Fog in the Gateway: Brownlie v Four Seasons Holdings Inc
| Author | Joseph Crampin |
| Published date | 01 March 2019 |
| Date | 01 March 2019 |
| DOI | http://doi.org/10.1111/1468-2230.12402 |
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CASES
Two Steps Forward, One Step Back: One Step (Support)
LTD vMorris-Garner and Another
Caspar Bartscherer∗
One Step is an important decision that deals with the circumstances in which a claimant may
recover damages in contract on the so-called Wrotham Park basis, valued as the amount that
would hypothetically have been negotiated between willing parties to release the defendant
from his obligation. This note argues that, although the Supreme Court was right not to award
damages on this basis in this case, the test laid down by their Lordships for when such damages
are available is unclear and will be difficult to apply.
In One Step vMorris-Garner1(One Step), the Supreme Court recently had
an opportunity to consider awards of damages on the so-called Wrotham Park
basis. The proceedings before the Supreme Court had attracted some academic
interest in advance because of the potentially drastic impact of the decision
of the Court of Appeal2which appeared to have significantly widened the
category of cases in which these types of damages were available. They are
known as Wrotham Park damages after the case of that name,3in which
Brightman J awarded damages on this basis for the first time, but as Lord Reed
suggests in One Step, it is perhaps best to call them negotiating damages to
avoid confusion.
The facts of One Step were fairly unremarkable in themselves. The defen-
dants were in the business of providing support ser vices to young adults leaving
local authority care; these services were provided to several local author ities.
The claimant company was incorporated in 2002 to enable a Mr and
Mrs Costelloe to take a half share in the business. Mrs Costelloe and the
first defendant each owned 50 per cent of the issued share capital in the
claimant and Mr Costelloe and the second defendant were employed in leading
positions by the claimant. The relationship between the defendants and the
Costelloes subsequently deteriorated, and, in 2006, Mrs Costelloe triggered
∗Faculty of Laws, University College London. I am grateful to Charles Mitchell, Harrison Tait,
Aaron Taylor and the anonymous referee for their comments on earlier drafts of this note. All errors,
naturally,remainmyown.
1One Step (Support) Ltd vMorris-Garner and another[2018] UKSC 20, [2018] 2 WLR 1353 (One
Step [2018]).
2One Step (Support) Ltd vMorris-Garner and another [2016] EWCA Civ 180, [2017] QB 1 (One
Step [2016]); on the decision of the Court of Appeal, see, P. S Davies, ‘One Step Forwards:
The Availability of Wrotham Park Damages for Breach of Contract One Step v Mor ris-Garner’
[2017] Lloyd’s Mar itime and Commercial Law Quarterly 201.
3Wrotham Park Estate Co Ltd vParkside Homes Ltd [1974] 1 WLR 798 (Wrotham Park).
C2019 The Author. The Modern Law Review C2019 The Modern Law Review Limited. (2019) 82(2) MLR 367–388
Published by JohnWiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 101 Station Landing, Medford, MA 02155, USA
Two Steps Forward, One Step Back
a deadlock notice, requiring the first defendant to choose between either
buying Mrs Costelloe’s shares in the claimant for the sum of £3.15m or selling
her shares to Mrs Costelloe for that amount. The first defendant opted for the
latter option.
The sale agreement included a provision obligating both defendants not to
use the claimant’s confidential information in any subsequent business ventures
as well as a provision prohibiting them, for a per iod of three years, from
competing with the claimant in the provision of certain services within a
specified area. In 2007, the defendants, in breach of the sale agreement, started
competing using confidential information they had obtained surreptitiously
before the sale. In 2008, solicitors for the claimants wrote to the defendants
threatening to bring proceedings to obtain an injunction, but, in the event,
nothing came of it. Whilst the claimant’s business floundered, the defendants’
new business flourished. In 2010, shortly after their obligation not to compete
had expired, the defendants sold their new business for some £12.8m.
Proceedings were issued in 2012. In 2014, Phillips J, trying a preliminary
matter at first instance, held that the claimant was entitled to elect between
ordinary compensatory damages and negotiating damages.4The Court of
Appeal unanimously upheld this decision. While the concurring judgment
of Longmore LJ attempted to lay down more structured criteria for deter-
mining when negotiating damages would be available in breach of contract
claims, Christopher Clarke LJ, with whose judgment King LJ agreed, merely
stated that the question for the court was ‘what remedy is required to avoid
injustice[.]5In light of this potentially broad test for the availability of negoti-
ating damages, the leading judgment of Lord Reed restricting the availability
of these damages is to be welcomed.
The Supreme Court unanimously allowed the defendants’ appeal, ordering
a hearing on the quantum of damages which were to be calculated on the
conventional basis. However, as Lord Carnwarth observed in his concurring
judgment, there were ‘significant differences’ between Lord Reed’s leading
judgment, given with the concurrence of Lady Hale, Lord Wilson and Lord
Carnwarth, and the minority reasoning of Lord Sumption.6This should be of
little practical significance, since, as Lord Reed somewhat obliquely asserts, his
Lordship’s judgment clearly ‘represents the view of a majority of the court’.7
After a brief survey of the facts, Lord Reed’s judgment reviews the funda-
mental principles underpinning awards of damages in tort, contract, and for
infringements of property rights and intellectual property r ights. Building on
the distinction, drawn by Lord Shaw in Watson, Laidlaw & Co Ltd vPott, Cas-
sels and Williamson8(Watson, Laidlaw), between restoration to the position C
would have been in had D perfor med, and compensation on a ‘user principle’
calculated on the basis of ‘price or hire’,9his Lordship makes it clear that only
4One Step (Support) Ltd vMorris-Garner and another[2014] EWHC 2213 (QB), [2015] IRLR 215;
5One Step [2016] n 2 above at [120].
6One Step [2018] n 1 above at [127].
7ibid at [101].
8Watson, Laidlaw & Co Ltd vPott, Cassels and Williamson 1914 SC (HL) 18.
9One Step [2018] n 1 above at [27].
368 C2019 The Author. The Modern Law Review C2019 The Modern Law Review Limited.
(2019) 82(2) MLR 367–388
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