Duadata Limited v Tian Cha Le Limited

In an inquiry as to damages for passing off, loss may be inferred from the available facts and reasonable assumptions may be made when assessing quantum. A claimant may quantify loss by hypothesising a lost commercial agreement, including where the agreement was never actually concluded, provided the hypothesis is a reasonable method of assessing the loss. Pleadings may stand as evidence where the procedural arrangements and parties’ consent support that inference. An award of damages should ordinarily exclude VAT recoverable from HMRC.

Duadata obtained default judgment against Tian Cha Le Limited for passing off in connection with the operation of a bubble-tea business. The injunction restrained the defendant from using specified drink names and from presenting its menu in a way suggesting the use of the claimant’s recipes.

The inquiry concerned damages for an assumed period between the defendant’s incorporation and the default judgment. Duadata claimed the fees it said would have been payable under a hypothetical franchise agreement for a South Shields outlet. The defendant challenged the evidence of loss, causation, profitability and the use of a hypothetical agreement.

1. Evidence in the inquiry. In the circumstances, the Points of Claim could be relied on as evidence, together with the parties’ comments and exhibited documents. This was a necessary inference from the order providing for judgment on the papers after the parties had supplied their respective material. The court noted the practice under CPR PD63 31.1 that parties commonly rely on pleadings as evidence in this court.
2. Inference and assumptions. In an inquiry as to damages, loss is frequently inferred from the facts. Necessary assumptions may be made by the claimant in assessing quantum. The critical question is whether the assumptions are reasonable. The defendant had not challenged the asserted reluctance of potential franchisees in South Shields or the claimed connection between that reluctance and the defendant’s passing off.
3. Hypothetical agreement. The claimant was entitled to rely on the hypothesis of a franchise agreement which would have been entered into, and on its absence, for the purpose of quantifying loss. A contractual relationship between the parties was not required.
4. Quantum and order. The claimed franchise fees represented the claimant’s best reasonable assessment of its loss. VAT was deducted because it would not normally be recoverable from HMRC on an award of damages. The defendant was ordered to pay the rounded sum of £14,350. Costs and consequential matters were reserved for submissions.

Not an appeal. The inquiry followed default judgment entered on 2 July 2024.