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.
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.
Related cases on remedies
- Addis v Gramophone Co Ltd [1909] AC 488
- Anglia Television Ltd v Reed [1972] 1 QB 60
- Attorney General v Blake [2001] 1 AC 268
- British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673
- Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67, [2016] AC 1172
- Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
- Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
- Farley v Skinner [2001] UKHL 49, [2002] 2 AC 732
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