Chapter 18 Guidance on questions in the book

Remedies III: other non-compensatory or exceptional remedies

Question

Xizzi runs an elite model agency for children and often has to employ chaperones to accompany the children to assignments. Acutely conscious of the importance of child protection and that she has little time to undertake checks herself, Xizzi enters into a two-year contract with Yvonne’s Chaperone Agency, paying the contact price of £50,000 upfront. Although Yvonne’s services are very expensive, Xizzi does not mind paying because she is very impressed with the promises made in return: Yvonne undertakes to conduct exhaustive checks on her chaperones, not just with the criminal records bureau, but with numerous other sources of information, formal and informal, describing the agency’s service as ‘equivalent to MI5 levels of scrutiny’. When the two years have elapsed, however, Xizzi is contacted by Zoot, a disgruntled former employee of Yvonne, who tells her that absolutely no checks are carried out, that the chaperones are all out-of-work actor friends of Yvonne, at least one of whom is a convicted paedophile, and that Yvonne has used the money paid by Xizzi to make hugely profitable investments in the gold market. Xizzi is absolutely horrified to learn this, although fortunately all her child models have been safely chaperoned throughout the two year period, and seeks your advice as to whether she can recover the profits made by Yvonne in order to punish her.

Answer guidance

Remember you are asked to advise Xizzi on the specific question of whether she can recover Yvonne’s profits ‘in order to punish her’. You must first explain to Xizzi that punishment is not part of the remit of the law of contract and that punitive damages are not available in English law for breach of contract. However, there are two possible ways of recovering damages based on Yvonne’s profits made by virtue of the breach of contract. First, consider the possibility of ‘negotiating damages’, a compensatory measure which uses a proportion of the defendant’s profits as a guide to the hypothetical sum the claimant would have accepted to release the defendant from the relevant negative covenant. If they are available, it is irrelevant that Xizzi would not have released Yvonne from her promise at any price (the same applied in Wrotham Park). But remember that although all the child models were safely chaperoned throughout the two year period, that does not mean that Xizzi has suffered no loss from the breach - just as in the City of New Orleans case, she did not get the level of contractual performance she paid for. It is likely that, since One Step, negotiating damages would be unavailable here, though the boundary of the principle is now a little unclear. The second option is to apply the Blake case, which directly awards the claimant a restitutionary remedy, namely an account of all the defendant’s profits. Do you think these facts are exceptional enough to attract a Blake award (maybe a court would be swayed by the pre-contractual description of ‘MI5 levels of scrutiny’)?  Finally, perhaps consider whether a full account of profits for breach of contract can ever be justified – would Blake survive a direct challenge in the Supreme Court?

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