Breach of an Island Records Order does not require an application for relief from sanctions (Lufthansa Technik AG v Panasonic Avionics Corporation and others)

13 Nov 2023

Dispute Resolution analysis: The Court of Appeal has concluded that a party who is in serious and substantial breach of an Island Records Order for the provision of information permitting a successful litigant to choose between an account of profits and enquiry into damages need not apply for relief from sanctions. The breach is capable of resolution using ordinary case management powers.

Lufthansa Technik AG v Panasonic Avionics Corporation and others [2023] EWCA Civ 1273

What are the practical implications of this case?

This decision of the Court of Appeal highlights the fact that not every breach of a rule, order or practice direction necessarily requires an application for relief from sanctions and the application of the well-known Denton principles (Denton v TH White [2014] EWCA Civ 906). The judgment offers an analytical distinction between the sort of breaches which fall to be determined in accordance with those principles and those which can be determined in accordance with ordinary case management principles. It also focuses on the nature of the evidence required to be disclosed by the unsuccessful party in litigation to the successful party in circumstances where the successful party is entitled to elect between an account of profits and an enquiry into damages. It highlights the balance which must be struck in providing sufficient and sufficiently accurate information to enable to successful party to make an informed decision but without requiring a disproportionately burdensome and expensive exercise to be undertaken.

What was the background?

Lufthansa holds a patent for an invention relating to electric plug sockets on aeroplanes. It succeeded in a claim for breach of that patent by a group of Defendants led by Panasonic. Panasonic was ordered to provide information to enable Lufthansa to elect between an enquiry as to damages and an order for an account of profits. This is known as an “Island Records Order”. On the basis of an apparently comprehensive witness statement served on behalf of Panasonic in October 2020, Lufthansa elected to pursue an account of profit, albeit not until September 2022 due to a pending appeal. The evidence came from a person who was not a director of Panasonic. In December 2022, Panasonic served a further witness statement updating the financial information, this time from a Director and identified various deductions which reduced the relevant profit figure by approximately £30 million. Panasonic offered Lufthansa an opportunity to revisit the election of the account of profit but Lufthansa declined. Lufthansa applied for an order that Panasonic be prevented from relying upon the additional deductions identified in its second witness statement. Panasonic cross applied for a retrospective extension of time for filing evidence so as to render the second witness statement compliant with the original order.

What did the court decide?

At first instance, this was approached on the basis that Panasonic was applying for relief from sanctions. Recorder Douglas Campbell KC (sitting as a Deputy High Court Judge) refused the application for relief from sanctions. On appeal, Panasonic advanced a new case as Ground 1, namely that the application should not be characterised as one of relief from sanctions but as one which was governed by ordinary case management principles. Three alternative Grounds were pursued which fell within the ambit of an application for relief from sanctions. The appeal was allowed on Ground 1. The Court of Appeal noted that the key feature of an application for relief from sanctions was that they arose in circumstances where a sanction is already in place and the party is seeking to disapply it. The information provided for the purpose of an Island Records Order to enable the successful party to elect between the two options for relief needs to be sufficient to enable an informed choice and to give a realistic indication of the entitlement under both options. However, it need not be a particularly length or sophisticated analysis. There was, however, a very substantial difference in the profit figures between the first witness statement produced by Panasonic and the second. This amounted to a serious and substantial breach of the Island Records Order. The appropriate consequence of that breach was that Lufthansa should be given a further 14 day period to make a revised election of remedies in light of the new information provided.

Case details

  • Court: Court of Appeal, Civil Division
  • Judges: Lady Justice King, Lord Justice Newey and Lord Justice Birss
  • Date of judgment: 1 November 2023

Article by Phillip Patterson – first published by LexisNexis


Phillip Patterson

Call: 2008


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