12/08/2010

Jones v Ricoh UK Ltd [2010] EWHC 1743 (Ch)

It is often said that a defendant “is not liable for not doing that which he is not bound to do.” So if the defendant is not bound to confer a benefit on you, you cannot get damages for the value of that benefit even if he would in fact in all probability have conferred it upon you. But how does this principle apply when the obligation in question is a negative obligation (an obligation not to do something) and if the defendant had not done the thing which he was obliged not to do, he would probably in fact have conferred the benefit upon you even if he was not obliged to do so?

That was one of the issues which faced Roth J in this case. It required him to consider the scope of the legal principle that “the defendant is not liable for not doing that which he is not bound to do” in the light of the recent Court of Appeal decision in the Durham Tees Valley Airport case [2010] EWCA Civ 485 and to apply it in the context of a negative obligation. His judgment provides an interesting analysis of the authorities.

The claimant Robert Jones sued as the assignee of his company CMP Group Ltd whose business was to provide assistance to companies in the acquisition and management of photocopying and similar equipment. One client of CMP was a company called Bombardier, to whom CMP successfully recommended that Ricoh equipment should be obtained. A time came when, according to the claimant’s evidence, Bombardier decided to extend the business model successfully implemented in the United Kingdom (with CMP recommending Ricoh equipment and achieving cost savings and efficiencies for Bombardier to the benefit of all three parties) throughout its European operations and invited CMP, Ricoh and others to quote for this business. CMP was confident that a joint bid by itself and Ricoh would have led to the successful conclusion of a lucrative contract. However, Ricoh decided to bid against CMP.

In outline, it was the claimant’s case that Ricoh’s bid was contrary to the terms of a prohibition on contacting CMP customers in the contract between CMP and Ricoh, and was also in breach of a contractual duty not to use or disclose CMP’s confidential information. The claimant issued proceedings against Ricoh claiming (1) damages consisting of the profits which CMP would have obtained as a result of a successful joint bid by itself and Ricoh which it assessed on various alternative assumptions at between £4 million and £49 million, alternatively (2) an account of the profits which Ricoh made when it was ultimately awarded a contract by Bombardier, alternatively (3) Wrotham Park damages consisting of the sum which Ricoh would have had to pay in order to be released from its contractual obligations to CMP. Ricoh applied for summary judgment dismissing the claim on the basis that it was bad in law.

Roth J held that the prohibition on contacting CMP customers was so widely drafted as to be contrary to Article 101 TFEU and therefore void. However, it was accepted that the claim for breach of confidence could not be dismissed on the facts. Rather Ricoh’s case was that it could not be liable in damages for not submitting a joint bid with CMP as a matter of law since it was under no obligation to submit such a bid. This submission called for careful analysis of the cases on what is often referred to as the “minimum performance” or “least onerous obligation” rule. Having analysed these cases, including the recent Durham Tees Valley Airport case, Roth J held that in a case where the obligation sued on is a negative obligation (here, not to misuse confidential information) there is no question of seeking to hold the defendant liable for failing to confer a benefit which it was not obliged to provide. The question is simply one of fact on the balance of probabilities — what would the defendant have done if it had not done what it did do. Thus it was open to the claimant to prove that Ricoh had misused CMP’s confidential information, that if Ricoh had not done so, it would probably have submitted a joint bid with CMP (not least because not to do so would have caused it to lose a valuable customer), and that this bid would have been successful, and to recover damages accordingly.

The alternative claim for an account of profits was dismissed on the basis that such a remedy is only available in an exceptional case, while the further alternative claim for Wrotham Park damages was allowed to continue. Stephen Males QC represented the claimant.