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Morris-Garner v One Step (Support) Ltd: Limiting the Scope of Gain-Based Damages

Document Cited in Related
Vincent
Author
Pages242-247
Published date01 May 2019
DOI10.3366/elr.2019.0552
Date01 May 2019

It is rare even for a Supreme Court case to provide a judgment as consequential as Morris-Garner v One Step (Support) Ltd., finally bringing clarity to issues first raised by Wrotham Park in 1973,1 imposing much-needed structure on the nature and availability of negotiating damages for breach of contract, and confining Attorney General v Blake as a wholly distinct form of award.2 In a field of confused terminology, Lord Reed adopted the nomenclature “negotiating damages” for Wrotham Park damages.3 That term will be used hereafter.

LEGAL BACKGROUND

The orthodox legal position on damages for breach of contract in Scots law is that they are a substitute for performance. Their purpose, where specific implement is not possible, is to put an aggrieved party in the position he or she would have been in had the contract not been broken. Damages therefore look to the pursuer's loss not the defender's gain, with the classic formulation of the measure of compensatory damages found in Robinson v Harman.4 Then in 1973 came the Wrotham Park decision. In this case, a developer had built on land in breach of a restrictive covenant. The court declined to issue an injunction requiring the demolition of the houses so, citing Lord Cairns’ Act (now section 50 of the Senior Courts Act 1981) and notwithstanding the absence of any material loss, Lord Brightman made an award of damages as a “just substitute” in lieu of an injunction, assessed on the basis of a hypothetical release fee amounting to 5% of the profits made by the developer, a sum the court reckoned the developer might reasonably have demanded to have the covenant relaxed.5

A line of cases followed, all concerning either tortious interference with property rights or breach of restrictive covenants where no pecuniary loss occurred, in which damages were awarded in lieu of an injunction and assessed on the Wrotham Park basis.6 This line of cases, however, revealed inconsistency in courts’ understanding of the character of such damages. Thus, in the Court of Appeal case of Surrey County Council v Bredero Homes, Steyn LJ stated that, in his view, Wrotham Park damages were restitutionary in nature,7 an analysis subsequently rejected by Sir Thomas Bingham MR who, in Jaggard v Sawyer, asserted that he could not construe the damages in Wrotham Park as based on anything other than compensatory principles.8 On 27 July 2000, the House of Lords delivered its judgment in Attorney General v Blake and, in the process, rehabilitated the idea that Wrotham Park could be relevant in a breach of contract case. The ruling in this highly unusual case – where an account of profits was awarded to the Crown for breach of contract by the notorious traitor George Blake despite the absence of any financial loss – was by any measure inconsistent with the orthodox legal understanding of damages for breach of contract as compensation for the claimant's loss. In delivering the leading speech, Lord Justice Nicholls stated that awards of this kind could be made in exceptional circumstances and where the plaintiff has a “legitimate interest” in depriving the defendant of his profit.

It was in attempting to show that, in some circumstances, an account of profits was available for breach of contract that Lord Nicholls discussed the Wrotham Park line of cases as instances where the need for a compensatory measure of damages had been...

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