Sony Computer Entertainment UK Ltd v Cinram Logistics UK Ltd

Where goods are lost or converted by a bailee before delivery, the owner’s prima facie loss is the value of the goods, including the price of an identified sale, rather than merely the cost of replacement. The claimant bears the legal burden of proving loss, but the evidential burden shifts where the defendant says that the loss was reduced by substitute or replacement sales. The defendant must prove that the profit was recouped; the claimant need not prove a negative. Whether replacement occurred is assessed on the balance of probabilities from the commercial evidence. A continuous product and the possibility of later reordering do not, without more, establish replacement. Authorities concerned with remoteness do not govern where remoteness is not in issue.

Sony sold memory cards to Game and entrusted them to TEN, later known as Cinram, for warehousing and distribution. Seventeen thousand cards were stolen before delivery. TEN admitted liability, leaving only the assessment of damages. At trial, His Honour Judge Knight QC found that Sony had proved that the sales were not replaced and awarded the discounted sale value of £187,989.41 rather than Sony’s cost of £56,246.

TEN appealed, arguing that Sony bore the burden of proving that the sales had been lost and that later orders had not recouped the profit. The central issues were the proper inference from the ordering evidence and the allocation of the legal and evidential burdens.

1. Appeal dismissed. Rix LJ gave the leading judgment, with Wilson LJ and Rimer LJ agreeing.
2. Factual finding. The trial judge was entitled to find that the stolen cards had not been replaced. There was no immediate replacement, the relevant September orders were cancelled or treated as discharged, and later orders were made in reduced numbers after a substantial lapse of time. The general possibility that a continuous product might later be reordered was a weak inference against the detailed commercial evidence. The finding that Sony had lost the sale value of the 17,000 cards was therefore sustainable.
3. Burden of proof. The legal burden remained on Sony to prove its loss. However, the evidential burden shifted to TEN once it asserted that Sony’s loss was reduced because the profit had been recouped through substitute or replacement sales. Sony was not required to prove a negative; TEN had to prove the positive case that the profit had in fact been recouped.
4. Authorities. Charter v Sullivan [1957] 2 QB 117 concerned a seller who retained the goods and resold the same car, and was distinguishable. In re Vic Mill Ltd [1913] 1 Ch 465 and Hill & Sons v Edwin Showell & Sons Ltd (1918) 87 LJKB 1106 supported placing the evidential burden of displacing prima facie lost profit on the defendant. The Sale of Goods Act 1893 Sale of Goods Act 1893 analysis in Charter did not control the present claim. The Pegase [1981] 1 Lloyd’s Rep 175 was concerned with remoteness, whereas remoteness was not in issue here.
5. Direct damages analysis. Whether viewed by analogy with non-acceptance of goods or directly as loss or conversion by a bailee, Sony was prima facie entitled to the value of the goods. If TEN wished to reduce that amount by relying on replacement sales, it bore the evidential burden of proving the reduction. Even if the factual finding had been overturned, TEN could not have met that burden.

1. Court of Appeal (Civil Division) In [2008] EWCA Civ 955, Rix LJ, with Wilson LJ and Rimer LJ agreeing, dismissed Cinram’s appeal.
2. Commercial Court His Honour Judge Knight QC, sitting as a deputy High Court judge, found that Sony had proved the loss of the sales and awarded the discounted sale value of the stolen cards.