HC-2013-000089 - [2025] EWHC 2376 (Ch)

Mr Wynn was cross-examined first (and relatively shortly) by Mr Hobbs on the general approach taken in his evidence on valuation of the notional licences. The bulk of his cross-examination was, however, conducted by Mr Hollingworth, who addressed in detail Mr Wynn’s comparables analysis, as well as his (alternative) economic benefits analysis.

When questioned, Mr Wynn confirmed that he did not disagree with any of Dr Stec’s calculations of statistical significance. He accepted that the differences between the sample sets used in the EY benchmarking study were not statistically significant, and that to achieve statistical significance it would be necessary to have a “rather large” dataset, which he said would have to have at least 30 data points in each set, if not more. He therefore accepted that on the sample sizes identified by EY, it would be difficult to identify a mean figure that was statistically significant. While he initially maintained that the analysis in the EY benchmarking study was a reasonable approach to follow, he ultimately accepted that the results of that study were not reliable, and that he ought to have accepted earlier that he should not place weight on that study.

Mr Wynn sought to fall back on the position that the figure produced by the EY benchmarking study was broadly in the same range as other licences that he had considered, such as licences for the Virgin and easy brands. His first report had, however, explicitly stated that the utility of those licences as comparables was limited since they were in different industries, and there was a lack of information on the nature of the economic relationships between the licensors and licensees. Mr Wynn ultimately accepted (albeit with considerable reluctance) that (i) there was in fact nothing other than the EY benchmarking study that produced the specific figure of 0.33% which he had used as his starting point; and (ii) if the correct starting point was not 0.33%, he had no basis to determine where between 0% and 0.33% the correct figure should lie.

Mr Wynn nevertheless attempted to stand by limbs (i)–(iii) of his reasoning summarised at §90 above, namely that the licences were formulated on the basis of an arm’s length principle, had real world tax implications and were subject to review by the tax authorities, and that Merck had no incentive to overstate the transfer pricing rate. None of those points, however, enables the court to place any reliance on the 0.33% figure as an appropriate starting point. As to the first point, there is no doubt that the EY analysis sought to identify an arm’s length rate, but it is now common ground that the outcome of that analysis was so unreliable as to be meaningless as a basis for such a rate. As to the second and third points, Merck’s tax incentives do not justify reliance on the 0.33% figure for the entirely unrelated purpose of the present damages inquiry (and I note that a similar argument was likewise rejected by Newey J in 32Red, §64). As Mr Wynn accepted in his cross-examination, an entirely different figure could have been selected, and he had seen transfer pricing licence rates of as low as 0.1%.

Mr Wynn was then asked, essentially, how his adjustments to the starting rate (which he accepted were subjective and uncertain) could be regarded as meaningful, given that he had acknowledged that the starting point of 0.33% was unreliable. He was unable to give a coherent answer to that question.

It is very regrettable that Mr Wynn failed to acknowledge the serious problems with the EY analysis at any point prior to his cross-examination. His abandonment of his position on the EY analysis, when pressed by Mr Hollingworth on the point, did not come as a result of any new evidence or argument, but rather reflected an inability to counter the criticisms of the EY analysis that Dr Stec had raised from the outset.

Having recognised, belatedly, that no weight at all could be placed on the EY benchmarking study, the only proper and objective conclusion to be drawn was that the 0.33% starting point was in consequence entirely unreliable and could not form the basis for any meaningful assessment of damages, whether adjusted or not. It is a rather obvious observation that an adjustment to a meaningless figure produces an equally meaningless figure. It is unfortunate that Mr Wynn refused to acknowledge this, instead maintaining to the end of his cross-examination that his comparables approach was preferable to an economic benefits analysis.