Want to claim damages for breach of restrictive covenant? Not a problem – as long as you know the law!

 

In 1974 a new type of damages award was developed known as “Wrotham Park Damages” (following the decision in Wrotham Park Estate Company v Parkside Homes Limited).  In that case the Court found that the Defendant had acted in breach of a restrictive covenant.  For damages (compensation) the court looked at what sum the Defendant might have negotiated to pay for being released from the restrictive covenant. The Court decided that it was that sum (the result of a hypothetical negotiation) that the Claimant was entitled to recover.

 

There was a recent attempt to widen the Wrotham Park principle, however the Supreme Court has prevented this and provided clarification.  The Court of Appeal had held that the Claimant could ‘elect’ whether to seek a normal damages award for breach of contract, or to base damages on hypothetical negotiation.  The Supreme Court (highest court in the UK) reversed that decision.  It held that there is no right to chose (or ‘elect’) between the two types of damages.  It stated that in the majority of contract cases, damages based on the identifiable loss is the appropriate measure; and that it is only where there is no identifiable loss and one has to look at what may have been negotiated if the contract had been properly observed (for example to obtain the release of a restrictive covenant) that the Wrotham Park test may be used. 

 

If you have further interest see Morris-Garner and another v One Step (Support) Limited [2018] UK SC 20 or better still contact one of our great litigators for a free, obligation free discussion.