Bath and North East Somerset District Council v Mowlem Plc

An agreed liquidated-damages clause fixes the damages recoverable for delay. It does not make those damages adequate compensation for the purpose of an interlocutory injunction, nor does it give a contractor a price for breach or exclude other appropriate relief.

Under the broad statutory jurisdiction, the [1975] AC 396 guidelines are not rigid rules. The court may consider the likely actual loss avoided by an injunction, including loss which is difficult to quantify. It may also take account of unquantifiable and uncompensatable harm to a public authority’s legitimate public aims. The injunction was therefore properly granted.

The Council engaged Mowlem as main contractor for the restoration and regeneration of Bath’s Heritage Spa Buildings and construction of a new building. Defects were alleged in paint finishes applied to four pools. Under an architect’s instruction issued pursuant to the contract, Mowlem was directed to remove the finishes and fillers so that the substrate could be inspected.

Mowlem refused to carry out the work and denied the Council’s replacement contractor access to the site. HHJ Seymour QC, sitting in the Technology and Construction Court, granted an interlocutory injunction requiring access. He found serious questions to be tried about the validity of the instruction, but held that the balance of convenience overwhelmingly favoured the Council.

Mowlem’s appeal was confined to whether the contractual liquidated and ascertained damages of £12,000 per week meant that damages were necessarily an adequate remedy pending trial.

1. Appeal dismissed unanimously. Lord Justice Mance gave the judgment, with which Mr Justice Park and Lord Justice Brooke agreed. The court upheld the interlocutory injunction requiring Mowlem to allow access for the instructed works.

2. The governing power under section 37(1) of the Supreme Court Act 1981 is a broad discretion to grant an injunction where just and convenient. The guidelines in [1975] AC 396 guide, but do not fetter, that discretion. The relevant inquiry was whether, if the Council succeeded at trial, damages would adequately compensate it for Mowlem’s continued refusal of access until trial.

3. The liquidated and ascertained damages clause did not compel an affirmative answer. Such a clause may reflect only readily quantified losses or an agreed contractual limit on financial recovery. It cannot be assumed to be an agreed measure of the whole loss otherwise recoverable at common law. Nor is it an agreed price permitting breach or a bar to injunctive relief. The Council remained bound by the clause in a damages claim, but could rely on the likelihood that its actual loss pending trial would exceed the agreed sum in order to establish the inadequacy of damages.

4. Difficulty in quantifying loss may itself make damages inadequate. The court could also consider the likely harm caused by further delay to the Council’s general public aims, including economic regeneration and public confidence. Those losses were substantially unquantifiable and irrecoverable, even though the project was a commercial enterprise.

5. The Council would not be adequately compensated if access were withheld. Mowlem identified no loss from the injunction which would not be adequately compensated under the Council’s undertaking in damages. Alternative contractual steps or adjudication did not undermine the Council’s entitlement to select the contractual course it considered most favourable.

• Court of Appeal (Civil Division): Dismissed Mowlem’s appeal and upheld the interlocutory injunction.
• Technology and Construction Court: HHJ Seymour QC granted the Council an interlocutory injunction on 2 October 2003, restraining Mowlem from denying the Council’s contractor access to carry out the works required by architect’s instruction No. 103.