Leofelis SA & Anor v Londsdal Sports Ltd & Ors

Contractual damages must reflect the value of the benefit actually lost. Where an agreement ends after the breach, the court must take that known event into account when assessing loss of future contractual benefits. A claimant cannot recover damages for royalties which could only have been earned after the agreement ended, even where the parties dispute responsibility for the termination. Any loss caused by a repudiatory breach which validly brings the agreement to an end belongs in the claim for that breach, not in an earlier claim for loss caused by separate breaches.

On a summary judgment application, the court may decide a short point of law where the evidence is sufficient, but must not conduct a mini-trial. The court should consider evidence reasonably expected to be available at trial.

The judgment concerned applications in two related actions arising from a licence of trade marks. In the 2005 Action, Leofelis claimed damages for breaches of exclusivity, including lost royalty income allegedly caused by sales into licensed territories. It claimed loss extending beyond September 2007, when it purported to terminate the licence.

In the 2009 Action, the licensors claimed damages for Leofelis’s repudiatory breach following their termination of the agreement. Leofelis defended that claim and counterclaimed on the basis that the licensors had themselves committed repudiatory breaches, including matters concerning a licence granted to a Latvian company.

The applications raised whether future losses could be claimed after the agreement ended, and whether an undiscovered repudiatory breach could support damages for the agreement’s subsequent termination.

1. Summary judgment principles. The court applied the established Part 24 approach. It had to assess whether the claim had a realistic, rather than fanciful, prospect of success, without conducting a mini-trial. It could analyse the evidence and consider evidence reasonably expected to be available at trial. A short point of law or construction should be decided summarily where the necessary material was before the court.
2. 2005 Action. Contractual damages are compensatory. They must place the innocent party in the position it would have occupied had the contract been performed, and must not provide a windfall. Applying The Golden Victory, the court held that a subsequent event which actually ended an agreement must be taken into account when assessing loss of future benefits. The claim for royalties after 28 September 2007 was therefore bound to fail. That conclusion did not depend on whether the later termination resulted from Leofelis’s breach or a separate repudiatory breach by Lonsdale.
3. The appropriate cut-off was 28 September 2007 because Leofelis’s notice treated the agreement as terminated on that date. If Leofelis established in the 2009 Action that Lonsdale’s repudiatory breach justified that termination, its resulting loss had to be pursued in that action.
4. France. The Court of Appeal’s order declared that no valid sub-licence had been granted for any territory outside Italy. An appeal is against the order, not merely the reasoning. Leofelis could not revive an argument based on an undisturbed passage in the first-instance judgment when the Court of Appeal’s order was unequivocal.
5. 2009 Action. Boston Deep Sea Fishing supported reliance on a distinct repudiatory breach as a defence to wrongful termination and as a basis for pre-termination loss. It did not support damages for loss caused by the contract’s termination itself. Since Leofelis terminated without knowing of the alleged SIA breach, that breach did not cause the agreement to end. The counterclaim for damages after 28 September 2007 therefore had to fail.

The judgment records that Evans-Lombe J decided liability in the 2005 Action on 8 March 2007, and that the Court of Appeal partly reversed that decision on 1 July 2008. It also records that Kitchin J refused summary judgment in the 2009 Action on 6 May 2010, subject to payment into court. The present court determined the applications concerning post-termination damages.