Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors (Rev 1)

Compensatory damages are the ordinary remedy for breach of statutory duty arising from a competition-law infringement. A claimant cannot obtain an account of the defendant’s profits for a non-proprietary tort merely because the profits resulted from wrongdoing.

Even if such relief could extend to a non-proprietary tort, it would be available only in exceptional circumstances where ordinary remedies were inadequate and the claimant had a legitimate interest in stripping the profit. Evidential difficulty does not ordinarily make damages inadequate. Nor may an account be used to avoid the consequences of passing an overcharge to customers.

Community law neither requires nor prohibits a domestic account-of-profits remedy. Compensation for actual loss, loss of profit and interest satisfies the principle of effectiveness.

The respondents participated in cartels for vitamin products contrary to article 81 of the EC Treaty. Devenish bought vitamins or vitamin products from them and alleged that cartel-induced prices included an unlawful overcharge. In follow-on proceedings it sought compensatory damages and, alternatively, an account of the respondents’ profits.

Lewison J decided the preliminary issue against Devenish: [2007] EWHC 2394 (Ch), reported at [2008] 2 WLR 637. He held that binding Court of Appeal authority precluded a restitutionary award for this non-proprietary tort and that compensatory damages were adequate.

The appeal concerned whether an account of profits was legally available for breach of statutory duty, whether the circumstances were exceptional, and whether Community law required or prohibited that remedy.

1. The appeal was dismissed. Stoke-on-Trent City Council v W & J Wass Ltd remained binding. Although the reasoning in Attorney General v Blake suggested that an account of profits could in principle extend beyond proprietary wrongs, Blake did not necessarily overrule Wass. A Court of Appeal decision confining gain-based recovery outside recognised proprietary torts therefore continued to govern: per Arden and Tuckey LJJ. Longmore LJ likewise rejected the claim, although he did not regard Wass as necessarily confining the remedy to proprietary torts.
2. In any event, the proposed account failed under the exceptional-remedy principles in Blake. An account of profits is available outside established categories only where justice requires it, ordinary remedies are inadequate, and the claimant has a legitimate interest in depriving the defendant of its profit. The seriousness and deliberateness of the cartel did not by themselves satisfy that standard.
3. Compensatory damages were adequate. The overcharge was capable of estimation through conventional economic evidence. Difficulty in proving the additional “margin squeeze” claim did not justify substituting the defendants’ gain for the claimant’s loss. Courts may address evidential uncertainty by reasonable estimation and the broad-axe approach.
4. An account could not properly enable a purchaser to recover an overcharge which it had passed to downstream customers. Such an award would transfer a gain to a claimant which had suffered no corresponding loss and would produce a windfall. The claimant was entitled to compensation for loss caused by the cartel, no more and no less.
5. Community law neither prevented nor required an account of profits. Article 16 of the Modernisation Regulation did not prohibit such a domestic remedy. Conversely, the effectiveness principle required an adequate remedy for loss, not the fullest possible remedy. Compensatory damages for actual loss, loss of profit and interest were sufficient. The principle of equivalence would govern if domestic law made an additional form of damages available in comparable domestic proceedings.
6. Arden LJ considered provisionally that the existence of multiple claimants would not invariably bar an otherwise available remedy; suitable case-management directions might address conflicting claims. That issue did not affect the disposition.

1. Court of Appeal (Civil Division): The court unanimously dismissed the appeal: [2008] EWCA Civ 1086.
2. High Court of Justice, Chancery Division: Lewison J determined the preliminary issue against Devenish and held that an account of profits was unavailable: [2007] EWHC 2394 (Ch), reported at [2008] 2 WLR 637.