27 September 2018

Turf Club Auto Emporium Pte Ltd v Yeo Boong Hua [2018] SGCA 44

Wrotham Park damages” are damages for breach of a restrictive covenant. They are measured not by reference to the claimant’s pecuniary loss, but by the sum of money which the claimant could have demanded from the defendant for relaxing the covenant.

Such damages were first awarded by the English High Court in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 (“Wrotham Park”). That case dealt with damages for the breach of a restrictive covenant over land.

Since then, Wrotham Park damages have been extended to other areas, including restrictive covenants over the use of intellectual property and confidential information. These developments have sparked debate in both Singapore and England on the doctrinal basis of Wrotham Park damages and widened the scope of their potential application.

In Turf Club Auto Emporium Pte Ltd v Yeo Boong Hua (“Turf Club”), the Singapore Court of Appeal clarified the underlying principles of Wrotham Park damages. Notably, the Court of Appeal chose not to follow UK Supreme Court authority in Morris-Garner v One-Step Support [2018] 1 WLR 1353 (“One-Step Support”) out of concern that the UK position could unduly narrow the scope of Wrotham Park damages, and revive a narrow proprietary conception of the doctrine which was expressly rejected in the earlier authorities.

Facts

In Turf Club, the respondents brought a claim against the appellants for breaches of a consent order. In 2001, the appellants (Singapore Agro Agricultural Pte Ltd and related parties (“SAA Group”)) and the respondents started a joint venture and incorporated certain corporate vehicles (“Joint Venture Companies”) to develop a large plot of land in Bukit Timah which the SAA Group had leased from the Government. While the site was being developed, the two groups (the SAA Group and the respondents) fell into dispute. As a result, the SAA Group renewed the head lease over the land (held by the SAA Group) without granting sub-tenancies to the Joint Venture Companies. The SAA Group did not inform the respondents that sub-tenancies had not been granted to the Joint Venture Companies. After the dispute arose, the respondents applied to court and obtained a consent order (“Consent Order”) to settle the dispute, but subsequently brought a claim against the appellants for a breach of the Consent Order. The Court of Appeal found that the Consent Order had been breached.

In this case, the Court of Appeal had to decide, among other things, on what were the appropriate remedies that could be claimed from a repudiatory breach of a consent order, and whether there was scope for the imposition of Wrotham Park damages.

Decision of the Singapore Court of Appeal  

The Court of Appeal held that Wrotham Park damages were not an appropriate remedy on the present facts. However, in doing so, it clarified many principles of Wrotham Park damages, such as its purpose to protect and vindicate the interest of the plaintiff in obtaining the promised performance.  Significantly, the court held that Wrotham Park damages should be recognised as a head of contractual damages in Singapore law, albeit in a limited role and in a specific manner. The Court of Appeal clarified the requirements to be satisfied before Wrotham Park damages are available. The conditions are as follows:

  • the court must be satisfied that orthodox compensatory damages and specific relief are unavailable;
  • there must have been a breach of a negative covenant; or
  • the case must not be one where it would be irrational or totally unrealistic to expect the parties to bargain for the release of the relevant covenant, even on a hypothetical basis.

That orthodox compensatory damages and specific relief are unavailable

The court held that Wrotham Park damages should only be “a limited remedy to address the remedial lacuna which arises in cases where the court is unable to award orthodox compensatory damages or grant specific relief, but where there is still a need to provide the plaintiff with a remedy to protect the plaintiff’s performance interest”. This does not mean that Wrotham Park damages are available whenever orthodox compensatory damages are “difficult” to assess or “inadequate”. Courts invariably face difficulties in the assessment of damages in the face of incomplete evidence. The “remedial lacuna” exists only where the plaintiff may have suffered some financial loss, but it is “practically impossible” on the facts and circumstances of the case to assess compensatory damages based on either expectation loss or reliance loss.

There must be a breach of a negative covenant 

The court held that the “remedial lacuna” was most acute in the context of negative covenants, where demonstrating financial loss may be practically impossible. For positive covenants, the plaintiff can typically obtain substitute performance when a defendant fails to do what he has promised to do, and damages can be measured by the additional cost of the substitute performance which the plaintiff has been made to procure.

The case must not be one where it would be irrational or totally unrealistic to expect the parties to bargain for the release of the relevant covenant, even on a hypothetical basis

This is a practical and principled limitation on the doctrine of Wrotham Park damages. It is practical because the court cannot arbitrarily pluck a figure out of thin air in an attempt to do justice. It is also principled because there would be situations where the hypothetical bargain measure cannot be rationally or realistically applied - for example, an agreement for a “licence fee” to divulge official State secrets.

Conclusion

It is noteworthy that the Singapore Court of Appeal declined to follow the majority decision of the UK Supreme Court in One-Step Support which confined the availability of Wrotham Park damages to only specific categories of circumstances wherein the contractual right breached is considered an economically valuable asset, e.g. land, intellectual property rights and confidential information.

The Court of Appeal explained, inter alia, that the One-Step Support approach could unduly narrow the scope of Wrotham Park damages and revive a narrow proprietary conception of the doctrine which was expressly rejected in the earlier authorities. The court was also concerned with protecting the performance interest of the plaintiff. It was therefore not clear to the court “why it should be any more permissible to expropriate personal rights than it is permissible to expropriate property rights; and the fact that the contractual right breached was of a personal nature does not detract from the need to protect the plaintiff’s performance interest by addressing the remedial lacuna which arises where orthodox contractual remedies are otherwise unavailable”. 

Further information

For more information on this area of law, please click here to read an article titled “Wrotham Park Damages - Principles and Practical Issues” that was contributed by Allen & Gledhill Partner Tay Yong Seng and Senior Associate Ang Ann Liang to the SAL Practitioner, published by the Singapore Academy of Law.

 

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