INJUNCTIONS AND DAMAGES Michael BRYAN

• Citation: (2016) 28 SAcLJ 921
• Date: 01 December 2016
• Published date: 01 December 2016

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

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

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

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. There are many examples of self-evidently strong grounds for refusing an injunction. One is where the injunction, if granted, would compel the defendant to initiate doubtful or socially undesirable litigation against a third party.15

Finally, in some cases the claimant would almost certainly have obtained an injunction if a timely application had been made, but it later becomes clear that the wrong will not continue or be repeated, so that the claimant is denied an injunction and remitted to her claim in damages under Lord Cairns' Act. For example, an injunction to restrain a breach of confidence will be refused if the information subsequently ceases to be confidential, of if the improper disclosure cannot be repeated.16

8 In yet other cases the court has a genuine choice between the injunction and a damages award, but the choice is (or ought to be) governed by general law principles, not by Lord Cairns' Act. The principle applicable in these cases will usually depend on the jurisdictional basis of the cause of action. So where a common law duty has been broken, equitable relief will only be granted in equity's auxiliary jurisdiction if common law compensatory damages are inadequate.17 In equity compensation can be awarded in substitution for, or in addition to, an injunction where an equitable wrong, such as a breach of trust, has been committed without reference to any “inadequacy” principle. Equity here exercises its inherent jurisdiction to fashion relief according to the necessities of the case.18

9 This summary of the relationship between injunctions and damages at law and in equity highlights the extent to which jurisdictional criteria, as well as criteria based on the character and efficacy of the remedy, influence the choice of remedy. Lord Cairns' Act has been superimposed on the application of the jurisdictional criteria, thereby adding another layer of complexity. But the difficulties do not end there. There are pockets of common law and equity where we find compensation awards being made under Lord Cairns' Act when we might expect the “injunction versus damages” question to be decided in accordance with basic common law or equitable principle. On the common law side, it has become routine, upon proof of the commission of the torts of private nuisance or trespass to land, for an injunction to be granted as the primary remedy, with damages being awarded under Lord Cairns' Act only if for some reason an injunction would be inequitable. Lord Sumption noted in Fen Tigers that the usual reason given in the cases for granting an injunction is that the injury in private nuisance is considered to be “irreparable”, in the sense that a money award cannot atone for it.19 The primacy of the injunction in the private

law of nuisance might conceivably have been analogised to equity's preference for orders of specific performance, rather than damages, to enforce contracts for the sale of land, on the basis of the supposedly unique, or at least special, character of land.20 In practice, however, as Lord Sumption also noted, the courts have not consistently applied the equitable “inadequacy of damages” principle to cases of private law nuisance. Many have simply applied Lord Cairns' Act criteria laid down in the Court of Appeal decision in Shelfer.21 That decision in turn assumed, without analysis, that the injunction was the primary remedy in private nuisance cases.

10 On the equity...