Marathon Asset Management LLP and Another v James Seddon and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leggatt |
| Judgment Date | 22 February 2017 |
| Neutral Citation | [2017] EWHC 300 (Comm) |
| Docket Number | Case No: CL-2013-000689 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 February 2017 |
[2017] EWHC 300 (Comm)
The Honourable Mr Justice Leggatt
Case No: CL-2013-000689
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Neil Kitchener QC, Jane McCafferty, Edwin Peel and Gideon Cohen (instructed by Herbert Smith Freehills LLP) for the Claimants
Pushpinder Saini QC and Paul Luckhurst (instructed by Orrick, Herrington, Sutcliffe) (Europe) LLP for the First Defendant
Stuart Ritchie QC, Victoria Windle and Can Yeginsu (instructed by Withers LLP) for the Third Defendant
Hearing dates: 21–24, 28 and 29 November; 1, 12 and 13 December 2016
Judgment Approved
| Section | Para No. |
| I. Introduction | 1 |
| II. Factual Findings | 8 |
| III. Legal Liability | 111 |
| IV. Damages | 143 |
| V. Conclusion | 283 |
I. INTRODUCTION
The claimants ("Marathon") carry on an investment management business. A long-running dispute between the firm's three founders led to one of them leaving, followed by employees who worked with him. They have since set up a competing business. Protracted arbitration proceedings and this litigation have ensued. The arbitration claims have all now been resolved and some of the claims made in this action have been settled. But there remain claims against the first defendant ("Mr Seddon") and the third defendant ("Mr Bridgeman") for taking confidential documents. Those claims have been the subject of this trial.
Mr Bridgeman has admitted that, over a period of several months before he left Marathon's employment in December 2012, he copied onto USB drives a substantial number of files containing information confidential to Marathon and that he kept these files until the summer of 2013, when they were delivered up after these proceedings were threatened. Mr Bridgeman further admits that, in copying the files and retaining them when he left Marathon, he was in breach of his contract of employment.
There are two main issues in dispute. The first is whether Mr Seddon is liable for copying some of the files. This turns on the purpose for which Mr Seddon shared certain files containing information about Marathon's business with Mr Bridgeman on 29 August 2012 by saving copies on a shared drive on Marathon's computer system. Shortly afterwards Mr Bridgeman downloaded the files to one of his USB drives. Marathon's case – denied by Mr Seddon – is that Mr Seddon intended Mr Bridgeman to add these files to other files that he planned to keep for future use in setting up a new fund management business. If this factual dispute is decided in Marathon's favour, questions arise as to the legal basis on which Mr Seddon is liable to Marathon and the extent of his liability.
The second main issue is what, if any, damages are payable by Mr Bridgeman and, if he is also liable, Mr Seddon. It is common ground that the files which Mr Seddon shared with Mr Bridgeman were never actually used after they left Marathon's employment. Mr Bridgeman made some use of a few of the many other files which he copied and removed but it is not alleged that this caused Marathon any financial loss. Marathon's case is that it does not matter what use was actually made of any of the files or that no loss has been shown: the defendants unlawfully took its confidential information and must pay for the value of what they took – which Marathon estimates at £15m.
Marathon asks the court to assess damages by estimating the price which Marathon could reasonably have charged the defendants for releasing them from the obligations of which they are in breach. Such damages are often referred to as " Wrotham Park damages" after the case of Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 in which such a measure was first articulated. But, as with " Mareva injunctions" and " Anton Pillar orders", a label based on the name of the case in which the remedy was originally granted is abstruse. Of the various alternative labels which have been suggested, I propose to use the term "licence fee damages", which captures the basic idea that the damages represent a fee that would reasonably have been agreed between the parties to license the defendant's wrongful activity. 1
The justification for awarding licence fee damages and, in consequence, the question of when it is appropriate to do so is a controversial subject. In engaging with it I have had the assistance of strongly argued written and oral submissions from counsel representing each of the three remaining parties and citation of case law and legal scholarship filling no fewer than 11 volumes.
Before I come to the legal arguments, I will first summarise the background facts and decide the factual issues in dispute. The factual summary which follows is largely derived from awards made in earlier arbitration proceedings which I will describe in due course. The defendants were not parties to those proceedings but they disclosed documents and gave evidence in them. With some encouragement from the court, an agreement has sensibly been reached in relation to the use of the arbitrator's awards in these terms:
"The parties agree that the judge may treat the contents of the arbitration awards as evidence of the truth of the propositions and conclusions contained therein and may adopt those propositions and conclusions as being true without giving independent consideration to the matter save where those propositions and conclusions conflict with the submissions of any of the parties (and are expressly identified as such by counsel)."
II. FACTUAL FINDINGS
Marathon's business
Marathon's investment management business was founded in the late 1980s by three individuals: Mr Neil Ostrer, Mr Jeremy Hosking and Mr William Arah. In 2004 the business was reorganised as a limited liability partnership (LLP). The funds which Marathon managed for its clients were of two main types. The "Global" funds, as the name implies, were invested in stocks worldwide. The "non-Global" funds (also referred to as "EAFE", denoting Europe, Australasia and the Far East) were aimed, in particular, at North American investors who wanted exposure to other international markets; they were "non-Global" only because their geographical scope excluded North America.
Marathon's business was extremely successful. By the end of 2011, Marathon had clients spread around the world and assets under management of some US$50bn. Marathon's profits in the year ending in March 2012 were approximately £146m.
Over time, however, tensions developed between the founders of Marathon. They disagreed over matters of business strategy, approach to investment and planning for the future. Increasingly, a divide emerged between Mr Ostrer and Mr Arah on the one side and Mr Hosking on the other.
The position was stabilised, in the short term, by an agreement reached between the founders in September 2006, which came to be known as the "separate beds agreement". This provided for a split between the Global business and the non-Global business. Control of the Global business was ceded to Mr Hosking and control of the non-Global business to Mr Ostrer and Mr Arah.
Recruitment of the Global team
The first four defendants in this action were subsequently employed by Marathon to assist Mr Hosking in developing the Global business and became known as the "Global team". The first to join was Mr James Seddon in November 2006, followed by Ms Louise Keeling in December 2006. Mr Luke Bridgeman was recruited in November 2009 and Mr Julius Mort in January 2011. Mr Seddon, Ms Keeling and Mr Mort were fund managers. Mr Bridgeman, whose background was in private equity investment, worked principally as an analyst focusing on companies in which Marathon held large stakes.
As a result of the separate beds agreement, the Global team functioned as a separate division of Marathon. The separation was accentuated when the Global division moved to a different floor of Marathon's offices. The members of the Global team developed a close working relationship with, and loyalty to, Mr Hosking. By contrast, they had very little contact, and little or no working relationship, with Mr Ostrer and Mr Arah.
The Marathon New Global Fund
In February 2008 a new Global product was launched, designed by Mr Hosking with the assistance of Mr Seddon and reflecting Mr Hosking's preferred investment approach. It was called the Marathon New Global Fund. The fund was launched despite objections from Mr Ostrer and Mr Arah. It was successful. The fund's assets grew to around US$7bn and in the year to March 2012 it generated revenue of approximately £40m for Marathon.
Some investors in the New Global Fund were based in South Africa. The fifth defendant in this action, Ms Jennifer Buchanan, acted as a marketing agent for Marathon in South Africa under a consulting agreement dated 1 May 2002 between Marathon and the sixth defendant ("GIM"), a company of which Ms Buchanan was the sole shareholder.
Departure of Mr Hosking and the Global team
The separate beds agreement provided that it could not be altered for a minimum of five years. After that period had expired in September 2011, Mr Ostrer wanted to terminate the arrangement, while Mr Hosking wanted it to continue. Linked to this dispute was disagreement between the founders of Marathon over a range of issues. By early 2012, the relationship between them was permeated with acrimony. On 6 March 2012, Mr Ostrer commenced arbitration proceedings against Mr Hosking under the LLP deed seeking (among other things) a ruling on...
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