上诉法院判决：违约

DAMAGES — Contract — Breach — Restrictive covenant — Claim for injunction to restrain future breaches and damages for past breaches — Injunction granted and inquiry as to damages ordered — Application to add claim for accounts of profits refused — Claim added for damages in form of reasonable payment for hypothetical relaxation of covenant during period of breach — Whether claimant entitled to seek damages on that basis — Whether claim abuse of process

WWF — World Wide Fund for Nature and another v World Wrestling Federation Entertainment Inc [2007] EWCA Civ 286

CA: Chadwick, Maurice Kay and Wilson LJJ: 2 April 2007

On an action for breach of covenant the court could grant injunctions to restrain future breaches and damages for past breaches which could be in the form of a reasonable payment for the hypothetical release of that covenant during the period of the breach. However, if the claimant had sought to add a claim for an account of profits arising from the breach on the basis that such damages would not be claimed, and permission had been refused, it would be an abuse of process for him subsequently to advance a claim for such damages against the same defendant in the same action.

The Court of Appeal so stated allowing an appeal of the defendant, World Wrestling Federation Entertainment Inc, from the judgment of Peter Smith J [2006] EWHC 184 (Ch) dated 16 February 2006 holding, on a preliminary issue, that the claimants, WWF – World Wide Fund for Nature and World Wildlife Fund Inc, were entitled in point of law to seek damages for breach of covenant in the form of a reasonable payment as a quid pro quo for hypothetically relaxing their rights under an agreement between the parties.

In 1994 the parties had entered into an agreement, intended to resolve extensive litigation concerning the use of the initials “WWF”, whereby substantial restrictions had been placed on the use the defendant could make of those initials. In 2001 Jacob J [2002] FSR 32 had given summary judgment for the claimants in an action for breach of that agreement, by way of an injunction to restrain future breach and an inquiry as to damages for past breaches, but had refused permission to add a claim for an account of profits made from those breaches. In 2005 Patten J had allowed the claimants to amend their claim to claim damages in the form of a reasonable payment for the hypothetical release of the covenant during the period when the defendant had been in breach, and had ordered the trial of a preliminary issue as to whether the claimant were entitled in the inquiry as to damages to advance such a claim.

CHADWICK LJ said that on a claim by a covenantee for an injunction and damages against a covenantor who had acted in breach of a restrictive covenant, the court might, in addition to granting an injunction to restrain further breaches, award damages in respect of past breaches notwithstanding that the covenantee could not establish actual financial loss. Such damages might be in an amount assessed as the sum which the court considered it would have been reasonable for the covenantor to pay and the covenantee to accept for the hypothetical release of the covenant. Principle required that the sum be assessed on the basis (i) that the hypothetical release would have taken effect from a date immediately before the covenantor was first in breach and (ii) that the hypothetical release should be for a period ending on the date when the injunction to restrain future breaches took effect. Where a covenantor had acted in breach of a restrictive covenant the court might award damages on the basis identified in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR798 (a reasonable payment for hypothetical release of a restrictive covenant), notwithstanding that there was and could be no claim for an injunction. The power to award damages on that basis did not depend on Lord Cairns’s Act (the Chancery Amendment Act 1858); it existed at common law. Further, the power to award damages on the basis of what it would have been reasonable for the covenantor to pay for a hypothetical release did not depend on the covenantee establishing (as a factual premise) that, absent a release, the covenant could have been enforced by injunction. The Wrotham Park damages now claimed by the claimants were juridically highly similar relief to the account of profits previously sought. It was an abuse of process for them now to pursue a claim for Wrotham Park damages after inviting Jacob J to decide in October 2001 whether to order an account of profits on the basis that there would be no claim for such damages in the proceedings. The course which the claimants had adopted was inconsistent with the underlying interest that there should be finality in litigation and that a party should not be vexed twice in the same matter, and with the need for economy and efficiency in the conduct of litigation, in the interest of the parties and of the public as a whole. The defendant had been entitled to proceed on the basis that, Wrotham Park damages not having been sought in 2001, such a claim was not being pursued in these proceedings. The flaw in the judge’s reasoning lay in his failure to appreciate that the claim to Wrotham Park damages should have been raised before Jacob J in conjunction with the claim to an account of profits.

MAURICE KAY and WILSON LJJ agreed.

Appearances: Christopher Carr QC and Guy Hollingworth (Kirkpatrick & Lockhart Nicholson Graham LLP) for the defendant; Mark Brealey QC and Sarah Lee (Edwin Coe) for the claimants.

Reported by: Ken Mydeen, barrister.