Sawyer v Atari Interactive Inc

A restitution claim for alleged overpayment must identify the mistake relied upon. Merely describing an overpayment as erroneous is insufficient where the surrounding case alleges a deliberate contractual deduction.

Contractual construction issues may remain suitable for trial even where the evidence cannot sustain restitution. Industry practice may assist construction of commercial wording such as customary trade and volume discounts. A claim with no real prospect of success may exceptionally proceed where an imminent authoritative decision could alter the law and strike-out could cause injustice.

Chris Sawyer brought proceedings against Atari Interactive, Inc concerning royalties payable under licence agreements for the RollerCoaster Tycoon games. Atari counterclaimed for repayment of alleged overpayments, relied on set-off, and advanced claims concerning a proposed further game. Mr Justice Cooke struck out the counterclaim and set-off defence, refused amendments, and entered summary judgment on parts of Mr Sawyer’s claim.

Atari sought permission to appeal, amend, and rely on further evidence. It accepted that some claims concerning the Thrills Game could not stand, but proposed revised claims based on breach of a contractual right of first negotiation and alleged inducement of breach. The central issues were whether the restitution claim disclosed a mistake, whether contractual issues remained triable, and whether the revised claims should proceed pending decisions in related economic-tort appeals.

1. Restitution. Permission to appeal was refused concerning the claim for repayment of alleged overpayments. A restitutionary claim based on mistake must identify the relevant mistake. The existing pleading was internally inconsistent: it described the 10 per cent deduction as a preliminary provision, yet alleged that the claimant had been mistakenly or erroneously overpaid. The further evidence did not support a proposed plea that the contractual formula had been mistakenly misapplied.
2. Set-off and contractual construction. Striking out the restitution claim did not necessarily determine the contractual set-off defence. The meaning and effect of the contractual definition of Net Sales Revenues remained live in the underpayment claim. Whether customary trade and volume discounts required product-specific calculation or permitted averaging was an issue for trial. If Atari established that it had been entitled to deduct more than the 10 per cent actually withheld, it could seek to set off the resulting overpayment against other claims. Evidence of computer-games industry practice could assist construction.
3. Thrills Game claims. Revised amendments alleging that the game initially constituted a sequel, before becoming an Additional Format and ultimately a stand-alone game, could not be dismissed as fanciful. The breach of contract claim was permitted to proceed. The inducement claim was also allowed to proceed provisionally. Although Mainstream Properties v Young [2005] EWCA Civ 861 treated intention to cause harm as an essential ingredient, pending House of Lords judgments in Douglas v Hello! Ltd [2005] EWCA Civ 595 and Mainstream Properties v Young created a risk of injustice if the claim were struck out immediately.
4. The Court allowed the relevant appeals, set aside the orders striking out the set-off and amended claims, granted permission to rely on further evidence to the stated extent, and refused permission to introduce proposed paragraph 31.6A.

• Court of Appeal (Civil Division) [2007] EWCA Civ 170: permission to appeal was refused concerning the restitution claim, but the appeals concerning set-off, amendments, further evidence, and the revised Thrills Game claims were allowed in the stated terms.
• High Court of Justice, Chancery Division: Mr Justice Cooke struck out the Part 20 counterclaim and set-off defence, refused permission to amend, and entered judgment for Mr Sawyer in the aggregate sum of $151,296.