Wednesday, 19 November 2014

[Essay] Wrotham Park damages - remedy under Lord Cairn's Act



1.0       General Principle: Wrotham Park Damages

Wrotham Park damages, which term derives from the case of Wrotham Park Estate Company Ltd v Parkside Homes Ltd, refers to damages awarded which are intended to compensate the claimant for the court’s decision not to grant relief in the form of an order for specific performance or an injunction.

1.1           Measure

The measure of Wrotham Park damages is by calculating an amount which represents the sum that the claimant might reasonably have demanded from the defendant as compensation for allowing it to breach the relevant contractual provision. The Court will use the ‘hypothetical negotiation’ carried out between the parties at the date of breach to assess this amount. The measure could also be understood by reference to ‘user principle’ which assesses damages on the basis of a reasonable wayleave rent.
In subsequent case of Jaggard v Sawyer, Millett LH explained that the measure is compensatory in that damages are measured by reference to what the P had lost.

            1.2       Facts of the case [write if relevant]

D had erected houses in breach of covenant. Court had jurisdiction to grant mandatory injunction against D and the purchasers but refused to grant an injunction on the basis that it would be unfair to the inhabitants of the unlawfully built building. Since the court had jurisdiction to award a mandatory injunction, damages under Lord Cairns’ Act were available.

2.0       Restitutionary or compensatory?

There is a debate as to whether this form of relief is best characterised as compensatory or restitutionary.

Some argue it is compensatory. Millet LJ in Jaggard v Sawyer was of the view that the Wrotham Park damages measure is compensatory in that damages are measured by reference to what the P had lost where loss is to be seen as the sum which it might reasonably have demanded as the quid prop quo for relaxing the covenant. This measure appears identical to the measured for award of compensatory damages.

2.1       Judgment in Jaggard v Sawyer

Jaggard is a case where damages in lieu were awarded on a hypothetical negotiation basis. It involved a trespass and breach of restrictive covenant. The trial judge held that D might reasonably have paid 6,250.00 pounds for a right of way and release of covenant. The Court of Appeal upheld this decision. 
Millett LJ stated that Lord Cairns Act is not intended to worsen the claimant’s position but to improve it by making damages in lieu available. However his Lordship cautioned that it is not intended to make it harder to obtain an injunction- the claimant remains prima facie entitled to an injunction.

However, this lost bargain analysis has received criticism because the compensatory rationale fails to logically explain how P would have been able to exact a fee if asked to give consent.

Others argue it is restitutionary. The measure in LJP Investments v Howard Chia Investments placed emphasis on the powerful bargaining position in which the P had stood in relation to the defendant. Having failed to reach an agreement with the P, D proceeded to trespass onto P’s land. P sought damages under the Lord Cairns Act. Hodgson J awarded ‘restitutory’ damages which was designed to reflect what the D ought to have paid to use the plaintiff’s land. This reflects the reality that it is the presence of an unjust benefit that justifies this form of relief and that it is irrelevant whether or not the claimant has suffered a loss.

The restitutionary approach has recently been confirmed as open in Australia by Edelman J in Hampton v BHP Billiton (No 2) although his Honour also considered that compensatory approach could be used to calculate the damages. In that case, Edelman J referred to Bunnings Case and stated that the case also involved restitutionary approach to assessment of damages.

Edelman J also stated that the outcome could be same regardless of approach taken. If this is the case, then surely than there is no significance in justifying which measure is the correct measure.

3.0       Justification

3.1       New development in the law of equitable damages

Equitable damages awarded on a restitutionary basis provides an attractive alternative remedy when compensatory damages are inadequate and full equitable relief is unavailable.

3.2       It provides much needed protection to performance interest of contracts

The inadequacy of protection provided by conventional common law and equitable remedies was also clear on facts of Wrotham Park Case. In that case, injunction was rejected and nominal damages would have been awarded at common law. This was clearly an unsatisfactory result.

It effectively addresses the inadequacy of compensatory damages.

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