Pillsbury Winthrop Shaw Pittman

English law: when contractual limitations on damages can backfire

By Raymond L Sweigart

In AB v CD [2014] EWCA Civ 229, the Court of Appeal for England and Wales addressed an issue with surprisingly little precedent. It held that a claimant seeking an injunction to prevent an alleged wrongful termination of a contract was entitled to argue that damages could not be an adequate remedy because recoverable damages were limited or excluded under the contract.

The claimant, AB, instituted arbitration proceeding against CD, and also sought an interim injunction before Stuart-Smith J of the English High Court Queen’s Bench Division under section 44 of the Arbitration Act 1996 requiring CD to continue to perform his obligations under the contract and preventing termination of a licence of certain intellectual property rights pending the conclusion of the arbitration proceedings. The claimant argued in support of its application for injunctive relief that damages would not be an adequate remedy at law since the contract excluded liability for a number of types of loss and otherwise capped the total damages recoverable.

Judge Stuart-Smith concluded that AB’s application should be refused because CD did have an adequate remedy in damages. He proceeded nevertheless to consider whether if he had reached the opposite conclusion the balance of convenience would have favoured the grant of an injunction. He held that it would, relying on the decision in Ericsson AB v EADS Defence and Security Systems Ltd [2009] EWHC 2598 (TCC). However, he believed that there was a tension between that decision and other authority and therefore gave AB permission to appeal…

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