UK: Stop! That’s No Way For A Lady To Perform

In November of last year, in LauritzenCool AB v Lady Navigation Inc [2004] All ER (D) 225 (Nov), Cooke J in the Commercial Court had to consider whether an injunction restraining Lady Navigation ("Owners") from, (1) taking any steps preventing the performance of Time charters entered into with LauritzenCool ("Charterers"); (2) employing the chartered vessels in a manner inconsistent with such charters; or (3) fixing the vessels with a third party within the period of the charters, was tantamount to an order for specific performance which, according to trite law, was not an available remedy.

The two vessels in question had been chartered on long term charters on Cooltime 95 terms and were due to run until 2010. However, in late 2003 Owners were becoming concerned that the pool arrangement under which the vessels were being operated by Charterers was in breach of EC competition provisions and as a result informed Charterers of their intention to withdraw the vessels from service. Consequently Charterers commenced arbitration proceedings to determine, inter alia, the validity of Owners’ claim to withdraw the vessels. The injunctions were sought pending the result of those proceedings.

Owners had challenged the injunctions on the basis of the House of Lords decision in the Scaptrade [1983] 2 AC 694 and the more recent decision in Warren v Mendy [1989] 1 WLR 853. In the Scaptrade, Lord Diplock equated an injunction restraining a shipowner from exercising his contractual right to withdraw a vessel, with an order for specific performance. Cooke J took the view that an order restraining a party from exercising a contractual right was, both in form and substance, different from one restraining an owner from employing the vessel outside the charter. He preferred to rely on earlier authorities (Strathcona, the Georgios C and the Oakworth) where it was clear that an injunction restraining the defendant from employing the vessel outside the time charter does not in itself compel performance of the charter even though in practice, if the defendant is restrained from other gainful employment of the vessel, it is likely that performance under the charter will continue. The key here is that the injunctions would be both negative in form and in substance and there would be no compulsion to perform the charters, only a financial incentive to do so in the absence of any other legitimate available employment.

Owners sought also to rely on the decision in Warren where the Court refused to grant an injunction restraining the breach of a boxer’s management contract due to the contract being one of personal services involving a special skill or talent and to grant an injunction, however framed, would have the effect of compelling performance. Owners contended that the relationship arising from the pooling arrangement was akin to such a contract. Their arguments in this respect were, however, rejected. Cooke J took the view that the relationship between the parties in this case was nothing like those existing in the entertainment or sporting worlds and, notwithstanding the fiduciary obligations owed by one commercial entity to another, the services could not be seen as being "personal" in nature.

Consequently Cooke J held that whilst it was possible an order in the form of (1) above might be impermissible, there was no objection in principle to granting injunctions in the form of (2) & (3). The injunctions sought were not mandatory and the Court was content that the applicable test for the granting of an interim injunction (as refined in Bath & NE Somerset District Council v Mowlem Plc [2004] BLR 153) namely, whether there was a serious issue to be tried and whether damages would be an inadequate remedy, had been satisfied. Furthermore, the balance of convenience favoured the granting of an injunction in the terms of (2) & (3).