Court of Appeal clarifies applicability of Wrotham Park damages in Singapore

Court of Appeal clarifies applicability of Wrotham Park damages in Singapore

In the seminal case of Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2018] SGCA 44 (comprising the appeals in CA/CA 168/2015 (“CA 168”) and CA/CA 171/2015 (“CA 171”)), the Court of Appeal took the opportunity to, inter alia, clarify the scope and applicability of Wrotham Park damages in Singapore. Other issues arising from the case included whether (i) parties were in a relationship of trust and confidence such that fiduciary obligations should arise; and (ii) whether a consent order is capable of imposing fiduciary obligations on the parties concerned.

The 5th Appellant in CA 168 and the Appellant in CA 171 in the proceedings before the Court of Appeal were represented by Mr Irving Choh and Ms Melissa Kor, who managed to argue successfully on the issues above. The appeals were recognised by the Court of Appeal to be highly exceptional in their complexity and length.

Background to Proceedings
Parties had entered into a joint venture for the development of a plot of land in Bukit Timah. Further to the joint venture, two companies were incorporated (the “JV Companies”), with the three Respondents holding 37.5% of the shares in total. The site was leased from the Singapore Land Authority (“SLA”) to the 2nd Appellant, and sub-leases were granted to the JV Companies, which in turn granted sub-sub-leases of the units on site to the ultimate tenants.

Parties soon fell into dispute over various matters. The Respondents alleged minority oppression, and accordingly brought proceedings before the High Court. In the meantime, SLA renewed the head lease to the 2nd Appellant. However, the 2nd Appellant did not disclose this to the Respondents. Neither did the 2nd Appellant renew the sub-leases for the joint venture companies. Parties entered into a consent order, which required, inter alia, that the ‘status quo’ be kept. A bidding process was also recorded under the consent order, which envisaged a buyout of the joint venture companies by the successful bidder.

The High Court primarily found that the 2nd and 3rd Appellants, in failing to disclose the renewal of the head lease and granting sub-leases to the joint venture companies, had repudiatorily breached the express term requiring parties to preserve the status quo. The High Court also found that the 2nd Appellant had breached an implied term that it would not appropriate the benefit of the renewed head lease for itself pending the full performance of the consent order. The High Court therefore set aside the consent order.

The Court of Appeal found that whilst there was a repudiatory breach of the consent order, the appropriate remedy was damages. The issue arose as to whether Wrotham Park damages was an appropriate remedy in the appeals.

Decision of the Court of Appeal
Wrotham Park damages

Wrotham Park damages are damages traditionally awarded for the breach of a restrictive covenant, and were first awarded by the English High Court in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798. Since then, the Singapore courts have had the opportunity to examine the scope and applicability of such a head of damages. Cases include (i) PH Hydraulics & Engineering Pte Ltd v Airtrust (Hong Kong) Ltd [2017] 2 SLR 129; (ii) Clearlab SG Pte Ltd v Ting Chong Chai [2015] 1 SLR 163; and (iii) JES International Holdings Ltd v Yang Shushan [2016] 3 SLR 193.

In the present appeals, the Court of Appeal found that Wrotham Park damages was a recognised head of damage under Singapore law. The Court of Appeal confirmed that that Wrotham Park damages compensatory and not restitutionary in nature, and are objective awards aimed at compensating the claimant for the loss of his performance interest due to the defendant’s breach of contract.
However, the Court of Appeal clarified that there are three requirements to be fulfilled before such damages can be awarded:

  1. Orthodox compensatory remedies must be unavailable to the claimant;
  2. There had to be a breach of a negative covenant;
  3. It must not be irrational or unrealistic to expect that the parties bargain for the release of the covenant, even hypothetically.

Further, in measuring Wrotham Park damages, one should consider the quantum as might have been reasonably demanded as a quid pro quo for relaxing the negative covenant.

Ultimately, the Court of Appeal declined to award Wrotham Park damages in the present appeals. On the facts, the first and third requirements were not satisfied. The Respondents could be awarded orthodox compensatory damages referenced by their shareholding in the joint venture companies, with an uplift of 15% to reflect their true expectation loss. It was also unrealistic to expect that parties enter into a bargaining exercise for the 2nd Appellant to be released from the negative covenant of preserving the status quo.

Fiduciary Duties & Consent Order Issue

The parties were not in a fiduciary relationship vis-à-vis each other. Indeed, the relationship was that of shareholders in joint venture companies. They had met each other by chance, and their relationship was always formal and commercial. Both groups were commercial parties capable of advancing and protecting their own interests.

Finally, a consent order, being only a settlement agreement, could not have imposed fiduciary obligations on the parties as such.

Concluding observations

The Court of Appeal’s judgment has provided clarity as to the scope and operability of Wrotham Park damages in respect of breaches negative covenants in which orthodox compensatory damages are not an adequate remedy. However, the Court of Appeal also left open the possibility of Wrotham Park damages being applicable to breaches of positive covenants. It would be interesting to see how the doctrine of Wrotham Park damages continues to develop in the future.

Citations | High Court

Yeo Boong Hua and others v Turf Club Auto Emporium Pte Ltd and others [2015] 5 SLR 268
Yeo Boong Hua and others v Turf Club Auto Emporium Pte Ltd and others [2019] SGHC 73

Court of Appeal

Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2017] 2 SLR 12
Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2018] 2 SLR 655
Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2019] 1 SLR 214