Brainbox Digital Ltd v Backboard Media GmbH & Anor, Court of Appeal - Queen's Bench Division, October 06, 2017, [2017] EWHC 2465 (QB)

Issuing Organization:Queen's Bench Division
Actores:Brainbox Digital Ltd v Backboard Media GmbH & Anor
Resolution Date:October 06, 2017
 
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Neutral Citation Number: [2017] EWHC 2465 (QB)

Case No: HQ17X02604

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 6 October 2017

Before :

MR JOHN HOWELL QC

(Sitting as a Deputy High Court Judge)

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Between :

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Mr Max Mallin QC (instructed by Kemp Little LLP) for the Claimant

Mr David Reade QC and Mr Alexander Robson (instructed by Clintons) for the Defendants

Hearing date: 26 September 2017

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Mr John Howell QC :

  1. This judgment deals with (i) the question whether a proprietary and freezing injunction obtained by the Claimant should be continued and, if so, on what conditions, and (ii) the Defendants' application for security for their costs of this claim.

    BACKGROUND

  2. These matters arise in a claim brought by Brainbox Digital Ltd (``Brainbox'') against Backbord Media GMBH (``Backbord'') and Christian Hansen.

  3. Brainbox is a company that acts as an intermediary between online advertisers and digital publishers.

  4. Backbord is a publisher based in Germany with a number of websites, principally price-comparison websites, on which advertisers place advertisements. It also claims that it ``retargets'' internet users. Mr Hansen is the Head of IT at Backbord.

  5. On April 29th 2015 Brainbox entered into an agreement with eBay Partner Network Inc (``eBay'') under which eBay agreed to pay Brainbox a specified sum for each referral of an internet user whose search had been initiated on another website. The claims concern agreements that Brainbox contends that it had with each of the two defendants, the first with Backbord on April 30th 2015 and the second with Mr Christian Hansen on February 23rd 2016. The Claimant contends that, under these agreements, when an internet user searched a website belonging to the Defendants, they would present the internet user with an advertisement drawn from eBay (via the Claimant's and eBay's application programming interfaces). Brainbox agreed to pay the Defendants 70% of the revenue which it derived from eBay as a result of such referrals. In the event Brainbox says that, by the end of March 2017, it had received some $8.4m from eBay and that it had paid €5.5m to Backbord and €434,00 to Mr Hanson.

  6. In April 2017, however, eBay terminated its agreement with Brainbox by email. In May 2017 it demanded repayment of the amount which it had paid Brainbox as, so it claimed, its payments had been obtained by fraud. Brainbox says that the fraudulent activity involved the Defendants purchasing banner advertising on eBay's website and embedding software in those adverts which had the effect of making it appear to eBay that internet users, who were already browsing on eBay's website, had in fact been directed there from the Defendants' websites. Brainbox says that the software involved had features designed to conceal its existence and to make investigation and discovery harder.

  7. On July 21st 2017 Brainbox entered into an agreement with eBay to settle its claims. This apparently included provision for payment of $1.5m by Brainbox to eBay and obligations on Brainbox to seek to recover the payments which it had made to the Defendants and to share what it recovered with eBay.

  8. In its claims against the Defendants Brainbox seeks damages and/or restitution of the sums it has paid them.

  9. Its claim was issued on July 21st 2017. On the same day Kerr J made a proprietary and freezing injunction against both Defendants (``the injunction'') at a hearing without notice to them. The undertakings given to the Court included the following:

    ``1. If the court later finds that this order has caused loss to the [Defendants], and decides that the [Defendants] should be compensated for that loss, [Brainbox] will comply with any order the court may make.

  10. Within 7 days of the date of this order [Brainbox] will pay the sum of £100,000 into the client account of [its] solicitors Kemp Little LLP [to] be held by Kemp Little LLP pending further order of the Court.''

  11. The order granting the injunction provided for a hearing inter partes on July 31st 2017. On July 31st Kerr J adjourned the return date and ordered that the injunction should continue, with certain variations, until the conclusion of the hearing on the adjourned return date. One variation was to increase the amount to be deposited with Kemp Little LLP by a further £25,000, making a total sum of £125,000 to be held pending further order by the Court.

  12. Particulars of Claim were filed on August 11th 2017. The Defendants' defences are due to be filed, by agreement, on October 11th 2017.

    CONTINUATION OF THE INJUNCTION

  13. There is some agreement between the parties in relation to the injunction.

    i) Brainbox is content that it should cease to apply to Mr Hansen.

    ii) The parties are also agreed, if the injunction is to continue in force, that, upon certain undertakings, Backbord may use its existing cash reserves (found in its Hamburger Sparkasse and Deutsche Bank accounts) and any other monies subsequently received, in the proper performance of its business. The undertakings are that, until trial or further Order, Backbord will (a) continue to provide bank statements on a monthly basis to Brainbox (as envisaged by paragraph 11 of the injunction); (b) continue to inform Brainbox, before spending money, where the money is to come from (as envisaged by paragraph 14(3) of the injunction); and (c) (subject to one possible exception) will not make any payments of dividends to shareholders, or otherwise dispose of monies, save in the ordinary and proper course of business. This agreement and these undertakings I will refer to as ``the agreed adjustment for normal business''. The one possible exception from this third undertaking is that Backbord wishes to pay Mr Borkenhagen, its Managing Director, a salary each month of €10,000. This is opposed by Brainbox and it would appear that the parties wish the court to resolve that dispute.

    iii) Backbord are content in principle that the injunction should continue but only, as Brainbox is no longer a viable business and is being wound down, if there is provided an unlimited undertaking in damages from a third party who does have the means to support one. Brainbox opposes any such condition. It does not suggest that its own undertaking has any substantial value. But it contends that Backbord have not made a sufficient case for further fortification of its cross-undertaking.

    (i) further fortification of the Brainbox's cross-undertaking in damages

    (a) the Defendants' case

  14. On behalf of the Defendants, Mr David Reade QC contended that there is the real risk that Backbord will suffer uncompensated loss if it turns out that the injunction was wrongly granted. Mr Reade relied on the evidence given by Mr Karim Bouzidi, a solicitor who is a partner at Clintons and who has conduct of the matter for the Defendants.

  15. In his first witness statement dated September 18th 2017, Mr Bouzidi stated that Backbord was a fast growing entrepreneurial business, whose activities were substantially disrupted on receipt of the injunction. He stated that it is impossible to know what business opportunities were lost as a result in the immediate aftermath but, at the very least, Backbord was unable to fulfill an agreement to increase traffic to Yieldkit and Awin and as a result suffered an immediate financial loss and a loss of faith in it as a reliable counterparty. Mr Bouzidi also stated that the manner in which the injunction was enforced in Germany effectively froze the Defendants' bank accounts depriving them of the ability to incur expenditure on ordinary business expenses (as had been provided for in the injunction) with the result that the Defendants had to authorise each transaction manually and to ask Brainbox to authorise any payment. Moreover, so Mr Bouzidi said, the uncertain effects of the injunction restraining any use of the proceeds of the payments made to the Defendants by Brainbox and any assets acquired with them meant that Backbord was unwilling to spend its reserves on online advertising campaigns that are the lifeblood of its business. (Although he recognised in his second witness statement that Brainbox had stated that Backbord could spend inter alia €50,000 on campaigns, he stated that it did not have the certainty to which it was entitled pursuant to the injunction.) In the absence of such campaigns Backbord's standing with its trading partners has, so Mr Bouzidi said, been ``severely damaged''. He said that Backbord had estimated that, as a result of the injunction, by September 18th 2017, the ``loss of revenue'' that it had suffered was at least €160,000. He stated that the directors of Backbord were concerned about its ongoing viability unless changes were made. Given that it cannot trade properly it was then thought likely that employees would shortly look for employment elsewhere.

  16. In relation to Mr Hansen, Mr Bouzidi stated that the principal impact of the injunction had been emotional and that his doctor declared that he was unfit to attend work for a period of 6 working days by reason of the resulting stress.

  17. Mr Bouzidi stated that the amount held by Brainbox's solicitors was calculated by reference to the costs likely to be incurred only through to the Return Date and that there is no meaningful undertaking to cover the loss that Backbord has suffered and stands to suffer by reason of the injunctions. Mr Reade submitted that it was not sufficient to say that Backbord cannot particularise its anticipated loss with precision. It is sufficient if (as here) it is realistic to suppose that the existence of the freezing order could cause significant damage to Backbord: see Bloomsbury International Limited and Others v Holyoake and Others [2010] EWHC 1150 (Ch) per Floyd J...

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