THJ Systems Limited & Anor v Daniel Sheridan & Anor

A claimant must prove the amount of loss even where the defendant is debarred from defending. The court may make reasonable assumptions to resolve uncertainty caused by the defendant’s wrongdoing, but that principle does not reverse or dilute the burden of proof.

Contractual damages compensate loss caused by breach. Copyright damages must reflect the actual infringement and the territorial loss proved. Where copyright subsists only in part of a software product, damages cannot simply be assessed by reference to the value of the whole product without evidence supporting an appropriate apportionment. Additional damages under Copyright, Designs and Patents Act 1988, section 97(2), require a discretionary assessment of flagrancy and all the circumstances.

The claimants sought damages following a liability judgment concerning a joint venture to exploit options-trading software. The defendants had breached contractual advertising obligations, and the defendants’ licences had been terminated. The liability judgment dismissed the copyright claim, but the Court of Appeal later declared that copyright subsisted in the software’s Risk and Price Charts as graphic works and that two identified uses infringed that copyright, directing inquiries as to damages or an account of profits.

The defendants failed to comply with subsequent orders, including a Tring order, and were debarred from defending the inquiries. The issues were the damages caused by the advertising breaches, a claim for lost management time, copyright damages, and additional damages.

1. Debarring order. A debarring order operated according to its terms. The defendants could not use limited submissions or other participation to circumvent the sanction. They remained entitled to put the claimants to proof, and debarment did not automatically establish the claim. The approach in Al Saud v Gibbs and Michael v Phillips was applied. The Tring order required information sufficient to enable an informed election between damages and an account of profits.
2. Advertising breaches. Contractual damages were assessed by the compensatory principle. The court could make reasonable assumptions where uncertainty resulted from the defendants’ breach, but assumptions had to be consequent on that wrongdoing and could not cure deficiencies in the claimants’ own evidence. The revised calculation, allowing for the 2018–2020 dip and amelioration of the breach’s effect after termination, proved loss of £3,358,079.86. The claim for lost management time failed because the evidence did not establish business disruption, diversion from revenue-generating activity, or the relevant cost. The reasoning in Aerospace Publishing and Haysman was applied by analogy.
3. Copyright damages. Damages were territorial and had to reflect the actual infringement, namely use of the Risk and Price Charts in the United Kingdom. The claimants’ proposed read-across from the UK proportion of their customers to the defendants’ US-based training business was unsupported. Nor could the licence fee for the whole software be equated with the value of copyright in the charts without evidence of apportionment. The copyright damages claim therefore failed.
4. Additional damages. The court considered the factors summarised in Software Solutions. Continued availability of historic materials, the parties’ prior contractual relationship, the dispute over termination, and the absence of cogent evidence of conduct outside the norm did not establish flagrancy. No additional damages were awarded.

The claimants were awarded advertising-breach damages only. The lost-management-time, copyright-damages and additional-damages claims failed. Questions of interest, costs and the form of order were reserved for a short consequentials hearing.

• High Court (Chancery Division): The liability judgment at [2023] EWHC 927 (Ch) found contractual advertising breaches, ordered an inquiry as to damages, and dismissed the copyright claim.
• Court of Appeal: In [2023] EWCA Civ 1354 , the court declared that copyright subsisted in the Risk and Price Charts as graphic works and that specified uses infringed copyright. It directed an inquiry as to damages or an account of profits.
• High Court (Business List): The present court awarded £3,358,079.86 for the advertising breaches and dismissed the other damages claims.