HP-2020-000016 - [2025] EWHC 1451 (Ch)

Once causation of a head of loss is established, damages are assessed on the compensatory basis. Cabo is therefore entitled to be placed in the position in which it would have been had the breach not been committed: Sainsbury’s v Visa [2020] UKSC 24, §194. That requires an assessment of Cabo’s performance in the counterfactual world in which its market entry was not impeded by MGA’s intervention.

That assessment is necessarily uncertain: it is impossible to predict with precision how an undertaking would have performed on the market in a hypothetical scenario that is very different from what happened in fact. The basic common law approach to the assessment of damages in such a case requires the court to do the best that it can on the available evidence, notwithstanding forensic difficulties that may arise. This is often labelled the “broad axe” principle: see Mastercard v Merricks [2020] UKSC 51, [2021] 3 All ER 285, §§49–51 (referring to the well-known dictum of Lord Shaw in Watson, Laidlaw v Pott 1914 SC (HL) at 29–30). The basic principle is that the court should avoid “artificial demands for precision” but should instead achieve practical justice on the basis of material which may well be limited: Green LJ in London & SE Railway v Gutmann [2022] EWCA Civ 1077, §59. That may well require broad assumptions, estimates, generalisations and “informed guesswork” on the basis of the evidence before the court.

For the same reason, where quantification of the loss turns on a hypothetical exercise, the court does not have to establish a particular quantum of loss on a balance of probabilities. That would demand artificial precision in a context where precise measurement is impossible. Rather, the court must make a reasonable assessment based on the evidence before it, taking all relevant and material factors into account.

Toulson J explained that point in Fyffes Group v Templeman, p. 667, as follows:

“[T]here is an important distinction between identification and measurement of the wrong (injury) done to the claimant – or, to use legal terms, between causation of loss and quantification of loss. The distinction is easy to see in theory, but drawing the boundary line can be difficult in practice because questions of causation and quantum can be closely entwined. Causation of a head of loss must be established on a balance of probabilities. Quantification of a head of loss may involve an assessment of all shades of risks and possibilities. … As I have said, causation of a head of loss has to be established on the balance of probabilities.”

He made similar comments (by then as Toulson LJ) in Parabola, §§22–24:

“22.

… Some claims for consequential loss are capable of being established with precision (for example, expenses incurred prior to the date of trial). Other forms of consequential loss are not capable of similarly precise calculation because they involve the attempted measurement of things which would or might have happened (or might not have happened) but for the defendant’s wrongful conduct, as distinct from things which have happened. In such a situation the law does not require a claimant to prove the impossible, nor does it apply the balance of probability test to the measurement of the loss.

23.

The claimant has first to establish an actionable head of loss. … [In the present case] the judge found that, but for Mr Bomford’s fraud, on a balance of probability Tangent would have traded profitably at stage 1, and would have traded more profitably with a larger fund at stage 2. The next task is to quantify the loss. Where that involves a hypothetical exercise, the court does not apply the same balance of probability approach as it would to the proof of past facts. Rather, it estimates the loss by making the best attempt it can to evaluate the chances, great or small (unless those chances amount to no more than remote speculation), taking all significant factors into account …

24.

The appellants’ submission, for example, that ‘the case that a specific amount of profits would have been earned in stage 1 was unproven’ is therefore misdirected. It is true that by the nature of things the judge could not find as a fact that the amount of lost profits at stage 1 was more likely than not to have been the specific figure which he awarded, but that is not to the point. The judge had to make a reasonable assessment and different judges might come to different assessments without being unreasonable.”

In Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475, §25, Patten LJ cited the above passage of the Parabola judgment, commenting that this does not mean importing the loss of chance doctrine into the quantification of loss:

“Where the quantification of loss depends upon an assessment of events which did not happen the judge is left to assess the chances of the alternative scenario he is presented with. This has nothing to do with loss of chance as such. It is simply the judge making a realistic and reasoned assessment of a variety of circumstances in order to determine what the level of loss has been.”

The “broad axe” approach was applied more recently in Royal Mail, both by the Competition Appeal Tribunal (at §§173–174) and the Court of Appeal. As Sir Julian Flaux C observed in the Court of Appeal [2024] EWCA Civ 181, §145, “once a Court has established loss on a balance of probabilities, the claimant is entitled to be compensated and the Court will do its best to quantify the compensation on the available evidence. … it is in the context of difficulties in the quantification of loss that the principle of the broad axe is deployed by the Courts”.

It may be appropriate to err on the side of generosity to a claimant in the calculation of loss, where evidence is unavailable as a result of the defendant’s conduct. The classic example of this is the case of Armory v Delamirie (1722) 1 Str 505, where a jewel of unknown value was removed from its setting by the defendant, which was accordingly required to pay damages on the basis of a presumption of the highest value jewel which the setting would have accommodated. Likewise, the court may draw adverse inferences from a failure to adduce evidence, as the CAT did in the Royal Mail v DAF Trucks case in relation to DAF’s failure to provide evidence as to how the cartel operated and the benefits it derived from participation: see the judgment of the Court of Appeal in that case at §§143–144, upholding the approach of the Tribunal.

That does not, however, mean that in any case where the defendant’s wrongdoing requires damages to be calculated by assessing a counterfactual scenario, even where there is voluminous evidence on both sides, the court is required to resolve all uncertainties in favour of the claimant. That would be wholly inconsistent with the approach set out in the cases above. Rather, the court will assess the totality of the material before it, giving such weight as is appropriate to the evidence on each side, depending on the court’s appraisal of the strength of that evidence. Where that analysis requires assumptions or inferences to be made, the court will make those assessments on the basis of a consideration of what is reasonable and realistic. There is no principle that requires that approach to be overridden by a default presumption in favour of the claimant, simply because the exercise being carried out is the assessment of a hypothetical counterfactual scenario which did not occur as a result of the defendant’s conduct.

Similar comments were made in Porton Capital Technology v 3M UK Holdings [2011] EWHC 2895 (Comm), concerning a claim for lost profits for breach of contract. Hamblen J observed at §§244–245 that:

“This is not a case concerning the value of goods which the defendant has refused to produce or of the suppression of evidence, as in Armory v Delamirie. … It is a claim for lost profits for breach of contract. There is factual and expert evidence before the court relating to that claim. There is documentation before the court relevant to the claim. The evidential playing field is a level one. Whilst it is correct that the claim involves a degree of conjecture, that is the case in relation to very many contractual damages claims and in all such cases it can be said that it is the defendant’s breach of contract which has made that conjecture necessary. As a matter of authority there is no requirement to apply the principle of Armory v Delamirie to a case such as the present, and as a matter of principle I consider that there is good reason not to do so and that the application of the principle should not be extended further than is necessary.

Even if that be wrong … any presumption would only arise in a case of doubt and in arriving at the findings set out below I have not found there to be sufficient doubt to give rise to any presumption that might otherwise be applicable.”

As in the Porton Capital case, there was in this trial an abundance of factual and expert evidence on both sides. While there were some aspects on which the evidence was not entirely complete by the end of the trial, that was not because it was inherently unavailable, but was because of the problems discussed at §§42–54 above, namely the divergence of the experts’ positions and the evolving nature of both parties’ positions during the trial. Where necessary, further submissions and evidence were provided by the parties following the trial. I do not consider there to be remaining material doubts in the assessment of the evidence, still less doubts of such a nature that might raise the application of the Armory v Delamirie principle.