Devenish Nutrition V. Aventis Notes

Devenish Nutrition v. Aventis

Facts

As to the facts, by a decision dated 21 November 2001 (“the 2001 decision”), the commission found that certain vitamin manufacturers, including some of the defendants, had participated in eight cartels relating to the supply of various vitamin products, and imposed fines totalling € 855.22m (though the fines imposed on one cartelist, BASF AG, the sixth respondent, were subsequently reduced on appeal to the Court of First Instance). The 2001 decision was published in OJ 2003 L6, p 1. The size of these fines is an indication of the seriousness of the cartels in this case.

During the cartels' existence, Devenish purchased vitamins, or products containing vitamins, from the defendants. In general it mixed these vitamins with other ingredients to make animal feedstuffs which it then sold on to customers. In these follow-on proceedings, Devenish seeks damages or a restitutionary award. Devenish's case is that the restitutionary award should be in a sum equal to the “overcharge” or amount of the defendants' wrongful net profit. (Thus, Devenish claims the amount by which the prices it was charged for vitamins exceeded the price that would lawfully have been charged if there had been no cartels.) There is no issue about the availability (subject to proof of loss at trial) of a claim for damages. Moreover, notwithstanding the form of its pleading, Devenish does not rely on any claim for restitution otherwise than arising out of the defendants' wrongful conduct.

Holding

Arden LJ

Nature of the Claim – Account of Profits

Additionally, the term “restitutionary award” covers the case where the purpose of the award of damages is to strip the defendant of his profit and the case where its purpose is simply to cause the reversal of a benefit conferred by the claimant. In some cases, such as breach of confidence (an example of the former) or trespass (an example of the latter), this distinction is clear. In this case, although the point has not been fully argued, the purpose of the award sought is largely the former purpose as opposed to the latter. Different considerations may apply where the purpose of the order is one, rather than the other, purpose.

AG v. Blake

I shall need to consider this decision in detail, but the bottom line is that this case establishes that a restitutionary award is available for breach of contract.

The theme is thus coherence in the law of remedies. He makes it clear at several points that he is concerned with the principles that lie behind the case law. His conclusion on breach of contract claims is that no distinction can be drawn between the topics covered by the earlier sub-headings and, there being no policy reason for not having an account of profits as a remedy for a breach of contract, that remedy was available for a breach of contract too.

As I read the speech of Lord Nicholls, the making of a restitutionary award does not depend on whether a property right has been infringed or whether the award is compensatory for loss or not. Rather, it depends on whether damages alone would be a sufficient remedy in the eyes of the law for the wrong that has occurred. If this is right, and moreover an account of profits can be ordered for a breach of contract that, as in Blake's case, does not involve interference with a proprietary right, it would not, in my judgment, be inconsistent with the reasoning of Lord Nicholls in the passages cited above if it were also available in the case of non-proprietary tort. This point can be supported by pointing to the fact that a claim for damages under Lord Cairns's Act may also be available for a non-proprietary tort. Lord Nicholls's speech does not suggest that an account of profits is not available on a like basis in the case of a non-proprietary tort.

Lord Nicholls offers a general test, namely that the claimant has a legitimate interest in stripping the wrongdoer of his profit. There was no single feature which was requisite for the purpose of ordering an account of profits: it was the combination of the fact that the contract was clearly drafted with a view to protecting national security, the facts that the information in question had originally been confidential to the Crown and that Blake had been in breach of fiduciary duty in misusing it, the deliberate nature of the breach of contract, the fact that Blake intended to benefit from earlier treacherous conduct, and the absence of an appropriate remedy in compensatory damages that led the House to order an account.

Stoke on Trent City Council v. Wass

Nourse LJ went on to hold, at p 1414, that the award of the user damages in trespass cases depended on the fact that the defendant's use of the claimant's land deprived the claimant of any opportunity of using it himself. By contrast, holding an unauthorised market did not deprive the council of the opportunity of holding one itself.

The ratio of the judgment of Nourse LJ, with which Mann LJ agreed, is therefore that the user principle ought not to be applied to the infringement of a right to hold a market where no loss had been suffered by the market owner.

Reconciling AG v. Blake and Wass

Nourse LJ's concerns about revolutionising the law of tort are moreover taken into account to some extent at least by Lord Nicholls in Blake's case, in that the remedy of an account of profits is only to be awarded in exceptional cases where justice would not otherwise be done. None the less, it was an essential part of Nourse LJ's reasoning that damages by reference to the benefit obtained by the defendant could only be awarded in those limited situations, and it would in my judgment have to be shown that his circumscription of the cases where damages were not assessed on a purely compensatory basis could not stand with Blake's case: see Young v Bristol Aeroplane Co Ltd [1944] KB 718, 729. I do not consider that this can be shown. Blake's case does not discuss non-proprietary torts. In my judgment,...

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