – – – – – – – – –