We use cookies to improve our site and your experience. By continuing to browse on this website you accept the use of cookies. Read more...

Wrotham Park damages for breach of contract

In Wrotham Park, the claimant was awarded damages following the defendant’s breach of a restrictive covenant by building a housing development.

The claimant had suffered no loss in a traditional sense. However, damages were awarded on the basis of the hypothetical sum the claimant could have charged to release the covenants, calculated as a share of the defendant’s profits.

The basis upon which Wrotham Park damages might be awarded generally in the law of contract is a developing area.  

In Karen Morris-Garner and Andrea Morris-Garner v One Step (Support) Limited [2016] EWCA Civ 180, the C.A. has arguably expanded the circumstances in which such damages can be awarded.

The case concerned the sale of a business with non-compete, non-solicitation and confidentiality clauses which the Defendant had breached for significant gain.

Philips J rejected an outright account of profits as the appropriate remedy: the case was not sufficiently “exceptional”. He allowed the Claimant, however, to elect Wrotham Park damages.

Founding themselves on dicta in earlier cases, the Defendants appealed contending such an award is only available where: (a) there is no identifiable loss as opposed simply to difficulties in computing/ascertaining loss; (b) an award is necessary to avoid “manifest injustice”; and (c) where there are exceptional circumstances. 

The C.A. disagreed. As regards (a): the absence of any identifiable loss was not a pre-requisite. As to (b), the test was simply whether Wrotham Park damages were “a just response”. That was “quintisentially a matter for the [first instance] judge to decide”. Of particular importance was the fact that it would have been very difficult to ascertain the conventional loss, in particular as regards damage to goodwill.  As regards (c), the test was not whether the facts were exceptional but, rather, what justice required. In any event, Clarke LJ considered the facts in One Step were somewhat exceptional.

More generally, Longmore LJ approved the 3 tier test set out by Peter Gibson LJ in Experience Hendrix [2003] EWCA Civ 323 for a Wrotham award, namely: (1) deliberate breach of contract for reward; (2) difficulty in establishing financial loss; and (3) that the Claimant had a legitimate interest in preventing the defendant’s profit making arising from the breach. To this, Longmore LJ added (though not as a pre-requisite) whether the Defendant’s activity had made it doubtful interim injunctive relief could have been obtained.    

The decision should not be taken as carte blanch to claim Wrotham damages, or ignore the need to prove “conventional” loss if possible: the Court emphasised the unusual features of the case, such as the absence of any challenge to the efficacy of the restrictions and the furtive nature of the breaches, and expressed concerns about such damages becoming the norm rather than exception. However, the decision does appear to open this area up somewhat and it will be interesting to chart future developments.   

Richard Hayes / 6th May 2016


Disclaimer

The information and any commentary on the law contained on this web site is provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member of Chambers. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site. No responsibility is accepted for the content or accuracy of linked sites.


Download as PDF


Back to News