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Damages: is it the court's role to punish people?

In the case of Marathon Asset Management LLP v Seddon, the trial judge stated that “punishment and deterrence are not purposes for which damages for civil wrongs can be awarded in English law”.

In this case, the claimant was one of three founders of a successful investment management business.  Following long-running disagreements between the three founders, one founder left the business and took with him a number of other employees to set up a competing fund management business.  The claimant subsequently discovered that these employees had taken confidential documents with them.

The claimant issued proceedings against the employees and sought substantial damages for the unlawful removal of the confidential documents claiming that these documents could cause serious and significant losses for the claimant.

The judge found that the defendants were indeed liable to the claimant for breach of their contractual and common law duties of confidence. However, the judge only awarded nominal damages to the claimant instead of the very substantial damages claimed by the claimant. The problem for the claimant was that its damages claim was calculated on the basis of hypothetical views of what the misuse of the confidential information could potentially cause.

The judge was not happy with this. He ruled that the unlawful removal of the confidential information by the defendants had not, in reality, caused the claimant to suffer any real loss. Nor had the misuse of this confidential information resulted in the defendants actually making any financial gain.

It is fair to say that the claimant was seeking punishment of the defendants in this case. Its damages claim, if granted, would have inflicted serious financial pain on the defendants. But the judge quite properly limited his analysis to the actual loss suffered by the claimant rather than expanding that analysis to the questions of deterrent and punishment.

It is important that claimants avoid relying upon hypothetical scenarios and that the quantification of a claim is based upon evidence. Evidence of what has been lost, and what will be lost. Trying to refer to hypothetical outcomes is going to result in short shrift from the court.