In Marathon v Seddon & others, while both defendants were found liable for breach of confidence, Marathon was only awarded nominal damages of £2 in comparison to the £15 million it had claimed.


Background

The claim related to the copying and retention of documents by two former employees of Marathon. Prior to leaving the business, they were found to have identified and downloaded a significant number of files. Initially, they denied that any documents had been taken. However, these were ultimately delivered up in July 2013 around 7 months after they had left the business.

Marathon was successful in relation to liability (one defendant had admitted liability before trial) but following delivery up of the documents forensic investigation showed that little, if any, use had been made of them. Marathon could not show that it had suffered any loss as a result of their removal and the Defendants had not made any profit as a result of their wrongdoing.

Wrotham Park damages

Therefore, Marathon relied on the case of Wrotham Park Estate Co Ltd v. Parkside Homes Ltd. Wrotham Park related to the breach of a restrictive covenant not to develop land. The value of the land had not been diminished by the breach and the claimant had suffered no damage but, having identified the profits made by the developer, the Court awarded a fair proportion of those profits. The rationale was that this payment would have been required by the landowner to relax the covenant. The same principle has been applied in other types of case by assessing what would have been paid by a defendant for releasing him from the obligation he has breached; a notional "licence fee" which is termed Wrotham Park damages.

But what would any "licence fee" in this case have paid for? Marathon submitted that any hypothetical negotiation of a licence fee should be not only for copying the information and documents, but also having them available to use, if the defendants had wished, for the length of time that they held them. This "fee" was assessed by Marathon at between £2.5million and £39.4million.

The Judge rejected this approach. In his view any licence fee needed to be matched to the legal wrong for which it was intended to provide a remedy. Therefore, the starting point was to identify the wrongful acts. Marathon referred to a case where the "hypothetical negotiation" of the fee included enabling the "exploitation of the opportunity free of restrictions and with an open mind (and some uncertainty) as to where that might lead" CF Partners (UK) LLP v Barclays Bank PLC. The Judge noted that in that case information had been misused. In this case there had been little use and the documents had been delivered up. Future misuse could only be relevant where the defendants still possessed the confidential information. 

Marathon had not advanced any claim based on the actual use made by the defendants but said that this was irrelevant. 

Not a concrete mixer, nor a dictionary

The claimant tried to draw an analogy between the documents taken and a concrete mixer (linked to a previous reported case). Marathon said that if a person hires a concrete mixer then he must pay a daily hire charge, even if unable to use the mixer, until he returns it. This analogy was rejected by the judge who observed that in such a hiring relationship the extent of use was not relevant to the amount that would be charged. 

Marathon also relied on the analogy of a dictionary. The defendants had had all of the documents and information available for them to refer to, up until the date they were delivered up, and believed that they could refer to them if they wanted to. They had the whole "dictionary" and should have to pay for it. This line of argument had already failed in Force India Formula One Team Limited v Aerolab SRL. The Judge reiterated that actual misuse was the important factor (as had also been held in Force India). He also noted that the documents and information were in any event not one single collection of information; they could have been obtained separately. 

As Marathon had not pleaded an alternative case on damages, the Judge concluded that he could not award damages on any other basis and awarded nominal damages only. 

Who pays the costs when the damages are nominal only?

When assessing the costs of the action, even though Marathon had succeeded on liability, the Court considered that as money was Marathon's object, the defendants were in reality the successful parties. The defendants had also made a Part 36 offer to settle the claim in February 2016 for £1.5million. 

The court held that the defendant who had admitted liability should pay Marathon's costs up to January 2014, when the documents had been delivered up and Marathon had undertaken a forensic inquiry. From that point onwards, Marathon was ordered to pay that defendant's costs (over 3 years). 

For the defendant who had not admitted liability, Marathon was ordered to pay 50% of his costs up to the Part 36 offer in February 2016. After that Marathon was ordered to pay all of his costs. 

Comment

Wrotham Park damages are rarely awarded, having moved and out of fashion over the years. Their stated purpose is to address injustice where a claimant would otherwise receive no compensation. However, in this case the court described Marathon's claim for £15 million as a claim for "jackpot" damages and was not willing to bridge the gap for Marathon. It is striking that in the previous Wrotham Park damages cases relied on by Marathon there had been some use and some profit, which perhaps made Marathon's lack of either more obvious.

Although the Judge refused permission to appeal, Marathon is, we understand, applying for permission to the Court of Appeal. We note that another case relating to licence fee damages, One Step (Support) Ltd v Morris-Garner, is to be heard by the Supreme Court over the next few months, so useful clarification may be on the way. 

The Marathon decision shows that where delivery up has been obtained, either voluntarily or through a search and seize order, and on investigation there appears to have been no misuse or damage, careful thought is needed about what to do next: pursuing a claim to trial in those circumstances is likely to be a very risky strategy.

Key contact

Rachel Cook

Rachel Cook

Managing Associate, Dispute Resolution
United Kingdom

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