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    01:18 AM Leong Hoi Seng Victor (Justices’ Law Clerk, Supreme Court of Singapore)

    The Damages That the Common Law Hath Wrought

        

    The damages awarded in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 (“Wrotham Park”) are commonly seen to involve the partial disgorgement of profits, and therefore as the little brother of the damages awarded in Attorney-General v Blake (Jonathan Cape Ltd, third party) [2001] AC 268 (“AG v Blake”), which involve the total disgorgement of profits. In Turf Club Auto Emporium and others v Yeo Boong Hua and others and another appeal [2018] SGCA 44 (“Turf Club”), the Singapore Court of Appeal decoupled the two. In relation to Wrotham Park damages, the court reviewed the English cases, recognised the doctrine as part of Singapore law, and restated its contours comprehensively. In relation to AG v Blake damages, the court observed that the doctrine had its difficulties but left its exact status and scope open. This commentary summarises Turf Club and offers some observations on the Court of Appeal’s approach to both.

    The decision in Turf Club

    In reviewing and restating the contours of Wrotham Park damages, the Court of Appeal considered three aspects of the doctrine: its conceptual basis (whether compensatory or restitutionary), the legal requirements to be met for such damages to be available, and how the quantum of damages is to be assessed. Each of these aspects will be considered in turn.

    (A)      Conceptual basis

    Wrotham Park damages have been awarded either on a compensatory or restitutionary basis. While “compensation” is clear – it aims to put the plaintiff in the position that he would have been in had there been no breach of contract – “restitution” requires some unpacking. As the Court of Appeal explained in Turf Club, it could refer simply to the fact that the plaintiff recovers a sum of money, or it could refer to the legal concept of awarding the plaintiff a sum of money in order to punish or deter the defendant for his breach (at [183]–[187]).

    The English and Singapore positions are aligned in that both jurisdictions reject the legal concept of restitution as the basis for awarding Wrotham Park damages, instead preferring the compensatory basis. The English position, however, was not settled until the recent 2018 UK Supreme Court decision of One Step (Support) Ltd v Morris-Garner [2018] 2 WLR 1353 (“One Step (SC)”). Prior to that decision, the cases took differing views. Early cases like Wrotham Park explained that such damages were meant to compensate the plaintiff for having lost an opportunity to negotiate with the defendant, prior to the breach, for the defendant to pay the plaintiff a sum of money to be released from his obligations. Later cases took a contrary view. Chief among these was Lord Nicholl’s judgment in AG v Blake, where the learned judge explained that Wrotham Park damages were a less extreme version of the damages awarded in AG v Blake and were thus restitutionary. This view was not well taken and was criticised, for instance by Lord Hobhouse in AG v Blake itself, and was eventually not followed in One Step (SC).

    The Singapore position is much clearer. The Court of Appeal in Turf Club explained that Wrotham Park damages are compensatory for the following reasons.

    1. The preponderance of cases took this view (at [202]).
    2. Unlike the compensatory measure, the restitutionary approach does not accord with the purpose of damages as a remedy under contract law, which is to vindicate the plaintiff’s performance interest in the contract (at [196]–[198]).
    3. The restitutionary approach would also not comport with the accepted test for assessing Wrotham Park damages, which is to determine what the parties, in a hypothetical bargain between them, would agree that the defendant pay the plaintiff in exchange for being released from his contractual obligations. This sum, being objectively assessed, may not accord with the defendant’s actual gain, and could thus potentially over- or under- punish or deter the defendant (at [199]–[201]).

    In coming to this conclusion, the court noted that although it rejected the legal concept of restitution as a basis for awarding Wrotham Park damages, these damages could still be considered “restitutionary” in the sense that factually, the plaintiff would still receive a sum of money as damages (at [183]–[187]).

    (B)      Legal requirements

    The compensatory basis for Wrotham Park damages is not merely theoretical. In Singapore, it has assisted the Court of Appeal in Turf Club in fashioning three requirements that must be satisfied before such damages can be awarded.

    First, as a threshold requirement, the plaintiff must show that orthodox compensatory damages and specific relief cannot be awarded in the case (at [217(a)]). This allows the court to protect the plaintiff’s performance interest while still ensuring that Wrotham Park damages remain a last resort used to address a “remedial lacuna”. The plaintiff can satisfy this requirement in two ways:

    1. by demonstrating that while he has a performance interest to vindicate, he has suffered no financial loss; or
    2. by demonstrating that he has suffered financial loss but that this loss is “practically impossible” to prove.

    This requirement somewhat mirrors the position at English law, in that some English cases have also required the plaintiff to face a “practical impossibility” in proving the expectation or reliance loss before Wrotham Park damages became available (see Experience Hendrix LLC v PPX Enterprises Inc [2003] 1 All ER (Comm) 830 at [38] per Mance LJ). It should be noted, however, that the English Court of Appeal’s recent decision in One Step (Support) Ltd v Morris-Garner [2017] QB 1 has muddied the waters. There, Clarke and Longman LJJ appeared to have endorsed a lower threshold – the plaintiff only needs to show “difficulties” in proving such loss (at [122] and [145]). The extent to which this threshold has been lowered in English law is not entirely clear. While the UK Supreme Court in One Step (SC) did not directly comment on these observations, Lord Reed did note that the law was tolerant towards imprecision of proof, in the sense that inherent difficulties in the measurement of loss do not, in themselves, justify the abandonment of an attempt to measure the said loss and that the law would instead attempt to place a reasonable monetary value on the loss (at [40], [73] and [95(8)]).

    Second, the plaintiff must show that there has been in substance a breach of a negative covenant (at [217(b)]) for two reasons.

    1. First, it flows from the threshold requirement. Where a negative covenant is breached, it would be impossible to assess orthodox compensatory damages given that (i) there is no market substitute for a promise not to do something and (ii) the plaintiff is in the exact same position as if the breach had not occurred (at [171]).
    2. Second, it flows from the “hypothetical bargain” test for assessing Wrotham Park damages. Such a test “cannot easily be applied” to positive obligations since the plaintiff has already paid the contractual sum in exchange for the performance of the positive obligation (at [175]).

    The court did, however, leave open the possibility that Wrotham Park damages would be available for truly exceptional breaches of positive obligations (at [228]).

    Third, Wrotham Park damages would not be available if it would be objectively irrational or totally unrealistic to expect the parties to bargain for the release of the covenant, for instance where negotiating a release would be legally impermissible, such as in AG v Blake, where to release the defendant from his obligations would result in state secrets being divulged. The court stressed that this is different from a situation where the parties were actually unwilling to enter into a negotiation, which is irrelevant because the test is objective and not subjective (at [217(c)]).

    While the second and third requirements have not been explicitly stated in the English cases, some English cases have alluded to these as relevant considerations in deciding whether Wrotham Park damages should be awarded. For instance, the English Court of Appeal in Experience Hendrix referred to the fact that a negative obligation was breached on the facts before it as one relevant factor in determining whether to award Wrotham Park damages (at [46]). The same court in WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2008] 1 WLR 445 observed that the House of Lords in AG v Blake had to go further than ordinary Wrotham Park damages because, in that situation, a hypothetical bargain between the Crown and the agent in breach of his confidentiality obligations was “too bizarre to contemplate” (at [46]) – a reference to the third requirement of whether a bargain would be totally unrealistic. In that sense, there is unity in the English and Singapore positions.

    Apart from setting out these requirements, the English and Singapore cases have also been united in holding that certain other requirements, which had been set out in previous cases, should no longer be applicable as they do not accord with the compensatory basis for awarding such damages.

    1. The requirement that an injunction must have been sought, since the plaintiff has a performance interest in the contract even if he seeks only damages (Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd and others [2011] 1 WLR 2370 at [48]). Rather, the availability of an injunction is just one relevant factor in determining whether there is a “remedial lacuna” on the facts of any given case (see Turf Club at [286]).
    2. For the same reasons, the requirement that the plaintiff must have sought to vindicate a proprietary interest (AG v Blake at 283–284 per Lord Nicholls; Turf Club at [239]).
    3. The consideration of whether the defendant had deliberately breached the contract or whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity, because this focuses on the defendant’s profit rather than the plaintiff’s loss (One Step (SC) at [35] and [90]; Turf Club at [240]).

    There remains, however, at least one difference between the English and Singapore positions. In One Step (SC), the court noted that Wrotham Park compensation is only available where the infringement of the plaintiff’s right “can result in an identifiable loss equivalent to the economic value of the right, considered as an asset”, for instance rights in land, intellectual property or confidential information (at [93]). In Turf Club, the Court of Appeal did not agree with this requirement for two reasons.

    1. It is not clear whether economically valuable assets are limited to rights in land, intellectual property or confidential information. If so, then this may be unduly narrow and comes close to reviving the requirement that there must be a proprietary interest (at [279]–[280]).
    2. It is difficult to assess when this test is satisfied. For instance, the breach of non-compete and non-solicitation clauses, which the court in One Step (SC) concluded did not protect any economically valuable assets, could on one view be said to have protected the economically valuable goodwill in the plaintiff’s business (at [281]–[282]).

    Thus, while there is broad concurrence in the requirements for awarding Wrotham Park damages, there exists at least one area of dissonance.

    (C)      Assessment of quantum

    In relation to how the quantum Wrotham Park damages are assessed, the English and Singapore positions are also aligned. The Court of Appeal in Turf Club set out the applicable principles, which it derived from English cases.

    1. The court looks at a hypothetical bargain between the parties for the release of the defendant from his obligation. The damages are the sum that the parties would have agreed that the defendant pay the plaintiff to be released from his obligations.
    2. The hypothetical bargain is assessed objectively. Thus, whether the parties would actually have been willing to negotiate or how they would actually have negotiated is irrelevant. However, the hypothetical parties conducting the bargain must be equipped with the information available to the parties and must consider the commercial context at the time the notional negotiation would have taken place, which is the date of breach (at [244]–[246]).
    3. While the defendant’s actual profit is not determinative, it is relevant in the sense that hypothetical negotiating parties would consider the profit to be made from the release when determining how much the defendant would pay the plaintiff (at [247]).

    The court also expressed the tentative view that causation and remoteness are not relevant because they apply only where the plaintiff seeks to show that damages should be awarded for actual, subjective loss because the said loss is reasonable; whereas Wrotham Park damages are awarded objectively to begin with (at [248]).

     (D)    AG v Blake damages

    Finally, the Court of Appeal in Turf Club offered the following tentative observations in relation to AG v Blake damages.

    1. There are significant objections to recognising the doctrine, most notably that the test for such damages, which requires the plaintiff to show that there is a legitimate interest in preventing the defendant’s profit-making activity, is too uncertain to be practically applied (at [252]).
    2. Even if such damages are to be recognised, they are not plus-sized Wrotham Park damages. Instead, AG v Blake damages are restitutionary and are based on the defendant’s actual profits (at [254]). Such damages can also only be awarded in exceptional cases where it would be in the public interest to punish the defendant for his breach as a matter of policy, for instance the divulging of state secrets in AG v Blake itself (at [255]).

    The “exact status and scope” of such relief was, however, left open.

    Brief observations

    While Turf Club comprehensively clarifies most of the aspects of the doctrine, three brief observations can be made about the approach set out in that case.

    (A)      Unavailability of orthodox relief

    The first observation relates to the threshold requirement that orthodox relief must be unavailable. As the court explains, this requirement ensures that Wrotham Park damages fill only a “remedial lacuna” and are not sought for every breach of contract. This is achieved in practical terms by requiring the plaintiff to show that he has suffered either non-financial loss, or financial loss the quantification of which is a practical impossibility: see Turf Club at [220] and [225]. What is excluded, therefore, is financial loss that is capable of being quantified. In such situations, the plaintiff bears the burden of adducing precise evidence of his loss, and if he cannot do so, then he fails to discharge the burden and the court will not assist him in doing so.

    Implicit in this distinction is the reasoning in Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and another [2008] 2 SLR(R) 623 (“Robertson Quay”). There, the Court of Appeal observed that “[d]ifferent occasions may call for different evidence with regard to certainty of proof, depending on the circumstances of the case and the nature of the damages claimed” (at [30]). It seems that what the court in Turf Club meant was that since it is typically difficult to adduce precise evidence of non-financial loss due to its very nature, Wrotham Park damages are more readily available where the type of loss is non-financial. In contrast, since certainty of proof is typically expected where the loss is financial in nature, Wrotham Park damages would only be available where it is practically impossible to adduce precise evidence in the circumstances of the particular case.

    In line with this reasoning, it is submitted that rather than look to whether the type of loss is “financial” or “non-financial”, the better approach may be to look at the facts of each case to determine whether certainty of proof is typically expected for the loss claimed, regardless of whether the loss may be characterised as “financial” loss. This is because certain types of financial loss, such as prospective earnings or loss of profits, also cannot always be proved with certainty (see Robertson Quay at [30]). Thus, it may not be useful to draw a bright line between “financial” and “non-financial” loss. Rather, the “remedial lacuna” that can be filled by Wrotham Park damages exists whenever the type of loss claimed is not typically amenable to proof by precise evidence, because in such situations, it would be unfair to ask the plaintiff to adduce precise evidence over and beyond showing some evidence that there has been loss.

    (B)      Breach of negative covenants

    The second observation pertains to the requirement that there must have been a breach of a negative covenant. It seems odd that this is an absolute requirement because, similar to the court’s reasoning in relation to whether an injunction must be sought and whether a proprietary interest must be present, a plaintiff may have a performance interest in the contract even in cases where no negative obligation is breached. Indeed, the court also accepted this, although it qualified the position by stating that it would be a rare case for a breach of a positive obligation to give rise to Wrotham Park damages (at [228]).

    Understandably, the court was reluctant to extend the scope of Wrotham Park damages too far, for fear that this exceptional remedy would become the norm, severely diluting the common law rules relating to damages at contract law. It is submitted that this concern can be dealt with using the threshold requirement, especially if the approach suggested above is taken. Precise proof of the loss suffered by the plaintiff, even if it is financial loss, would not typically be expected where the breach is of a negative obligation because, as the court noted, negative obligations have no market substitute and the plaintiff’s position is no different (see Turf Club at [171]). Wrotham Park damages would thus be readily available.

    Since this requirement is simply a practical manifestation of the threshold requirement, it is suggested that there is no need for it to be a distinct prerequisite.

    (C)      AG v Blake damages

    The final observation pertains to the exact status and scope of AG v Blake damages, which the court appeared to be inclined to recognise on an exceptional “public interest” basis assuming that the legal criteria could ever be made certain.

    It is submitted that in addition to the uncertainty of legal criteria, the conceptual basis of AG v Blake damages simply does not accord with the performance interest analysis used in Turf Club. It will be recalled that the court’s restatement of Wrotham Park principles flows in large part from the starting point that the overarching rationale of contractual remedies for breach is to protect the plaintiff’s performance interest (at [170]). The court utilised this starting point to reject the restitutionary basis for awarding Wrotham Park damages and to fashion its legal requirements, which also eventually affected its statement of the principles pertaining to the assessment of quantum. This starting point sits uncomfortably with AG v Blake damages because:

    1. such damages, even if conceptualised on a “public interest” basis, are still restitutionary, and thus do not vindicate the plaintiff’s performance interest; and
    2. such damages would be assessed by reference to the defendant’s actual gain, which would not necessarily protect the plaintiff’s performance interest.

    In the light of these conceptual difficulties, it is submitted that the recognition of AG v Blake damages, and any similar damages awards based on the reasoning in AG v Blake, should be left to Parliament, in order to preserve the performance interest-centric reasoning employed throughout Turf Club.

     

    Leong Hoi Seng Victor (Justices’ Law Clerk, Supreme Court of Singapore)

     

    * This blog entry may be cited as Victor Yao, “The Damages That the Common Law Hath Wrought”  (Date) (http://www.singaporelawblog.sg/blog/article/223)

    ** The opinions contained in this commentary reflect the authors’ own views and are not to be understood as reflecting the views of the authors’ employers.

    The damages awarded in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 (“Wrotham Park”) are commonly seen to involve the partial disgorgement of profits, and therefore as the little brother of the damages awarded in Attorney-General v Blake (Jonathan Cape Ltd, third party) [2001] AC 268 (“AG v Blake”), which involve the total disgorgement of profits. In Turf Club Auto Emporium and others v Yeo Boong Hua and others and another appeal [2018] SGCA 44 (“Turf Club”), the Singapore Court of Appeal decoupled the two. In relation to Wrotham Park damages, the court reviewed the English cases, recognised the doctrine as part of Singapore law, and restated its contours comprehensively. In relation to AG v Blake damages, the court observed that the doctrine had its difficulties but left its exact status and scope open. This commentary summarises Turf Club and offers some observations on the Court of Appeal’s approach to both.

    The decision in Turf Club

    In reviewing and restating the contours of Wrotham Park damages, the Court of Appeal considered three aspects of the doctrine: its conceptual basis (whether compensatory or restitutionary), the legal requirements to be met for such damages to be available, and how the quantum of damages is to be assessed. Each of these aspects will be considered in turn.

    (A)      Conceptual basis

    Wrotham Park damages have been awarded either on a compensatory or restitutionary basis. While “compensation” is clear – it aims to put the plaintiff in the position that he would have been in had there been no breach of contract – “restitution” requires some unpacking. As the Court of Appeal explained in Turf Club, it could refer simply to the fact that the plaintiff recovers a sum of money, or it could refer to the legal concept of awarding the plaintiff a sum of money in order to punish or deter the defendant for his breach (at [183]–[187]).

    The English and Singapore positions are aligned in that both jurisdictions reject the legal concept of restitution as the basis for awarding Wrotham Park damages, instead preferring the compensatory basis. The English position, however, was not settled until the recent 2018 UK Supreme Court decision of One Step (Support) Ltd v Morris-Garner [2018] 2 WLR 1353 (“One Step (SC)”). Prior to that decision, the cases took differing views. Early cases like Wrotham Park explained that such damages were meant to compensate the plaintiff for having lost an opportunity to negotiate with the defendant, prior to the breach, for the defendant to pay the plaintiff a sum of money to be released from his obligations. Later cases took a contrary view. Chief among these was Lord Nicholl’s judgment in AG v Blake, where the learned judge explained that Wrotham Park damages were a less extreme version of the damages awarded in AG v Blake and were thus restitutionary. This view was not well taken and was criticised, for instance by Lord Hobhouse in AG v Blake itself, and was eventually not followed in One Step (SC).

    The Singapore position is much clearer. The Court of Appeal in Turf Club explained that Wrotham Park damages are compensatory for the following reasons.

    1. The preponderance of cases took this view (at [202]).
    2. Unlike the compensatory measure, the restitutionary approach does not accord with the purpose of damages as a remedy under contract law, which is to vindicate the plaintiff’s performance interest in the contract (at [196]–[198]).
    3. The restitutionary approach would also not comport with the accepted test for assessing Wrotham Park damages, which is to determine what the parties, in a hypothetical bargain between them, would agree that the defendant pay the plaintiff in exchange for being released from his contractual obligations. This sum, being objectively assessed, may not accord with the defendant’s actual gain, and could thus potentially over- or under- punish or deter the defendant (at [199]–[201]).

    In coming to this conclusion, the court noted that although it rejected the legal concept of restitution as a basis for awarding Wrotham Park damages, these damages could still be considered “restitutionary” in the sense that factually, the plaintiff would still receive a sum of money as damages (at [183]–[187]).

    (B)      Legal requirements

    The compensatory basis for Wrotham Park damages is not merely theoretical. In Singapore, it has assisted the Court of Appeal in Turf Club in fashioning three requirements that must be satisfied before such damages can be awarded.

    First, as a threshold requirement, the plaintiff must show that orthodox compensatory damages and specific relief cannot be awarded in the case (at [217(a)]). This allows the court to protect the plaintiff’s performance interest while still ensuring that Wrotham Park damages remain a last resort used to address a “remedial lacuna”. The plaintiff can satisfy this requirement in two ways:

    1. by demonstrating that while he has a performance interest to vindicate, he has suffered no financial loss; or
    2. by demonstrating that he has suffered financial loss but that this loss is “practically impossible” to prove.

    This requirement somewhat mirrors the position at English law, in that some English cases have also required the plaintiff to face a “practical impossibility” in proving the expectation or reliance loss before Wrotham Park damages became available (see Experience Hendrix LLC v PPX Enterprises Inc [2003] 1 All ER (Comm) 830 at [38] per Mance LJ). It should be noted, however, that the English Court of Appeal’s recent decision in One Step (Support) Ltd v Morris-Garner [2017] QB 1 has muddied the waters. There, Clarke and Longman LJJ appeared to have endorsed a lower threshold – the plaintiff only needs to show “difficulties” in proving such loss (at [122] and [145]). The extent to which this threshold has been lowered in English law is not entirely clear. While the UK Supreme Court in One Step (SC) did not directly comment on these observations, Lord Reed did note that the law was tolerant towards imprecision of proof, in the sense that inherent difficulties in the measurement of loss do not, in themselves, justify the abandonment of an attempt to measure the said loss and that the law would instead attempt to place a reasonable monetary value on the loss (at [40], [73] and [95(8)]).

    Second, the plaintiff must show that there has been in substance a breach of a negative covenant (at [217(b)]) for two reasons.

    1. First, it flows from the threshold requirement. Where a negative covenant is breached, it would be impossible to assess orthodox compensatory damages given that (i) there is no market substitute for a promise not to do something and (ii) the plaintiff is in the exact same position as if the breach had not occurred (at [171]).
    2. Second, it flows from the “hypothetical bargain” test for assessing Wrotham Park damages. Such a test “cannot easily be applied” to positive obligations since the plaintiff has already paid the contractual sum in exchange for the performance of the positive obligation (at [175]).

    The court did, however, leave open the possibility that Wrotham Park damages would be available for truly exceptional breaches of positive obligations (at [228]).

    Third, Wrotham Park damages would not be available if it would be objectively irrational or totally unrealistic to expect the parties to bargain for the release of the covenant, for instance where negotiating a release would be legally impermissible, such as in AG v Blake, where to release the defendant from his obligations would result in state secrets being divulged. The court stressed that this is different from a situation where the parties were actually unwilling to enter into a negotiation, which is irrelevant because the test is objective and not subjective (at [217(c)]).

    While the second and third requirements have not been explicitly stated in the English cases, some English cases have alluded to these as relevant considerations in deciding whether Wrotham Park damages should be awarded. For instance, the English Court of Appeal in Experience Hendrix referred to the fact that a negative obligation was breached on the facts before it as one relevant factor in determining whether to award Wrotham Park damages (at [46]). The same court in WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2008] 1 WLR 445 observed that the House of Lords in AG v Blake had to go further than ordinary Wrotham Park damages because, in that situation, a hypothetical bargain between the Crown and the agent in breach of his confidentiality obligations was “too bizarre to contemplate” (at [46]) – a reference to the third requirement of whether a bargain would be totally unrealistic. In that sense, there is unity in the English and Singapore positions.

    Apart from setting out these requirements, the English and Singapore cases have also been united in holding that certain other requirements, which had been set out in previous cases, should no longer be applicable as they do not accord with the compensatory basis for awarding such damages.

    1. The requirement that an injunction must have been sought, since the plaintiff has a performance interest in the contract even if he seeks only damages (Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd and others [2011] 1 WLR 2370 at [48]). Rather, the availability of an injunction is just one relevant factor in determining whether there is a “remedial lacuna” on the facts of any given case (see Turf Club at [286]).
    2. For the same reasons, the requirement that the plaintiff must have sought to vindicate a proprietary interest (AG v Blake at 283–284 per Lord Nicholls; Turf Club at [239]).
    3. The consideration of whether the defendant had deliberately breached the contract or whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity, because this focuses on the defendant’s profit rather than the plaintiff’s loss (One Step (SC) at [35] and [90]; Turf Club at [240]).

    There remains, however, at least one difference between the English and Singapore positions. In One Step (SC), the court noted that Wrotham Park compensation is only available where the infringement of the plaintiff’s right “can result in an identifiable loss equivalent to the economic value of the right, considered as an asset”, for instance rights in land, intellectual property or confidential information (at [93]). In Turf Club, the Court of Appeal did not agree with this requirement for two reasons.

    1. It is not clear whether economically valuable assets are limited to rights in land, intellectual property or confidential information. If so, then this may be unduly narrow and comes close to reviving the requirement that there must be a proprietary interest (at [279]–[280]).
    2. It is difficult to assess when this test is satisfied. For instance, the breach of non-compete and non-solicitation clauses, which the court in One Step (SC) concluded did not protect any economically valuable assets, could on one view be said to have protected the economically valuable goodwill in the plaintiff’s business (at [281]–[282]).

    Thus, while there is broad concurrence in the requirements for awarding Wrotham Park damages, there exists at least one area of dissonance.

    (C)      Assessment of quantum

    In relation to how the quantum Wrotham Park damages are assessed, the English and Singapore positions are also aligned. The Court of Appeal in Turf Club set out the applicable principles, which it derived from English cases.

    1. The court looks at a hypothetical bargain between the parties for the release of the defendant from his obligation. The damages are the sum that the parties would have agreed that the defendant pay the plaintiff to be released from his obligations.
    2. The hypothetical bargain is assessed objectively. Thus, whether the parties would actually have been willing to negotiate or how they would actually have negotiated is irrelevant. However, the hypothetical parties conducting the bargain must be equipped with the information available to the parties and must consider the commercial context at the time the notional negotiation would have taken place, which is the date of breach (at [244]–[246]).
    3. While the defendant’s actual profit is not determinative, it is relevant in the sense that hypothetical negotiating parties would consider the profit to be made from the release when determining how much the defendant would pay the plaintiff (at [247]).

    The court also expressed the tentative view that causation and remoteness are not relevant because they apply only where the plaintiff seeks to show that damages should be awarded for actual, subjective loss because the said loss is reasonable; whereas Wrotham Park damages are awarded objectively to begin with (at [248]).

     (D)    AG v Blake damages

    Finally, the Court of Appeal in Turf Club offered the following tentative observations in relation to AG v Blake damages.

    1. There are significant objections to recognising the doctrine, most notably that the test for such damages, which requires the plaintiff to show that there is a legitimate interest in preventing the defendant’s profit-making activity, is too uncertain to be practically applied (at [252]).
    2. Even if such damages are to be recognised, they are not plus-sized Wrotham Park damages. Instead, AG v Blake damages are restitutionary and are based on the defendant’s actual profits (at [254]). Such damages can also only be awarded in exceptional cases where it would be in the public interest to punish the defendant for his breach as a matter of policy, for instance the divulging of state secrets in AG v Blake itself (at [255]).

    The “exact status and scope” of such relief was, however, left open.

    Brief observations

    While Turf Club comprehensively clarifies most of the aspects of the doctrine, three brief observations can be made about the approach set out in that case.

    (A)      Unavailability of orthodox relief

    The first observation relates to the threshold requirement that orthodox relief must be unavailable. As the court explains, this requirement ensures that Wrotham Park damages fill only a “remedial lacuna” and are not sought for every breach of contract. This is achieved in practical terms by requiring the plaintiff to show that he has suffered either non-financial loss, or financial loss the quantification of which is a practical impossibility: see Turf Club at [220] and [225]. What is excluded, therefore, is financial loss that is capable of being quantified. In such situations, the plaintiff bears the burden of adducing precise evidence of his loss, and if he cannot do so, then he fails to discharge the burden and the court will not assist him in doing so.

    Implicit in this distinction is the reasoning in Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and another [2008] 2 SLR(R) 623 (“Robertson Quay”). There, the Court of Appeal observed that “[d]ifferent occasions may call for different evidence with regard to certainty of proof, depending on the circumstances of the case and the nature of the damages claimed” (at [30]). It seems that what the court in Turf Club meant was that since it is typically difficult to adduce precise evidence of non-financial loss due to its very nature, Wrotham Park damages are more readily available where the type of loss is non-financial. In contrast, since certainty of proof is typically expected where the loss is financial in nature, Wrotham Park damages would only be available where it is practically impossible to adduce precise evidence in the circumstances of the particular case.

    In line with this reasoning, it is submitted that rather than look to whether the type of loss is “financial” or “non-financial”, the better approach may be to look at the facts of each case to determine whether certainty of proof is typically expected for the loss claimed, regardless of whether the loss may be characterised as “financial” loss. This is because certain types of financial loss, such as prospective earnings or loss of profits, also cannot always be proved with certainty (see Robertson Quay at [30]). Thus, it may not be useful to draw a bright line between “financial” and “non-financial” loss. Rather, the “remedial lacuna” that can be filled by Wrotham Park damages exists whenever the type of loss claimed is not typically amenable to proof by precise evidence, because in such situations, it would be unfair to ask the plaintiff to adduce precise evidence over and beyond showing some evidence that there has been loss.

    (B)      Breach of negative covenants

    The second observation pertains to the requirement that there must have been a breach of a negative covenant. It seems odd that this is an absolute requirement because, similar to the court’s reasoning in relation to whether an injunction must be sought and whether a proprietary interest must be present, a plaintiff may have a performance interest in the contract even in cases where no negative obligation is breached. Indeed, the court also accepted this, although it qualified the position by stating that it would be a rare case for a breach of a positive obligation to give rise to Wrotham Park damages (at [228]).

    Understandably, the court was reluctant to extend the scope of Wrotham Park damages too far, for fear that this exceptional remedy would become the norm, severely diluting the common law rules relating to damages at contract law. It is submitted that this concern can be dealt with using the threshold requirement, especially if the approach suggested above is taken. Precise proof of the loss suffered by the plaintiff, even if it is financial loss, would not typically be expected where the breach is of a negative obligation because, as the court noted, negative obligations have no market substitute and the plaintiff’s position is no different (see Turf Club at [171]). Wrotham Park damages would thus be readily available.

    Since this requirement is simply a practical manifestation of the threshold requirement, it is suggested that there is no need for it to be a distinct prerequisite.

    (C)      AG v Blake damages

    The final observation pertains to the exact status and scope of AG v Blake damages, which the court appeared to be inclined to recognise on an exceptional “public interest” basis assuming that the legal criteria could ever be made certain.

    It is submitted that in addition to the uncertainty of legal criteria, the conceptual basis of AG v Blake damages simply does not accord with the performance interest analysis used in Turf Club. It will be recalled that the court’s restatement of Wrotham Park principles flows in large part from the starting point that the overarching rationale of contractual remedies for breach is to protect the plaintiff’s performance interest (at [170]). The court utilised this starting point to reject the restitutionary basis for awarding Wrotham Park damages and to fashion its legal requirements, which also eventually affected its statement of the principles pertaining to the assessment of quantum. This starting point sits uncomfortably with AG v Blake damages because:

    1. such damages, even if conceptualised on a “public interest” basis, are still restitutionary, and thus do not vindicate the plaintiff’s performance interest; and
    2. such damages would be assessed by reference to the defendant’s actual gain, which would not necessarily protect the plaintiff’s performance interest.

    In the light of these conceptual difficulties, it is submitted that the recognition of AG v Blake damages, and any similar damages awards based on the reasoning in AG v Blake, should be left to Parliament, in order to preserve the performance interest-centric reasoning employed throughout Turf Club.

    * This blog entry may be cited as Leong Hoi Seng Victor, “The Damages That the Common Law Hath Wrought”  (8 November 2018) (http://www.singaporelawblog.sg/blog/article/223)

    ** The opinions contained in this commentary reflect the authors’ own views and are not to be understood as reflecting the views of the authors’ employers.

    *** A PDF version of this entry may be downoaded here

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