Double G Communications Ltd v News Group International Ltd

Damages for breach of contract must be assessed by making the best evaluation possible of probable loss, while remaining anchored to the evidence. An evidential presumption may give a claimant the benefit of relevant uncertainty where the defendant’s wrongdoing created that uncertainty, but it does not justify assumptions unsupported by evidence. The court must distinguish realistic estimation from speculation. In assessing contractual performance, it should determine the counterfactual course of performance, assuming that the defaulting party would act within the contract and in its own commercial interests. Expert forecasts must disclose a sufficiently testable methodology and reliable comparators. Where detailed market evidence conflicts with optimistic modelling, the court may reject the modelling and make its own conservative assessment.

The claimant had entered into a licence agreement with the defendant to produce and distribute a board game using the defendant’s Page 3 and Page 3 Idol brands. The defendant repudiated the agreement before launch and instructed the claimant not to sell the game. Summary judgment had established liability, and the present hearing concerned the assessment of damages for lost profits during the proposed three-year licence term.

The claimant claimed approximately £1.3 million, based principally on forecasts of substantial retail, online and defendant-supported sales. The defendant contended that sales would have been very limited. The central issues were the proper approach to evidential uncertainty, the reliability of the parties’ expert evidence, the effect of the defendant’s contractual marketing obligations, and the probable level of sales.

1. The claim was assessed on the basis that the licence would not have been wrongfully terminated and that the defendant would have complied with its marketing obligations in accordance with the claimant’s reasonable expectations derived from the agreement and surrounding material.

2. The principle in Armory v Delamirie and its modern restatements could, in an appropriate case, give a claimant the benefit of relevant doubt. It did not justify a strong presumption in favour of the claimant on every uncertain matter. The present assessment had to be based on the evidence and the balance of probabilities.

3. The court’s task was to evaluate the chances of sales, great or small, while excluding remote speculation. The claimant’s expert’s micro-benchmarking methodology was not useful because it was contradicted by the actual market reaction, including firm refusals by major retailers. Confidential or unpublished data could be used by an expert, but only if the court could assess the comparability of the underlying material and test the reasoning process.

4. The defendant’s marketing obligation was a relevant factor in assessing probable sales. The word “discretion” did not permit wholly perfunctory performance. The counterfactual required the defendant to perform within the contract and in its own commercial interests, rather than to act uncommercially merely to disadvantage the claimant.

5. Giving the claimant as fair a wind as the evidence permitted, the court assessed sales at 6,500 units in 2009 at £24.99, 3,500 units in 2010 at £19.99 and 2,500 units in 2011 at £14.99, totalling 12,500 units. The parties were to agree the resulting financial consequences, with liberty to apply.

Summary judgment was entered for the claimant by Master Eyre on 6 January 2010. Simon J dismissed the defendant’s appeal on 27 April 2010. The present judgment assessed damages.