Morris-Garner v One Step (Support) Ltd

Negotiating damages are available only where the loss is the economic value of the right breached, treated as an asset.

Citation
[2018] UKSC 20, [2019] AC 649
Court
UK Supreme Court
Year
2018
Subject
Contract Law
Topic
Remedies

Facts

One Step provided support services to young people leaving care. Ms Morris-Garner and Mr Gill had worked for the company and held shares in it. When they sold their shares, they agreed to restrictive covenants not to compete with the company or solicit its clients for a period. In breach of those covenants, they set up a competing business, which took business away from One Step. One Step claimed damages measured by the sum it could reasonably have demanded for releasing them from the covenants, rather than by the profits it had lost, which would be harder to prove.

Legal principle

The Supreme Court held that negotiating damages were not available on the facts. Lord Reed said that negotiating damages are compensatory, not a discretionary or restitutionary remedy, and may be awarded where the loss suffered is the economic value of the right that has been breached, considered as an asset, such as rights over land, intellectual property rights or confidential information. In most cases of breach of a restrictive covenant of this kind, the claimant's loss is its lost profits, which must be proved in the ordinary way, even if this is difficult. The case was sent back to the High Court for damages to be assessed on that basis.

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