(i) The Approach of the Court of Appeal
The Court of Appeal recognized that the remedy of an account of profits could be awarded for a breach of contract in two particular contexts.
(1) Skimped Performance
A gain-based remedy is justified where the defendant agreed to provide a particular service for the claimant but, after the claimant had paid the full price for it, the defendant provided a less extensive service.[1] In such circumstances the defendant should be required to disgorge to the claimant the amount saved by breaching the contract. This is because in such a case compensatory damages are an inadequate remedy, since by requesting the particular performance the claimant has shown that he or she has an interest in it being performed, and the benefit obtained by the defendant, namely the amount saved, arises directly from the breach of the contract.
(2) Doing What the Defendant Contracted Not to Do
Where the defendant promised not to do something and then obtained a benefit as a result of doing this, the defendant should disgorge any benefits obtained as a result of the breach. This occurred in Blake itself, since the defendant had disclosed information in his autobiography which he had previously agreed he would not disclose, and obtained benefits, in the form of royalties, as a direct result of this breach of contract. The award of a gain-based remedy in such a case can be justified because the benefit derived directly from the breach of contract, and because the claimant had suffered no loss, so compensatory damages would not adequately protect its interest in the performance of the contract.
- [1] See the facts of City of New Orleans v Fireman’s Charitable Association (1891) 9 Sol 486: failure to providethe stipulated fire-fighting service.
