Back
Image Alt

The Singapore Law Gazette

Wrotham Park Damages Revisited

Perspectives on the Wrotham Park Remedy for Breach of Contract

Wrotham Park damages, otherwise known as “hypothetical bargain”, “negotiating” damages, have, for decades, attracted the sustained curiosity of academics, practitioners and judges alike. Of late, there has been considerable debate over the following questions, which were recently heard on appeal before the Supreme Court of the United Kingdom – should Wrotham Park damages be available generally as a remedy for breach of contract and if so, when should it be available? This article explores some perspectives on these issues.

Introduction

“In assessing damages, whether for a breach of contract or for a tort, the general rule is that the plaintiff recovers the loss he has suffered, no more and no less. This rule is, however, often departed from.” per Denning LJ in Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd.1 [1952] 2 QB 246.

Wrotham Park damages, which are awarded based on a reasonable sum that would be demanded by a claimant as quid pro quo for releasing a defendant from a burdensome covenant, may perhaps be known as one of the most peculiar exceptions to the conventional measure of damages. This article traces the historical origins and subsequent development of the Wrotham Park damages in the United Kingdom and Singapore, and considers the various theories that have been expressed on the juridical basis of such damages. It also goes further to consider the more controversial questions of whether Wrotham Park damages should be available as a general remedy for breach of contract, and the test to be adopted in determining when such damages should be available. Based on a careful analysis of the rationale and theoretical basis behind such damages, together with its practical application, this author argues that Wrotham Park damages should be available generally as a remedy for breach of contract, to be invoked whenever required to ensure a just response to a breach.

A Brief History of the Development of Wrotham Park Damages

The Decision in Wrotham Park Estate

The decision by Justice Brightman in the English decision of Wrotham Park Estate Co Ltd v Parkside Homes Ltd (Wrotham Park Estate)2 [1974] 1 WLR 798.marked the genesis of what has grown to be the widely-known category of Wrotham Park damages.

In Wrotham Park Estate, a landowner sold a piece of land surrounding Wrotham Park Estate in Hertfordshire, England, to a purchaser subject to a restrictive covenant that the new owner would not develop the land without first obtaining the approval of the estate owners of any proposed lay-out plan. The land was subsequently sold to the first defendant who bought it with notice of the covenant. In breach of the restrictive covenant, the first defendant commenced building works on the land for the construction of several residential homes.

The plaintiffs, who were the present estate owners, sought an injunction to restrain further development of the land and for the demolition of any buildings erected in breach of the covenant. By then, the building works had already commenced and some of the new residents had also begun to move into their new homes.

Justice Brightman declined to grant the injunction on the basis that to do so would represent “an unpardonable waste of much needed houses”, and that an order would to demolish the houses would be unnecessary for the purpose of preserving the integrity of the restrictive covenants.3Ibid at 811. In accordance with the Court’s jurisdiction under the Lord Cairns’ Act, he considered that damages should be awarded in lieu of an injunction. However, as the neighbouring construction did not cause any diminution in the value of Wrotham Park Estate, the plaintiffs suffered no pecuniary loss and would only be entitled to an award of nominal damages based on the conventional measure of damages for breach of contract.

Electing to depart from the conventional measure of assessing damages, Justice Brightman was of the view that an award of nominal damages would lead to “a result of questionable fairness … that the defendants should be left in undisturbed possession of the fruits of their wrongdoing.”4Ibid at 812. He held that damages should be assessed in accordance with the sum which would be reasonably demanded by the plaintiffs as quid pro quo for relaxing the covenant. In Wrotham Park Estate, this sum was assessed as one that was equal to five per cent of the defendant’s anticipated profit from the construction of the residential homes.5Ibid at 815–816.

Significant Developments after Wrotham Park Estate

After the seminal decision in Wrotham Park Estate, the doctrine continued to develop in interesting and unexpected ways. Notably, even though the Wrotham Park damages were awarded in lieu of an injunction in Wrotham Park Estate, subsequent authorities have shown that an injunction is not a requirement for such damages to be awarded.

Some two decades after Wrotham Park Estate was decided, came into the spotlight Surrey County Council v Bredero Homes Ltd (Bredero Homes),6 [1993] 1 WLR 1361. which was a case with a similar factual matrix. In Bredero Homes, the plaintiffs brought a claim against the defendant for failing to develop the land in accordance with the planning permission stipulated in the contract, thereby acting in breach of its contractual obligations. Relying on the dicta in Wrotham Park Estate, the plaintiffs claimed damages on the Wrotham Park measure despite not having suffered any financial loss. Unlike the plaintiffs in Wrotham Park Estate, the plaintiffs in Bredero Homes did not apply for an injunction to restrain the defendant at any juncture, hence the jurisdiction of the Lord Cairns’ Act was not invoked.

The Court of Appeal unanimously dismissed the plaintiff’s claim for Wrotham Park damages, and handed down only an award of nominal damages. However, there was significant variation in the ratio decidendi of the case. Lord Justice Dillon held that the applicability of Wrotham Park damages should be restricted to situations falling within the Lord Cairns’ Act, as the decision in Wrotham Park Estate did not establish a common law principle that damages could be awarded for breach of contract even in the absence of financial loss.7Ibid at 1367–1368. Lord Justice Steyn, on the other hand, dismissed the claim on the basis that the Wrotham Park Estate remedy should only be available in respect of interferences with proprietary rights, but not contractual rights. He opined that as Wrotham Park damages were a form of restitutionary remedy, and any extension of its applicability was undesirable as it would “lead to greater uncertainty in the assessment of damages in commercial and consumer disputes”.8Ibid at 1370.

The decision in Bredero Homes was met with heavy criticism by Lord Nicholls of Birkenhead in Attorney General v Blake (Blake).9 [2001] 1 AC 268 He expressed that the decision represented a “sorry reflection on the law”, as it gave rise to the implication that restrictive covenants could in general be breached with impunity.10Ibid at 283. By contrast, Lord Nicholls preferred the approach in Wrotham Park Estate, expressing that the former decision stood as a “solitary beacon” in demonstrating that damages may not always be confined to financial loss in breach of contract cases.11Ibid. Lord Hobhouse, in his dissenting judgment, also concurred with Lord Nicholls on this point.12Ibid at 298. The opinion of Lord Nicholls has therefore left open the question of whether Bredero Homes was effectively overruled by the decision in Blake.

While the proceedings for Blake were taking place, similar issues also surfaced concurrently in another ongoing decision. The estate of Jimi Hendrix had brought an action against a recording company, PPX Enterprise Inc, for acting in breach of a settlement agreement between the parties by granting licenses of Jimi Hendrix recordings to other recording companies. Following the decision in Blake, the appellants in Experience Hendrix LLC v PPX Enterprise Inc (Experience Hendrix)13 [2002] EWHC 1353 (QB)amended their submissions to include a claim against the respondents for damages based on either the Wrotham Park Estate measure or an account of profits.14Ibid at [15]–[16]. Counsel for the appellants had made clear that they did not and could not possibly obtain evidence to show or quantify any financial loss suffered by the appellants as a result of the breaches.

Even though the claim for account of profits was dismissed, the appellants in Experience Hendrix succeeded in obtaining damages on the Wrotham Park Estate measure, being “such sum as might reasonably have been demanded” by the estate of Jimi Hendrix for releasing PPX from their obligation not to grant the licenses to third parties.15Ibid at [45].

The decision in Experience Hendrix is notable as the Court did not apply the decision in Bredero Homes – to award Wrotham Park damages despite the breach being in respect of a contractual right, and in the absence of any jurisdiction under the Lord Cairns’ Act.

The Availability of Wrotham Park Damages for Breach of Contract — Karren-Morris Gardner & Andrea Morris-Gardner v One Step (Support) Ltd16 [2016] EWCA Civ 180 (“One Step”)

The issue of whether Wrotham Park damages should be available as a remedy for breach of contract, and not just for interferences with proprietary rights, arose squarely before the Court of Appeal in One Step.One Step was recently heard on appeal before the United Kingdom Supreme Court and judgment is currently pending. The proceedings in One Step arose from a claim that was brought by the respondent company against the appellants, who were former employees and shareholders of the respondent company, for acting in breach of non-compete and non-solicitation covenants under a shareholders agreement between the parties.

Both the High Court and the Court of Appeal found that the appellants had acted in breach of the non-compete covenant in setting up a rival business to the respondent. The issue before the Court of Appeal was whether the High Court had rightly awarded Wrotham Park damages to the respondent, and what the applicable test should be for such an award in the context of breach of contract.

Markedly different views were held by the appellants and the respondents on the appropriate test to be applied in determining the circumstances under which Wrotham Park damages should be available. The appellants submitted that exceptional circumstances are needed to justify an award of Wrotham Park damages, and they should only be awarded when (a) the injured party was unable to demonstrate financial loss and (b) where it was necessary to do so to avoid manifest injustice.17Ibid at [79].

On other hand, the respondents submitted that Wrotham Park damages should be available where required by the justice of the case, and in that regard two questions need be asked:

  1. whether it would be very difficult in the circumstances for the claimant to demonstrate identifiable financial loss, or where compensation cannot be measured solely by identifiable financial loss; and
  2. whether Wrotham Park damages are a just response to the breach.18Ibid at [85].

The Court held that on the authority of Blake, Experience Hendrix and other recent authorities expressing similar views, it was well-established that Wrotham Park damages could potentially be available in breach of contract claims.19 Other recent decisions include Lord Justice Chadwick in World Wide Fund for Nature v World Wrestling Foundation Inc [2008] 1 WLR 445 and Lord Justice Neuberger in Lunn Poly Ltd v Liverpool & Lancashire Properties Limited [2006] EWCA Civ 430. Dismissing the appellant’s case, it adopted the test submitted by the respondents and expressed its agreement that Wrotham Park damages should be awarded where it would be a just response to the breach and not only in exceptional circumstances.

The Inception of Wrotham Park Damages in Singapore

The Authority of Wrotham Park Estate Affirmed

Wrotham Park Estate was affirmed in Clearlab SG Pte Ltd v Ting Chong Chai and others (Clearlab).20 [2015] 1 SLR 163Clearlab involved a claim by a contacts lens manufacturing company against several ex-employees for wrongfully taking and misusing confidential information they had acquired during the course of their employment. The claimant sought injunctive relief against the defendants to restrain them from further and continued use of the confidential information acquired and Wrotham Park damages as compensation for losses incurred during the period between the breach of confidence and the grant of interim injunction.21Ibid at [334]. The Singapore Court granted an injunction against the ex-employees to restrain them from using and disclosing confidential information belonging to the claimant, but dismissed Clearlab’s claim for Wrotham Park damages on the basis that such damages would only be awarded in lieu of injunctive relief, and not in addition to such relief.22Ibid at [336].

Nevertheless, the Singapore Court recognised the availability of Wrotham Park damages and defined it as “the price which the owner of the confidential information could reasonably have demanded for agreeing to relax the restriction in question”, explaining that such damages would be equivalent to an “outright purchase” by the defendant of the confidential information, and will “belong to the defendants as if they had bought it in an agreement of sale”.23 Ibid at [335].

In JES International Holdings Ltd v Yang Shushan,24 [2016] 3 SLR 193. the Singapore High Court handed down further guidance on the factors that would be relevant to an assessment of the quantum of Wrotham Park damages. When considering the price that a claimant would have agreed to in consideration for releasing the defendant from a burdensome restrictive covenant in a hypothetical negotiation, the Court would have to objectively assess the likely parameters of the negotiation based on “ordinary commercial considerations relevant to each party, having regard to the position each one was placed in”.25Ibid at [212]. The final assessment of quantum should not deviate significantly from the parties’ realistic expectations and standards of commercial acceptability.

The Theoretical Basis of Wrotham Park Damages – A Vexed Question

In PH Hydraulics & Engineering Pte Ltd v Airtrust (Hong Kong) Ltd and another appeal (PH Hydraulics),26 [2017] 2 SLR 129. a decision that discusses the novel issue of whether punitive damages should be available as a remedy for breach of contract, the Singapore Court of Appeal considered whether Wrotham Park damages was a suitable remedial alternative to punitive damages.27Ibid at [82]. The Court expressed that Wrotham Park damages are “largely accepted to be compensatory in nature”, even though they differ significantly from a traditional loss-based measure of damages, as their primary purpose is to protect a claimant’s interest in contractual performance and to provide compensation for any loss suffered as a result of the defendant’s wrongdoing.

These remarks were acknowledged in Marken Limited (Singapore branch) v Scott Ohanesian (Marken),28 [2017] SGHC 227. where the Singapore High Court alluded to the ongoing controversy surrounding the juridical basis of Wrotham Park damages, and in particular, whether such damages were compensatory or restitutionary in nature. In Marken, the High Court dismissed the plaintiff employer’s claim against a former employee for a purported breach of his employment agreement by prematurely terminating his employment. However, the Court went further to consider, by way of obiter dicta, whether Wrotham Park damages could be awarded if the plaintiff had been successful in its claim. In doing so, it adopted the test laid down by Justice Leggatt in Marathon Asset Management LLP v Seddon & another (Marathon Asset),29 [2017] EWHC 300 (Comm).that Wrotham Park damages should be awarded where it was a “just response” to the wrongdoing, and where compensatory damages would be an “inherently inadequate” remedy. As the plaintiff was neither able to prove any loss nor show that compensatory damages would be “inherently inadequate”, the claim for Wrotham Park damages was dismissed.

Importantly, the dicta in Marken on the test for Wrotham Park damages is largely in line with judicial sentiment in One Step and Experience Hendrix.

Compensatory Damages, Restitutionary Damages, or a Bit of Both?

As evident from the authorities reflecting the incremental development of Wrotham Park damages, there has been considerable divergence between judicial and academic opinion on the theoretical basis of such damages. The comments made by the Singapore High Court in Marken merely represent the proverbial tip of the iceberg in the debate. This section considers some of the competing theories that have been the subject of controversy – do Wrotham Park damages belong to the category of compensatory damages, restitutionary damages, neither, or both?

Compensatory Damages, But Not of the Conventional Form

A commonly-held view is that Wrotham Park damages are a form of compensatory damages, although not of the conventional form.30 Apart from the Court in PH Hydraulics, this view has also been expressed by Lord Justice Chadwick in World Wide Fund for Nature v World Wrestling Foundation Inc [2008] 1 WLR 445 (World Wide Fund), Lord Hobhouse in Blake and Sir Thomas Bingham MR in Jaggard v Sawyer [1995] 1 WLR 269. Ordinarily, as compensatory damages seeks to restore the claimant to a position it would be in the absence of the defendant’s breach, it is typically quantified with reference to the actual financial loss that the claimant has suffered from the defendant’s breach. By contrast, damages on the Wrotham Park measure is not derived from the claimant’s financial loss, but is assessed with reference to a reasonable price that the claimant will have agreed to for the release of the defendant from the restrictive covenant in a hypothetical negotiation.

What then, is the “loss” that a remedy of Wrotham Park damages seeks to compensate? This question gives rise to considerable difficulty in cases involving breaches of restrictive covenants, as the claimant may frequently only be able to prove minimal financial loss or worse, be unable to prove any financial loss at all, due to the evidential difficulties that he may face in doing so. The case of Wrotham Park Estate itself is an example of an instance where the claimants were unable to prove any financial loss. In the absence of loss, it would be quite inaccurate to describe Wrotham Park damages as serving any compensatory function for the claimant at all.

Proponents of the compensatory model have argued, in response to this difficulty, that the loss suffered by the claimant may be conceived as the loss of opportunity to negotiate with the defendant for a reasonable price to be paid for the breach. Damages on the Wrotham Park measure would, on this definition, be regarded as compensating the claimant for the monetary value it could have obtained from the defendant for releasing him from a burdensome covenant in the context of the hypothetical negotiations.

A fundamental flaw with this analysis arises from its underlying presumption that the claimant would be willing to negotiate with the defendant in respect of an anticipated breach of the covenant in the first place. This presumption is unlikely to hold true in many cases, especially in instances where the covenant relates to the use of highly sensitive information or where a breach may potentially cause a significant loss of goodwill to the claimant’s business. In his obiter comment in Marathon Asset, Justice Leggatt opined that “such a method makes no sense because in such a context the negotiation is not merely fictional in the sense that it did not actually happen but fictional in the stronger sense that it lacks any verisimilitude”.31 [2016] 3 SLR 193 at [236]. Where the claimant would not have agreed to any such negotiation in the first place, an award of Wrotham Park damages cannot be said to serve a compensatory function as it would be incapable of restoring the claimant to the position he would be in if the breach had not occurred.

Professor Andrew Burrows has also observed that unless we adopt an extremely strained definition of “loss”, it will not be possible to reconcile the conventional understanding of the definition of loss, which is assessed on pecuniary terms, with “loss” that takes the form of a lost bargaining opportunity.32 Andrew Burrows, “Are ‘Damages on the Wrotham Park Basis’ Compensatory, Restitutionary, or Neither?” Djakhongir Saidov and Ralph Cunnington (eds), Current Themes in the Law of Contract Damages (Hart Publishing, 2008) pp 165–185.

An alternative view is that Wrotham Park damages should be classified as a restitutionary remedy.33 Support for this view has been expressed by Lord Steyn in Bredero Homes, (arguably) Lord Nicholls in Blake and Professor Graham Virgo. Based on a restitutionary analysis, the focus of Wrotham Park damages shifts away from the claimant’s loss towards the defendant’s unjustly acquired gain. Notably, Wrotham Park damages have never been awarded to disgorge the defendant of the entirety of its gains arising from the breach, but have instead been typically awarded in the form of a fair proportion of the profits that the defendant has gained from the breach of the covenant.

At first blush this classification appears to be attractive. As a restitutionary-based measure of Wrotham Park damages is assessed with reference to actual information on the defendant’s financial gains, it avoids the superficiality of the compensatory approach, where damages are assessed on the basis of a notional concept of loss.

From a practical standpoint, information on the defendant’s profits is often the main source of financial information the Court will have at hand for the purpose of damages assessment, especially where the claimant has suffered little or no financial loss. This is reflected in the approach that Courts have taken in assessing the measure of damages to be awarded in past cases. In Wrotham Park Estate, damages was assessed as five per cent of the defendant’s profits whereas in Experience Hendrix the defendant was ordered to pay to the claimant a percentage proportion of the advances it had received from the breach.

Based on Professor Graham Virgo’s analysis, a “restitutionary slant” is discernible from the Court’s approach to the assessment of Wrotham Park damages, and it would be inaccurate to continue analysing such damages solely through the compensatory lens.34 Graham Virgo, “Hypothetical Bargains: Compensation or Restitution?” 2006 CLJ 65(2) 272.

However, the conceptual weakness of classifying Wrotham Park damages as a restitutionary remedy stems from its conceptual incompatibility with the traditional definition of restitutionary damages. Generally, a restitutionary claim is conceptualised as an “all-or-nothing claim” – either the defendant’s profits are disgorged in its entirety, or not. A classic example of such a remedy is an account of profits. This stands apart from a Wrotham Park remedy where the claimant is only awarded a fair proportion of the defendant’s gains or profits.35Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086 per Longmore LJ at [148]. Justice Leggatt has similarly observed that while the two different methods of assessment – an account of profits and assessing a fair proportion of the defendant’s profits – may in time be harmonised into a single measure, but “for the time being, they remain doctrinally distinct”.36 [2016] 3 SLR 193 at [236].

This author expresses the view that it is neither conceptually helpful nor practically accurate to describe Wrotham Park damages as falling within either category of compensatory or restitutionary damages. While the conceptual aim of Wrotham Park damages may broadly be described as being compensatory because it seeks to provide a remedy for the loss or injustice that has been suffered by the claimant, the quantum of damages to be awarded are almost invariably assessed with reference to the defendant’s gains.

Ultimately, neither a compensatory or restitutionary account can comprehensively describe the nature of Wrotham Park damages nor sufficiently assist an understanding of the principles guiding the Court’s decision in awarding such damages.37World Wide Fund at [59]. Wrotham Park damages is therefore best conceived as a method of assessment, comprising both compensatory and restitutionary elements, that may be invoked by the Courts where compensatory damages are not an adequate remedy.

Should Wrotham Park Damages be Available as a General Remedy for Breach of Contract?

One Step marks a pivotal point in the development of Wrotham Park damages and compels critical reflection on the following questions – should Wrotham Park damages be available generally as a remedy for breach of contract? If so, what is the appropriate test to be used in determining when such damages should be awarded?

This section expounds on reasons for the author’s submission that Wrotham Park damages should be available generally as a remedy for breach of contract, and that such an award should be made in circumstances where it would represent the “just response” to the breach.

A Wrotham Park Remedy for Breach of Contract?

Throughout the historical development of Wrotham Park damages, it has been expressed time and again that the basis of the Court’s jurisdiction to award Wrotham Park damages stems from the fact that the conventional measure of damages, otherwise known as compensatory damages, is not always an adequate remedy for the defendant’s wrongdoing. This is equally applicable in the context of breach of contract. In particular, there are two kinds of situations where a remedy of Wrotham Park damages would be particularly apposite. The first type of situation arises when it would be especially difficult for the claimant to adduce evidence of the pecuniary losses he has suffered as a result of the defendant’s wrongdoing. This was precisely the struggle faced by the respondents in One Step. It would have been extremely difficult and cumbersome for them to obtain information on whether existing and potential customers would have continued to seek placements with One Step even after the appellants had started their competing business. The second type of situation arises where intangible losses are involved. Intangible losses would encompass losses which are inherently incapable of being quantified in monetary terms, such as the loss of goodwill in a business or any other form of injustice that the claimant has suffered as a result of the breach. An award of compensatory damages is unlikely to provide an adequate remedy to the claimant in these circumstances.

It may be argued in turn that the difficulties relating to proof and quantification in these types of situations do not necessarily preclude compensatory damages from being an adequate remedy for the breach. The Court may overcome these difficulties by “the exercise of a sound imagination and the practice of the broad axe”.38Watson Laidlaw & Co Ltd v Pott, Cassells and Willliamson (1914) 31 RPC 104 per Lord Shaw at 117–118. For instance, the Court was willing to award compensatory damages to a beauty contest finalist for the loss of chance in winning the beauty contest,39Chaplin v Hicks [1911] 2 KB 786. despite the inherent difficulties in quantifying such tangible forms of loss, and also to a homeowner whose swimming pool was not built to the contractually-agreed specifications, despite his inability to demonstrate any pecuniary loss.40Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8.

Be that as it may, it is submitted the Court’s ability to award compensatory damages in these different situations is not a sufficient reason to deny the availability of Wrotham Park damages – the Wrotham Park remedy merely provides the Court with yet another alternative method of assessment that it may utilise in order to best ensure a just response to the breach. The use of alternative remedies in the law of damages is by no means novel, with specific performance and injunctions being common examples.

Another compelling justification for Wrotham Park damages is the need to ensure consistency with other areas of law. Why should the law deny the remedy of Wrotham Park damages to cases involving breach of contract, when the law already allows a similar measure of damages in other cases? Of particular significance is the existence of a remedy that is analogous to Wrotham Park damages in cases involving interferences with proprietary rights (also known as “the user principle”).41Stoke-on-Trent Council v W& J Wass Ltd [1988] 1 WLR 1406 at 1416. In cases involving interferences with proprietary rights, such as trespass to land and wrongful detention of goods, damages are typically awarded to the victim on the basis of a reasonable price that may be demanded from the wrongdoer for the wrongful use of the property, regardless of whether the victim is able to adduce evidence of pecuniary loss. The user principle is also widely applicable in the context of patent infringements, and has since been extended to infringements of other forms of intellectual property rights as well.42 For a brief and succinct history of the user principle, see Kelvin F K Low, “The User Principle – Rashomon Effect or Much Ado about Nothing?” (2016) 28 SAcLJ 984 at [2]–[7]. If a Wrotham Park -based remedy is already well-established in situations involving infringements of proprietary rights, there seems to be no good reason to regard infringements of contractual rights as being less deserving of protection.43 It is arguable that for this reason, Justice Brightman in Wrotham Park Estate chose to rely on authorities applying the user principle to support of his holding that a mere award of nominal damages for breach of the restrictive covenant would result in “questionable fairness” to the claimants. Inconsistencies in the availability of Wrotham Park damages for infringements of proprietary and contractual rights respectively will also result in different economic consequences for claimants in each category, as nominal damages will remain the only alternative remedy. Denying the remedy of Wrotham Park damages to cases involving breach of contract will thereby give rise to doctrinal inconsistencies and undesirable practical consequences, which will in turn engender greater incoherency within the law of damages.44Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086 at [38].

Further, as detailed in the earlier sections of this article, the position that Wrotham Park damages should be available as a remedy for breach of contract is also amply supported by authority.45 See the judgment of Lord Nicholls in Blake, Lord Justice Mance in Experience Hendrix and the decision of the Court of Appeal in PH Hydraulics and the High Court in Marken.

The Applicable Test

The more difficult task that remains is the identification of an appropriate test to determine the circumstances in which a Wrotham Park remedy will be a suitable. Based on the competing tests put forth by the opposing parties in One Step, the question to ask is this: should Wrotham Park damages be available only in exceptional circumstances involving manifest injustice, or, more broadly, whenever it is required by the justice of the case?

Any meaningful contemplation of this question must begin by reexamining the raison d’être for Wrotham Park damages. As a matter of practical justification, Wrotham Park damages have been awarded in order to overcome evidential difficulties in situations where it would have been difficult or impossible for a claimant to prove financial loss. On a normative level, however, it also acts as a response to the instinctive reaction that, where a claimant has suffered some form of injustice as a result of the defendant’s breach, the defendant ought to make some reasonable recompense regardless of whether the claimant would be better off without the breach.46Experience Hendrix per Lord Justice Mance at [26].

To accord with the normative and practical justification for Wrotham Park damages, it is submitted that the Wrotham Park damages should be available whenever it is required to achieve a just response to a breach, and not merely in exceptional circumstances.47 In Marken, the Singapore High Court had also adopted the test laid down by Justice Leggatt in Marathon Asset, which is very similar to the “just response” test advocated by the respondents in One Step. A broad test will be appropriate as it will enable the Court to examine all the circumstances of the case before ascertaining whether Wrotham Park damages will be a suitable remedy. In the course of such an assessment, a whole range of factors may potentially be considered – the nature of the breach, the extent of wrongdoing, the loss or harm suffered by the claimant, the evidential difficulties suffered by the claimant in proving loss, and the defendant’s gain, will have to be considered in the round. The requirement of manifest injustice, on the other hand, does not afford the Court with the flexibility and discretion it requires when undertaking a holistic assessment of these wide-ranging considerations.

The appellants in One Step had vehemently refuted the “just response” test on the basis that it engenders greater uncertainty and unpredictability on the circumstances in which Wrotham Park damages will be awarded. They also raised the concern that if the “just response” test is applied, due to the broad nature of the test, Wrotham Park damages may in time supplant compensatory damages as the primary remedy for breach of contract.

While these concerns may hold some normative force, an examination of the judicial treatment of Wrotham Park damages in practice will reveal that these concerns do not merit significant concern. Since the inception of the Wrotham Park remedy, there has not been any sign of judicial departure from the conventional position that compensatory damages should remain the primary remedy. Where compensatory damages would be an adequate remedy, the Courts have not shied away from declining an award of Wrotham Park damages.48 Example where the Court has declined an award of Wrotham Park damages on the basis that compensatory damages would be adequate can be seen in Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086 and BGC Capital Markets (Switzerland) LLC v Reed [2011] EWHC 2009 (QB). Based on the depth of analysis displayed by Courts in past decisions, commercial parties can be confident that the Courts will undertake a careful assessment of all the circumstances surrounding the breach before deciding on the appropriate remedy. Any concerns regarding the uncertainty of the “just response” approach may also be alleviated by looking to the substantial body of judicial guidance that can be found in existing authorities on the factors that would be relevant to the Court’s evaluation of each case.

Concluding Remarks

In closing, this article has argued that Wrotham Park damages is best understood as a sui generis category of damages, that should be available generally as an alternative remedy in contract, whenever required by the Court to ensure a just response to the alleged breach. This analysis is not only normatively justified as it coheres with the very rationale behind Wrotham Park damages, but is also consistent with the manner in which such damages has been practically applied. This author hopes that these discussions will continue to spur further debate on the challenges that lie ahead in respect of its applicability, such as the proper method of quantifying Wrotham Park damages, the considerations relevant to a hypothetical negotiation, and the interaction between Wrotham Park damages and other alternative remedies in the law of damages.

Endnotes

Endnotes
1 [1952] 2 QB 246.
2 [1974] 1 WLR 798.
3 Ibid at 811.
4 Ibid at 812.
5 Ibid at 815–816.
6 [1993] 1 WLR 1361.
7 Ibid at 1367–1368.
8 Ibid at 1370.
9 [2001] 1 AC 268
10 Ibid at 283.
11 Ibid.
12 Ibid at 298.
13 [2002] EWHC 1353 (QB)
14 Ibid at [15]–[16].
15 Ibid at [45].
16 [2016] EWCA Civ 180
17 Ibid at [79].
18 Ibid at [85].
19 Other recent decisions include Lord Justice Chadwick in World Wide Fund for Nature v World Wrestling Foundation Inc [2008] 1 WLR 445 and Lord Justice Neuberger in Lunn Poly Ltd v Liverpool & Lancashire Properties Limited [2006] EWCA Civ 430.
20 [2015] 1 SLR 163
21 Ibid at [334].
22 Ibid at [336].
23 Ibid at [335].
24 [2016] 3 SLR 193.
25 Ibid at [212].
26 [2017] 2 SLR 129.
27 Ibid at [82].
28 [2017] SGHC 227.
29 [2017] EWHC 300 (Comm).
30 Apart from the Court in PH Hydraulics, this view has also been expressed by Lord Justice Chadwick in World Wide Fund for Nature v World Wrestling Foundation Inc [2008] 1 WLR 445 (World Wide Fund), Lord Hobhouse in Blake and Sir Thomas Bingham MR in Jaggard v Sawyer [1995] 1 WLR 269.
31 [2016] 3 SLR 193 at [236].
32 Andrew Burrows, “Are ‘Damages on the Wrotham Park Basis’ Compensatory, Restitutionary, or Neither?” Djakhongir Saidov and Ralph Cunnington (eds), Current Themes in the Law of Contract Damages (Hart Publishing, 2008) pp 165–185.
33 Support for this view has been expressed by Lord Steyn in Bredero Homes, (arguably) Lord Nicholls in Blake and Professor Graham Virgo.
34 Graham Virgo, “Hypothetical Bargains: Compensation or Restitution?” 2006 CLJ 65(2) 272.
35 Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086 per Longmore LJ at [148].
36 [2016] 3 SLR 193 at [236].
37 World Wide Fund at [59].
38 Watson Laidlaw & Co Ltd v Pott, Cassells and Willliamson (1914) 31 RPC 104 per Lord Shaw at 117–118.
39 Chaplin v Hicks [1911] 2 KB 786.
40 Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8.
41 Stoke-on-Trent Council v W& J Wass Ltd [1988] 1 WLR 1406 at 1416.
42 For a brief and succinct history of the user principle, see Kelvin F K Low, “The User Principle – Rashomon Effect or Much Ado about Nothing?” (2016) 28 SAcLJ 984 at [2]–[7].
43 It is arguable that for this reason, Justice Brightman in Wrotham Park Estate chose to rely on authorities applying the user principle to support of his holding that a mere award of nominal damages for breach of the restrictive covenant would result in “questionable fairness” to the claimants.
44 Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086 at [38].
45 See the judgment of Lord Nicholls in Blake, Lord Justice Mance in Experience Hendrix and the decision of the Court of Appeal in PH Hydraulics and the High Court in Marken.
46 Experience Hendrix per Lord Justice Mance at [26].
47 In Marken, the Singapore High Court had also adopted the test laid down by Justice Leggatt in Marathon Asset, which is very similar to the “just response” test advocated by the respondents in One Step.
48 Example where the Court has declined an award of Wrotham Park damages on the basis that compensatory damages would be adequate can be seen in Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086 and BGC Capital Markets (Switzerland) LLC v Reed [2011] EWHC 2009 (QB).

LVM Law Chambers LLC
LLB (London School of Economics), BCL (Oxon); Advocate & Solicitor, Supreme Court of Singapore
E-mail: [email protected]