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INJUNCTIONS and DAMAGES Taking Shelfer Off the Shelf (2016) 28 SAcLJ Injunctions and Damages 921 INJUNCTIONS AND DAMAGES Taking Shelfer off the Shelf In Lawrence v Fen Tigers Ltd (“Fen Tigers”) the UK Supreme Court reviewed the criteria for awarding damages in substitution for an injunction in the exercise of discretion under s 50 of the Senior Courts Act 1981 (c 54), commonly known as Lord Cairns’ Act. The decision is significant because equivalent provisions have been enacted by many other common law jurisdictions. The Supreme Court held that public interest considerations were relevant to the exercise of the statutory discretion. The article argues that the public interest should have only a small role to play in determining the outcome of “damages versus injunction” disputes in modern private law litigation. Moreover, the public interest should rarely, if ever, be a decisive factor in private law remedy selection. The article concludes by identifying some unresolved issues in quantifying damages awards under the Act. Michael BRYAN* MA, BCL (Oxford), PhD (London). Emeritus Professor of Law, University of Melbourne. I. Introduction 1 Upon proof of the commission of a private law wrong a court will sometimes have to decide whether to grant an injunction to prevent repetition or continuation of the wrong, or whether to award compensatory damages for the breach.1 The starting point for analysis of the choice of remedy under English law still largely reflects the historic jurisdictional separation of common law and equity. An injunction may be awarded to prevent the occurrence or continuation of a common law wrong, such as a tort or a breach of contract, if compensatory damages are inadequate. But in equity’s original jurisdiction an injunction will be awarded to prevent a breach of trust or other equitable wrong without the necessity of having to prove the inadequacy of compensation. In addition, legislation in common law jurisdictions deriving from s 2 of * Thanks to Elise Bant, Katy Barnett and an anonymous referee for their insights and advice. The usual disclaimer applies. 1 Awards of damages to compensate for past loss are often combined with injunctions to prevent future loss, but they are not the concern of this article. © 2016 Contributor(s) and Singapore Academy of Law. No part of this document may be reproduced without permission from the copyright holders. 922 Singapore Academy of Law Journal (2016) 28 SAcLJ the Chancery Amendment Act 18582 (“Lord Cairns’ Act”) provides that in any case in which a court has jurisdiction to entertain an application for an injunction it may award damages (commonly known as equitable damages) in substitution for the injunction.3 The purpose of this article is to examine how courts exercise their discretion to award damages under the Act. What will be shown is that the simplicity in the wording and objectives of s 2, and its modern counterparts, conceals the value judgments that must be made in applying the provision, as well as the difficulties involved in placing a monetary value on specific performance or injunctive relief. 2 The vehicle for re-assessing the Act is the decision of the UK Supreme Court in Lawrence v Fen Tigers Ltd4 (“Fen Tigers”), a decision on the tort of private nuisance. One of the issues in the case concerned the availability of Lord Cairns’ Act damages as an alternative to the award of an injunction. The Supreme Court proposed modifications of the criteria for the award of damages laid down in the earlier Court of Appeal decision of Shelfer v City of London Electric Lighting Co5 (“Shelfer”), although the precise extent of these modifications is unclear. A critical question in Fen Tigers was whether the public interest could be taken into account in determining whether injunctive relief should be granted. This is not a new question. Nineteenth-century equity judges had occasionally to balance private rights against the benefits the community would obtain from the innovations of the Industrial Revolution, although the balancing exercise had ceased to be undertaken by the end of the century for reasons explored later in this article.6 At the doctrinal level Fen Tigers raises important questions, only lightly touched upon in the decision, as to the place of Lord Cairns’ Act in the post-Judicature Act scheme of remedies, and how monetary awards under the Act should be assessed. 3 The first part of this article7 examines the circumstances in which the “injunction versus damages” question arises in private law litigation. It will be shown that Lord Cairns’ Act should only have a limited role to play where the court exercises a post-Judicature Act 2 c 27 (UK). 3 The provision currently in force in England and Wales is s 50 of the Senior Courts Act 1981 (c 54). For the different versions that have been adopted in common law jurisdictions see Katy Barnett & Michael Bryan, “Lord Cairns’ Act: A Case Study in the Unintended Consequences of Legislation” (2015) 9 J Eq 150. 4 [2014] AC 822; [2014] UKSC 13. The case made two return visits to the Supreme Court (Coventry v Lawrence (No 2) [2015] AC 106; [2014] UKSC 46 and Coventry v Lawrence (No 3) [2015] 1 WLR 3485; [2015] UKSC 50) on issues not relevant to this article. 5 [1895] 1 Ch 287. 6 See paras 28–29 below. 7 See paras 4–30 below. © 2016 Contributor(s) and Singapore Academy of Law. No part of this document may be reproduced without permission from the copyright holders. (2016) 28 SAcLJ Injunctions and Damages 923 jurisdiction administering both common law and equity. The second part8 examines how the judgments of the Supreme Court in Fen Tigers analysed the “injunction versus damages” question. The final part9 explores some of the issues, relating both to remedy selection and to quantifying damages, that were left unresolved by the Fen Tigers decision. II. The scope of the Lord Cairns’ Act jurisdiction: Real and illusory choice between damages and injunctions A. History and context 4 Lord Cairns’ Act was an outcome of the Third Report of the Commissioners Appointed to Inquire into the Practice of Chancery, published in 1856.10 The proposal to confer the power to award damages on equity judges was uncontroversial, being considered the natural corollary of the power bestowed on common law courts to grant injunctions, enacted by s 79 of the Common Law Procedure Act 1854.11 Section 2 provided: In all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract or agreement, it shall be lawful for the same court, if it shall think fit, to award damages to the party injured either in addition to or in substitution for such injunction or specific performance, and such damages may be assessed in such manner as the court shall direct. The Act provided no guidance to equity judges as to how their discretion to award damages was to be exercised. Save for a little-used provision empowering the court to summon a jury, the promoters of the Act were content to leave the principles of assessment to be elaborated by Chancery judges.12 8 See paras 31–62 below. 9 See paras 63–66 below. 10 Peter M McDermott, Equitable Damages (Sydney: Butterworths, 1994); John A Jolowicz, “Damages in Equity: A Study of Lord Cairns’ Act” (1975) 34 Camb LJ 224. 11 c 125 (UK). 12 See Katy Barnett & Michael Bryan, “Lord Cairns’s Act: A Case Study in the Unintended Consequences of Legislation” (2015) 9 J Eq 150 at 152–153. See also s 2 of the Chancery Regulation Act 1862 (c 42) (UK), empowering a Chancery judge to send an issue to be tried by a common law court, which could also result in a jury decision. © 2016 Contributor(s) and Singapore Academy of Law. No part of this document may be reproduced without permission from the copyright holders. 924 Singapore Academy of Law Journal (2016) 28 SAcLJ 5 The original legislation has been re-enacted in other common law jurisdictions with variations in the wording of its material provisions but with no legislative intent to alter the substance of the jurisdiction.13 6 The cases with which this article is primarily concerned are those in which the court has a genuine choice between granting an injunction and awarding damages. But not all cases decided under Lord Cairns’ Act are “injunction versus damages” cases in this sense. The Act has sometimes been applied in cases where there was no possibility, or at least no realistic possibility, of the claimant obtaining an injunction. Such cases need to be identified, if only to distinguish them from the central concern of the article, namely how courts exercise a discretion between an injunction and a damages award where a genuine choice has to be made between alternative remedies. 7 First, there are cases where an order of specific performance or an injunction has been made, but for practical reasons the order cannot be enforced, so that the court later replaces it with a damages award. For example, a vendor under a contract for the sale of land may obtain an order of specific performance against a defaulting purchaser, but before the order can be enforced the vendor’s mortgagee sells the land in question because the vendor is in arrears with its mortgage repayments.14 Secondly, the discretionary reasons for refusing the injunction (such as the exceptional hardship the making of the order would impose on the defendant) may be so strong in some cases that there is no realistic possibility of equitable relief, with the result that damages become the more-or-less automatic remedy.
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