Priyanka Shipping Ltd v Glory Bulk Carriers PTE Limited

Factual and Procedural Background

The dispute arises from the sale of a 2002-built Capesize bulk carrier ("the Vessel") by the Defendant ("the Seller"), a Singapore company, to the Plaintiff ("the Buyer"), a one-ship company incorporated in Nevis. The sale was pursuant to a Memorandum of Agreement ("MOA") dated 26 April 2019, under which the Buyer purchased the Vessel for demolition only and guaranteed not to trade the Vessel further or sell it except for demolition purposes (Clause 19).

The Vessel was delivered to the Buyer on 14 May 2019 at Singapore and renamed. Initially, the Buyer intended to comply with the demolition restriction. However, by 20 May 2019, due to market conditions and lack of interest from scrap buyers, the Buyer sought to trade the Vessel, concluding three trading fixtures for carriage of coal, in breach of Clause 19.

The Seller objected to the trading, asserting a policy of scrapping older vessels to reduce market oversupply, and refused to waive Clause 19. The Seller commenced proceedings in the High Court of Gujarat, India ("the Indian Proceedings"), arresting the Vessel and claiming damages for breach of Clause 19 and alleging breach of an exclusive jurisdiction clause (Clause 16) in the MOA. The Buyer contended that the Indian Proceedings breached the exclusive jurisdiction clause and sought relief in the English courts.

The Buyer applied for an interim anti-suit injunction in England to restrain the Indian Proceedings, which was dismissed on undertakings by the Seller. Subsequently, the Buyer sought declaratory relief that the Seller was entitled only to nominal damages for breaches of Clause 19 and applied for summary judgment on this claim. The Seller opposed, counterclaiming for damages and a final injunction to enforce Clause 19, preventing further trading.

The court ordered that the Buyer's claim for declaratory relief ("the Damages Declaration") and the Seller's injunction counterclaim ("the Injunction Counterclaim") and damages counterclaims ("the Damages Counterclaims") be tried together on an expedited basis. The trial took place on 24 September 2019.

Legal Issues Presented

1. Whether the Seller is entitled only to nominal damages or to substantial damages for breaches of Clause 19 of the MOA relating to the trading of the Vessel.
2. Whether the court should grant a final injunction enforcing Clause 19 to prevent any further trading of the Vessel by the Buyer.
3. Whether negotiating damages (damages measured by the economic value of the breached right) are available to the Seller for breaches of Clause 19.
4. The extent to which damages are an adequate remedy and the circumstances in which damages in lieu of an injunction should be awarded.
5. The scope and enforceability of the exclusive jurisdiction clause (Clause 16) in the MOA, and whether the Indian Proceedings breached it.

Arguments of the Parties

Seller's Arguments

• Clause 19 contains a negative covenant restricting the Buyer from trading the Vessel, which should be enforced by injunction as a matter of English law.
• There is a strong presumption that negative covenants are enforced by injunction unless the Buyer rebuts it by showing unconscionability or oppression.
• The Seller has suffered loss measured by the economic value of the right breached, estimated by the difference between the Vessel's scrap value and its market value without the trading restriction.
• The Seller seeks damages for breach of contract at common law, equitable damages, and damages in lieu of injunction, based on the profits earned by the Buyer from trading fixtures.
• The Indian Proceedings were justified as they sought security and did not breach the exclusive jurisdiction clause.

Buyer's Arguments

• The Buyer does not dispute that Clause 19 contains a negative covenant but argues damages would be an adequate remedy, and an injunction should be refused.
• The Seller's interest in Clause 19 is purely financial and the Seller has no measurable financial interest in restraining trading.
• The Seller's conduct, including arresting the Vessel and threatening re-arrest, is vexatious and oppressive.
• The Buyer contends the Seller is entitled only to nominal damages for breach of Clause 19, as the Seller cannot prove loss.
• The Buyer argues that negotiating damages are not available because the Seller does not have a proprietary or valuable asset interest affected by the breach.
• The Buyer claims the Indian Proceedings breached the exclusive jurisdiction clause and seeks declaratory relief accordingly.
• The Buyer submitted that damages in lieu of injunction under the Senior Courts Act 1981 should be considered, but that damages would be nominal or zero.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Doherty v Allman (1878) 3 App. Cas. 709	Negative covenants are generally enforced by injunction without discretion except in exceptional cases.	Established the strong presumption in favor of injunctions for negative covenants; court applied this presumption.
Sharp v Harrison [1922] 1 Ch. 502	Consideration of injunctions for breach of negative covenants and circumstances to refuse injunction.	Used to illustrate discretion in injunctions but reaffirmed injunctions are generally granted for negative covenants.
Warner Brothers Pictures, Inc. v Nelson [1937] 1 KB 209	Injunctions for negative covenants in personal service contracts are discretionary but generally granted.	Supported principle that injunctions for negative covenants are the norm unless oppressive.
Attorney General v Barker [1990] 3 All ER 257	Enforcement of negative covenants and adequacy of damages in interlocutory injunctions.	Confirmed injunctions are generally granted; adequacy of damages considered but does not preclude injunction.
Insurance Co v Lloyd's Syndicate [1995] 1 Lloyd's Rep. 272	Summary of principles for injunctions enforcing negative covenants and discretion.	Principles summarized and applied; injunctions are the ordinary remedy.
Tye v House (1998) 76 P. & C.R. 188	Consideration of damages as alternative to injunction where injunction may be inappropriate.	Referenced in discussion of when damages in lieu of injunction might be appropriate.
Araci v Fallon [2011] EWCA Civ 668	Discretionary nature of injunctions for negative covenants and adequacy of damages.	Confirmed injunctions are generally granted unless oppressive; adequacy of damages not usually relevant.
P v D [2016] EWCA Civ 87	Enforcement of post-termination restrictive covenants and discretion over injunctions.	Reaffirmed starting point that injunction is the ordinary remedy; burden on defendant to show why not.
Shelfer v City of London Electric Lighting Company [1895] 1 Ch. 287	Criteria for awarding damages in lieu of injunction and when injunctions may be refused.	Applied as a "good working rule" for discretion over injunctions and damages in lieu.
Jaggard v Sawyer [1995] 1 WLR 269	Application of Shelfer criteria and oppression test for injunctions.	Confirmed oppression as key test for refusing injunction and awarding damages instead.
HTC Corporation v Nokia Corporation [2013] EWHC 3778 (Pat)	Application of Shelfer and Jaggard principles, focus on oppression test.	Reinforced that injunctions are the prima facie remedy and refusal depends on oppression.
One Step (Support) Ltd v Morris Garner [2018] UKSC 20	Clarification of negotiating damages (Wrotham Park damages) and their availability.	Applied to assess whether negotiating damages were available; court held they were not in this case.
Johnson v Agnew [1980] AC 367	Principles for assessment of damages under common law and Lord Cairns' Act.	Confirmed damages under different legal bases are assessed similarly.
Wrotham Park Estate Co. Ltd v Parkside Homes Ltd [1974] 1 WLR 798	Foundation for negotiating damages as damages in lieu of injunction for breach of restrictive covenants.	Discussed as foundational authority for negotiating damages but distinguished on facts.
Experience Hendrix LLC v PPX Enterprises, Inc. [2003] 1 All ER (Comm) 830	Damages for breach of contract relating to intellectual property rights; negotiating damages.	Considered as an example of negotiating damages in breach of IP rights; court analyzed analogy.

Court's Reasoning and Analysis

The court began by addressing the Injunction Counterclaim. Clause 19 of the MOA was a negative covenant restricting trading of the Vessel, which English law generally enforces by injunction unless exceptional circumstances exist. The court reviewed authorities confirming that injunctions for negative covenants are the ordinary remedy and that the burden lies on the party breaching the covenant to show why injunction should not be granted.

The Buyer failed to rebut this presumption. The breaches were deliberate, including a fixture concluded shortly before the trial in full knowledge of the injunction application, which the court regarded as cynical. The economic hardship on the Buyer was insufficient to render the injunction unconscionable or oppressive. The Buyer had options such as laying up the Vessel but chose to trade instead.

The court found damages would not be an adequate remedy for the Seller because the Seller had a legitimate commercial interest in enforcing the demolition-only restriction to reduce market oversupply, and damages would be uncertain and difficult to quantify. The Seller's conduct, including arresting the Vessel, was not vexatious or oppressive.

Accordingly, the court granted the final injunction preventing further trading of the Vessel, including the recently concluded Third Fixture.

Regarding the Damages Counterclaims, the Seller sought damages on two bases: common law damages measured by the economic value of the breached right (negotiating damages) and damages in addition to an injunction under section 50 of the Senior Courts Act 1981. The court held that the assessment of damages under both bases should be the same.

The court analyzed the availability of negotiating damages in light of the Supreme Court's decision in One Step. Negotiating damages are available where the breach results in loss of a valuable asset created or protected by the breached right, such as restrictive covenants over land or intellectual property rights. The court found that the Seller’s interest in Clause 19 was not analogous to these cases because after sale and delivery, the Seller had no proprietary interest in the Vessel or right to control its use.

The Seller's right under Clause 19 was more akin to a non-compete obligation, which the Supreme Court in One Step held does not attract negotiating damages absent conventional loss. The Seller did not plead or prove conventional loss or loss of profits. Therefore, the Seller was entitled only to nominal damages for past breaches.

Finally, the court considered the Damages Declaration sought by the Buyer, declaring the Seller entitled only to nominal damages for past and future breaches. The court was willing to declare nominal damages only for past breaches (First and Second Fixtures) but declined to make a broad declaration for future breaches, as circumstances were unknown and the court did not wish to encourage deliberate future breaches.

Holding and Implications

Holding:

• The court granted the Seller a final injunction enforcing Clause 19 of the MOA, preventing any further trading of the Vessel by the Buyer.
• The Seller’s counterclaim for substantial damages for breaches of Clause 19 in respect of the First and Second Fixtures was dismissed; the Seller is entitled only to nominal damages for those breaches.
• The court declared that the Seller is entitled only to nominal damages for the past breaches but declined to make a declaration limiting damages for any future breaches.

Implications: The decision enforces the principle that negative covenants restricting use of property are ordinarily enforced by injunction, especially where breaches are deliberate. The ruling clarifies the limited availability of negotiating damages, emphasizing that such damages require a proprietary or valuable asset interest protected by the breached right, which was absent here. The court’s refusal to preemptively limit damages for future breaches discourages deliberate contractual breaches by the Buyer. No new legal precedent was established; rather, the court applied existing principles to the facts.