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

It is important to note at the outset that the evidence of the economic experts (Mr Colley and Mr Parker) was not directed at the question of whether, on a balance of probabilities, Cabo would in fact have been profitable in the counterfactual scenario. Rather, what they did was to model the potential profits that Cabo would have obtained if it had enjoyed various levels of success, based on comparator products. The question of whether Worldeez would have been as successful as the various different comparators selected was, they recognised, ultimately not a matter falling within their expertise. Mr Davies’ valuation evidence likewise did not assume any particular level of success, but simply commented on the appropriate approach to the valuation aspects of the modelling.

The evidence as to Cabo’s profitability in the counterfactual scenario therefore came from the factual witnesses and the toy industry experts. Cabo’s submission was that Worldeez would have been highly profitable, but for MGA’s conduct. It contended that Worldeez was an attractive and appealing toy, with a good brand name, an innovative unboxing experience, well-executed figurines and a strong marketing campaign. Cabo submitted that Worldeez was comparable to toys such as Hatchimals Colleggtibles and 5 Surprise Mini Brands, and was also comparable to Shopkins in many respects (and indeed Cabo claimed that Worldeez was potentially superior to Shopkins in some respects).

Cabo relied on the successful initial launch of Worldeez in B&M, the evidence of the witnesses of fact as to the appeal of Worldeez, and the evidence of retailer support prior to MGA’s intervention. In addition to the factual evidence, Cabo relied on Ms Munt’s view that Worldeez would have been successful in stores. On that basis, Cabo contended that Worldeez would have enjoyed commercial success upon launch in the UK, followed by international sales and licensing deals.

MGA submitted that Worldeez was not a particularly innovative product and had various design and manufacturing defects. More importantly, however, MGA said that however good a product Worldeez was, Cabo lacked the operational expertise necessary to turn it into a commercially successful and profitable business. In particular, MGA said that Cabo had done no consumer research, had no formal business plan or financial projections, was paying too much for the product, lacked experience in inventory management, and did not have sufficient working capital support from Singleton. Mr Harper’s opinion was that these problems meant that Worldeez would not have been commercially successful in the UK whatever level of retail distribution was achieved. MGA also relied on a breakeven analysis showing that on a range of assumptions as to the appropriate level of costs, Cabo would have required huge sales volumes merely to break even in 2017, which would not realistically have been achievable.

On that basis, MGA submitted that there was no realistic likelihood of international and licensing revenues. In any event, however, MGA submitted that the international distribution routes would not have worked for Cabo given its cost model and the lack of sufficient working capital. Finally, although (as explained above) the economic experts did not opine on the likely commercial success of the Worldeez product, MGA said that its submission as to the likely unprofitability of Cabo was supported by Mr Parker’s quantum scenarios.

It is appropriate to consider in turn the various factors relied upon by the parties. One preliminary overarching point should, however, be made. For the reasons set out at §§464–466 above, I do not accept Cabo’s submission that because the effect of MGA’s conduct was that Worldeez’ market access was significantly hindered, such that there are no hard data on what an “unhindered performance” would look like, the application of the principle in Armory v Delamirie means that Worldeez should be assumed to have “the highest level of success”, as Ms Kreisberger put it in her closing submissions. The fact that the assessment of causation of loss in this case is based on an assessment of counterfactual profitability, given the nature of the infringement, does not mean that every disputed point must be assessed in Cabo’s favour. Nor (unlike the situation in Armory v Delamirie) is this a case where nothing is known about profitability in the counterfactual case. On the contrary, there is in this case very extensive factual and expert evidence from which conclusions may be drawn as to the likely counterfactual success of Worldeez. My assessment of that evidence is set out in the discussion below.