Lady Navigation Inc v Lauritzencool AB & Anor

The unavailability of specific performance for a time charter does not create an inflexible bar against a negative injunction. The Scaptrade [1983] 2 AC 694 concerned an injunction restraining exercise of a contractual withdrawal right, which was legally equivalent to specific performance. It did not govern an order restraining employment outside the charter where the order was legally distinct, even if its practical effect encouraged performance.

Relief remains discretionary. Personal services involving special skill or talent may require a different approach, but commercial arrangements between independent companies are not barred merely because they involve services, fiduciary obligations or practical pressure to perform.

Lady Navigation Inc, the owner of two vessels, appealed an interim order made by Cooke J in the Queen’s Bench Division on 12 November 2004. The order restrained employment inconsistent with long-term time charters and fixing the vessels with third parties before specified dates while arbitration determined whether the owners could withdraw them from Lauritzencool’s pool.

The appellant’s sole ground was that The Scaptrade [1983] 2 AC 694 precluded negative injunctive relief where its practical effect would compel performance. It accepted that the balance of convenience otherwise favoured relief and that the judge’s discretionary assessment was unchallengeable if that legal objection failed.

Appeal dismissed. Mance LJ gave the leading judgment. Judge LJ and Thomas LJ agreed.

1. Scope of The Scaptrade. The case concerned an injunction restraining a shipowner from exercising a contractual right to withdraw a vessel. Lord Diplock treated that relief as legally equivalent to specific performance of a services contract. The present orders were different: they restrained employment outside the charter and were legally negative, although they might practically lead to continued performance. The Scaptrade therefore did not establish a general rule against such relief.
2. Availability of negative relief. The authorities, including Lumley v Wagner (1852) 1 De G.M & G. 604, De Mattos v Gibson (1859) 4 De G and J 276, 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, supported injunctive relief restraining conduct contrary to an express or implied negative stipulation. Its practical effect of encouraging performance did not itself prevent relief.
3. Fact-sensitive discretion. Warren v Mendy [1989] 1 WLR 853 concerned personal services inseparable from special skill or talent. Whether an injunction effectively compels performance depends on the facts, including the need to maintain the skill, the duration of the restraint and issues of trust and confidence. No inflexible rule applies to every contract for services.
4. Application. The arrangements were commercial contracts between independent companies, involved no named individuals and did not provide personal services. The fiduciary obligations concerned discretionary operation and accounting of the pool, not the workability of future performance. The realistic commercial consequence that the vessels would remain in the pool did not convert the injunction into specific performance. Cooke J had committed no error of principle, and the interim orders were upheld.

• Court of Appeal (Civil Division): On 17 May 2005, the appeal was dismissed. [2005] EWCA Civ 579
• Queen’s Bench Division: Cooke J granted interim injunctions on 12 November 2004 restraining employment inconsistent with the time charters and specified third-party fixing. Permission to appeal was granted by Jacob LJ.