Red Card For Penalty Damages

In 2001, a number of companies, including Sanofi-Aventis were

found guilty by the European Commission of participating in cartels

and collectively fined ?855.22 million.

During the existence of these cartels, Devenish, a Belfast-based

supplier of pig and poultry feed, purchased vitamins from

Sanofi-Aventis at prices which were artificially inflated as a

result of the cartel activity.

Following the European Commission's decision, Devenish

raised proceedings in England against Sanofi-Aventis seeking a

restitutionary award (a sum of money assessed by reference to the

gain which the wrongdoer has made as a result of the wrong) in

place of compensatory damages, which compensate the claimant for

loss suffered as a result of the wrongdoing. The argument submitted

on behalf of Devenish was that compensatory damages would not

provide an adequate remedy in the circumstances.

The sum sought by Devenish was 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 cartel in existence.

A trial of preliminary issues was ordered in order to assess

whether Devenish were entitled to the following heads of

relief:-

An account of profits

Restitution of unjust enrichment

Exemplary damages

At first instance, the judge rejected Devenish's claims on

the above heads.

Devenish appealed. The Court of Appeal also rejected Devenish's

claims. The usual rule is that a Claimant is only entitled to

recover the loss that they have suffered as a result of a wrong

committed by a defendant. There are certain circumstances where a

claimant can recover more than the loss suffered, for example, to

penalise a defendant for wrongful conduct.

Alternatively, there are some circumstances where an account of

profits would be appropriate, for example, where a defendant has

wrongfully used the claimant's property and made a gain from

it.

In the particular circumstances of the claim here, Devenish

indicated that they would have some difficulty providing the loss

suffered as a result of the cartel's activity and that

compensatory damages would be an inadequate remedy.

The Court rejected Devenish's contentions. The Court did not

consider this case to be exceptional in any way and they did not

consider there to be any reason to depart from the usual rule that

a claimant can only recover the loss suffered by them as a result

of the wrongful conduct of the defendant.

Of particular significance here was the fact...