Summary of Court Opinion

Factual and Procedural Background

This is an application for permission to appeal an order of Judge Bacon dated 1 July 2025, by which she dismissed the claim of Company A (which comprised two trading entities jointly referred to as "Company A") against Company B (two related companies jointly referred to as "Company B").

Company A's claim alleged abuse of a dominant position by Company B under Chapter II of Part 1 of the Competition Act 1998 and/or Article 102 TFEU. The alleged abuse consisted of steps taken by Company B to dissuade retailers from stocking a collectible toy called "Worldeez", which Company A said was similar to a collectible toy already made by Company B.

Judge Bacon found that Company B was dominant in the relevant market, that it had abused its dominant position, and that it had made unjustified threats of patent infringement proceedings within section 70 of the Patents Act 1977. Nevertheless, the judge dismissed Company A's claim for damages because Company A failed to establish that it would have traded profitably in the counterfactual (i.e. absent Company B's alleged unlawful conduct).

Company A sought permission to appeal the dismissal on three specified grounds. The opinion under summary is the decision of Judge Snowden and Judge Zacaroli on that application for permission to appeal.

Legal Issues Presented

1. Whether a pleaded claim for loss of profits can encompass a situation in which the claimant would have been less loss-making in the counterfactual (i.e. suffered a smaller loss) even if it would not have been profitable overall (Ground 1).
2. Whether the claimant must prove, on the balance of probabilities, that it would have been profitable in the counterfactual in order to recover lost profits (Ground 2).
3. Whether the judge's finding that Company A would have failed in early 2018 in any event (and thus would not have been profitable in the counterfactual) could be sustained on the evidence (Ground 3).

Arguments of the Parties

Company A's Arguments (Appellant)

• Company A submitted that, on the judge's own findings, it would have suffered less loss in the counterfactual than in fact; therefore a lost-profits claim can extend to recovery where the counterfactual would have produced a smaller loss rather than an outright profit (Ground 1).
• Company A contended that the judge wrongly required proof on the balance of probabilities that Company A would have been profitable in the counterfactual; it argued that it would be sufficient to establish on the balance of probabilities that it would have suffered at least some loss that was smaller than the loss actually suffered, allowing the court then to quantify loss (Ground 2).
• On the procedural point, Company A (through Attorney Eadie on the permission application) argued that a close reading of the trial transcript and the totality of written and oral submissions showed that Company A had not abandoned the argument that a reduced loss in the counterfactual could suffice and had not made the concessions recorded by the judge in the draft judgment.
• Company A argued that, if necessary, presumptions in favour of the claimant should be applied where reliable evidence is lacking (invoking principles derived from historic and Supreme Court authority), and that the judge erred in her approach to evaluation of the counterfactual.

Company B's Arguments (Respondent)

• Company B submitted that the judge was correct to require on the pleaded case that lost-profits recovery depended on the claimant showing that it would have been a profitable business in the counterfactual.
• Company B argued that Company A had, in closing submissions at trial, accepted that lost-profits claims required proof on the balance of probabilities that there would have been profits in the counterfactual, and had therefore abandoned any alternative case that it would merely have been less loss-making.
• Company B further submitted that it was too late for Company A to contend otherwise, and relied on the principle that a party who believes a draft judgment wrongly records concessions should raise that with the judge at the draft stage (drawing attention to authority on exceptional circumstances permitting reconsideration of draft judgments).
• Company B also relied on trial evidence (including expert evidence) which the judge accepted and which supported the conclusion that Company A's prospects of trading profitably in the counterfactual were very low.

Table of Precedents Cited

Court's Reasoning and Analysis

The panel (Judge Snowden and Judge Zacaroli) analysed the three grounds together with the procedural history of the trial and the concessions recorded by Judge Bacon.

On Grounds 1 and 2 (the legal questions about the nature of a lost-profits claim and the required standard of proof), the panel observed the judge had made several inter-related conclusions at trial:

• That Company A's claim for lost profits was advanced on a case that, absent Company B's conduct, Company A would have become an overall profitable business.
• That this pleaded head of loss was distinct from a claim that Company A simply would have been less loss-making in the counterfactual.
• That the case as pleaded and argued at trial did not include a suitably particularised claim that Company A would merely have made a smaller loss in the counterfactual.
• That, in tort, a cause of action is not complete until the claimant establishes on the balance of probabilities that some compensatable damage was suffered; the judge treated completion of the cause of action as requiring Company A to establish profitability on the balance of probabilities under the pleaded case.

The panel concluded that the legal points raised by Grounds 1 and 2 were arguable and deserved fuller consideration on appeal. However, they acknowledged the case was complicated by concessions recorded in the trial judgment indicating that Company A had accepted the need to prove profitability on the balance of probabilities and had not pursued a pleaded case that it would have been merely less loss-making. The panel carefully examined whether those recorded concessions were unarguable. They were not satisfied on the permission application that Company A had unambiguously made the concessions recorded by the trial judge: it was arguable that Company A's trial team had not abandoned the alternative contention and that the judge nonetheless addressed the legal point.

Given those competing contentions about what was said and conceded at trial, the panel concluded that the appropriate course for Grounds 1 and 2 was to direct a rolled-up hearing combining the permission application and the appeal (if permission were granted). That would permit fuller factual and legal argument, including inquiry into whether Company A could rely on existing findings to support a claim that it would have been less loss-making in the counterfactual, or whether the appeal would need to be remitted.

On Ground 3 (challenge to the judge's evaluative finding that Company A would have failed in early 2018 in any event), the panel emphasised the high hurdle for disturbing evaluative factual findings. Company A argued that the judge impermissibly relied on events in the actual world that were tainted by Company B's conduct. The panel summarised Company A's three principal examples: reliance on sales achieved through Company C (a discount retailer), reliance on evidence that Company D (the funder) was reluctant to fund a US expansion in August 2017, and the judge's focus on achieving profitability by the end of 2017.

The panel found no arguable error with real prospect of success. They accepted that the judge was aware of the need to take care when considering real-world events that might be tainted by the defendant's conduct, and they pointed to specific passages in the judgment showing the judge had made such allowances (including a finding that there was no evidence to support the suggestion that sales at Company C could have been more than tripled to substitute for the lost specialist-retailer sales). The panel also noted that many factors relied upon by the judge in reaching her evaluative conclusion were untainted by the defendant's conduct, including assessments of product quality, insufficient marketing budget, lack of a formal business plan, implausible financial projections, the funder's contractual rights to withdraw cash, and expert evidence on the low likelihood of sufficient sales. The expert evidence relied on by the judge (from Expert Harper) estimating very low chances of securing sufficient sales in the first year was not challenged at trial.

Reading the trial judgment as a whole, the panel was satisfied that the judge did not impermissibly place reliance on tainted matters and that her evaluative conclusions were open to her on the evidence; accordingly they refused permission to appeal on Ground 3.

Holding and Implications

DECISION: The application for permission to appeal was partially adjourned and partially refused:

• The court directed that the application for permission to appeal on Grounds 1 and 2 be adjourned to a rolled-up hearing combining the permission application and the substantive appeal (if permission is granted). The parties were directed to address, in a fuller hearing, the questions identified in the judgment, including whether concessions recorded below were in fact made and the extent to which existing findings of fact can support a counterfactual of reduced loss rather than profitability.
• Permission to appeal was refused on Ground 3 (the challenge to the judge's evaluative finding that Company A would have failed in early 2018 in any event).

Implications: The immediate practical effect is that Grounds 1 and 2 will be considered at a fuller rolled-up hearing (the court envisaged a two-day appeal hearing). Ground 3 will not proceed to appeal. The panel did not purport to lay down a new legal rule; rather, it found the legal questions in Grounds 1 and 2 arguable and suitable for fuller appellate determination and found no realistic prospect of overturning the trial judge's evaluative findings on Ground 3.