Injunctions, a new regime for damages in lieu

For over one hundred years the decision of the Court of Appeal in Shelfer v. City of London Electric Lighting Co [1895] 1 Ch 287 governed the circumstances in which damages in lieu of an injunction could be warded. In Lindley LJ’s classic formulation, in order for there to be an award of damages in lieu it needed to be shown that the injury to the claimant’s rights was small, was capable of being estimated in money, was capable of being compensated by a small money payment, and that it would be oppressive to grant an injunction.

These principle have always been controversial in their application. On the one hand allowing damages in lieu of an injunction restraining interference with a property right allows for a form of compulsory purchase by a wrongdoer. On the other granting injunctions may allow owners who are little affected to extort large amounts of money in order to allow otherwise desirable development. There has also been the continuing controversy of what amounts to oppression: one man’s meat is another man’s poison.

In the recent decision of the Supreme Court in Coventry v. Lawrence [2014] UKSC 13, the Court decided to signal a move ways from the Shelfer criteria.  Lord Neuberger said that the courts should adopt a more flexible approach, in which the public interest could be taken into account on all occasions. However the burden would be on the defendant to show why an injunction should not be granted. He refused to give any firm guidance, on the ground that that could do more harm than good. He indicated that where all four Shelfer criteria were made out it would normally be right to refuse an injunction. However he also said that an injunction could be refused even where some of the criteria were not made ou

Lord Sumption and Lord Clarke appeared to favour an even more liberal approach, while Lords Mance and Carnwath, while supporting the move from Shelfer, were more cautious as to how far.

The real issue for practitioners is how to advise clients who are wishing to seek, or to defend applications for, injunctions for breaches of property rights.  The Court of Appeal, while mentioning the Coventry decision on a number of occasions, is yet to give any guidance. There are, however, some first instance decisions

In the case of  Comic Enterprises Limited v. Twentieth Century Fox Film Corporation [2014] EWHC 2286 (Ch), Roger Wyand QC sitting as a deputy High Court Judge, having discussed Lord Neuberger’s remarks in Coventry v. Lawrence, sai

“From all of this I extract the conclusion that I have to apply a multifactorial exercise balancing the two competing fundamental rights with no presumption that either one automatically trumps the other. There is, however, a legal burden on the Defendant to show why an injunction should not be granted. It will depend upon the facts of the case. That is the approach I intend to adopt here“

This was a case concerning the infringement of a trademark

Also, in case of Charlie v. Risetall Ltd [2014] EWHC 4057 Nicholas Strauss QC, in giving summary judgment for an injunction in a case of flagrant trespass expressed the view that the Court now has an unfettered discretion over whether to award damages in lieu, taking into account the public interest and the interest of third parties.

A few observations arise from the decisions.

First, the new approach would appear to be slightly more defendant friendly. While the burden is on the defendant to show why an injunction should not be granted, it will not be necessary to make out all of the Shelfer criteria.

Second, claimants may need to give greater thought to obtaining interim injunctions against the conduct complained of. This is so that they will not be faced at trial with the argument that the infringement may easily be compensated by a money payment.

Third, the question of planning permission will be more relevant in weighing the factors for and against the grant of an injunction. How relevant that will be remains to be seen.

Fourth, the jurisdiction to discharge or modify covenant under Section 84 law of property Act 1925 may become of lesser importance, if defendants are better able to “buy off” injunctions.

Back to News »