Interactive Technology Corporation Ltd v Ferster & Ors

An order takes effect when it is pronounced or made, unless the court specifies a later date. Sealing is not required before the order becomes binding and effective.

Where a claimant has alternative and inconsistent remedies, an effective election occurs when the claimant chooses a remedy and the court gives effect to that choice in an effective judgment. An election may be effective even if the claimant’s information was incomplete, where the claimant chose to proceed on that basis.

The meaning of equitable compensation depends on context. It may refer to compensation for loss caused by breach of duty, or, in another sense, payment of the amount due on an account of profits. The court may decline to determine a difficult causation issue on a consequential- relief application where the issue is premature.

The claimant had succeeded in an earlier judgment in its claim that the first defendant had caused unauthorised remuneration to be paid to himself in breach of fiduciary duty. At a subsequent hearing, the parties agreed the form of an order providing for equitable compensation, and the court pronounced that order on 19 December 2016.

Before the order was sealed, the claimant changed position and sought a different order requiring repayment or an account of the unauthorised remuneration. The first defendant contended that the original order had already been made, was effective, and reflected the claimant’s binding election of a remedy.

The issues were whether the order had been made and was effective before sealing, what remedy it provided, whether the claimant could reverse its election, and whether the court should determine the disputed causation issue at that stage.

1. The remuneration order had been made and was effective. The transcript showed that the parties had agreed its terms and that the court had pronounced it on 19 December 2016. Under Civil Procedure Rules 1998, r 40.7, an order takes effect when it is given or made unless the court specifies a later date. No later date had been specified. Sealing was therefore not a precondition to effectiveness.
2. The order provided for loss-based equitable compensation. The phrase equitable compensation can bear more than one meaning. In the context of the pleadings, the earlier judgment, the parties’ submissions and the hearing, it referred to compensation for loss resulting from the payment of unauthorised remuneration. It did not provide the same remedy as an account and repayment of the sums paid away. The court could not construe the order as having the effect of the claimant’s proposed new draft.
3. The claimant had made an effective election. The two remedies were treated as inconsistent, and the claimant had elected for equitable compensation when it asked the court to make the order in those terms. The election was effective when the court gave effect to it in a binding judgment. The fact that the order had not been sealed did not permit the claimant to reverse the election. A litigant who elects on the basis of information available to it is bound by that election, even if the information is incomplete, unless the court has allowed further investigation before election.
4. The court declined to determine at this stage whether the claimant’s loss was established merely by showing that money had been paid away, or whether a further counterfactual causation inquiry was required. The issue was difficult and potentially fact-sensitive, including because the analysis may differ according to the nature of the breach and the identity of the recipient.
5. The court had power to alter its own order before sealing, as explained in Re L (Children) (Preliminary Finding: Power to Reverse) [2013] 1 WLR 634. However, there was no sufficient basis to exercise that jurisdiction where the order had been made at both parties’ request following a knowing election. The remuneration order was to be sealed.

The judgment followed an earlier judgment of the same court in the same proceedings, reported at [2016] EWHC 2896 (Ch). The present judgment determined consequential matters and was not an appeal.