IN THE HONOURABLE HIGH COURT OF NAYA XILI AT NAYA XILI
ORIGINAL CIVIL JURISDICTION
UNDER
SECTION 9
AND
15
OF THE
CODE
OF
CIVIL
PROCEDURE, READ WITH ORDER IV RULE 1 OF THE CODE OF CIVIL PROCEDURE, 1908 AND
RULE 2 OF THE BOMBAY HIGH COURT RULES, FRAMED UNDER SECTION 34(1) OF
THE ADVOCATES ACT, 1961
OS NO. XXX OF 2012
IN THE MATTER OF SGE Ltd. (Represented by the Company Secretary)........................................(Plaintiff) V. Actio McSong...............................................................................................(Defendant)
-MEMORIAL ON BEHALF OF THE DEFENDANT-
TABLE OF CONTENTS Table of Contents ...................................................................................................... ii Index of Authorities.................................................................................................. iii Statement of Facts ..................................................................................................... v Statement of Jurisdiction .......................................................................................... vi Issues for Consideration ........................................................................................... vi Summary of Arguments........................................................................................... vii Arguments Advanced ................................................................................................ 1 I. The defendant Actio McSong is not liable for the breach of contract and consequent damages. ............................................................................................. 1 A.
The agreement is not a contract within the meaning of the Contract Act,
1872 .................................................................................................................. 1 B.
The contract between the defendant and the plaintiff stands frustrated. ....... 3
II. The defendant Actio McSong is not liable for the tort of negligence and the consequent damages. ............................................................................................. 6 A.
There exists no duty of care as the duty arose from the contract but the
contractual obligation is voidable. ...................................................................... 6 B.
Arguendo - The duty imposed must be fair, just and reasonable.................. 7
C.
Arguendo - Actio took reasonable care not to breach the duty .................... 7
D.
The defendant cannot be held liable for causing public humiliation to the
plaintiff. ............................................................................................................. 8 E. The defendant cannot be held liable for the loss of goodwill caused to the plaintiff. ........................................................................................................... 10 Prayer ...................................................................................................................... 15
ii
INDEX OF AUTHORITIES Cases 21st Century Systems, Inc. v. Perot Systems Government Services, Inc, Record No. 110114, Virginia Supreme Court ......................................................................... 11 Afsar Sheikh v. Suleman Bibi AIR 1976 SC 163 ....................................................... 1 Amir Chand Tota Ram v. Sucheta Kripalani AIR 1961 Punj 383 ............................... 2 Anheuser-Busch v Budejoicky [1984] FSR 413 CA.................................................. 12 Blyth v. Birmingham Waterworks Co., (1856) 11 Ex. 781 at 784 ............................... 8 C. Czarnikow Ltd. v. Koufos, [1969] 1 A.C. 350 ...................................................... 10 Caparo, [1990] 2 A.C 643 ......................................................................................... 7 Central National Bank ltd v. United Industrial bank AIR 1954 SC 181 ..................... 1 Commissioner of Income Tax, Bangalore v. B. C. Srinivasa Shetty, AIR 1981 SC p. 972 ...................................................................................................................... 11 Delhi Transport Corporation v. D.T.C. Mazdoor Congress 1991 AIR 101 ................ 1 Eacom Controls v. Bailey Controls, AIR1998Delhi365 ............................................. 4 IRC v Muller&Co’sMargerine [1901] AC 217 HL .................................................. 11 Ladli Parshad Jaiswal v. Kamal Distillery AIR 1963 SC 1279 .................................. 1 London and Lancashire Insurance v. Binoy Krishna Mitra AIR 1945 Cal 218 .......... 2 Morgan v. Manser [1948] 2 ALL ER 666................................................................. 4 Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2 ............................................... 12 Re Polemis, [1921] 3 K.B. 560 ................................................................................ 10 Robinson v. Davison (1871) LR 6 Ex 269.................................................................. 4 Satyabrata Ghose v. Mugneeram Bangur AIR 1954 SC 44 ....................................... 4 Sushila Devi v. Hari SinghAIR 1971 SC 1756 ........................................................... 4 T. V. Venugopal v. Ushodaya Enterprises ltd and other (2011) 2012, 4 SCC 85 ...... 11
iii
Tai Hing Cotton Mill v. Liu Chong Hing Bank [1986] A.C 80 ................................... 6 Tamplin Steamship v. Anglo- Mexican petroleum(1916) AC 397 ............................... 4 Tarsem Singh v. Sukhminder Singh, AIR 1998 SC 1400 ............................................ 1 The Wagon Mound, [1961] A.C. 388 ....................................................................... 10 McKew v. Holland & Hannen & Cubitts (Scotland) Ltd. [1969] 3 All. E.R 1623 ...... 9 Weld-Blundell v. Stephens [1920] A.C. 956 ............................................................... 9 Statutes Section 10 of the Contract Act, 1872 ......................................................................... 1 Section 14 of the Contract Act, 1872 ......................................................................... 1 Section 16 of the Contract Act, 1872 ......................................................................... 1 Section 19A of the Contract Act, 1872 ...................................................................... 7 Section 2(h) of the Contract Act, 1872....................................................................... 1 Books & Treatises BRYAN A. GARNER, BLACK‟S LAW DICTIONARY,(9th ed 2001)................................ 11 POLLOCK AND MULLA, INDIAN CONTRACT AND SPECIFIC RELIEF ACT, Part 1, 306-376 (LexisNexis Butterworth Wadhwa, Nagpur, 13nd ed. 2009)................................ 2, 3 WINFIELD AND JOLOWICZ, TORT, 313, (Sweet & Maxwell, South Asian Edition, 18 th ed., 2010) .............................................................................................................. 9 Articles McCutcheon, Lynn, E., Lang, Renee., Hourst, James., Conceptualization and Measurement of Celebrity Worship, British Journal of Psychology, 93, Issue 1, pp. 67-87 February 2002 ........................................................................................... 13
iv
STATEMENT OF FACTS Actio McSong is a world famous actor and singer from Xephilia. Spice Galore Entertainment Co. Ltd. (SGE) is a renowned company in the field of entertainment and movies. SGE was organizing the entertainment for the inauguration of Xephilia Premier League, at the capital city Naya Xili on 15 th May for which Mr. Elmo, representative of the managers of SGE signed a contract with Actio to perform for half an hour at the inauguration ceremony and paid him an advance. The contract between them contained certain restrictive clauses. Actio was angered by these clauses, yet signed the contract. On 12th May, Actio requested Mr. Elmo to allow him to record the live event for his personal use, which he refused, resulting in Actio leaving the place in a fit of rage. It was published in a news daily on 13th Maythat prawns and lobsters were contaminated due to poor health standards in local restaurants causing allergic reactions. Actio threw a party for his friends at a seafood specialty restaurant Coral Reef. Actio had a medical history of being allergic to prawns but had eaten small quantities of it uneventfully. Actio filled his plate with dishes including a certain complimentary dish, which contained fine pieces of prawn. Soon after consumption, he fell sick and threw up. The doctor said that Actio was suffering an allergic reaction from the contaminated food and requested him to rest. Mr. Elmo saw a video taken by the security camera and conveyed its contents to Mr. McGuire, who tweeted regarding the issue against Actio. SGE sent a notice to Actio stating that Actio can either perform or face legal action, since the incident may not have been accidental. Both these events led to messages being spread on the Internet referring to SGE in bad light. SGE replaced Actio with local star Henry. SGE sued Actio claiming damages for breach of agreement for performance, for loss of goodwill, humiliation among peers, clientele and community at large.
v
STATEMENT OF JURISDICTION The defendant most humbly and respectfully submits that this honourable court has the requisite jurisdiction to hear and adjudicate the matter under Sections 9 and 15 read with Order IV Rule 1 of the Code of Civil Procedure, 1908 and Rule 2 of the Bombay High Court Rules, framed under Section 34(1) of the Advocates Act, 1961.
ISSUES FOR CONSIDERATION I.
WHETHER
THE DEFENDANT,
ACTIO MCSONG,
CONTRACT AND CONSEQUENT DAMAGES?
vi
IS LIABLE FOR A BREACH OF
II.
WHETHER
THE DEFENDANT,
ACTIO MCSONG,
IS LIABLE FOR THE TORT OF
NEGLIGENCE AND THE CONSEQUENT DAMAGES?
SUMMARY OF ARGUMENTS I.
THE
DEFENDANT,
ACTIO MCSONG,
IS NOT LIABLE FOR THE BREACH OF
CONTRACT AND CONSEQUENT DAMAGES.
The contract is not valid as the defendant‟s consent was taken using undue influence. The plaintiff was in a position to dominate the will of the defendant
vii
owing to the facts and circumstances. The terms are extremely unreasonable and unconscionable owing to the fact that the terms are too broad and the period of the restrictions is 6 months. The plaintiff used its dominating position to obtain undue influence over the defendant.
The contract is frustrated as the defendant is physically incapable of performing the contract. The incapacity cannot be imputed to the default of the defendant, as there was an actual contamination of seafood beyond his control. The event of him falling ill was unforeseeable as Coral Reef was a specialty restaurant, not a local one.The fine pieces of prawn were present in the complimentary dish, and knowledge of this fact by the defendant cannot be assumed.
II.
THE DEFENDANT ACTIO MCSONG IS NOT LIABLE FOR THE TORT OF NEGLIGENCE AND THE CONSEQUENT DAMAGES.
The duty of care arose solely from the contractual obligation and the contractual obligation has been declared void, therefore it is not an independent liability. Since there is no duty of care, there can be no alleged breach of such duty. Assuming but not conceding that a duty of care exists, such a duty must be fair, just and reasonable. The duty imposed is extremely wide, arbitrary and unconscionable. The defendant took reasonable care not to breach the duty. He acted as a reasonable man would.
The defendant cannot be held liable for the damage of public humiliation. The causal link between his act and the consequent damage is broken, as the plaintiff‟s own act interfered in the chain of events. The plaintiff had other reasonable options rather than sending a threatening notice to the sick defendant. The plaintiff‟s own default in disclosing the content of a security
viii
tape to a third party and serving a threatening legal notice resulted in the consequent criticisms and public humiliation. The damage is too remote as the defendant could not have anticipated the chain of events that would occur.
The defendant cannot be held liable for loss of goodwill to the plaintiff. Since goodwill is about the client attracting capability of the firm, this one singular event cannot be responsible for changing the perception of competence of the plaintiff in the media entertainment world. The entire event, which occurred, had no effect on the clientele of the company. The negative perception of the plaintiff by one niche fan community is inconsequential to the plaintiff‟s goodwill. Further, the event did not result in any actual economic loss to the plaintiff,
as
the
ticket
ix
amount
was
non-refundable.
ARGUMENTS ADVANCED
I.
THE
DEFENDANT
ACTIO MCSONG
IS NOT LIABLE FOR THE BREACH OF
CONTRACT AND CONSEQUENT DAMAGES.
The defendant is not liable for the beach of the contract because [A] The agreement is not a contract within the meaning of The Contract Act, 1872, assuming but not conceding that the consent is valid, [B] The contract stands frustrated. A. The agreement is not a contract within the meaning of the Contract Act, 1872 The agreement between the defendant and the plaintiff is not a contract within the meaning of the Contract Act, 1872 (hereafter referred to as „the Act‟), as the defendant‟s consent has been caused by undue influence. A contract is an agreement enforceable by law. 1 For an agreement to be enforceable by law, consent between the parties must be free. 2 Consent is not free when it has been actuated by undue influence. 3 A contract is induced by undue influence when [i] one of the parties is in a position to dominate the will of another, [ii] when the other party uses that position to obtain an unfair advantage over the other. 4 The person
1
Section 2(h) of the Contract Act, 1872; Delhi Transport Corporation v. D.T.C. Mazdoor Congress 1991 AIR 101; Tarsem Singh v. Sukhminder Singh, AIR 1998 SC 1400 2
Section 13 of the Act; Central National Bank ltd v. United Industrial bank AIR 1954 SC 181
3
Section 14 of the Act
4
Section 16 of the Act; LadliParshadJaiswal v. Kamal Distillery AIR 1963 SC 1279; Afsar Sheikh v. SulemanBibiAIR 1976 SC 163
1
influenced is constrained to do against his will that, which, but for the influence, he would have refused to do if left to exercise his own judgment.5 i.
The plaintiff was in a position to dominate the will of the defendant
According to Section 16(3) of the Act, a presumption of undue influence arises when two factors are proved; firstly that the person was in a position to dominate the will of another, and that the transaction appears to be unconscionable on the face of it or by evidence adduced.A dominating position can arise as a result of the circumstances in which the contract was entered into.6 The plaintiff is one of the most sought after event organizer, and had been tasked with organizing the opening ceremony of Xephilia premier league. The agreement between the defendant and the plaintiff is unconscionable on the face of it. Clause 5.1 of the agreement is unconscionable, not engaging in any sport activities, non-consumption of alcohol, and the term stating not to engage in any activity, which would risk the performer or affect performance. These terms are extremely unreasonable and unconscionable when viewed in light of the fact that, the term of the contract extends to a period of more than 6 months from the date of the agreement. The opening ceremony was a gala event, where many stars performed and even the president of Xephilia was going to attend the ceremony. The defendant himself was taken by the enormity of the event. These circumstances empowered the plaintiff to a position such as to dominate the will of the defendant. Both these factors are satisfied in the present matter. Hence, a presumption of undue influence is adduced7. 5
Amir Chand Tota Ram v. SuchetaKripalani AIR 1961 Punj 383
6
London and Lancashire Insurance v. Binoy Krishna Mitra AIR 1945 Cal 218; POLLOCK AND MULLA, INDIAN CONTRACT AND SPECIFIC RELIEF ACT, Part 1, 476 (LexisNexis Butterworth Wadhwa, Nagpur, 13nd ed. 2009). 7
Id.
2
ii.
The plaintiff used their dominant position to obtain an unfair advantage over the defendant
The plaintiff had obtained a position through which it could dominate the will of the defendant. Through the existing circumstances in their favor, they also used this position to obtain an unfair advantage over the defendant, in the sense, that the terms in the agreement under the garb of protecting the interests of the plaintiff, impaired the defendant from conducting activities such as any sport, imposed complete restrictions on consumption of alcohol and restrictions on consumption of food. Clause 5.1(j) was too wide and arbitrary as it prevented the defendant from indulging in any activity, which could be construed as harmful to him or the plaintiff. Keeping in mind the period of restriction, that is, more than 6 months coupled with Mr. Elmo‟s stand on non negotiability of any term, and the rejection of the defendant‟s idea of shooting the event, shows how the bargain unreasonably protected the interests of the plaintiff while blatantly exposing the defendant to hardship and ignoring his interests for the term of the agreement. B. The contract between the defendant and the plaintiff stands frustrated. The contract between the defendantand the plaintiff is frustrated and hence has been rendered void. It has been held that when personal performance is the foundation of the contract which is to be performed only by the promisor is discharged, if without default on the part of the promisor, he becomes physically incapable of performing the contract.8 Exposition of the expression „impossible of performance‟ was made in Tamplin Steamship v. Anglo- Mexican petroleum9 as, “The parties shall be excused if substantially the whole contract becomes impossible of performance or in other 8
Robinson v. Davison (1871) LR 6 Ex 269, Morgan v. Manser [1948] 2 ALL ER 666
9
Tamplin Steamship v. Anglo- Mexican petroleum(1916) AC 397
3
words impracticable by some cause for which neither was responsible”, was later affirmed by the Delhi High Court10 Apex Court11. The defendant had fallen sick after being served contaminated food and had been admitted to a star county hospital and in the press conference held by doctors was asked to rest for the entire week. 12 Also, it was stated and there was huge news coverage of the fact that the defendant because of his illness would be disabled from performing in the event. This is further substantiated with two reasons. [i] The incapacity was without the default of the defendant. [ii] The event was not foreseeable. i.
The incapacity was without default of the defendant
The incapacity cannot be imputed to the defendant, there was no default from his side, which can link to the illness which led to incapacity, and this has to be construed from the entire situation and variables at play. The defendant fell sick and was be hospitalized because of the contamination of the food that he was served, the contamination, if, attributed to poor hygiene standards of the restaurant, leads to the inference that the defendant had no control over this possibility. The defendant served himself the dish „Dry Seafood Special‟ which was complementary, and it was one among other dishes that he served to himself, one of the ingredients was fine pieces of prawns, which brings into question, whether knowledge about the pawns can be imputed to the defendant. Also, what exactly did
10
Eacom Controls v. Bailey Controls, AIR1998Delhi365
11
SatyabrataGhose v. MugneeramBangur AIR 1954 SC 44, Sushila Devi v. HariSinghAIR 1971 SC 1756 12
Proposition, para 10
4
the defendant consume is not known. The knowledge of the presence of prawns to the defendant cannot be presumed. ii.
The event was not foreseeable
The event of contamination was not foreseeable, and it would be unreasonable to impute knowledge of the same to the defendant. An analysis of the facts proves this point. The article about the contamination due to poor hygiene standards was posted in the magazine by „Morning Espresso‟ and not the news daily, though the magazine was placed in every room, there were other newspapers and magazines present, it cannot reasonably be presumed that the defendant read all of the material kept in his room. A reasonable standard would be to read the important news, in the news dailies, and not all the articles in all the magazines present in his room. Assuming but not conceding to the fact, that he had read the article, still a reasonable assumption of poor hygiene standards would not arise, the article refers to local restaurants, while „Coral reef‟ was a seafood specialty restaurant, one frequented by stars of showbiz.13 A comparison cannot be drawn between both restaurants, the article in any sense cannot be constructed to mean and include „Coral Reef‟ within the meaning of the article. Poor hygiene standards cannot be expected from Coral Reef. Hence, the happening of the event was not foreseeable. Thus the contract stands frustrated.
13
Proposition, Para 7
5
II.
THE
DEFENDANT
ACTIO MCSONG
IS NOT LIABLE FOR THE TORT OF
NEGLIGENCE AND THE CONSEQUENT DAMAGES.
The defendant Actio McSong is not liable for the tort of negligence and the consequent damages as: [A] There exists no duty of care as the duty arose from the contract but the contractual obligation is voidable. [B] Arguendo – The duty imposed must be fair, just and reasonable. [C] Arguendo – The defendant took reasonable care not to breach this duty. [D] The defendant cannot be held liable for causing public humiliation to the plaintiff. [E] The defendant cannot be held liable for loss of goodwill to the plaintiff. A. There exists no duty of care as the duty arose from the contract but the contractual obligation is voidable. Actio is not liable for the tort of negligence because the duty of care whose breach has been alleged by SGE Ltd. arises from the contract and is not an independent liability. 14 When the consent to the contract had been induced by undue influence, it would be highly unreasonable and unjust to impose a liability in tort which arises from contractual terms of which Actio seeks to not be bound by. The transaction on the face of it seems unconscionable and clause 5.1 has been especially claimed as to be highly unreasonable, then it would not be fair just and reasonable to import a duty of care in this regard as to impose a tortuous duty which would have the same effect as though enforcing terms of the contract when the
14
Tai Hing Cotton Mill v. Liu Chong Hing Bank [1986] A.C 80
6
contract should be voidable for consent is caused by undue influence 15. Since there is no duty of care owed by Actio with regard to his conduct, he can commit no breach of it. Therefore, the Act of Actio does not fall within the meaning of Negligence. B. Arguendo - The duty imposed must be fair, just and reasonable. Assuming but not conceding that a duty exists, the duty imposed should be fair just and reasonable. Even if there is the requisite degree of proximity, a duty may be denied if in the court‟s view imposition of liability is not fair, just and reasonable. 16 If we look at the duty of the plaintiff to the defendant, it is clear that such a duty is not fair just and reasonable. To expect the plaintiff to not eat out at any place for a period of 6 months, except at the place of stay provided by the defendant is extremely unjust, unfair and unreasonable. The duty imposed is highly arbitrary and is biased in favour of the defendant. C. Arguendo - Actio took reasonable care not to breach the duty Assuming but conceding that Actio owed SGE Ltd. a duty of care, it is enough to prove that there was no breach of duty if the plaintiff took reasonable care to avoid any damage. 17 The term reasonable care is derived from what a reasonable man would or would not do. In the present case, Actio took reasonable care not to cause the damage of public humiliation and loss of goodwill to SGE Ltd. In the restaurant, though it was a seafood specialty restaurant, it is not mentioned specifically that Actio ordered a dish, which contained prawn, which he was allergic to. The dish, which contained fine
15
Section 19A of the Act
16
Caparo, [1990] 2 A.C 643
17
Blyth v. Birmingham Waterworks Co., (1856) 11 Ex. 781 at 784
7
pieces of prawn, was a complimentary dish served by the restaurant. 18 It is also mentioned that Actio piled his plate with dishes and it is not clear what exact caused the reaction. In such a circumstance of ambiguity, it is unreasonable and impossible to assume that Actio did not take the care of a reasonable man. Secondly, it was stated in the news daily that the seafood in local restaurants was prone to contamination. Even if Actio did come across this article, it didn‟t refer to specialty restaurants such as Coral Reef, but local restaurants. In this way, Actio still took reasonable care against seafood contamination by going to a specialty restaurant and not any local restaurant. The other ingredients for the tort of negligence have been elaborated upon individually within the explanation of damages. D. The defendant cannot be held liable for causing public humiliation to the plaintiff. The defendant cannot be held liable for causing public humiliation as: [i] Public humiliation was not caused by Actio‟s alleged negligence. [ii] The damage is too remote. i.
Public humiliation was not caused by Actio’s alleged negligence.
The tortious damage alleged is that of public humiliation and this damage cannot be attributed to Actio‟s negligent act. There can exist multiple causes for a particular damage. 19 The but-for test cannot be simply applied here. The causal link between the negligent
18
19
action
and
the
damage
is
broken,
as
there
exists
a
Proposition, Para 8 WINFIELD AND JOLOWICZ, TORT, 313, (Sweet & Maxwell, South Asian Edition, 18th ed., 2010)
8
nova
causainterveniens.20It was held by the House of Lords that the plaintiff‟s action can be attributed to nova causaintervenienseven if it was foreseeable, but unreasonable. 21 If he had no reasonable alternative to acting as he did, it would not have broken the chain of causation.22 The damage caused was due to SGE Ltd.‟s own acts, therefore, there was an intervening act of the claimant. Mr. Elmo disclosed the details of the security camera tape to Mr. McGuire who in turn posted it on a social networking site. There was widespread commenting for and against this issue based on Mr. McGuire‟s initial post.23 SGE Ltd. sent Actio a notice stating that non-performance would provoke legal action, especially as they doubted that the incident might not have been accidental.24 Fans criticized SGE Ltd. on the basis of the notice sent to Actio by SGE Ltd Itself. 25 The legal notice served by SGE is an independent act. If not for the notice, there would have been no resultant public humiliation. SGE was unreasonable. There were more reasonable options that SGE could have resorted to, such as not threatening Actio with legal action and claiming his act was not accidental, as it was clear that Actio was genuinely ill and through no fault of his own. It is evident that there were many events between the negligent act and the damage. The negligent act did not directly cause the damage of public humiliation. Acts of SGE Ltd. intervened and caused the damage. Therefore, Actio cannot be held for the damage allegedly caused by him. 20
Weld-Blundell v. Stephens [1920] A.C. 956
21
McKew v. Holland &Hannen&Cubitts (Scotland) Ltd. [1969] 3 All. E.R 1623
22
WINFIELD AND JOLOWICZ, TORT, 361, (Sweet & Maxwell, South Asian Edition, 18th ed., 2010)
23
Proposition, Para 13.
24
Proposition, Para 14
25
Proposition, Para 15
9
ii.
The damage is too remote
Earlier, in the case of Re Polemis,26it was held that a person is liable for the all the direct consequences of his act. This was overruled in the Wagon Mound,where it was stated that the defendant could be held liable for only those damages that a reasonable man can foresee to arise from his actions. 27 The defendant should be able to reasonably foresee the chain of actions which can occur and the consequent damage, if he cannot, then he cannot be held be liable for the damage. 28 In the present argument, we have assumed but not conceded that Actio disabled himself from performance. The events, which occurred,were not foreseeable, since SGE itself served a notice, which was an intervening act, and criticisms against it went viral on the internet. There is no causal relationship between the negligent act and the consequent damage. The acts of SGE Ltd. and the resultant reaction of a third party cannot be imputed to Actio and he cannot be held liable for public humiliation allegedly caused to SGE Ltd. E. The defendant cannot be held liable for the loss of goodwill caused to the plaintiff. Goodwill has been defined as “A business's reputation, patronage, and other intangible assets that are considered when appraising the business, esp. for purchase; the ability to earn income in excess of the income that would be expected from the business viewed as a mere collection ofassets.” 29 Thus Goodwill is the additional value accruing to the business functions of a business based on its reputation among
26
Re Polemis, [1921] 3 K.B. 560
27
The Wagon Mound, [1961] A.C. 388
28
C. Czarnikow Ltd. v. Koufos, [1969] 1 A.C. 350
29
BRYAN A. GARNER, BLACK‟S LAW DICTIONARY, 763 (9th ed. 2001)
10
the client population. Recently the Supreme Court decided that the unfair damage to goodwill is actionable.30 The decision reflected a shift towards a need to prove actual loss of goodwill above all else, especially in the minds of the business targets. Lord McNaughten stated that goodwill is “the benefit, and advantage of the good name, reputation and connection of a business. It is the attractive force that brings in customers”.31 The Supreme Court of India has also accepted the same. 32Thus to prove the loss of goodwill as an actionable damage, It is necessary to prove [i] The action was capable of causing harm to the business reputation and was unjustified, [ii] The action had an effect on the clientele of the business. [iii] The action resulted in actual economic loss. The burden of proof lies on the party alleging the loss of goodwill and it is imperative that the complaining party is required to prove the actual economic loss, which identifies the loss of goodwill. 33 In a recent Australian judgment, 34 the Court restated the need to prove the actual damage occurring. The decision clearly differentiated the possibility of the loss of goodwill from the actual suffering of loss of goodwill. It held that when there were distinguishing factors which did not directly or apparently harm the goodwill of the party claiming loss of goodwill, it becomes imperative on the party complaining to prove the causal factor relationship of the economic loss suffered with the action being complained of itself and then indicate the actual occurrence of loss of goodwill as a direct cause of the effected economic loss. There was no actionable loss of goodwill because: 30
T. V. Venugopalv. Ushodaya Enterprises ltd and other (2011) 2012, 4 SCC 85
31
IRC v Muller&Co.’sMargerine [1901] AC 217 HL
32
Commissioner of Income Tax, Bangalore v. B. C. SrinivasaShetty, AIR 1981 SC p. 972
33
21st Century Systems, Inc. v. Perot Systems Government Services, Inc, Record No. 110114, Virginia Supreme Court 34
Nutrientwater Pty Ltd vBaco Pty Ltd [2010] FCA 2
11
i.
The actions of the defendant were incapable of causing harm to the business reputation of the company
In the present case, the actions of the defendant were incapable of causing harm to the business reputation. When considering the goodwill of the firm, it is important to note that it is not merely the reputation of the business, but rather the effective client attracting capability of the firm35. Business reputation of a firm is characteristically identical to the reputation of a person as an entity 36 . However it alone doesn‟t substantially decide the business generating capability. In this case, the entire episode of events did nothing to affect the perception of competence of the plaintiffs in the media entertainment world. ii.
The action had no effect on the clientele of the business.
The actions of the defendant had no effect on the clientele of the business. The entire sequence of events, which took place didn‟t decrease the professional competence of the company, SGE Ltd. The unfortunate health complication affecting the defendant was out in the open for public perusal. It, in no way attributed any specific attribution of performance to SGE Ltd in a way as to diminish the credibility of the plaintiffs. Rather, the entire episode actually reaffirmed the professional competency of the plaintiffs by demonstrating their capability to respond to unforeseen contingencies of vast magnitude. So there were no negative attributions of any sort attributed to the company except some very expressive fans of Actio. The only negative evaluation of the defendant arising from the entire sequence of events is limited to the niche group within the fan base of Actio who are active users of his fan website. So, the proportion of people having a negative perception of SGE is a minority within a 35
Anheuser-Busch v Budejoicky [1984] FSR 413 CA
36
Ibid
12
minority with respect to the business interests of SGE Ltd. As explained in the case of Anheuser-Busch reputation of the firm is completely different from the goodwill accruing to the firm. The case here is analogous to the above case. The brief facts of the case were as follows: “A, a company based in the US had substantial reputation in the world, including the UK. The actions of B a company in the UK were objected to by A, who proceeded with a legal action pleading loss of goodwill as damage. The Court of Appeal held that the absence of business operations in the UK barred the US firm from seeking a legal remedy for loss of goodwill as the entire sequence entailed damage to reputation and damage to reputation doesn’t constitute damage to goodwill.” Here, the fan base of the defendant is in no way concerned with the business operations of SGE Ltd. SGE Ltd. is an entertainment company whose clients are the entertainment business players. SGE Ltd. by itself isn‟t actively concerned since it is merely a content provider and not the content producer itself. The fan community especially those active on websites dedicated to celebrities are perceived to be a niche category far removed from normal public perception and this effect is exponentially expanded in the case of issues concerning the celebrity. 37 Therefore, the negative perception of SGE Ltd. in the case of the fan community is inconsequential to the issue of goodwill of the plaintiffs. iii.
The action resulted in actual economic loss.
The sequence of events surrounding the defendant and the plaintiff did nothing substantial to stop the event. The show successfully continued despite the defendant‟s absence on account of unexpected contingencies. The plaintiff‟s competence was never called into question. The criticism by the fans of the defendant, were aimed 37
McCutcheon, Lynn, E., Lang, Renee.,Hourst, James., Conceptualization and Measurement of Celebrity Worship, British Journal of Psychology, 93, Issue 1, pp. 67-87 February 2002
13
only at the behaviour of the company with Actio and had nothing to do with the competence of the company to ensure opportunities for stars in the entertainment business. 38 So the economic loss was not a factor. Tickets for the ceremony were booked prior to the events surrounding the frustration of the contract. Thus, the presence or absence of the defendant as a performer during the actual date of the performance did little to affect the revenues. This is reaffirmed in the clause defined by the plaintiffs for the ticket buyers, which expressly rejected any refund claims. 39
38
Proposition Point No. 15
39
Clause 20 of the Terms and Conditions of the Tickets.
14
PRAYER Wherefore in light of the facts stated, issues raised, arguments advanced and authorities cited it is most humbly prayed before this Honorable Court that it may be pleased to:
Dismiss the suit with costs.
And pass any such order which the Honorable Court may deem fit in the eyes of equity, justice and good conscience.
All of which is most humbly and respectfully, submitted.
Date: 15th May 2012 Place: Naya Xili
S/d: (Counsel for the Defendant)
15
