ON APPEAL FROM QUEEN’S BENCH DIVISION
Mr Justice Cooke
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
LORD JUSTICE JUDGE
LORD JUSTICE MANCE
and
LORD JUSTICE THOMAS
Between :
Lady Navigation Inc. | Appellant |
- and - | |
Lauritzencool AB & another | Respondent |
(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
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Andrew Popplewell QC and Karen Troy-Davies (instructed by Messrs Watson Farley & Williams) for the Appellant
Steven Berry QC and Simon Bryan (instructed by Messrs Fishers) for the Respondent
Judgment
Lord Justice Mance:
Introduction
This is an appeal by leave of Jacob LJ from the judgment and order of Cooke J dated 12th November 2004 granting the respondent interim injunctive relief against the appellant in the following terms:
“Until the Final Award of the arbitrators in the Arbitration herein as to the alleged entitlement of the Defendant to withdraw the Vessels "LADY RACISCE" and "LADY KORCULA" the Defendant, their managers, servants or agents must not: -
(a) employ the "LADY RACISCE" or the "LADY KORCULA" in a manner inconsistent with the time charters each dated 27th March 1998 between the Claimant and the Defendant in respect of each of the vessels "LADY RACISCE" and "LADY KORCULA"
(b) fix the "LADY RACISCE" or the "LADY KORCULA" with any third party for employment in respect of any period prior to 3rd March 2010 in the case of the "LADY RACISCE" and 4th December 2010 in the case of the "LADY KORCULA"."
Paragraphs (a) and (b) of the judge’s order mirror paragraphs 12(b) and (c) of the relief sought. Paragraph 12(a) of the relief sought was a claim to an injunction in the following terms, which the judge refused because it would or might amount to an order of specific performance:
“(a) take any step preventing the performance of the time charters each dated 27th March 1998 between the Claimant and the Defendant in respect of each of the vessels "LADY RACISCE" and "LADY KORCULA"”.
The basic facts can conveniently be taken from the judge’s summary:
“3. Lauritzen as Charterers manage a "pool" of "reefer" vessels of which the two "Lady" Vessels are part. The pool consists of a number of ships owned both by other related Lauritzen companies and external Owners who agreed to charter their ships to Lauritzen for it to manage on a fleet basis. The hire payable by Lauritzen to these Owners is calculated by reference to an elaborate formula depending upon the total revenue of the fleet which is then apportioned to the owners of pool ships in shares which vary according to the characteristics of each vessel, its days of availability for work in each month, its efficiency and its earning capability relative to the other fleet vessels, which is referred to as its "trade factor". As charterer, Lauritzen controls the trading of each pool vessel, negotiating its engagements, planning for its use in the fleet, scheduling its voyages and dealing with voyage operation, freight collection, cost control, accounting and claims handling. In this context it then informs the owners of the vessels in the pool of the hire due on a monthly basis and adjustments are made against an estimated contribution already paid.
4. For present purposes the detailed terms of the Charters do not matter. Lauritzen is entitled to a profit charge representing 6% of what is described as the "vessel return" which is the effective hire paid. In addition Lauritzen is entitled to an annual fee for management. Lauritzen is entitled to sublet the Vessel and is also entitled to charter in other Vessels for pool purposes. The Charters are on Cooltime 95 terms …..
……
6. In early 2003, there was a change in the beneficial ownership and control of the Liberian company (the Owners) and thus of the Vessels. ….. The Owners then sought information and documentation from Lauritzen about the operation of the pool and the calculation of the revenue paid to the ship owners in it. Allegations were made of implied terms in the Charters and of partnership and fiduciary duties and of mismanagement of the pool and inadequate reward to the Owners. The exchanges on these subjects led to a reference to Arbitration with Lord Millett as sole arbitrator, with a hearing on 27-29 July 2004, resulting in an Award published on 18th October 2004 (the Duties Arbitration).
7. In addition to claiming that Lauritzen had breached various duties owed to the Owners under the Charters and had thus caused them loss, in a series of letters the Owners also informed Lauritzen of their desire to take the two Lady ships out of the pool, notwithstanding the fact that the Charters are due to run until 2010.
i) By letter of 18th June 2004 the Owners solicitors wrote to Lauritzen stating that the pool was an illegal capacity cartel which did not qualify for exemption under the available block exemptions or under the provisions of Article 81 of the EC Treaty. The letter stated that it was not the "Owners' intention" to complain to the European Commission about this anti-competitive activity but sought, in accordance with its interpretation of the decision of the Commission in the East African Conference Report, to give notice of its desire to retake control of its Vessels not later than 31st December 2004.
ii) By a further letter of 16th August 2004, the same solicitors wrote to Lauritzen's solicitors setting out extensive arguments about the position under the European Law of Competition. The letter made the threat that if there was no agreement to allow the Owners to leave the pool compensation free on 15th December 2004, the Owners would need to raise the matter with the European Commission.
iii) Further exchanges followed between the parties in which Lauritzen maintained that the Charters were entirely lawful and that there was no justification for the Owners' stance.
8. In consequence, on 15th September 2004, Lauritzen commenced arbitration proceedings against the Owners to determine the alleged breaches of the EC Treaty, the validity of the Charters and the claim of the Owners to withdraw the Vessels in December 2004 (the Withdrawal Arbitration). Lauritzen sought an undertaking from the Owners that it would not withdraw the Vessels pending the final determination of these issues in the arbitration. On 29th September 2004 the Owners' solicitors appointed their arbitrator in this reference. On the same day, the Owners refused to give the undertaking sought and maintained that the Charters were contracts for services, that specific performance would not be obtainable and that damages would be an adequate remedy.
9. Lauritzen commenced proceedings in these Courts on 7th October 2004 but before the matter came before me, Lord Millett published his award in the Duties Arbitration, holding that Lauritzen was a fiduciary and owed implied duties to the Owners under the Charters. The claim that there was a partnership had been abandoned by the Owners but their other arguments as to the existence of duties were upheld by the Arbitrator.
10. In addition to the Duties Arbitration and the Withdrawal Arbitration, on 19th October 2004, the Owners made a formal complaint to the European Commission concerning the alleged incompatibility of the pool system and the Charters with Article 81 of the EC Treaty. …..
11. It can be seen that stress is placed in this complaint upon both the size of reefer vessels and their age in the context of marketability and competition and that the Lady Vessels are considered highly desirable, being ships which "could exercise considerable competition vis-à-vis the Pool".
The issue – The Scaptrade
The judge then summarised certain arguments of jurisdiction or principle raised before him:
“13. Regardless of the factual circumstances the Owners maintain that, as a matter of historical legal principle, the Court could not make orders in the form set out in paragraphs (a) and (b) above. The reason for this is that such orders are said to be pregnant with an affirmative obligation to perform the charter-party which is tantamount to specific performance and it is trite law that specific performance of a charter-party is not an available remedy. The same objection is not said to apply to (c) above which is framed as the enforcement of an implied negative covenant which does not equate to an order for specific performance inasmuch as the Owners could, in law, if not in practical commercial reality, consistently with such an order keep the Vessels idle without performance of the Charters or performance of any alternative employment.
14. Nonetheless, the Owners maintained that, as the result of Lord Diplock's speech in The Scaptrade[1983] 2 AC 694 at page 700-701, it was not now possible for a Court to make an order in any of the forms sought because in substance, if not in form, it amounted to a decree of specific performance. The critical part of Lord Diplock's speech reads as follows: -
"To grant an injunction restraining the ship owner from exercising his right of withdrawal of the Vessel from the service of the Charterer, though negative in form, is pregnant with an affirmative order to the ship owner to perform the contract; juristically it is indistinguishable from a decree for specific performance of a contract to render services; and in respect of that category of contracts, even in the event of breach, this is a remedy that English Courts have always disclaimed any jurisdiction to grant."
Cooke J did not agree that Lord Diplock’s statement in The Scaptrade precluded the grant of an injunction in the terms of either of sub-paragraphs (b) and (c), in which he granted the same. He referred to a series of cases in which he thought that similar injunctions had been contemplated or granted, from De Mattos v. Gibson (1859) 4 De G and J 276, in which the court cited Lumley v. Wagner (1852) 1 De G. M & G 604, to Lord Strathcona Steamship Co. Ltd. v. Dominion Coal Co. Ltd. [1926] AC 108, Empresa Cubana de Fletes v. Lagonisi Shipping Co. Ltd. (The Georgios C) [1971] 1 Ll.R. 7 and Associated Portland Cement Manufacturers Ltd. v. Teigland Shipping A/S (The Oakworth) [1975] 1 Ll.R. 581. He said in their light:
“19. It is against this background that the decision of the House of Lords in the Scaptrade must be seen. The House of Lords was concerned with the question of giving relief from forfeiture in circumstances where an owner had justifiably withdrawn his vessel in accordance with the terms of the charter. Lord Diplock held that the remedy of relief from forfeiture was unavailable, in part because a Court of Equity would not grant specific performance in respect of it. In this context he equated an injunction restraining the ship owner from exercising his right of withdrawal of the vessel (a contractual right given to him under the charter) with an order for specific performance.
20. An order restraining a party from exercising a contractual right, whether justifiably or not, is, both in form and substance, different from an order which restrains an owner from employing the vessel outside the charter. As the earlier authorities, to which I have referred, make plain, an injunction which restrains 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 for the vessel, it is likely that performance under the charter will continue.
21. Thus it may be that in accordance with the dictum of Lord Diplock, an injunction in the form set out in paragraph 12(a) might be impermissible but that in paragraph 12(c) would be in accordance with the authorities as, in my judgment, would be an injunction in the form set out in paragraph 12(b). If the formula utilised in the Strathcona, the Georgios C and the Oakworth decisions is followed, there can be no objection in principle to the granting of an injunction.”
Before us, Mr Popplewell QC for the appellants no longer suggests that paragraph (b) of the order sought is, as a matter of law, pregnant with an affirmative obligation to perform the charter-party which is tantamount to specific performance. He relies simply and solely on the principle which he submits appears or follows from The Scaptrade, to the effect that injunctive relief will not be granted to restrain conduct inconsistent with a time charter if the practical effect will be to compel the party injuncted to perform the charter. This is the sole point which Jacob LJ had in mind when giving permission, saying: “Permission is sought on the limited and sole basis that The Scaptrade decided that an injunction of the kind granted by Cooke J cannot (or ought not) to be granted. So it is accepted that otherwise the balance of convenience favours grant of an injunction”. The parties’ skeleton arguments contain signs of a possible secondary point, to the effect that, whatever might be the position with more ordinary time charters, the present time charter relating to the operation of the pool was of a special nature, in relation to which injunctive relief would not be appropriate. Before us Mr Popplewell did not pursue this as a separate point. He accepted that, if it is ever permissible to grant injunctive relief in relation to a time charter when the practical effect will be to compel performance, he could not challenge the judge’s conclusion, as a matter of judgment or discretion, that such relief would be appropriate in respect of this particular time charter, notwithstanding its particular features. Nor does he suggest that, if such relief is ever permissible, there is any principle which could or would exclude it at an interim stage, provided the tests for the grant of interim relief are otherwise applied and satisfied.
The judge made no express finding that the practical effect of the injunctions would be to compel performance. He said (paragraph 28(i)) that:
“The orders made would be negative in form and negative 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.”
He was confident, on the written evidence put before him, about the workable nature of the charter if the appellant owners chose to perform, He said:
“26. The evidence is that the Vessels continue to trade and to operate normally in the pool despite the financial disputes between the parties and the allegations of anti-competitiveness. Although the parties, in the course of their dispute have been abusive about one another, there is nothing in the material before me upon which I could conclude that the continuation of the current arrangements is unworkable, even if it that was relevant in the context of any possible injunction to be granted. If an injunction was to be granted until the determination of the current disputes between the parties, that would not present any insuperable problems in the interim period. Lauritzen and the Owners have shown themselves capable of cooperating with each other and working together on a day-to-day basis, despite their differences and such matters as dry-docking have been arranged without apparent difficulty.”
The vessels have continued to trade and operate within the pool, and there has been no suggestion that the judge’s assessment was in error. Mr Popplewell asks us to conclude that the appellants had in practical and commercial terms no realistic alternative but to leave the vessels in the pool, since laying them up would be obviously disadvantageous, and selling them with the benefits of the charters, even if feasible, would not relieve the appellants of their liabilities under them or relieve their purchasers with notice from the burden of performing them. I am prepared to proceed on this assumption.
The House of Lords in The Scaptrade was concerned with one question of jurisdiction (p.698F-G): “Has the High Court any jurisdiction to grant relief against the exercise by a shipowner of his contractual right, under the withdrawal clause in a time charter, to withdraw the vessel from the service of the charterer upon the latter’s failure to make due payment as provided by the withdrawal clause?”. Lord Diplock’s speech was the sole reasoned speech. The part on which Mr Popplewell relies represents a first reason for answering this question in the negative. It is worth quoting in full:
“A time charter, unless it is a charter by demise, with which your Lordships are not here concerned, transfers to the charterer no interest in or right to possession of the vessel; it is a contract for services to be rendered to the charterer by the shipowner through the use of the vessel by the shipowner’s own servants, the master and the crew, acting in accordance with such directions as to the cargoes to be loaded and the voyages to be undertaken as by the terms of the charterparty the charterer is entitled to give to them. Being a contract for services it is thus the very prototype of a contract of which before the fusion of law and equity a court would never grant specific performance: Clarke v Price (1819) 2 Wils. 157; Lumley v Wagner (1852) 1 De G.M & G. 604. In the event of failure to render the promised services, the party to whom they were to be rendered would be left to pursue such remedies in damages for breach of contract as he might have at law. But as an unbroken line of uniform authority in this House, from Tankexpress [1949] A.C. 76 to A/S Awilco of Oslo v Fulvia S.p.A. di Navigazione of Cagliari (The Chikuma) [1981] 1 W.L.R. 314, has held, if the withdrawal clause so provides, the shipowner is entitled to withdraw the services of the vessel from the charterer if the latter fails to pay an instalment of hire in precise compliance with the provisions of the charter. So the shipowner commits no breach of contract if he does so; and the charterer has no remedy in damages against him.
To grant an injunction restraining the shipowner from exercising his right of withdrawal of the vessel from the service of the charterer, though negative in form, is pregnant with an affirmative order to the shipowner to perform the contract; juristically it is indistinguishable from a decree for specific performance of a contract to render services; and in respect of that category of contracts, even in the event of breach, this is a remedy that English courts have always disclaimed any jurisdiction to grant. This is, in my view, sufficient reason in itself to compel rejection of the suggestion that the equitable principle of relief from forfeiture is juristically capable of extension so as to grant to the court a discretion to prevent a shipowner from exercising his strict contractual rights under a withdrawal clause in a time charter which is not a charter by demise.”
The reasoning does not reflect any appearing in the judgment of Robert Goff LJ in the court below ([1983] QB 529), or indeed in the reported arguments of counsel before the House (see pp.695-8). But it is common ground before us that The Scaptrade stands as authority for the proposition that specific performance will not be ordered of a time charter. Mr Berry QC for the respondents reserves his clients’ right to ask the House to review this proposition, should the matter go that far. Mr Popplewell submits that the House of Lords’ classification of a time charter as a contract of services brings it within a category of case where the courts will not order negative injunctive relief, if the practical effect will be to compel its performance. He submits that there is, in this context at least, no sustainable distinction between an order which amounts in law to an order to perform and an order which has that practical effect. Mr Berry submits that there is a great difference, and that it is only in certain cases having special characteristics that the practical effect of injunctive relief may preclude its grant.
I start by noting that, in the second paragraph quoted in paragraph 8 above, Lord Diplock was addressing or pre-supposing a very different type of injunctive relief to that granted by Cooke J. Lord Diplock was concerned with “an injunction restraining the shipowner from exercising his right of withdrawal of the vessel from the service of the charterer” which he said was “although negative in form, …. pregnant with an affirmative order to the shipowner to perform the contract” and “juristically, …. indistinguishable from a decree of specific performance of a contract to render services”. One can well understand why an injunction restraining a right of withdrawal would be regarded as pregnant with an affirmative order, and as juristically indistinguishable from an order for specific performance. But it is not now suggested that the relief granted by Cooke J was pregnant with any affirmative order. Further, it was, whatever its practical effect, juristically distinct from a decree of specific performance.
That brings one to Lord Diplock’s reference to the category of contracts to render services, in respect of which, he said, the English courts have always disclaimed any jurisdiction to grant a decree of specific performance, even in the event of breach. The generality of this statement may raise questions, since there are exceptional cases concerning contracts for services, even of a very personal nature, in relation to which the English courts have granted injunctive relief amounting juristically to specific performance: see e.g. Hill v. C. A. Parsons & Co. Ltd. [1972] Ch. 305 (CA), Irani v. Southampton and South-West Hampshire Health Authority[1985] IRLR 203 and Re Regent International Hotels (UK) Ltd. v. Pageguide Ltd. (CA 10 May 1985).
However, whatever may be the position in that regard and accepting for present purposes the generality of Lord Diplock’s statement, the question is whether there is any principle that the English courts will - either invariably or absent exceptional circumstances – refuse to grant negative injunctive relief, when this would not juristically amount to an order of specific performance, but would as a matter of practical reality compel the other party to perform. In his speech in The Scaptrade Lord Diplock said nothing at all about the possibility of negative injunctive relief not, juristically, amounting to an order of specific performance. Nor, with one exception, did he refer to any of the cases to which Cooke J referred, in which negative injunctive relief had previously been contemplated or granted. We should therefore be cautious before concluding that it was either the intention or the effect of the House of Lords’ decision in The Scaptrade to alter established principles or to depart from any of such cases in relation to such relief.
The one exception was Lumley v. Wagner, to which Lord Diplock referred for the principle that a court would never grant specific performance of a contract for services. But the fact that he only referred to it in this context confirms the narrow ambit of the first reason for the House’s decision in The Scaptrade. Lord Diplock would have regarded Lumley v. Wagner as horn-book law, and the actual outcome was the grant of negative injunctive relief. Miss Johanna Wagner had committed herself to sing at Her Majesty’s Theatre (basically for twice a week for three months) and not elsewhere during that period without the permission of Mr Lumley, the theatre’s lessee. She then agreed with the lessee of Covent Garden, Mr Guy, to sing there for a larger sum. The judgment assumes that the contract with Mr Lumley could not be enforced by grant of specific performance, but his claim was for an injunction restraining her from singing or performing otherwise than in accordance with his contract during its period. In granting such relief the Lord Chancellor said:
“Wherever this Court has not proper jurisdiction to enforce specific performance, it operates to bind men’s consciences, as far as they can be bound, to a true and literal performance of their agreements; and it will not suffer them to depart from their contracts at their pleasure, leaving the party with whom they have contracted to the mere chance of any damages which a jury may give. The exercise of this jurisdiction has, I believe, had a wholesome tendency towards the maintenance of that good faith which exists in this country to a much greater degree perhaps that in any other; and although the jurisdiction is not to be extended, yet a Judge would desert his duty who did not act up to what his predecessors have handed down as the rule for his guidance in the administration of such an equity.
It was objected that the operation of the injunction in the present case was mischievous, excluding the Defendant J. Wagner from performing at any other theatre while this Court had no power to compel her to perform at Her Majesty’s Theatre. It is true that I have not the means of compelling her to sing, but she has no cause of complaint if I compel her to abstain from the commission of an act which she has bound herself not to do, and thus possibly cause her to fulfil her engagement. The jurisdiction which I now exercise is wholly within the power of the Court, and being of opinion that it is a proper case for interfering, I shall leave nothing unsatisfied by the judgment I pronounce. The effect, too, of the injunction in restraining J. Wagner from singing elsewhere may, in the event of an action being brought against her by the Plaintiff, prevent any such amount of vindictive damages being given against her as a jury might probably be inclined to give if she had carried her talents and exercised them at the rival theatre: the injunction may also, as I have said, tend to the fulfilment of her engagement; though, in continuing the injunction, I disclaim doing indirectly what I cannot do directly.”
Mr Popplewell observes that the Lord Chancellor contemplated no more than that the injunction “may …. tend to” or would “possibly” lead to the fulfilment of her engagement. Miss Wagner could no doubt afford to remain idle for two months, or indeed, since the negative covenant in her agreement seems only to have been intended to relate to England (see p.605), return to her activity as “cantatrice of the Court of His Majesty the King of Prussia” in Berlin. But subsequent authority takes the matter further.
In De Mattos v. Gibson a mortgagee took his interest from a shipowner with knowledge of a pre-existing voyage charter, and later sought to enforce the mortgage. The Vice-Chancellor refused interim relief by way of either specific performance or injunction, taking the view that any other ship could carry the goods on and damages would be an adequate remedy. The Court of Appeal in Chancery (Knight Bruce and Turner LJJ) disagreed, saying that there could have been no doubt about the right to injunctive relief if it had been the shipowner who had acted inconsistently with the charter, and that an injunction would lie against the mortgagee who had taken with express notice of the charter. At trial, the Lord Chancellor expressly accepted the availability of injunctive relief against a shipowner proposing to act contrary to a voyage charter, saying:
“I think that a vessel engaged under a charter-party ought to be regarded as a chattel of a peculiar value to the charterer, and that although a Court of Equity cannot compel a specific performance of the contract which it contains, yet that it will restrain the employment of the vessel in a different manner, whether such employment is expressly or impliedly forbidden, according to the principle so fully expressed in the case of Lumley v Wagner. In such cases the Court repudiates the idea of indirectly compelling performance where it could not directly decree it. It gives all the relief in its power, without looking to the effect which may be ultimately produced by the restraint which it places on the party who is disposed to break his contract.”
In the last two sentences it is clear, in my view, that the Lord Chancellor was saying that the effect of the relief granted will, at least in a voyage charter case like De Mattos v. Gibson,be ignored – in other words that, although injunctive relief will or may indirectly compel performance, that is irrelevant, so long as it does not directly decree it. The claim against the mortgagee failed on the facts, because, long before the mortgagee intervened, the shipowner had ceased to perform or to be able to perform, without (furthermore) the charterer taking any positive steps to obtain performance or even to prevent non-performance, so that the mortgagee’s intervention could not be said to have prevented performance.
In the Lord Strathcona case, concerning a time charter for ten successive St Lawrence seasons with options to extend, the Privy Council followed and applied Knight Bruce LJ’s statement in De Mattos v. Gibson, regarding the availability in principle of injunctive relief against someone purchasing a legal interest in a ship with knowledge of this prior time charter. The Privy Council acknowledged that this part of Knight Bruce LJ’s judgment was (as it has subsequently remained) somewhat controversial, but it does not require consideration in this present case, where the claim is against the other contractual party, not a third party. What is relevant for present purposes is the Privy Council’s further statement, at p.125, relying on Lumley v. Wagner, that:
“It does not matter that this Court cannot enforce specific performance. It can proceed if there is expressed or clearly implied a negative stipulation.”
Having thus determined what it described as “the fundamental point”, the Privy Council went on:
“The consequences of this decision, both as to the future use of the vessel and as to damages, will be applied in the Court below. It is incredible that the owners will lay up the vessel rather than permit its use under the contract, of which they were notified, and the provisions of which it is now determined that they ought to respect. The resumption of use under the charterparty will thus simplify the ascertainment of damages.”
The Privy Council in other words had no hesitation about granting negative injunctive relief which it appreciated would in practice, though not as a matter of law, compel performance.
In The Georgios C Donaldson J and in The Oakworth the Court of Appeal granted interim injunctions restraining shipowners from employing their ships in a manner inconsistent with respectively a time and a voyage charter. In the former case, Lord Denning concluded his judgment “The vessel must be returned to complete her charter with the Cuban enterprise”. This summary, not of the legal position but of the factual result of the relief, shows the court’s willingness to grant such relief in respect of a time charter although it would have the obvious practical effect of ensuring further performance. In the latter case in 1974 he said that the practice of granting such an injunction had become “very common” since the decision in the former case in 1970, and that such an injunction was “often granted so as to ensure that the existing charter is implemented”, a statement once again of its practical rather than legal effect.
Mr Popplewell submits that the thinking behind these cases and the statements in them which I have quoted was that specific performance was impermissible because of the problems it could pose of supervision and enforcement, while negative injunctive relief was permissible because it posed no such problems. For present purposes, I shall accept that that was so. The Lord Chancellor in De Mattos v. Gibson, for example, underlined the difficulty he saw about enforcing the contract there specifically (see p.115). That rationale is, however, Mr Popplewell submits, no longer viable in the light of The Scaptrade and of the principles governing contracts for services generally. If necessary, he confines his submission to the context of a time charter, that being the context of The Scaptrade. In so doing, however, he weakens his submission that The Scaptrade is based on or derived from some general principle relating to contracts of services. Further, I am unable for my part to see why the general differences between time and voyage charters (and Mr Popplewell accepts that there are many variants and hybrids) should be regarded as so fundamental as to merit an entirely different approach to the grant of negative injunctive relief.
This brings me to Mr Popplewell’s submission that there is a general principle that injunctive relief will not be given in respect of contract for services if the practical effect would be to compel performance. He suggests that this derives from the nature of the relationship of trust and confidence which exists in relation to such contracts, and is, he submits, of particular importance in time charters. If so, the point must have been overlooked by the Lord Chancellor in De Mattos v. Gibson and by the Court of Appeal in The Georgios C, in so far as it is general,and by the Privy Council in The Lord Strathcona and by the Court of Appeal in The Georgios C if and in so far as it is suggested that it is specific to time charters. However, I cannot, for my part, see what there is in The Scaptrade to suggest that any of these courts was wrong or to alter the pre-established principles stated in them.
Even if one is considering a contract for services far more easily described as personal in nature than the present, there is no inflexible principle precluding negative injunctive relief which prevents activity outside the contract contrary to its terms.
Mr Popplewell referred to Warren v. Mendy [1989] 1 WLR 853. In that case a boxing manager and promoter sought injunctive relief to restrain the defendant from interfering with a management contract between himself and B, a talented young boxer, and from acting for B in B’s professional career. B was at his request joined to the proceedings, and an injunction refused at first instance and on appeal. Nourse LJ began the only full judgment in the Court of Appeal at p.857D-E as follows:
“It is well settled that an injunction to restrain a breach of contract for personal services ought not to be granted where its effect will be to decree performance of the contract. Speaking generally, there is no comparable objection to the grant of an injunction restraining the performance of particular services for a third party, because, by not prohibiting the performance of other services, it does not bind the servant to his contract. But a difficulty can arise, usually in the entertainment or sporting worlds, where the services are inseparable from the exercise of some special skill or talent, whose continued display is essential to the psychological and material, and sometimes to the physical, well being of the servant. The difficulty does not reside in any beguilement of the court into looking more tenderly on such who breach their contracts, glamorous though they often are. It is that the human necessity of maintaining the skill or talent may practically bind the servant to the contract, compelling him to perform it. (Page 859)"
In the first sentence, Nourse LJ was clearly referring to injunctive relief which either expressed or was pregnant with a positive decree of performance of the contract. The second sentence deals with injunctions of the purely negative nature that Cooke J granted. The case was particularly concerned with the problem that can arise even in relation to such injunctions where “the human necessity” of maintaining “some special skill or talent, whose continued display is essential to the psychological and material, and sometimes to the physical, well-being of the servant” may “practically bind the servant to the contract, compelling him to perform”. It is an obvious non sequitur to derive from this reasoning a conclusion that, wherever the practical effect of negative injunctive relief would be to bind any party to any contract for services to the contract, compelling him to perform it, the court will or should refuse such relief.
Later in his judgment Nourse LJ expressed this general conclusion:
“This consideration of the authorities has led us to believe that the following general principles are applicable to the grant or refusal of an injunction to enforce performance of the servant's negative obligations in a contract for personal services inseparable from the exercise of some special skill or talent. (We use the expressions "master" and "servant" for ease of reference and not out of any regard for the reality of the relationship in many of these cases.) In such a case the court ought not to enforce the performance of the negative obligations if their enforcement will effectively compel the servant to perform his positive obligations under the contract. Compulsion is a question to be decided on the facts of each case, with a realistic regard for the probable reaction of an injunction on the psychological and material, and sometimes the physical, need of the servant to maintain the skill or talent. The longer the term, for which an injunction is sought, the more readily will compulsion be inferred. Compulsion may be inferred where the injunction is sought not against the servant but against a third party if either the third party is the only other available master or if it is likely that the master will seek relief against anyone who attempts to replace him. An injunction will less readily be granted where there are obligations of mutual trust and confidence, more especially where the servant's trust in the master may have been betrayed or his confidence in him has genuinely gone.”
He went on to examine with approval the reasoning of Pill J who at first instance had emphasised the very specialist nature of a professional boxer’s trade, requiring “dedication, extensive training and expertise” and involving a “comparatively short” professional life.
The case thus bears no similarity on the facts to the present. I doubt whether Nourse LJ had in mind at all the present type of contract, when speaking of a contract for personal services. But, however the present contract may be described, it is very far from the particular sub-category of contract for personal services involving very special personal skills, talent and other features which Warren v. Mendy concerned and which Nourse LJ identified. Nor does the present case bear any factual similarity to Page One Records Ltd. v. Britton[1967] 1 WLR 157, which was among the cases cited by Nourse LJ. That case concerned a five year contract to manage a pop group, in respect of which contract the manager claimed injunctive relief. Stamp J refused such relief and left the manager to its prima facie claim to damages, on the ground that the contract involved obligations of trust and confidence and was more a joint venture, approaching the relationship of partnership, than anything else. He also thought that an injunction would amount to forcing the pop group to remain idle or to continue to employ in a fiduciary capacity a manager and agent in whom they “for reasons good, bad or indifferent” had lost confidence “and who may, for all I know, fail in its duty to them”. Another case cited by Nourse LJ was Whitwood Chemical Co. v. Hardman[1891] 2 CH. 416. This case concerned an appointment for a 10 year term as a manufacturing chemist as manager of the plaintiff company’s works, in relation to which Lindley LJ said that, if negative injunctive relief was granted “the man must either be idle, or specifically perform the agreement into which he has entered”. He categorised the contract as being for personal services. He also said that there was “no very definite line”.
That last thought is reflected in Nourse LJ’s judgment in Warren v. Mendy, where he said at p.860:
“Any consideration of the authorities must be made with two general thoughts in mind. First, in this as much as in any other area of the law an injunction is a discretionary remedy, whose grant or refusal, especially at an interlocutory stage, depends on the infinitely variable facts of the individual case. Although statements of the principles on which the discretion ought to be exercised in some particular area are often authoritative, they are principles of practice rather than of law, whose application may be rendered inappropriate by the finest of factual variations between one case and another. Secondly, the discretion belongs, as always, to the judge of first instance. His decision can only be interfered with by an appellate court if he has erred in principle, if he has not exercised his discretion at all or if he has exercised it in a manner which is plainly wrong.”
Mr Popplewell’s attempt to treat all contracts for services as subject to inflexible or almost inflexible principles or rules is unsustainable. Once that attempt is rejected, that is really the end of this appeal, since Mr Popplewell does not seek to challenge Cooke J’s assessment of the facts or his exercise of his discretion.
With regard to the facts, Cooke J considered the reasoning and decision in Warren v. Mendy, but, unsurprisingly and correctly, concluded that the present case fell into a very different category. He took the following description of the pool’s operation from Lord Millett’s arbitration award:
“Proprietary pools are owned and administered by an independent party which may but need not own one or more of the participating vessels and which carries on the business of operating the pool. In this case decisions are taken by the operator, which is responsible for marketing and commercially operating the vessels in the pool. It acts as a disponent owner, giving instructions to the masters, appointing port agents and paying for services rendered. It does so as principal, not as agent for the members, and the relations between the operator and the members will normally be governed by a pool agreement or constitution which each member is required to accept on entering the pool. Whatever the nature of the pool, each shipowner remains responsible for obtaining and financing his vessel, for crewing and maintaining it, and for the normal voyage costs, though he may subcontract some of these responsibilities to a specialised ship manager who would be expected to work in close co-operation with the pool operator." (Award paragraph 4).
"In my opinion it is beyond argument that the pool operator undertook an obligation to operate the System in the interests of the ship owners (of which it might be one) and not its own. It is true that the relationship was governed by the terms of a charterparty, a contractual document which normally creates an exclusively commercial relationship between owner and hirer. But Cooltime 95 is very different from the ordinary charterparty. While it constitutes the pool operator the disponent owner in return for the payment of hire in the normal way, it does not entitle the hirer to retain for its own benefit the profits generated by employing the vessel. Subject only to the deduction of a fee and profit charge, it undertakes to pay the net profits generated by the employment of the vessels in the pool to the participating owners. The business of operating the pool is the business of the pool operator and not of the ship owners, just as the business of a professional trustee is that of the trustee and not of the beneficiaries; but the profits made by employing the vessels for the carriage of goods, which would normally belong to the charterer, belongs in this instance to the owners. The pool operator was, therefore, responsible for making profits for the collective benefit of the members of the pool and is obliged to act in their interests and not its own. That is of the essence of a fiduciary obligation.
…. This conclusion accords with that of Mr. Packard (op. cit. at p. 45) that
"Shipping pools are founded on the concept of mutual trust".
Participating owners in a proprietary shipping pool do not operate the pool themselves; they place their trust in the pool operator to do it for their benefit. By engaging itself to do so the operator assumes obligations of a fiduciary character. ….."
Cooke J therefore rejected the appellant’s reliance on Warren v. Mendy in these terms:
“25. Despite these passages in the award and the Owners' arguments as to the special nature of the relationship between the Owners and Lauritzen, I am unable to equate arrangements of this kind with those in Warren v Mendy. There is no real doubt in my mind that the ship managers can continue to manage the vessels and give appropriate orders to the officers and crew of the vessels and that the services rendered by Lauritzen are not so "personal" nor involve such a degree of skill and talent in the context of man management as to make a negative injunction unavailable, whether as a matter of principle or of discretion. There is no psychological or physical element of the kind which surfaces in cases which involve the world of entertainment or sport. The position here is much closer to that of the Pageguide case and, in reality, little different from any of the charter-party cases where injunctions have previously been granted. The fiduciary element where trust and loyalty are involved, centres upon the discretionary decision making of Lauritzen in the employment of the vessel but above all in relation to the accounting for the pool as a whole. That is where issues have arisen between the parties which led to the Duties Arbitration and continuing disputes as to the reward to be paid under the pooling arrangements to the owners. Those matters do not touch upon the workability of the future arrangements in the event of an injunction being granted, even if the Owners decide to continue under the charter-party in circumstances where the injunction does not compel them to do so but merely prevents them from employing the Vessel for other purposes.
26. The evidence is that the Vessels continue to trade and to operate normally in the pool despite the financial disputes between the parties and the allegations of anti-competitiveness. Although the parties, in the course of their dispute have been abusive about one another, there is nothing in the material before me upon which I could conclude that the continuation of the current arrangements is unworkable, even if it that was relevant in the context of any possible injunction to be granted. If an injunction was to be granted until the determination of the current disputes between the parties, that would not present any insuperable problems in the interim period. Lauritzen and the Owners have shown themselves capable of cooperating with each other and working together on a day-to-day basis, despite their differences and such matters as dry-docking have been arranged without apparent difficulty.
27. In short, despite the nature of the pool and its management, and the existence of fiduciary duties found by Lord Millett, I do not find that the relationship between the parties is anything like those which exist in the entertainment or sporting worlds where "the services are so linked to some special skill or talent whose continued display is essential to the psychological, material or physical well-being of the 'servant'". Here there are commercial arrangements made between independent companies involving the employment of no named individuals, where the services are not "personal" in nature, notwithstanding the fiduciary obligations owed by one commercial entity to another.”
Cooke J’s reference to the Pageguide case is to an unreported decision of this court which repays study: re Regent Hotels (UK) Ltd. v. Pageguide Ltd (10th May 1985, The Times 13th May 1985). The court was concerned with a long-term management contract for the Dorchester Hotel between Regent as managers and Pageguide, a company to which Regent had sold the hotel on the basis that the existing management contract would continue and be novated (with some amendment) so as to apply between Regent and Pageguide. Not long after acquiring ownership, Pageguide sought to cancel the management contract alleging serious and fundamental breach. Injunctive relief was granted restraining Pageguide “from taking any steps to prevent or hinder [Regent] from performing their function of the management and operation of the Dorchester Hotel in accordance with the management agreement”. Mr Hoffmann QC, as he was, sought without success to have the order set aside. He conceded that there was no rule of law precluding specific performance, but identified principles based on public policy, fairness and practical convenience, which he submitted militated against the relief sought. Under the heading of public policy, he identified both moral and economic grounds, referring in each context to the breakdown of trust and confidence which Pageguide was asserting.
In Pageguide the first ground on which the Court of Appeal refused to accept Mr Hoffmann’s argument that no injunction was appropriate because there had been a breakdown of trust and confidence was that this was in issue. Regent’s case was the Pageguide was acting cynically and in bad faith, for pure financial or business motives. But the court also said this:
“Leaving aside the factual issue as to whether Pageguide would be able to establish that they have lost confidence in the Regent companies, in regard to which there is, in my judgment, a serious question to be tried, this action raises the further serious question, as yet unresolved by English authority, as to the extent to which a commercial arrangement of this kind between two independent companies, which does not provide for the employment of any named individuals and is part of a larger package including the sale of the hotel itself, can be properly treated as analogous to a contract of personal service. There are, however, two commonwealth decisions, one from Canada and one from Singapore, both of which were concerned with attempts by hotel owners to terminate long-term management contracts and in both cases the courts granted interlocutory relief. The Canadian case went to the Court of Appeal of Montreal which affirmed the decision: Loewess Hotel Montreal v Concordia City Properties [1979]. In the Singapore case, Holiday Inns v Holiday Enterprises [1975] the court expressly contemplated that specific performance was available.”
With regard to Page One Records Ltd. v. Britton Ackner LJ said this:
“In the Page One Records’ case contract was to manage four young men and was concerned with every aspect of the pop stars’ life. The judge considered that if a negative injunction had been granted, then the pop stars would have been obliged to be managed by the plaintiffs or to be idle. All this is far removed from managing a hotel.”
Cooke J adopted similar reasoning, when concluding that the present case concerned “commercial arrangements made between independent companies involving the employment of no named individuals, where the services are not "personal" in nature, notwithstanding the fiduciary obligations owed by one commercial entity to another” (paragraph 27 of his judgment, quoted in paragraph 27 above).
Under the heading of fairness, the court in Pageguide also examined two decisions of Megarry J as he was when deciding the first, CH Giles & Co. v. Morris[1972] 1 WLR 307 or Megarry V-C as he had become by the time of the second, Tito v. Waddell (No. 2)[1977] Ch. 106. In each he had questioned the extent to which there was any absolute rule precluding an order for specific performance of a contract for personal services or involving the continuous performance of services, and took issue with the familiar statement that difficulties of superintendence constitute a real justification for such a rule.
The court in Pageguide then turned to the availability of negative injunctive relief, and said this:
“It is accepted that an injunction may be granted to restrain the breach of a negative covenant in an agreement which would not be ordered to be specifically performed; see in Lumley v Wagner (1852) 1 DEGM&G 604. Mr Hoffman conceded that, for the purpose of the appeal, such negative covenant may be either express or implied and that clause 4 of the Management Agreement effectively implies such a covenant. Even where specific performance would not be granted, the court will be prepared by granting an injunction, to encourage a defendant to perform its contractual obligations.
…
The effect of the injunction granted by Mr Justice Simon Brown does not of course provide the defendants with no alternative but to comply with the Management and Marketing Agreements. Pageguide are entitled, pursuant to clause 35, to sell the hotel again. If they are not entitled to determine these agreements, subject to which they purchased the hotel, and if in reality their only complaint is that they are dissatisfied with the bargain which they made, such a course is one which in justice they should take. Thus, if the effect of this injunction is to put pressure on Pageguide to honour its bargain, this would seem to me to be wholly unobjectionable.
As already stated, we are not concerned with a contract of personal service, but with a commercial arrangement made between two independent companies involving the employment of no named individuals. In such a situation, Mr Rix submits, there is no bar to the enforcement of obligations by means of injunctions, even where the commercial relationship is a long-term one and does involve a substantial degree of mutual co-operation. He relies upon the case of Evans, Marshall v Bertola [1973] 1 All ER 992, [1973] 1 WLR 349 to which I have already referred, where Lord Justice Sachs at page 379 stated:
‘This is a commercial agreement between trading companies that can be implemented to the profit of both parties, if each conforms with its express and implied terms. As in a great many commercial contracts consultation between the parties as to implementation is desirable; but that does not necessarily turn them into joint ventures.
But in any event the fact that some degree of mutual co-operation or confidence is needed does not preclude the Court from granting negative injunctions designed to encourage the party in breach to perform its part.’
Lord Justice Sachs referred to Warner Bros Pictures Inc v Nelson and also to Decro-Wall International SA v Practitioners in Marketing Limited[1973] 2 All ER 216, [1973] 1 WLR 361. That case concerned a sole distribution agreement involving a continuing number of individual transactions for the sale and delivery of goods by the plaintiffs to the defendants. It had a far wider ambit than being merely a contract between the parties for the sale of goods. It involved a long-term project for building up, for the mutual benefit of both parties, a large-scale and specialised product.
In regard to these two cases, Mr Justice Simon Brown stated:
‘It is true that the relief there granted was a clearly negative injunction rather than an order for specific performance, or indeed a form of injunction closely akin to such order. It is true too, that these contracts each contained express negative covenants. It is true further that the injunctions there granted encouraged rather than enforced performance of the contracts, and certainly, unlike those here in question, did embrace the entire positive obligations of the party enjoined. It is true, lastly, that the terms of the injunctions there were plainer and more easily susceptible to unproblematic enforcement. All these are points of difference cogently advanced by Mr Cooke on behalf of the defendants.
Nevertheless, assert the plaintiffs, with to my mind some force, the two cases are clear examples of the Courts’ preparedness to exert strong and – in the real world – very probably decisive pressure on a contract-breaker to continue in a long-term considerable element of co-operation.’
The learned judge then referred to the Canadian and Singapore cases, accepted that there were distinctions to be drawn and this case, but concluded that he could not ignore the apparent close similarities. Finally, on this aspect of the case, he concluded that the plaintiff’s arguments, at least in combination, revealed that there was a serious question to be tried an accordingly the plaintiffs had discharged the burden of establishing that there was a real prospect of succeeding in their eventual claim for permanent injunctive relief.
Having at considerable length set out the contentions of the parties, and referred to the main authorities upon which they relied, I agree with the learned judge’s conclusion.”
Cooke J was right to conclude that the Pageguide case lent assistance in legal principle to the respondents’ application for injunctive relief. We were told by Mr Popplewell (who was counsel for Regent in Pageguide) that matters did not proceed happily, at least for his clients, after the judgment in Pageguide. But each case must be viewed upon its own facts. Whatever the actual outcome in the particular business context as between the particular parties in Pageguide, the judge was able to reach clear conclusions about the workability of the present time charter relationships in the event of negative injunctive relief. The present relationships are between business concerns who, in the event of such relief, can be expected to continue to make them work in their own interests, and to sort out any complaints in arbitration if necessary hereafter. Nothing suggests that the judge was wrong in his assessment, nor has any issue about the exercise of judgment or discretion involved in this assessment been raised before us.
In conclusion, neither the fact that the contracts involved were for services in the form of a time charter nor the existence under such contracts of a fiduciary relationship of mutual trust and confidence represents in law any necessary or general objection in principle to the grant of injunctive relief precluding the appellants from employing their vessels outside the pool pending the outcome of the current arbitration. Nor does it afford any such objection to the grant of such relief that the only realistic commercial course which it left to the appellants was, as I am prepared to assume, to do what they have done, namely to continue to provide the vessels to the pool and to perform the charters. In my judgment, therefore, the present appeal by each appellant should be dismissed.
Lord Justice Thomas:
I agree
Lord Justice Judge:
I also agree