It has become conventional to assess damages for breach of a contract such as a confidentiality agreement or a restrictive covenant where the assessment of loss will be difficult by reference to the sum that the claimant could hypothetically have received in return for releasing the defendant from the obligation which he failed to perform. This stance was deprecated by the majority: instead, it is merely one tool to assess the economic value of the right which has been breached, considered as an asset.
The facts of the case itself illustrate the change of approach. One Step ran a business. Two directors wanted to leave the company and entered into covenants against competition and solicitation. Despite this, the directors opened a new business and breached those covenants. The judge at first instance ordered an assessment of the hypothetical licence fee that would have been agreed for a release from those covenants on a Wrotham Park basis in the alternative to ordinary compensatory damages. The Supreme Court rejected this approach: where the breach of a contractual obligation has caused the claimant to suffer economic loss, that loss should be measured as accurately or reliably as the nature of the case permits.
Damages assessed by reference to the value of the use wrongfully made of property (‘user damages’) are readily awarded at common law for the invasion or rights to tangible, moveable or immoveable property. Damages can be awarded in lieu of an injunction: one method of assessment is on the basis of the economic value of the right that the court declined to enforce by reference to the amount which the claimant could reasonably have demanded as a quid pro quo. Negotiating damages can be awarded for breach of contract where the loss suffered by the claimant is appropriately measured by reference to the economic value of the right which has been breached, considered as an asset. Common law damages for breach of contract are not a matter of discretion.
In the instant case, the correct object of the assessment would be to measure, as accurately as possible, the financial loss the claimant sustained. A hypothetical fee was not itself the measure of the claimant’s loss.