Fearns (trading as Autopaint International) v Anglo-Dutch Paint & Chemical Company Ltd and Others
| Jurisdiction | England & Wales |
| Judgment Date | 2011 |
| Date | 2011 |
| Court | Chancery Division |
Practice - Set-off - Damages - Judgment for claimant for damages in sterling and for defendant on counterclaim in debt in euros - Equitable set-off - Judgment to be given for single net sum necessitating conversion of sums due into common currency - Whether existence or exercise of equitable set-off extinguishing or reducing either claim - Whether rate of exchange to be applied on conversion that prevailing when claim arising or at date of judgment - Whether costs to be set off against net damages
The claimant claimed damages against the defendants for trade mark infringement, passing off and breach of contract. The second defendant counterclaimed in debt for the price of goods which it had supplied to the claimant. Judgment was entered for the clamant on his claim, with damages to be assessed, and for the second defendant on its counterclaim. Following the assessment of damages hearing judgment was given assessing the sums due from each party to the other, the damages being denominated in sterling and the debt in euros. The parties agreed that the claims were subject to an equitable set-off and that judgment should be given for a single net sum, which necessitated their conversion into a common currency.
On the question whether rate of exchange to be applied on the conversion was that prevailing when the claim had arisen or at the date of judgment—
Held, that where one party had a claim against another party who had a cross-claim, the two claims could not be netted off so as to extinguish each liability to the extent of the other except by agreement or a judgment of the court and once both liabilities had been established by agreement or judgment; that where the two claims were made reasonably and in good faith and so closely connected that it would be manifestly unjust to allow one party to enforce payment without taking into account the cross-claim, an equitable set-off arose before agreement or judgment the effect of which was not to extinguish or reduce either claim but that neither party might exercise any rights contingent on the validity of its claim except in so far as it exceeded the other party’s claim; that, in addition, the court had a discretion to order any judgment sum to be netted off against any other such sum as from the date on which the existence and amount of the two liabilities was established; that when ordering such a set-off between amounts payable in different currencies the court should assess and add to each principal amount any interest accruing up to the date of the set-off, convert the smaller amount into the currency of the larger amount at the exchange rate prevailing at that date and order payment of the balance; and that, therefore, the date at which the damages payable to the claimant and the sum which he owed to the second defendant fell to be converted into a common currency and netted off against each other was the date on which the amounts of those liabilities were finally determined (post, paras 25, 26, 30, 32–33, 35, 36, 39, 50–51, 55, 64).
On the question whether the costs awarded to the defendants should be set off against the net damages due to the claimant—
Held, that, although setting off an order for costs against damages did not fall within the statutory discretion conferred by section 51 of the Senior Courts Act 1981, the court nevertheless had a discretion to order such a set off where it considered it just to do so, even if the test for an equitable set off were not satisfied; and that on the facts the connection between the two sums was such that justice required that they be set off (post, paras 73, 75–77).
The following cases are referred to in the judgment:
Aries Tanker Corpn v Total Transport Ltd [
Axel Johnson Petroleum AB v MG Mineral Group AG [
Botany Triad, The [
Brookes v Harris [
Debtor (No 21 of 1950), In re A (No 2); Ex p The Petitioning Creditors v The Debtor [
Despina R, The [
Edwards v Hope (
Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [
Geldof Metaalconstructie NV v Simon Carves Ltd
Hanak v Green [
Kaupthing Singer & Friedlander Ltd, In re
Lockley v National Blood Transfusion Service [
Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd [
Mondel v Steel (
President of India v Lips Maritime Corpn [
R (Burkett) v Hammersmith and Fulham London Borough Council
Reid v Cupper [
SL Sethia Liners Ltd v Naviagro Maritime Corpn [
Santiren Shipping Ltd v Unimarine SA [
Smit Tak International Zeesleepen Bergingsbedrijf BV v Selco Salvage Ltd [1988] 2 Lloyd’s Rep 398
Stein v Blake [
Stoomvaart Maatschappy Nederland Co v Peninsular and Oriental Steam Navigation Co (
Transoceanica Francesca and Nicos V, The [
No additional cases were cited in argument or referred to in the skeleton arguments.
ACTION
By a claim form issued in 2005 the claimant, Gary Fearns (trading as Autopaint International), brought an action for trade mark infringement, passing off and breach of contract against the defendants, Anglo-Dutch Paint & Chemical Co Ltd, De Beer Lakfabrieken BV, Christopher Welch, Richard Jongsma, Marco Van Der Woude and Theo Wemmers. The second defendant counterclaimed in debt the price of goods which it had sold to the claimant. On 2 May 2007 Christopher Floyd QC sitting as a deputy judge of the Chancery Division [2007] EWHC 955 (Ch) gave judgment for the claimant on his claim, awarding damages for trade mark infringement, passing off and breach of contract; and for the second defendant on its counterclaim; and directed that there should be an inquiry to assess the amount of the damages and other sums payable. On 9 July 2010 George Leggatt QC sitting as a deputy judge of the Chancery Division [2010] EWHC 1708 (Ch) assessed (i) the damages payable to the claimant as compensation for the defendants’ infringement of his Autopaint trademark and passing off in the principal sum of £438,569 and (2) the debt owed by the claimant to the second defendant in respect of goods sold him in the principal sum of €594,696. He left over for further argument the question of the date at which the damages payable in sterling and the debt payable in euros should be converted into a common currency and set off against each other to derive a net liability. On 28 July 2010 the judge made an order determining the net sum due on the inquiry for reasons to be given later.
The facts are stated in the judgment.
Alastair Wilson QC and Giles Fernando (instructed by
Thomas Moody-Stuart (instructed by
The court took time for consideration.
23 September 2010. GEORGE LEGGATT QC handed down the following judgment.
1 In my judgment [2010] EWHC 1708 (Ch) given on 9 July 2010 on the inquiry held in this case, I left over for further argument the question of the date at which the damages payable (in sterling) to the claimant, Mr Gary Fearns, and the debt payable (in euros) by Mr Fearns to the second defendant (“De Beer”) should be converted into a common currency and set off against each other to derive a net liability. I found that question difficult as well as being one on which, perhaps surprisingly, there appears to be little direct authority.
2 I heard argument on this question, and on other matters consequential on my judgment, on 28 July 2010. On that date I made an order determining the net sum due on the inquiry but indicated that I would give my reasons for my decision on the set-off point in writing later. In this judgment I give those reasons and also the reasons for my decision on a further question of set-off (between damages and costs) which I was asked to deal with after the hearing on 28 July on the basis of written submissions.
Amounts of claim and counterclaim3 In accordance with my earlier judgment I assessed the damages payable to Mr Fearns as compensation for the defendants’ infringement of his Autopaint trade mark and passing off in the principal sum of £438,569. This sum comprises £162,679 in respect of profits lost in the period up to the end of June 2005 as a result of unlicensed sales made by the second defendant (“Anglo Dutch”) to franchisees and £275,890 in respect of profits lost in the period from the end of June to the end of December 2005 as a result of the loss of the Autopaint...
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