Cyanamid revisited

Last month's appeal in Bath and North East Somerset District Council vs Mowlem concerned Mowlem's attempt to overturn an interim injunction in connection with the Bath Spa Project. The case threw up some interesting points on the court's approach to interim injunctions and the leading case of American Cyanamid vs Ethicon.

The purpose of the project in Bath is to restore the historic spa building. By mid-2003, however, the paint coatings that had been applied to pools on the site were causing concern (as reported in Building, most recently on 27 February, page 13).

Under the JCT contract used by the parties, the contractor has to comply with instructions issued by the architect (clause four). If it fails to do so after written notice, the employer can engage others to do the work. The council's architect had instructed Mowlem to remove the paint. When Mowlem failed to do so after written notice was given, the council instructed another contractor to carry out the work. Mowlem refused to give that contractor access to the site and made an offer to accept the instruction but on terms that Judge Seymour said could be disadvantageous to the council.

The judge granted an interim injunction restraining Mowlem from denying the other contractor access. He applied the well-known guidelines set out by Lord Diplock in American Cyanamid. He found that there were serious issues to be tried and considered where the balance of convenience lay. He held that if the matter went to trial and the council was successful, damages would not give it an adequate remedy. In contrast, he said there would be no obvious detriment to Mowlem if the injunction was granted.

Mowlem's appeal was limited to the finding that damages would not be an adequate remedy for the council. In the contract, liquidated damages for delay had been agreed. Mowlem argued that if the council succeeded at trial, the loss suffered in the meantime would be delay to the project. It said that since the council had agreed to accept liquidated damages for any delay, it could not now suggest that an award of damages would be inadequate compensation. On that basis, Mowlem said that the council could not overcome one of Diplock's main hurdles: the inadequacy of damages as a remedy.

The court said that in fixing a level of liquidated damages a large number of intangible considerations might play a part

The Court of Appeal pointed out that Diplock's speech in Cyanamid was not a statute. The jurisdiction to grant injunctions was not formally limited by the guidelines in that speech. This point had been made in other cases: in Lansing Linde vs Kerr Butler-Sloss, for example, the judge had said that the guidelines in Cyanamid did not cover every eventuality.

The court also said that in fixing a level of liquidated damages a large number of intangible and unknown considerations might play a part. It could not be assumed that the parties agreed that the damages constituted a measure of the full loss that might be suffered. For example, the damages might be limited for commercial reasons. It would be wrong to say that an agreement to liquidated damages should be regarded as a conclusive quantification of loss not only in the context of a claim for damages but also in the context of a claim for an injunction.

The court went on to say that it was open to the council to rely on wider considerations, namely the likelihood that delay to the project would cause loss to the general public through the negative effect on economic regeneration. The benefits expected to flow once the project was completed included, for example, extra visitors, extra trade for hotels and restaurants, additional parking revenue and extra demand in the local economy. Delay to the project could cause unquantifiable and, to a substantial extent, irrecoverable damage to the council's general public aims. These aspects, the court held, could be taken into account in deciding whether or not damages would be an adequate remedy.