Lauritzencool AB v Lady Navigation Inc.
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance,Lord Justice Thomas,Lord Justice Judge |
| Judgment Date | 17 May 2005 |
| Neutral Citation | [2005] EWCA Civ 579 |
| Docket Number | Case No: A3/2004/2502 |
| Court | Court of Appeal (Civil Division) |
[2005] EWCA Civ 579
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr Justice Cooke
Lord Justice Judge
Lord Justice Mance and
Lord Justice Thomas
Case No: A3/2004/2502
Andrew Popplewell QC and Karen Troy-Davies (instructed by Messrs Watson Farley & Williams) for the Appellant
Steven Berry QC and Simon Bryan (instructed by Messrs Fishers) for the Respondent
Introduction
This is an appeal by leave of Jacob LJ from the judgment and order of Cooke J dated 12 th November 2004 granting the respondent interim injunctive relief against the appellant in the following terms:
"Until the Final Award of the arbitrators in the Arbitration herein as to the alleged entitlement of the Defendant to withdraw the Vessels "LADY RACISCE" and "LADY KORCULA" the Defendant, their managers, servants or agents must not: —
(a) employ the "LADY RACISCE" or the "LADY KORCULA" in a manner inconsistent with the time charters each dated 27 th March 1998 between the Claimant and the Defendant in respect of each of the vessels "LADY RACISCE" and "LADY KORCULA"
(b) fix the "LADY RACISCE" or the "LADY KORCULA" with any third party for employment in respect of any period prior to 3 rd March 2010 in the case of the "LADY RACISCE" and 4 th December 2010 in the case of the "LADY KORCULA"."
Paragraphs (a) and (b) of the judge's order mirror paragraphs 12(b) and (c) of the relief sought. Paragraph 12(a) of the relief sought was a claim to an injunction in the following terms, which the judge refused because it would or might amount to an order of specific performance:
"(a) take any step preventing the performance of the time charters each dated 27 th March 1998 between the Claimant and the Defendant in respect of each of the vessels "LADY RACISCE" and "LADY KORCULA"".
The basic facts can conveniently be taken from the judge's summary:
"3. Lauritzen as Charterers manage a "pool" of "reefer" vessels of which the two "Lady" Vessels are part. The pool consists of a number of ships owned both by other related Lauritzen companies and external Owners who agreed to charter their ships to Lauritzen for it to manage on a fleet basis. The hire payable by Lauritzen to these Owners is calculated by reference to an elaborate formula depending upon the total revenue of the fleet which is then apportioned to the owners of pool ships in shares which vary according to the characteristics of each vessel, its days of availability for work in each month, its efficiency and its earning capability relative to the other fleet vessels, which is referred to as its "trade factor". As charterer, Lauritzen controls the trading of each pool vessel, negotiating its engagements, planning for its use in the fleet, scheduling its voyages and dealing with voyage operation, freight collection, cost control, accounting and claims handling. In this context it then informs the owners of the vessels in the pool of the hire due on a monthly basis and adjustments are made against an estimated contribution already paid.
4. For present purposes the detailed terms of the Charters do not matter. Lauritzen is entitled to a profit charge representing 6% of what is described as the "vessel return" which is the effective hire paid. In addition Lauritzen is entitled to an annual fee for management. Lauritzen is entitled to sublet the Vessel and is also entitled to charter in other Vessels for pool purposes. The Charters are on Cooltime 95 terms …..
……
6. In early 2003, there was a change in the beneficial ownership and control of the Liberian company (the Owners) and thus of the Vessels. ….. The Owners then sought information and documentation from Lauritzen about the operation of the pool and the calculation of the revenue paid to the ship owners in it. Allegations were made of implied terms in the Charters and of partnership and fiduciary duties and of mismanagement of the pool and inadequate reward to the Owners. The exchanges on these subjects led to a reference to Arbitration with Lord Millett as sole arbitrator, with a hearing on 27–29 July 2004, resulting in an Award published on 18 th October 2004 (the Duties Arbitration).
7. In addition to claiming that Lauritzen had breached various duties owed to the Owners under the Charters and had thus caused them loss, in a series of letters the Owners also informed Lauritzen of their desire to take the two Lady ships out of the pool, notwithstanding the fact that the Charters are due to run until 2010.
i) By letter of 18 th June 2004 the Owners solicitors wrote to Lauritzen stating that the pool was an illegal capacity cartel which did not qualify for exemption under the available block exemptions or under the provisions of Article 81 of the EC Treaty. The letter stated that it was not the "Owners' intention" to complain to the European Commission about this anti-competitive activity but sought, in accordance with its interpretation of the decision of the Commission in the East African Conference Report, to give notice of its desire to retake control of its Vessels not later than 31 st December 2004.
ii) By a further letter of 16 th August 2004, the same solicitors wrote to Lauritzen's solicitors setting out extensive arguments about the position under the European Law of Competition. The letter made the threat that if there was no agreement to allow the Owners to leave the pool compensation free on 15 th December 2004, the Owners would need to raise the matter with the European Commission.
iii) Further exchanges followed between the parties in which Lauritzen maintained that the Charters were entirely lawful and that there was no justification for the Owners' stance.
8. In consequence, on 15 th September 2004, Lauritzen commenced arbitration proceedings against the Owners to determine the alleged breaches of the EC Treaty, the validity of the Charters and the claim of the Owners to withdraw the Vessels in December 2004 (the Withdrawal Arbitration). Lauritzen sought an undertaking from the Owners that it would not withdraw the Vessels pending the final determination of these issues in the arbitration. On 29 th September 2004 the Owners' solicitors appointed their arbitrator in this reference. On the same day, the Owners refused to give the undertaking sought and maintained that the Charters were contracts for services, that specific performance would not be obtainable and that damages would be an adequate remedy.
9. Lauritzen commenced proceedings in these Courts on 7 th October 2004 but before the matter came before me, Lord Millett published his award in the Duties Arbitration, holding that Lauritzen was a fiduciary and owed implied duties to the Owners under the Charters. The claim that there was a partnership had been abandoned by the Owners but their other arguments as to the existence of duties were upheld by the Arbitrator.
10. In addition to the Duties Arbitration and the Withdrawal Arbitration, on 19 th October 2004, the Owners made a formal complaint to the European Commission concerning the alleged incompatibility of the pool system and the Charters with Article 81 of the EC Treaty. …..
11. It can be seen that stress is placed in this complaint upon both the size of reefer vessels and their age in the context of marketability and competition and that the Lady Vessels are considered highly desirable, being ships which "could exercise considerable competition vis-à-vis the Pool".
The issue – The Scaptrade
The judge then summarised certain arguments of jurisdiction or principle raised before him:
"13. Regardless of the factual circumstances the Owners maintain that, as a matter of historical legal principle, the Court could not make orders in the form set out in paragraphs (a) and (b) above. The reason for this is that such orders are said to be pregnant with an affirmative obligation to perform the charter-party which is tantamount to specific performance and it is trite law that specific performance of a charter-party is not an available remedy. The same objection is not said to apply to (c) above which is framed as the enforcement of an implied negative covenant which does not equate to an order for specific performance inasmuch as the Owners could, in law, if not in practical commercial reality, consistently with such an order keep the Vessels idle without performance of the Charters or performance of any alternative employment.
14. Nonetheless, the Owners maintained that, as the result of Lord Diplock's speech in The Scaptrade [1983] 2 AC 694 at page 700–701, it was not now possible for a Court to make an order in any of the forms sought because in substance, if not in form, it amounted to a decree of specific performance. The critical part of Lord Diplock's speech reads as follows: —
"To grant an injunction restraining the ship owner from exercising his right of withdrawal of the Vessel from the service of the Charterer, though negative in form, is pregnant with an affirmative order to the ship owner to perform the contract; juristically it is indistinguishable from a decree for specific performance of a contract to render services; and in respect of that category of contracts, even in the event of breach, this is a remedy that English Courts have always disclaimed any jurisdiction to grant."
Cooke J did not agree that Lord Diplock's statement in The Scaptrade precluded the grant of an injunction in the terms of either of sub-paragraphs (b) and (c), in which he granted the same. He referred to a series of cases in which he thought that similar...
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Table of Cases
...942 (8th Cir. 1976) .................................. 390 Lady Navigation Inc. v. Lauritzencool AB (2005), [2006] 1 All E.R. 866, [2005] EWCA Civ 579 ...............................430–31, 432 Laiken v. Carey, 2011 ONSC 5892 .......................................................................