Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd

Contractual damages put the claimant in the position it would have occupied had the contract been performed. Where a defendant was free to continue trading with introduced clients, but was contractually required to disclose that trading and pay agreed remuneration, the counterfactual assumes that the actual trading occurred with the promised payments made. The court need not speculate that the clients would have traded less on different terms.

An observation unnecessary to an earlier judgment cannot create issue estoppel. In assessing loss of profits, credit is allowed for costs saved or liabilities reduced, but not for distributions of the claimant’s own assets to its owners. Evidential uncertainty caused by the defendant’s conduct may justify reasonable assumptions, but it does not permit unsupported guesswork.

The claim arose from an agreement under which Medsted introduced clients wishing to trade contracts for differences to Collins Stewart, later renamed Canaccord. Collins Stewart was required to disclose the introduced clients’ trading and pay Medsted agreed commissions and financing rebates. It secretly continued trading with some clients without disclosure or payment.

At the liability trial, Teare J found breach of contract but awarded only nominal damages and rejected the debt claim. The Court of Appeal held that Medsted’s fiduciary duty did not justify limiting damages, while upholding the conclusion that the claim was in damages rather than debt: [2019] EWCA Civ 83. The present judgment assessed quantum. The central issues were the correct counterfactual, credits for payments to sub-introducers, and the extent of hidden trading.

1. Basis of assessment. The court applied the compensatory principle for breach of contract. The relevant question was what would have happened had Collins Stewart performed its obligation to disclose trading and pay Medsted. Collins Stewart was not obliged to continue dealing with the clients, but it was entitled to reduce its own charges if it wished. Once it traded with introduced clients, the agreement operated in substance as a unilateral contract: the agreed remuneration became payable. The actual hidden trading was therefore assumed to have occurred with the agreed payments disclosed and made. A discount based on the clients’ possible refusal to trade on the original terms was rejected.
2. The fact that the damages figure might resemble the amount which would have been payable in debt did not prevent that result. There was no rule that damages could not reach the same figure merely because a debt claim failed.
3. Issue estoppel and abuse of process. The earlier judge’s observation that payments to sub-introducers would have to be considered was obiter. It was unnecessary to the award of nominal damages and was not an issue captured by the order determining liability. It therefore created no issue estoppel. In the absence of issue estoppel, reargument was not abusive.
4. Credits. Payments to Inverness and Filicity were distributions to Medsted’s owners, not business costs, and required no credit. Medsted retained liability to genuine sub-introducers, so no general credit was allowed for those liabilities. A credit of £214,000 was allowed for rebates already paid by Collins Stewart to Mr Komninos and associated companies, because those payments reduced Medsted’s corresponding liability and prevented double recovery.
5. Evidence and quantum. The court gave Medsted a fair wind because Collins Stewart’s wrongdoing and incomplete records created evidential difficulty, but not a free ride. The recalibration exercise based on Collins Stewart’s remuneration records was accepted, with £126,000 added for Goldman Sachs trading and £31,000 awarded for non-CFD trading. Damages were assessed at €832,000, £1,084,000 and $955,000, subject to further argument on interest and currency if required.

• Court of Appeal: The liability appeal was allowed. The court held that Medsted was not necessarily obliged to disclose its remuneration to introduced clients and that nominal damages were inappropriate. The debt analysis was upheld: [2019] EWCA Civ 83.
• High Court (Commercial Court): Quantum was assessed in accordance with the Court of Appeal’s decision.