THE USER PRINCIPLE
| Author | Kelvin F K LOW LLB (Hons) (National University of Singapore), BCL (Oxford); Advocate and Solicitor (Singapore); Associate Professor, School of Law, Singapore Management University. |
| Citation | (2016) 28 SAcLJ 984 |
| Published date | 01 December 2016 |
| Date | 01 December 2016 |
Rashomon Effect or Much Ado about Nothing?
The underlying basis of an award of damages according to the user principle is the subject of intense and heated debate. The main debate concerns whether such awards are compensatory or restitutionary. Whilst more complex theories exist including mixed compensatory/restitutionary accounts, it is proposed that at the heart of the debate lies a dispute over the law's conception of gain and loss. Should gains and losses be narrowly or broadly conceived? It is suggested that the cases are only consistent with a broad conception of both since some cases would be inexplicable on a narrow conception of the same. If this is correct, then the restitutionary analysis, whilst theoretically plausible, would be practically unappealing to plaintiffs since on this basis, claims would be subject to defences not available to the same claim analysed purely in compensatory terms. Accordingly, it is difficult to imagine that a plaintiff would ever plead its case purely in restitutionary terms.
1 In Stoke-on-Trent Council v W & J Wass Ltd1 (“Stoke-on-Trent
Council”), Nicholls LJ opens his judgment as follows:2
It is an established principle concerning the assessment of damages that a person who has wrongfully used another's property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other's property.
Christened the “user principle” by his Lordship in the same case,3 its underlying basis has been and remains the subject of intense debate. Are damages awarded on the basis of the user principle awarded on a compensatory basis or a restitutionary basis? It will be seen that courts' and commentators' views of whether such awards are compensatory or restitutionary turn on their perspectives of what the words “loss” and “gain” mean in the law. It may thus be an instance of the occurrence of what has been termed the Rashomon effect in the law relating to remedies. Named after the classic 1950 Japanese film Rashomon by the acclaimed director Akira Kurosawa,4 the Rashomon effect is understood to represent contradictory interpretations of the same event by different people. On some accounts, the basis of an award of damages on the basis of the user principle has a practical significance.5 However, on a different view, it is a matter of no practical consequence.6 If the underlying basis of the award carries with it no practical import, then the entire exercise of trying to resolve this apparently intractable debate may perhaps be better laughed off as much ado about nothing. This article suggests that the better view is that, where such awards are available, whilst practical differences follow depending on which basis, compensatory or restitutionary, is preferred, both approaches are equally plausible. Despite their comparable credibility, the advantages of a compensatory analysis will invariably be preferred by plaintiffs who are normally permitted to bring such claims as they please. Thus, as a matter of litigation strategy, the theoretical differences fade into insignificance as lawyers would be well advised to argue both but lead with compensation. Nevertheless, a proper understanding of their underlying basis is, despite its apparent practical insignificance in its particular context, of immense value to the law of remedies more generally.
2 Damages awarded under the user principle come in numerous guises. The best established of such awards concern awards of
[O]n what principle of justice can it be said that these defendants are to use the plaintiffs' land for years for their own purposes, and to pay nothing for it, in addition to the injury that they have done to the land?
Where the use of land is more extensive and amounts to an occupation rather than a mere temporary user, the same principle is reflected by an award but goes by a different name. Such awards, sometimes referred to as mesne profits, were available regardless of whether the land could or would have been let to another during the period of occupation.11 The same principle applies in respect of chattels.
3 In Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd12 (“Strand Electric”), after referring to awards of wayleave, Denning LJ remarked: “I see no reason why the same principle should not apply to detention of goods.”13 Somervell LJ in the same case drew the analogy with claims for mesne profits rather than wayleave but reached the same conclusion as to the availability of awards assessed in accordance with what has come to be known as the user principle.14
4 In Stoke-on-Trent Council, Nicholls LJ observed that the same principle has also been applied in relation to intangible property, in
particular patents.15 As rationalised by Lord Shaw in Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson16 (“Watson”):17[T]here remains that class of business which the respondents would not have done; and in such cases it appears to me that the correct and full measure is only reached by adding that a patentee is also entitled, on the principle of price or hire, to a royalty for the unauthorised sale or use of every one of the infringing machines in a market which the [patentee], if left to himself, might not have reached. Otherwise, that property which consists in the monopoly of the patented articles granted to the patentee has been invaded, and indeed abstracted, and the law, when appealed to, would be standing by and allowing the invader or abstractor to go free. In such cases a royalty is an excellent key to unlock the difficulty, and I am in entire accord with the principle laid down by Lord Moulton in Meters Ld v Metropolitan Gas Meters Ld (28 RPC 163). Each of the infringements was an actionable wrong, and although it may have been committed in a range of business or of territory which the patentee might not have reached, he is entitled to hire or royalty in respect of each unauthorised use of his property. Otherwise, the remedy might fall unjustly short of the wrong.
5 While more established in respect of patent infringements, in Blayney t/a Aardvark Jewelry v Clogau St David's Gold Mines Ltd,18 Sir Andrew Morritt V-C extended the same principle to instances of copyright infringement thus:19
Given that that is the rule in the case of infringements of patents I can see no reason not to apply it in cases of infringements of copyright. In each case the infringement is an interference with the property rights of the owner … Though the nature of the monopoly conferred by a patent is not the same as that conferred by copyright I see no reason why that should affect the recoverability of damages in cases where the monopoly right has been infringed. The fact that the plaintiff may not be able to prove the application of one measure of damages, namely lost sales, does not mean that he has suffered no damage at all, rather some other measure by which to assess the compensation for that interference must be sought. Whilst, no doubt, there are differences between the rights granted to a patentee and those enjoyed by the owner of the copyright they draw no distinction between the effect of an infringement of a patent rather than a copyright.
It has also been applied in the context of trade mark infringement in 32Red plc v WHG (International) Ltd,20 but here its applicability is far from uncontroversial. In 32Red plc v WHG (International) Ltd, the parties agreed that the user principle was the correct basis for assessment. However, in Reed Executive v Reed Business Information,21 Jacob LJ was “by no means convinced that the ‘user’ principle automatically applies in trade marks and passing off cases, especially where the mark concerned is not the sort of ‘mark’ available for hire” [emphasis in original].22
6 Damages awarded under the Chancery Amendment Act 185823 (“Lord Cairns' Act”),24 in lieu of specific performance or an injunction, are also regarded as being premised “[o]n an analogous principle”.25 This can be clearly seen in the landmark case of Wrotham Park Estate Co Ltd v Parkside Homes Ltd26 (“Wrotham Park”). In that case, the first defendant developed its land in breach of a restrictive covenant. The plaintiffs brought an action shortly after the building works began but failed to seek an interlocutory injunction to restrain the development so that the works were complete by the date of the trial. Brightman J declined to grant the plaintiffs' prayer for a mandatory injunction for the demolition of the buildings as he considered that it would “be an unpardonable waste of much needed houses to direct that they now be pulled down”.27 Nevertheless, his Lordship was leery of awarding the plaintiffs merely nominal damages simply because the value of its own land had not been diminished by one farthing as a consequence of the breach:28
If, for social and economic reasons, the court does not see fit in the exercise of its discretion, to order demolition of the 14 houses, is it just that the plaintiffs should receive no compensation and that the defendants should be left in undisturbed possession of the fruits of their wrongdoing? Common sense would seem to demand a negative answer to this question.
In buttressing his instinct as a matter of common sense, his Lordship drew support29 from cases awarding wayleave rent,30 patent infringement31 and detinue32 in accordance with the user principle mentioned above. His Lordship eventually concluded that:33
… a just substitute for a mandatory injunction would be such a sum of money as might reasonably have been demanded by the plaintiffs from [the first defendants] as a quid pro quo for relaxing the covenant.
Subsequent cases have established that the measure of damages so...
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