Damages — Contract — Breach — Measure of damages — Defendant breaching agreement — Whether claimants entitled to claim a reasonable payment as a quid pro quo for relaxing its rights under agreement — Whether claimants entitled to claim an account of defendant’s profits caused by breaches

World Wide Fund for Nature (formerly World Wildlife Fund) and another v World Wrestling Federation Entertainment Inc [2006] EWHC 184 (Ch)

Ch D: Peter Smith J: 16 February 2006

Damages in the form of a reasonable payment as quid pro quo was an appropriate remedy for breach of contract where, in the particular circumstances, normal compensatory damages were inadequate.

Peter Smith J so held on the preliminary issue whether the claimants, World Wide Fund for Nature and World Wildlife Fund Inc (“the fund”), were entitled to claim damages in the form of a reasonable payment as a quid pro quo from the defendant, World Wrestling Federation Entertainment Inc (“the federation”), in return for hypothetically relaxing their rights under a settlement agreement relating to the permitted use of the initials “WWF” by the federation. Following various breaches of the agreement by the federation the fund began proceedings for damages to be assessed. Summary judgment and an inquiry into damages was ordered in their favour: see [2002] FSR 32. The fund sought to enforce the inquiry and obtained permission to amend their particulars by including a claim for a reasonable payment and an account of the federation’s profits.

PETER SMITH J said that in the light of Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 and Attorney General v Blake [2001] 1 AC 268 a reasonable payment as quid pro quo was an appropriate remedy for a breach of contract in return for a hypothetical release of the breach. Principles could be derived from the authorities to guide the courts in assessing damages on that basis: (i) the primary basis of assessment was to “consider the sum that would have been arrived at in negotiations between the parties had each been making reasonable use of their respective bargaining positions without holding out for unreasonable amounts”: Amec Developments Ltd v Jury’s Hotel Management (UK) Ltd [2001] 1 EGLR 81, 83; (ii) the outcome of that hypothetical negotiation had to be determined by reference to the parties’ actual knowledge at the time that negotiations would have taken place, which would normally be on the date of breach; (iii) the fact that the innocent party would never have agreed to any such sale or relaxation was irrelevant; (iv) the conduct of the wrongdoer was also irrelevant as to the breach of contract; (v) the decision to make such an award was discretionary, but should be taken when damages would be an inadequate remedy; (vi) the decision whether to make the award on that basis could take into account factors such as delay in intimating the claim and prosecuting the action, if appropriate; (vii) the assessment of those damages involved a number of possibilities and as one was assessing the amount by reference to hypothetical negotiations, each party was entitled as part of that exercise to adduce evidence that it would have deployed in such hypothetical negotiations. Here, the preliminary issue question could not be answered at the present stage but the claimants were entitled to seek in the inquiry damages in the form of a reasonable payment as a quid pro quo on the basis of their claim as presently formulated, which should be determined at the inquiry in accordance with those principles.

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

Reported by: Susanne Rook, barrister.