Global Coal Ltd v Icap Energy Ltd

On 15 December 2005 Mr Justice Patten refused the Claimant an interim injunction against the Defendant, on the ground that the Claimant did not have a seriously arguable case, on the construction of the relevant documents, for the grant of an injunction at trial. This is the Claimant’s appeal, to which the Defendant has served a Respondents’ Notice seeking to uphold the judgment on other grounds as well.

The case is about coal from Newcastle – but Newcastle in New South Wales, rather than Newcastle-upon-Tyne. More accurately, it is about broking deals in relation to financial derivatives of trading in such coal.

The Claimant is a company which was set up by a number of undertakings with large interests in the world coal industry - both as producers and as purchasers - with a view to designing and developing increased standardisation in the specification and trading of coal, for the sake of promoting electronic trading in coal and bringing transparency to the coal market. It has developed a standard form of contract, called SCoTA (Standard Coal Trading Agreement), with standard specifications for various products, among which is Australian coal shipped from Newcastle. On the basis of this, and of information about spot trading on the basis of contracts in this form, it has also developed a number of indices, among which one relates to Newcastle coal, referred to as NEWC (which the Claimant has registered as a trade mark, as it also has NEWC INDEX). These indices are used in the market, in particular as a reference price for price swap contracts.

According to the evidence, such swap contracts have come to be used extensively in recent years, because of the volatility of the price of coal and because of pressures on the price that can be charged to consumers for energy supplies, for example by way of post-privatisation regulatory processes, and as a result of competitive pressures following deregulation. A basic prerequisite for a swap contract is a reliable index of current prices of the relevant product, as a reference point for the application from time to time of the swap contract. Such an index also presupposes a standard specification so that the product to which the index relates and the product to which the swap contract relates can be seen to be identical. A number of indices exist in various markets, but according to the evidence some large participants in the market felt the need for such an index to be developed for other sectors of the coal market. That was the reason for the establishment of the Claimant.

By dint of substantial effort and expenditure, the Claimant has developed the form of agreement already mentioned, and the associated specifications, and has established its NEWC Index to the point where, although there are other indices for Newcastle coal, the Claimant’s index has gained general acceptance in the market, so as to be the only such index which is in general use.

Participants in the market use the Claimant’s index and other facilities provided by the Claimant, including SCoTA, by virtue of one or other of two forms of agreement. Traders use the Global Coal Usage Agreement (GCUA). Brokers enter into a Product Licence Agreement (PLA). The present proceedings turn on the PLA, as signed by the Defendant. But first I need to mention the GCUA.

According to the recitals to the GCUA, the Claimant owns and operates an internet-based system to provide its members with an online market place for trading coal and disseminating information about the coal industry, and the other party to the agreement, the member, wishes to have access to the Claimant’s internet-based system for trading coal, among other purposes. Members pay an annual fee and also transaction fees for any transaction which is carried out using the Claimant’s internet-based system. The Claimant grants to the member a licence to use the website and to trade on the internet-based market facilities on the terms of the agreement. The use of these facilities is limited to members, and members are bound by confidentiality undertakings. However, members are not limited to trading by way of these facilities and the agreement expressly recognises at clause 8.6 that the Claimant’s service may not represent the whole of the market for any relevant product. Mr Silverleaf Q.C. for the Claimant accepted that it was open to members to trade in the relevant products by the use of brokers if they wished.

The evidence shows that the Claimant does not employ brokers. The Claimant’s trading facilities are all to be found on its website. A member may post an offer or a bid for, say, Newcastle coal, in a given quantity for delivery at a given time, naming the price offered or asked (but not the identity of the person posting it), or for a swap contract in relation to such coal. Other members will see the offer or bid on the relevant section of the Claimant’s website, on their own computer screens. If another member wishes to accept the bid or offer, that can be done automatically by clicking on the relevant figure on the screen. The processing of the transaction is then carried out automatically through the computer system. If the other member wishes to bargain about the price, it can post a rival offer or bid, at a different price, to see if the first member will accept that or move towards it.

On the other hand, the Defendant’s evidence suggests that, for a number of particular reasons, traders in the coal market may need, or want, the assistance of brokers to get to an acceptable transaction. The Defendant provides a brokerage service. At one time it did so for the trade of physical coal, but it is no longer active in that market. Now it only deals with swap contracts. It has a team of brokers whose job it is to encourage or help traders to enter into contracts for the swaps they need, in order to reduce their exposure as regards the price payable for physical coal to be delivered in the future. The Defendant’s clients in the relevant market will be members of the Claimant’s system and thus entitled to access to the Claimant’s screens, with the information on them and the trading facilities which they provide. Originally brokers, such as the Defendant, did not themselves have any access to the Claimant’s screens, other than that which is generally available. Now, however, they can, by means of the PLA. The Defendant entered into a PLA on 16 April 2003. The Claimant’s evidence shows that all the major broking firms have entered into such an agreement with it.

Before setting out the relevant terms of the PLA, I will describe briefly the issue which has arisen. The evidence describes how, in the past (and in some other markets still), all trading was done by individual bilateral communication – once upon a time face to face, more recently by telephone and now by phone or by email or text message – known as voice transaction. Today it is possible, in some markets, including that of Newcastle coal, to trade entirely on screen, as I have described at paragraph 8 above. But some trading is done using both facilities: bids and offers are posted on a screen, but rather than accept, or attempt to bargain, on screen the interested party uses a broker as an intermediary to get to a contract. Even in that case, however, the parties may wish the contract to be executed on line, because that secures benefits in terms of administrative savings and enhanced security and reliability, by way of what is called “Straight Through Processing” of the transaction. All relevant details of the transaction will be fed directly to each party’s computer systems and, for a swap transaction, all the necessary material will be there, from which the calculations needed from time to time under the swap can be done automatically.

The Defendant’s team of brokers get involved in hybrid trading such as I have just described. Their client may see a bid or offer posted on a screen, but may wish either to accept it or to negotiate about it off screen. For that purpose, the client may contact one of the Defendant’s brokers. Alternatively they may be brought into contact by the broker’s efforts without having seen a relevant bid or offer on screen. If a contract results from the broker’s intervention, the client will want it to be executed on screen in order to secure the benefit of Straight Through Processing. The Defendant found that, from time to time, it lost the benefit of its broking efforts because clients, having got very close to a deal, would disappear, so to speak, instead of bringing the deal to contract by means of the Defendant. The explanation turned out to be the parties’ need for the contract to be executed on screen, for the sake of Straight Through Processing. The contracting parties would therefore take the benefit of the Defendant’s efforts but conclude the deal through the Claimant’s screens. In this way the Defendant lost the reward for its efforts, since it would only earn commission if it was able to conclude the contract, and the parties would instead pay the Claimant its transaction fee, and that despite the fact that, according to the evidence, the Claimant’s fees are higher than those payable to the Defendant.

This led the Defendant, which already had screen-based facilities for trading in some markets, to add Newcastle coal to its screens. On 28 November 2005 it issued a Press Release announcing “the addition of Newcastle price-swap markets to its coal trading platform”. In practice, to the spreadsheets which it already used for the posting of offers and bids in various markets, including coal, it added a column headed NEWC, in which bids and offers for swaps in relation to Newcastle coal could be posted. At that stage the bids and offers posted could be accepted on screen, just as bids and offers in other columns for swaps relating to coal of other specifications could be. Two days later, following a protest from the Claimant, two changes were made. Instead of NEWC, the heading to the column read Newcastle, and the ability to accept deals on this column at once by clicking on the posted figure was withdrawn. (According to the evidence no transaction had in fact been done in those first two days by way of this column on the screen).

The Claimant contends that what the Defendant is doing, even after those changes, is a breach of the PLA. I must therefore set out the main relevant provisions of that agreement.

I start with the two recitals:

Clause 2, which is headed Grant, is at the heart of the case. I will set out clauses 2.1 and 2.2 in full:

Some other provisions of the PLA have to be considered in relation to the submissions made, so it is convenient to set them out here as well:

The allegation is that the Defendant is in breach of clause 2.2.3. It is therefore necessary to consider whether the Defendant is using a globalCOAL Product, and if so whether what it is doing is using it in an on-screen trading environment. The Defendant denies that it is using any globalCOAL Product, and also that, if it is, it is doing so in an on-screen trading environment.

The Claimant’s contention is that the Defendant is using at least three of its products, though none of them appears on the screen: SCoTA, the specification for Newcastle coal, and the NEWC Index. It uses these, according to the Claimant, because any bid or offer posted in the Newcastle column on the Defendant’s screen is for a contract in relation to coal from Newcastle matching the Claimant’s specification, sold on the terms of SCoTA (though the terms of the swap contract itself will incorporate SCoTA only indirectly) and using as the reference price for the swap the NEWC Index figure on the relevant date. Each of those is said to be within the definition of the globalCOAL Products in the PLA.

The Defendant denies any such use, for two reasons: it says that it does not use them in any sense, and moreover it says that “use” in clause 2.2.3 means the same as “use” in clause 2.1, namely use in a manner which requires a licence under the Claimant’s intellectual property rights because it would otherwise infringe those rights. I will take those two points separately. The judge decided in the Defendant’s favour on the second point, and did not deal with the first.

The Defendant’s Press Release said that swap prices would be posted on the basis of a generic index, and the particular index to be used would be agreed at the time of the transaction, according to what clients wanted. There are other indices besides the Claimant’s, but the evidence is that, for at least the last three years, only the Claimant’s NEWC Index has been used for swap contracts. Accordingly Mr Silverleaf submitted that, in practice, any bid or offer posted on the Newcastle column on the Defendant’s screen would be understood to be by reference to the NEWC Index, in the sense that that Index would be used as the reference price for the proposed swap contract. It would also follow that the coal whose spot price would be the subject matter of the swap contract would be coal conforming with the Claimant’s specification, sold on the terms of SCoTA. Mr Wilson submitted that this did not amount to use by the Defendant, in any sense; it was only use by the Defendant’s client who posts the bid or offer.

Mr Silverleaf’s submission is that the Defendant is using these products, by providing for its clients a column in which to post bids or offers which implicitly use the specification, the Index and SCoTA. It is as if entries in the column were explained by small print which said, in terms: “bids and offers posted in this column are for swaps in relation to coal corresponding to the specification for Newcastle coal set out in Appendix F of SCoTA, sold on the terms of SCoTA, and the NEWC Index is to be used as the reference price for the swap”, or words to that effect. The fact that none of that needs to be spelled out because it would be understood by clients does not mean that the reference is not there, or that the matters referred to implicitly are not “used”, in a general sense.

The second issue on the word “use” is whether use in breach of the clause has to be, so to speak, infringing use for IP purposes. The judge thought it did. He said this, at paragraphs 18-19:

Clause 2.3 to which the judge refers is a warranty as to the Claimant’s title to grant the licence which is contained in clause 2.1. I do not see that this carries the matter any further by itself. Nor does clause 4.1, from which I have quoted above.

Mr Wilson renewed and enlarged on the submission which he made successfully to the judge to this effect. He pointed out that clause 2.1 is the only part of the agreement that grants anything to the Defendant, or another entity in its position, and that what it grants is a licence under IP rights, in consequence of which it is appropriate to define the Defendant, or an equivalent other party, as Licensee. Since the agreement is about IP rights, he submitted, in clause 2.1 the word “use” must refer to something which, but for the licence, the licensee would not be entitled to do, that is to say something which, but for the licence, would infringe one or more of the Claimant’s relevant IP rights, whether by way of breach of copyright, infringement of trade mark, misuse of confidential information, or whatever. There would be no sense in construing clause 2.1 as permitting, or clause 2.2 as excluding from the permission, something which the licensee is entitled to do even without the licence. He also submitted that, if “use” is read in clause 2.2 in a way which is not limited to what would, but for the licence, be an infringing use, clause 8.2, quoted above, would have excessive effects on termination of the agreement, because it would prevent the former licensee from doing things even though its right to do them did not depend on the licence and should therefore survive the termination of the licence.

It is a curious feature of the PLA that it does not refer to the Licensee being given access to some of the confidential parts of the Claimant’s website, but it is common ground that this is one of the practical benefits of the PLA. The evidence on this did not go into a great deal of detail, and a number of points had to be clarified on instructions in the course of the hearing before us. My understanding, as a result of what we were told, is that brokers under the PLA get access to some screens which the general public cannot see, though not to all that members can see and use under the GCUA. The exhibits include some prints of the Claimant’s screens. One, headed Standard Coal: Index Calculator for NEWC Index 16 November 2005, shows, among other things, three index figures: Current Daily Bid/Offer Index (then 35.25), Week to Date Index (then 36.10), and Month to Date Index (then 37.68). Below those figures it also shows “Bids and offers posted today for delivery in index months”, with details of two bids and four offers. As I understand it, members would have access to all that information under the GCUA. Brokers, as licensees under the PLA, would see the first three figures, but not the details of the day’s bids and offers. The Week to Date Index figure is the basic figure for the Claimant’s NEWC Index. It is published for each working day (for example in the Financial Times), and represents a weighted average of the past week’s trading information. The Index only relates to spot trades, that is to say transactions for delivery within 3 months. Thus, the PLA gives brokers access to more up to date information about movements in the spot price (by way of the Current Daily Bid/Offer Index figure) than is otherwise available, but not to the full detail of those movements which is available to a broker’s clients through the GCUA. The interim daily figure may, presumably, be data which, until the official daily index figure is published, is confidential information within the terms of the definitions in the PLA.

If a broker is dealing in physical coal, movements in the Index within the day will be of direct interest to him. According to the Defendant’s evidence, the current level of the Index is of less interest where one is dealing in swaps, but it is not said to be entirely irrelevant. It is one factor to be considered in an assessment of what is likely to happen to the spot price in future.

Thus, the PLA gives the broker the right, subject to certain limits, to use the items which are the subject of the Claimant’s IP rights, and in practice the facility to gain access to some information which is or may be of value and which would not otherwise be available. The broker does not make any payment in return for these facilities. Mr Wilson may well be right in his comment that it suited the Claimant that as many as possible of those active in the market should have access to and should use the Claimant’s proprietary material, and above all its Index, even if it got no direct return from such use on the part of brokers. But Mr Silverleaf also made what seems to me to be a telling point, namely that the Claimant’s sources of income include the transaction fees payable when a transaction is effected on its screens, and it has a major interest in seeing that this is not jeopardised. The evidence is that 70% of the Claimant’s income comes from these fees. No doubt this is not all from trades in Newcastle coal, but if the Defendant is entitled to trade in the way that it is doing as regards Newcastle coal, it and other brokers would be entitled, presumably, to do the same for physical coal, whether from Newcastle or other coal to which an index published by the Claimant relates, and for swaps relating to any such coal. If that were to happen, the whole of that 70% of the Claimant’s turnover would be at risk, leaving the Claimant with only what transaction fees it obtained from those who did wish to deal direct, using the Claimant’s screens, and its membership fees under the GCUA.

Mr Silverleaf submitted that the PLA forms part of a system set up by the Claimant for trading in coal generally, and Newcastle coal in particular, and it should be construed in a way which makes commercial sense as part of that system. While Mr Wilson is no doubt correct in saying that the right to use the globalCOAL Products and the trade marks which is granted by clause 2.1 is a right to do things which the Licensee would not otherwise have the right to do, because they would infringe one or other, or more, of the Claimant’s IP rights, Mr Silverleaf submitted that to construe “use” elsewhere in the agreement as meaning exactly the same is an over-literal interpretation, and is not consistent with the commercial sense and purpose of the transaction, and therefore also inconsistent, as a matter of law, with the relevant rules as to the interpretation of contracts, as set out in Investors Compensation Scheme v. West Bromwich Building Society[1998] 1 W.L.R. 896.

Mr Wilson pointed out what, on the face of it, seems to be an oddity, namely that clause 2.2.3 prohibits use of the globalCOAL Products, but it does not prohibit use of the trade marks. So, he said, the Defendant was entitled to use NEWC at the head of the relevant column on its screen, and need not have agreed to remove that and replace it with Newcastle, as it did on 1 December. If the column did have that heading, that would be sufficient to convey all necessary information about the content and purpose of the column, from the Defendant’s point of view. The Claimant could not then complain of anything that the Defendant was doing, whether or not the screen was, or was part of, an on-screen trading environment. It would follow that another broker could do the same for Newcastle coal as regards physical trades on the spot market, or as regards spot or swap trades in relation to other commodities for which the Claimant has established an index. The Claimant would have allowed brokers and their clients to trade not merely by means of traditional voice trading but also with the use of screens, including, if there were the demand, full on-screen trading. It would not have reserved to itself any monopoly at all, in practice. He supported this submission by pointing to other commodity price indices which are not supported by the same sort of contractual protection as the Claimant says exists for the NEWC Index. That point seems to me unhelpful, because we do not know anything about the circumstances relating to those other indices.

I see the force of Mr Wilson’s contention based on matching “use” in clause 2.2 to “use” in clause 2.1, and, for that matter, no doubt, tying other instances of the word “use”, such as in recital B, to the same meaning. It is a neat and conventionally literal reading. It may be right. But its consequences as regards the Claimant’s position seem to be remarkable and surprising, and it does seem to me that it may lead to a result which the parties cannot be taken to have intended. In my judgment there is substance in the Claimant’s contention that “use”, at least in clause 2.2 (and correspondingly in recital B), should be held to refer to any kind of use made by the Licensee of material which is made available to it by the Claimant under the PLA, whether it is use which would potentially infringe IP rights or not, and that the Defendant does make use of the Claimant’s NEWC Index, of SCoTA and of the specification for Newcastle coal (by inference) in presenting the relevant column of its coal screen to its clients for their use. That seems to me to be supported, in particular, by the terms of clause 2.2.1 and the broad terms of the definition of Purpose. What effect that reading would have as regards clause 8.2 is another matter. Mr Silverleaf submitted that it would not prohibit voice trading in Newcastle coal after termination of the PLA.

Thus, the contest seems to be between a literal and a contextual interpretation of the clause, with some clear support in the terms of the document for the literal approach, but quite strong support for the contrary contextual argument from the result which the literal reading would achieve. It seems to me that this is sufficient, by itself, to make it impossible to conclude that the Claimant’s contention, in this respect, is not seriously arguable. Moreover, to test the contextual reading requires evidence as to what the relevant surrounding circumstances were. It may be that there will be no dispute as to these, at trial. But it seems quite likely, in principle, that there is more evidence that would be relevant on this than was before the judge, and this may be confirmed by the extent to which points which appear to be, at least potentially, relevant had to be clarified on instructions during the hearing before us. That seems to me to be another reason why it would be wrong to conclude that the Claimant’s case on “use” is not seriously arguable.

The other point in the case is whether, even if the Claimant is right about “use” in clause 2.2.3, the Defendant’s use of globalCOAL Products was “in an on-screen trading environment”. On this the judge said, at paragraphs 19 to 20:

If this is right then, even if the Claimant’s contention as to the meaning of the word “use” were accepted, the Defendant, and any other broker, could provide its clients with access to screens on which they could post bids or offers, and could see such bids and offers posted by others, and the broker could also, whether through the same or other screens, execute a trade, once agreed off-screen, by clicking on the screen. A broker would be involved, at least to the extent of receiving an instruction from a client to accept a bid or offer so posted, and maybe to a greater extent if negotiation were needed, and to see to the execution of the trade on line. The evidence shows that the Defendant has effected trades in this way in relation to bids or offers posted on its screens since 28 November. This could apply to any aspect of the trading which the Claimant seeks to have done on its screens, and from which it derives a substantial part of its income. At least in relation to trading in coal price swaps, according to the Defendant’s evidence, many trades still require the use of brokers, in practice, so a system whereby the opening stage – the first bid or offer – is made, anonymously but generally to a broker’s clients, on-screen, and the resulting deal is executed on-screen, for the sake of the advantages of Straight Through Processing, and a broker is involved to a greater or lesser extent in between, is not only not inconvenient but might be said to have the best of both worlds.

For the Claimant, Mr Silverleaf submitted that there is nothing in the phrase itself which shows that it is limited to a full on-screen trading facility, such as the Claimant does offer, and there is no adequate reason to construe it as referring only to something substantially identical to that which the Claimant does provide. He also argued that this reading would enable brokers and their client to sidestep the use of the Claimant’s trading system with no difficulty or inconvenience, and thus produce a result as contrary to the commercial sense and purpose of the PLA as the Defendant’s reading of the word “use” in clause 2.2.3 would.

Mr Wilson, to the contrary, pointed out that everyone uses computer screens nowadays, and asked what justification there could be for depriving a broker of the ability to receive communications from its client on line by the client entering data on a screen. Of course the screen facility means that, by doing that, the client is communicating not only with the broker but also, at once, with all the broker’s other clients. He also submitted that the Claimant’s interpretation would, in practice, be very restrictive on brokers because a broker could not only not offer clients a screen on which to post and observe bids and offers, but they could not execute trades on line, so as to get the administrative benefits which clients want. They would thus risk devoting time and effort to setting up a trade, but losing the commission because the clients would go off to the Claimant’s screens to conclude and execute the trade. They could avoid this by using a different index but, as the evidence suggests, their clients want to use the Claimant’s index. If so, Mr Silverleaf submitted, they must accept the constraints of the contracts, and may not use whatever amounts to an on-screen trading environment.

For my part, I cannot accept that it is clear that what the Defendant is providing as regards Newcastle coal swaps does not amount to use in an on-screen trading environment. I do not see why it should make all the difference that the counterparty cannot accept the bid or offer, as the case may be, directly on screen. Trading in this context involves three essential processes: the opening offer (or bid), the acceptance, which may require some negotiation and one or more counter-offers, and the recording of the deal once it has been reached. It seems that the facilities offered by the Defendant to its clients provide for the first and third stages to take place on screen, but not (as regards Newcastle coal) the second. (I say “seems” because, even on this aspect of the case, details of the facts were the subject of clarification on instructions during the hearing before us. There may be other relevant facts which would emerge in evidence if the case goes to trial.)

Given that “on-screen trading environment” is not a defined term, and that it was not suggested in evidence that it is a term of art in the relevant market, and that it seems to me to be a phrase of some (perhaps deliberate) informality or generality, it seems to me that it would be difficult to be sure at a preliminary stage that it has one meaning rather than another. Apart from the link in the clause to the Claimant’s own facilities, which does not seem to me to be a strong indication, there is nothing in the terms of the PLA itself which assists on the point. Accordingly it must be a question which depends on whatever relevant background material there may be, as put in evidence at trial, and on the view taken by the court of the import of that evidence and of the implications of one reading or the other for the commercial effect of the contract. On this point too, I respectfully differ from the judge. I do not say that the judge’s construction of the contract is necessarily wrong. It may be that, at trial, the Defendant will succeed on one or all of these points. But in my judgment the Claimant has a seriously arguable case for an injunction at trial, and its application for an interim injunction ought not to be dismissed on the ground on which the judge dismissed it.

It is therefore necessary to consider the questions arising on the balance of convenience, in accordance with the guidance given in American Cyanamid Co. v. Ethicon Ltd.[1975] AC 396.

As to this the judge said, at paragraph 22:

That is an understandably compressed reference to a point which the judge did not have to decide. Mr Wilson pointed out that what is relevant is only uncompensatable damage, not all damage, but I have no doubt that the judge had that well in mind. Nevertheless Mr Wilson is entitled to submit that, because the judge did not have to decide the point, and did not articulate fully the reasons why he would have held in the Claimant’s favour on this point, the matter is at large before this court, and it is not merely a question of considering whether, if the judge had decided the case on that basis, he would have been wrong in principle so as to allow the appellate court to interfere with the exercise of his discretion.

The first question, therefore, is whether the Claimant would suffer loss which could not adequately be compensated in damages. Mr Silverleaf relied here on clause 6.3, which I have quoted above. Mr Wilson accepted that this is relevant. He said that this shows an acceptance by the Defendant that the Claimant would suffer some uncompensatable loss, but that it does not conclude the question, because the court has to consider what that loss would be, and compare it with what the Defendant would suffer.

Mr Silverleaf’s main point on this was that, if the Defendant can continue doing what it is doing, other brokers will follow it, in order not to be at a trading disadvantage themselves, and that thus a large part (perhaps not all) of the Claimant’s trading income will be in jeopardy. To be deprived of a major part of its income would have serious and unpredictable consequences for the Claimant which is a small company with limited resources of its own. The Claimant’s case was put on this basis in the evidence before the judge, as a matter of prediction. By the time of the hearing before us, according to evidence adduced on the Claimant’s behalf without objection from the Defendant, one other broker had in fact followed the Defendant in the relevant respect.

So far as the Defendant is concerned, Mr Wilson submitted that it would suffer uncompensatable loss in two ways, if it were subjected to an interim injunction which turned out at trial to have been wrongly granted. The first is that it would lose the benefit of trades which would have earned it commission, and although in some cases it would know which trades they were, so that they could be identified, and the loss quantified, in other cases they could not. The former would be cases where the parties, or one of them, started off by approaching the Defendant, but the eventual deal was done through the Claimant. The latter would be cases where, because the potential client knew that the Defendant could not complete the deal on screen, it did not even approach the Defendant. As Mr Silverleaf submitted, it seems to me that this latter category is very speculative. If a client does not want or need to use a broker, it may go straight to the Claimant’s screens: that is the easy option for it. If it does need or want a broker, then it will choose between the Defendant and others in the market. Only in those cases where the client chooses the Defendant, and approaches it for a broking service, can the Defendant plausibly say that there is a trade which, but for the injunction, it would have been able to put through and so earn commission. I accept Mr Silverleaf’s submission that this head of uncompensatable loss is not made out as likely.

The second head is damage to the Defendant’s reputation, which the Defendant’s witness, Mr Newman, its Managing Director, says it was already suffering from the fact of the proceedings, but would suffer much more if an injunction were granted. I can accept that the Defendant is jealous of its reputation and image. I can also accept that those with whom the Defendant’s reputation matters are not lawyers, and would not necessarily understand the significance of a decision by a court that an interim injunction should be granted, to preserve the position pending trial. No doubt those responsible for public and market relations on the Defendant’s behalf would have to do what they could to manage, by explanation and otherwise, the impact of the grant of such an injunction. It is a legitimate concern on the Defendant’s behalf, but I cannot regard it as a very substantial factor to be put in the balance as between the parties.

Mr Wilson submitted that the risk of damage to the Claimant of the kind which it relies on should be discounted, for a number of reasons. If it wins at the end of the day against the Defendant it would, presumably, win against any other broker who follows the Defendant’s example. The Defendant would be good for the damages, and presumably other brokers would as well. The relevant trades would be recorded by the Defendant and other brokers, so that there would be no difficulty in quantifying the transaction fees which the Claimant should have earned from them. Moreover, he submitted, small though the Claimant may be, it was established by, and is owned by, a number of very major undertakings active in various ways in the coal industry who have a substantial interest in maintaining, if possible, the viability of the Claimant’s NEWC Index and its other indices, and would therefore have every incentive to support the Claimant through any cash flow difficulty pending trial, and would not lack the capacity to do so. There is some force in these points, though apart from the identity of the bodies behind the Claimant (which is in the Claimant’s own evidence) it rests on inference. The witness statement which constitutes the Defendant’s evidence is dated 13 December 2005, the day before the hearing, so that, apart from the possibility of an adjournment, the Claimant did not have the opportunity to reply by way of evidence.

Looking at the matter overall, it seems to me that the Claimant is able to show that it would suffer some loss for which damages would not be adequate compensation. The Defendant might also suffer some loss which could not be compensated, because it could not be properly quantified, namely loss consequential on injury to its reputation. The balance of convenience is therefore the test which the court must apply. In my judgment, that balance favours the Claimant for two reasons above all. First, I consider (as the judge did) that the Claimant is more at risk as regards uncompensatable loss. Secondly, the grant of an injunction would preserve the status quo. I do not mean the status quo as it was on the date of the issue of the proceedings on 7 December 2005, but that prevailing before 28 November 2005. The Claimant acted very promptly on hearing of what the Defendant had done. It first got to know of this from the Defendant’s Press Release on 28 November, and from information from a trader on 29 November. Its solicitors wrote a letter before action the same day, and Mr Cunningham, CEO of the Claimant, was in contact with Mr Newman of the Defendant on 29 or at latest 30 November. On 30 November or 1 December the Defendant made changes to its on-screen facilities, to the state in which they now are. Correspondence between solicitors continued after 29 November. In the absence of satisfactory undertakings, as requested, the claim form was issued on 7 December, as was the application notice, returnable on 14 December. The Claimant’s evidence was made on the same day, and the claim form, application notice and evidence were served on 8 December. The application came on for hearing on 14 December, judgment being given the following day. In those circumstances it seems to me that the status quo which ought to be preserved is that before 28 November.

For those reasons it seems to me, differing from the judge, that the Claimant has a seriously arguable case for showing that it would be entitled to an injunction at trial, and that the balance of convenience favours the grant of an interim injunction. I would therefore allow the appeal, and grant an interim injunction until trial or further order in the meantime.

As was envisaged at the time of the hearing before the judge, this is a case which is appropriate for a speedy trial. We were told that the Defendant has sought to build on the advantage gained by the judge’s judgment, by applying for judgment against the Claimant under CPR Part 24. That will fall away. It will therefore be for the parties to take steps in the Chancery Division to obtain an early hearing for a case management conference at which directions can be given, if possible on an agreed basis, with a view to an early trial date.

The dispute between the parties is very unfortunate, but the evidence shows that there is a real dilemma. The Claimant needs to retain its source of income, in order that it can maintain its index for this and other products, and can take further the design and development of products to make other aspects of the coal market more transparent and efficient. On the Defendant’s evidence traders need or want the services of brokers and are not ready, in sufficient numbers, to trade on-screen without the assistance of brokers. If brokers are involved, it is only right that they should earn an appropriate reward. Yet if the fees or commission for a transaction go to brokers, they will not go to the Claimant, which will be deprived of a major part of the income it needs. If the Claimant were to cease to be viable, the Index would cease to be published, from which the Defendant’s clients would also suffer. Desirably, a commercial solution would be found to this problem, although clearly that is not merely a bilateral issue between the Claimant and the Defendant: it would affect other brokers and, indirectly, traders as well. Litigation cannot be relied on to produce a solution from which both sides can consider themselves to have gained. It is to be hoped that the problem can, sooner or later, be solved in a more constructive way than by taking these proceedings to trial and judgment.

I agree.

I also agree.