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Marathon Asset misses the jackpot again

12 April 2017

After being awarded only £2 in nominal damages in its breach of confidence case, Marathon Asset has been heavily penalised on costs after failing to accept the defendants’ Part 36 offer.

Background

In February 2017, the High Court rejected Marathon Asset’s claim for £15 million in damages for breaches of confidence by two of its founders who had copied thousands of Marathon’s confidential files upon leaving the company. Judgment in the main case was given in favour of Marathon and the defendants were found to have breached duties of confidence owed to their former company. However, since Marathon had suffered no actual loss and the defendants had gained no benefit from their breaches, Marathon was awarded only nominal damages amounting to just £1 per defendant. In his follow-up judgment in March 2017, Leggatt J ruled on the question of costs, with an important factor being a Part 36 offer made by the defendants to settle the claim for £1.5 million, which had been rejected by the claimant.

Decision

Leggatt J’s starting position was that a judgment for only nominal damages in a case such as this must be considered a defeat. He therefore approached the question of costs on the footing that the defendants were the successful parties. He considered each defendant separately.

With respect to Mr Bridgeman, the defendant who had taken most of the confidential files, Marathon was ordered to pay all of his costs from 25 January 2014, the day after he had delivered up the files to Marathon. Because Marathon had been forced to commence proceedings before Mr Bridgeman admitted liability, he was ordered to pay Marathon’s costs up until he returned the files. Interestingly, the judge made it clear that he had reached his conclusion without taking into account the defendants’ Part 36 offer, noting that Marathon’s failure to accept the Part 36 offer was “an added reason” to make the costs order that he considered to be right in any event.

The other defendant, Mr Seddon, had copied just 33 files for Mr Bridgeman to save onto a USB and had never used or had in his possession any of the files. On that basis, even though he had breached his duties of confidentiality, the judge did not think that Mr Seddon should bear any of Marathon’s costs of investigating the removal of confidential files and securing their delivery up. Mr Seddon had, however, never admitted that he had copied the files, even though it was clear that he had done so, and much of the costs of the case were concerned with investigating this aspect. This might have led to a finding that he be liable for Marathon’s costs related to this issue. However, the judge evidently wished to avoid an issue-based costs order, noting that implementing such an order would cause considerable complication and cost, and instead reduced Mr Seddon’s entitlement to costs for defending the misuse claim to only 50 per cent.

The judge then considered the defendants’ Part 36 offer, ruling that Marathon pay all parties’ costs from expiry of the offer in February 2016. The offer of £1.5 million had been made at a time when Marathon had no evidence to suggest that either defendant had derived any financial gain from misusing its confidential files let alone caused Marathon to suffer any loss. In fact the opposite was clear from the facts. Marathon’s decision not to accept that offer and instead pursue a claim for what the judge called “jackpot damages” made it fair to treat Marathon as litigating entirely at its own risk from that point on.

Comment

This case highlights the risks for claimants in being unrealistic in the remedies sought compared to the actual wrong suffered, and reiterates that parties can be heavily penalised if they reject a reasonable Part 36 offer. In particular, the courts will have very little sympathy for claimants who appear to have been holding out for “jackpot damages”.

Marathon Asset v Seddon - Costs judgment [2017] EWHC 479
Marathon Asset v Seddon - Main judgment [2017] EWHC 300

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