Shilmore Enterprises Corp & Anor v Phoenix 1 Aviation Ltd

In deciding an interlocutory application for a mandatory injunction, the court must select the course carrying the least risk of injustice if the order proves wrong. A mandatory order carries additional risks because it requires positive action and may be harder to reverse. A high degree of assurance that the claimant will succeed is relevant, but it is not an absolute requirement. The order may be made where the risk of injustice from refusing it sufficiently outweighs the risk from granting it. The court may also consider whether the respondent’s loss is compensable in damages, whether the proposed alternative would sterilise a valuable asset, the parties’ ability to give effective undertakings, and the practical prospects of compliance. On the contractual issue, a single option to purchase had been exercised and unsuccessfully completed; the respondent had no further option.

The claimants sought custody and possession of an executive aircraft pending trial. They had obtained an injunction restraining the defendant from dealing with the aircraft, but the aircraft remained in the Seychelles after the defendant had flown it there. The application was made under CPR Part 25.1(1)(c)(i) and/or Part 25.1(1)(a).

The defendant argued that the aircraft should remain in joint custody and be prevented from operating. Alternatively, it accepted that the claimants might have sole custody, but maintained that the aircraft should remain unusable. The central questions were whether a mandatory interlocutory order should be made and whether the defendant retained an option to purchase under the contractual arrangements.

1. Mandatory injunction principles. The court applied the least-risk-of-injustice approach in Films Rover International Limited v Cannon Films Sales Limited [1987] 1 WLR 670, together with the principles summarised in Nottingham Building Society v Euro Dynamics Systems Plc [1993] FSR 468 and endorsed in Zockoll Group Limited v Mercury Communications Limited [1998] 1 FSR 354. The overriding consideration was the course likely to involve the least risk of injustice if wrong.
2. A mandatory order normally creates a greater risk than a prohibitory order because it requires positive action and may cause wasted time and expense. A high degree of assurance that the claimant will establish its right is a legitimate consideration, but it is not essential. The order may still be granted where the risk of injustice from refusal sufficiently outweighs the risk from granting it.
3. The claimants’ proposed order involved less risk of injustice. Their loss from refusal would include being deprived of the use of their aircraft while it remained in joint custody with parties who had failed to co-operate. The defendant’s potential loss from the order was financial and could be protected by an undertaking and security.
4. The Heads of Terms created one option to purchase, exercisable at the end of the term or accelerated under clause 2.4. The defendant exercised that option in the negotiations recorded in the sale and purchase agreement. Its failure to pay the deposit was a breach which terminated that agreement. The contractual documents therefore did not preserve a second option.
5. Relief from forfeiture would not realistically be available. The defendant had agreed to buy the aircraft, had agreed to pay the deposit within 24 hours, had the means to pay, and deliberately failed to do so knowing that the sale and purchase agreement would terminate.
6. The application was granted. The claimants were to have custody and possession of the aircraft, subject to increasing the security paid into court from US$100,000 to US$350,000. Costs were reserved for argument.

First-instance decision. The judgment records earlier interlocutory orders made by Teare J on 28 December 2007 and by Silber J on 17 January 2008, including variation of the injunction to facilitate the aircraft’s return to Cologne.