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&CosMargerine [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, BLACKS 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.

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 defendants 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
plaintiffs 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 plaintiffs 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 plaintiffs
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
defendants 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

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

Section 14 of the Act

Section 16 of the Act; LadliParshadJaiswal v. Kamal Distillery AIR 1963 SC 1279; Afsar Sheikh v.
SulemanBibiAIR 1976 SC 163

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

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.

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. Elmos
stand on non negotiability of any term, and the rejection of the defendants 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

Tamplin Steamship v. Anglo- Mexican petroleum(1916) AC 397

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

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

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

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 courts 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

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 didnt 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 Actios alleged negligence. [ii] The damage is too
remote.
i.

Public humiliation was not caused by Actios alleged negligence.

The tortious damage alleged is that of public humiliation and this damage cannot be
attributed to Actios 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

Proposition, Para 8
WINFIELD AND JOLOWICZ, TORT, 313, (Sweet & Maxwell, South Asian Edition, 18th ed., 2010)

nova

causainterveniens.20It was held by the House of Lords that the plaintiffs 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. McGuires 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

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, BLACKS 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 doesnt
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 didnt 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 doesnt 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 isnt 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 defendants
absence on account of unexpected contingencies. The plaintiffs 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

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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.

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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)

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