Briefing Note

Injunctions

Updated September 2014

Introduction

This Briefing Note explains what an injunction is; the different types of injunction; when an injunction will be granted and how to obtain and enforce an injunction.

This Briefing Note should not be relied upon as legal advice and you should contact us for advice on your specific circumstances.

  1. What is an Injunction?

In simple terms, an injunction is a court order prohibiting a person from doing something (a Prohibitory Injunction) or requiring a person to do something (a Mandatory Injunction). Prohibitory Injunctions are most commonly granted in business protection cases, although there are other specific forms of injunctions including Springboard Injunctions, Search Orders, Norwich Pharmacal Orders and Freezing Injunctions which are beyond the scope of this Briefing Note.

One of the benefits of an injunction as a remedy, as opposed to a claim for damages or an account of profits, is that injunctions can either be interlocutory or final.[1] An interlocutory or interim injunction is granted at an early stage in the court proceedings, pending a final decision by the court at trial. Interim Injunctions can be granted until a specified date or until the trial of the action.

A final injunction is granted at the conclusion of proceedings and will either last to a specified date, or indefinitely. Generally speaking, the burden of proof upon the Claimant for a final injunction is higher than it is for an interim injunction. The great majority of business protection cases settle before trial and therefore the rest of this Briefing Note will focus upon principles and procedures relating to Interim Injunctions, although they generally hold good for final injunctions as well.

  1. Interim Injunctions

Discretionary Remedy

It should be understood that an injunction is granted at the discretion of the court – it is not available as a remedy as of right. An injunction will usually be granted where it appears to the court to be just and convenient to do so[2]. Whether the court will exercise its discretion to grant an injunction will depend on a number of factors including, whether there has been any delay, whether the injunction can be framed in clear terms so that it can be properly policed, and whether the Claimant has itself embarked on any misconduct or illegality that is linked to the relief sought – often referred to as “unclean hands”.

That being said, the court must exercise its discretion in accordance with guidelines laid down by Lord Diplock in the seminal case of American Cyanamid Co –v- Ethicon Limited[3]

The American Cyanamid Guidelines

The guidelines require a consideration of the following questions:-

  • Is there a serious issue to be tried
  • Would damages be an adequate remedy
  • Where does the balance of convenience lay
  • Are there any other special factors

Serious Issue to be Tried

It is not necessary for the Claimant to show that it is more likely than not to obtain a final injunction at trial. All the Claimant needs to satisfy the court of at this stage, is that the claim has some substance and is not frivolous or vexatious. Only if the Claimant fails to satisfy the court that it has any real prospect of success will it fail this test.

Adequacy of Damages

The court will next consider whether damages would be an adequate remedy for the Claimant. This question is first considered from the Claimant’s point of view. It is commonly found in business protection cases that damages will not be an adequate remedy. Firstly it is often impossible or extremely difficult to quantify loss in such cases. For example, in a solicitation case, it would be necessary to prove that the loss of a client occurred as a result of the solicitation rather than for some other reason, such as, the employee’s departure. It may also be difficult to prove consequential loss such as loss of goodwill.

It is frequently the case that the employee will have insufficient funds to meet an award of damages (particularly if they have to pay costs as well). A consideration of the parties’ respective financial positions may therefore have to be undertaken by the court, although it is usually the case that the court will find in the Claimant’s favour at this stage of a business protection dispute.

The same question will also be considered by the court from the Defendant’s perspective in respect of the Claimant’s Cross Undertaking in Damages (see below). Damages may be hard to assess where the effect of an interim injunction is to stifle a start up business – whereas this is less likely to be the case where the employee will merely suffer loss of earnings for going to work for a competitor as a mere employee.

Balance of Convenience

The third stage of the test is for the court to weigh the respective inconvenience or loss to each party dependant on whether or not the interim injunction is granted. The competing factors and weight to be attached to each, varies from case to case and cannot easily be listed but they have been found to include the deprivation of employment; the importance of preserving confidential information; damage to the goodwill of the business and the attitude and conduct of the defendant. As stated by Staughton LJ “the main question is then one of lesser evil: will it do less harm to grant an injunction which subsequently turns out to be unjustified, or to refuse one if it subsequently turns out that an injunction should have been granted…”[4] otherwise referred to by May LJ as “the balance of the risk of doing an injustice…”[5].

The way the courts apply the balance of convenience test, varies from case to case. For example, the fact that an injunction would cause disproportionate harm to a start-up business, has been held to be a determinative factor[6] whereas the fact that an injunction, against unlawful use of information, may drive a start-up into liquidation, was regarded as of no consequence[7].

Lord Dipolock, in American Cyanamid, concluded that where the other factors appear to be evenly balanced, the court should take such measures as are calculated to preserve the status quo. In business protection cases however, events can move quickly and at what point is the status quo to be judged from? In a subsequent case Lord Diplock suggested it should be the date from when proceedings were issued[8]. It was suggested by Dillon LJ, that in the absence of a letter before Action, the status quo should be judged from the date of service of the proceedings rather than issue.[9] In the context of a restrictive covenant case, the status quo is likely to be judged from the date immediately before the employee allegedly breached the covenant[10].

Another issue the court will take into consideration, is the length of time the interim injunction will remain in place before there can be trial. The fact that a judge (as is commonly the case is business protection disputes) was prepared to give directions for a speedy trial of the issues, would be a relevant factor when weighing the balance of convenience[11]. Lord Diplock also concluded that, where the advantages and disadvantages to the respective parties were evenly balanced, it may be appropriate to consider the relative strengths of each party’s case, based on the written evidence adduced at the hearing of the application. He made it clear that a consideration of the evidence was only appropriate, where there could be no credible dispute on the facts. The court could not embark on anything resembling a trial of the action upon conflicting evidence at the interim stage.

Laddie J, was of the view that Lord Diplock only intended to exclude consideration of the relative merits of the case where there were particularly intractable issues of fact or law involved. If the court could come to a view as to the strength of the case based upon credible written evidence, then it should do so[12]. Laddie J, gave the following guidance, which should be seen as supplementing the American Cyanamid Guidelines;

  • Interim Injunctions are discretionary and depend on all the facts of the case.
  • There are no fixed rules as when an interim injunction should or should not be granted – the relief must be kept flexible.
  • The court should rarely attempt to resolve complex issues of disputed fact or law at the interim stage.
  • The court should bear in mind the extent to which damages are likely to be an adequate remedy and the ability of the other party to pay; the balance of convenience; maintenance of the status quo and any clear view the court can reach as to the relative strength of the parties’ cases.

 Exceptions to the American Cyanamid Guidelines

Whilst the American Cyanamid guidelines apply in restraint of trade cases[13] the guidelines are not applied inflexibly and an exception will be applied, in particular, where the case is unlikely to come to trial before the interim relief has served its purpose – in other words, so as to render the interim hearing effectively determinative of the entire case. This is a particular feature of restrictive covenant injunctions, where by their very nature there is often a limited period of time to run.

In Lansing Linde Ltd –v- Kerr[14] the judge at first instance, declined to grant an injunction based on his view of the strength of the respective cases. He indicated he would have done so, had he thought the claim likely to succeed at trial. The matter came before the Court of Appeal, which upheld the judge’s departure from a strict application of the American Cyanamid principles. Staughton LJ, explained that if it is not possible to hold a trial before the injunction will expire, or substantially expire, then justice requires some consideration at the interlocutory stage as to whether the Claimant would be likely to succeed at trial. In these circumstances it is not enough to decide merely that there is a serious issue to be tried. Whilst it is unsatisfactory to determine cases based on written evidence, it is for the judge to control the extent of the evidential assessment.

  1. Procedural Issues

Timing

An application for an interim injunction can be made at any time, including before proceedings are started and after judgment has been given[15]. Typically, however, an application is made at the same time, or shortly after, the claim has been issued. The court may only grant an interim remedy before a claim has been issued if the matter is urgent or it is otherwise in the interests of justice to do so[16]. If the application is heard before proceedings are issued, the applicant will be required to give an undertaking to issue a claim form as soon as possible thereafter.

It is essential that the Claimant applies for an injunction without delay. It is even possible to apply for an injunction before a breach of contract has taken place where there is strong evidence that a breach is imminent.

Jurisdiction

Injunction applications should normally be made to a High Court Judge[17]. Both the Chancery Division and the Queens Bench Division have jurisdiction to hear such applications and further useful procedural information can be obtained from the Chancery Guide and Queens Bench Guide.

Masters and District Judges in the High Court only have power to grant limited kinds of injunctions by consent[18] or to vary or discharge an injunction previously granted with consent[19].

A County Court Judge with trial jurisdiction also has the power to grant interim injunctions but a County Court District Judge only has the power to vary or discharge an injunction with the consent of all of the parties[20]. The application should only be made in the court in which the substantive proceedings have been, or will be, issued unless there is a good reason to apply to a different court[21].

With or Without Notice?

Most applications for interim relief are made on notice to the respondent. The general rule is that a copy of the application notice must be served as soon as practicable after it is filed at court and, in any event, at least 3 clear days before the hearing at which the court will deal with the application takes place[22]. Where there is insufficient time to give 3 clear days notice because of the urgency of the application, the court will still expect the applicant to give some, albeit reduced, notice to the respondent. This is known as “informal notice”[23].

The value of applying on informal notice has been called into question following the judgment of Silber J in CEF Holdings Ltd and Another v Mundey & Others[24] where the Judge found that if a shorter period of notice is given – particularly if a much shorter period of notice is given – then the respondents to the application cannot be expected to be properly prepared and to put all relevant legal and factual information before the court. In such circumstances, the applicant is under an obligation to give full and frank disclosure (see below), save in respect of factual and legal issues that the respondent raises and deals with at the hearing. In many ways, therefore, an applicant who gives informal notice has the worst of both worlds, as the respondent is aware of the application but the applicant still has the more onerous duties that it would have been under had it applied without notice.

The court may grant an interim remedy on an application made without notice only where it appears that there are good reasons for not giving notice[25]. The usual reason for not giving notice is where such notice would defeat the purpose of making the application. This is particularly the case where the application is for a search order or a freezing order.

Where a without notice application is made, the reasons why it should be heard without notice must be included in the supporting evidence. Generally speaking, if the parties have engaged in pre-action correspondence, or if there has been delay, a without notice application will not be justified.

If an application is made without notice, additional onerous obligations are placed upon the applicant and his lawyers. Most significant of these is the duty to make full and frank disclosure, in other words to disclose to the court all relevant facts and points of law in relation to the application, whether they support the applicant’s case or are adverse to it. The duty extends to information that the applicant would have known if he had made reasonable and proper enquiries prior to making the application[26]. Not only must there be full and frank disclosure but there must be a fair, thorough and objective presentation of any facts adverse to the applicant’s case[27].

Where a material non-disclosure or misrepresentation is established (usually at the subsequent on notice hearing) the court will generally discharge the injunction and penalise the applicant in costs[28], although the court will continue the injunction and look for some other sanction against the applicant if it would otherwise result in an injustice[29].

Furthermore, the applicant’s lawyers must make a full note of what was said during any without notice hearing and immediately provide a copy of that note to all affected parties[30]. This is important so that those affected by the order will know the basis on which it was made and so the respondent can make an informed decision to apply to discharge the order if there has been a failure to make full and frank disclosure. The note of the hearing must be provided to the respondent whether or not it is asked for.

How to Apply

To make an application for interim relief, the applicant must file with the court the following documents:-

  • An application notice (usually form N244)
  • The claim form
  • Evidence in support usually in the form of witness statements or affidavits and exhibits
  • A draft order

Counsel conducting the hearing will, in addition, prepare a skeleton argument and file it with the court 2 clear days before the hearing, if possible.

Cross Undertaking in Damages

It is a long-standing and invariable practice of the courts to require a claimant who obtains an interim injunction to give an undertaking in damages to the respondent against whom the injunction has been granted. The cross-undertaking will usually be included within the draft order provided by the applicant. The purpose of the undertaking is to require the claimant to pay for any damage the respondent sustains by reason of the injunction, in the event that the court concludes at a later date that the injunction should not have been granted, or should not have been granted for the length of time that it was.

Typically, in the case of companies, the company’s most recent annual accounts and up-to-date management accounts will be exhibited.

It is generally good practice to include evidence about the applicant’s ability to meet the cross-undertaking in damages if called upon to do so, within the supporting witness statement. Where there is doubt about the applicant’s ability to satisfy the undertaking the court may require the provision of some security, such as a bank guarantee or a payment into court.

The Order

It may be stating the obvious, but the order must be drafted with precision so that it is clear what the respondent must not do[31].

Additionally, the order will usually contain a penal notice, warning the respondent that disobedience to the order would be a contempt of court punishable by imprisonment, a fine or sequestration of assets[32]. In the absence of such penal notice, it may not be possible to enforce the order by committal proceedings.

The order must also contain any undertakings the applicant gives to the court, such as the undertaking in damages, an undertaking to serve the application notice and supporting evidence where the hearing was without notice on undertaking, to fix a return date or to issue a claim form where that has not already been done.

Service

The application notice, supporting evidence, draft order and claim form must be served in accordance with the CPR unless the application is being made without notice. If it is, these documents, together with a full note of the hearing, must be served on any party or person against whom the order was either sought or obtained[33].

In order to be able to enforce the order through committal proceedings, the order containing the penal notice must be served upon the respondent personally,[34] although the court may dispense with personal service of a prohibitory interim injunction if it is satisfied that the respondent had notice of the order by either being present when it was made or notified of its terms by telephone, email or otherwise[35].

  1. Enforcing an Injunction

The usual remedy for breach of an injunction containing a penal notice is through committal proceedings for contempt of court. In other words, an application is made to commit the party in breach to prison, although the court has a range of sanctions available to it including the imposition of a fine or the sequestration of assets. The court could also order that an act is done at the expense of the disobedient party. These remedies are also available to any third party who has aided or abetted the breach of an injunction or undertaking[36].

The committal application is made using a Part 8 claim form unless it is made in the course of existing court proceedings in which case the application may be commenced by application notice. The application will be heard by a single High Court Judge. The application notice must make it clear what the contemnor is said to have done in breach of the order.

The court will not grant an order for committal if the order or undertaking itself is found to be ambiguous[37]. The criminal burden of proof applies, so a person will not be found to be in contempt of court unless it is established beyond reasonable doubt that he has breached an order or an undertaking. That being said, it is not necessary to establish that the contemnor deliberately set out to be in contempt of court. It is necessary to prove that the conduct was intentional, rather than accidental and that the contemnor was aware of the facts which rendered his conduct a breach of the order or undertaking.

A director may, in certain circumstances, be committed for contempt where it is his company that is in breach of an injunction[38].

Committal to prison is not the automatic sanction for contempt of court. Much will depend upon the egregiousness of the breach.

  1. Discharge of an Injunction

An injunction can be discharged at the court’s discretion when the matter next comes before the court. Usually an injunction will be discharged if:-

  • It has now served its purpose
  • It has become oppressive
  • There has been delay since the injunction was granted
  • There has been material non-disclosure when it was granted without notice

[1] s.37 (1) Senior Courts Act 1981.

[2] Ibid and s.38 County Courts Act 1984

[3] [1975] AC 396.

[4] Lansing Linde Ltd –v- Kerr [1991] 1 WLR 251, CA,

[5] Cayne –v- Global Natural Resources Plc [1984] 1 All ER 225.

[6] Lock International Plc –v- Beswick [1989] 3 All ER 373.

[7] Roger Bullivant Ltd –v- Ellis [1987] ICR 464, CA

[8] Garden Cottage Foods Ltd –v- Milk Marketing Board [1984] 1AC 130 HL

[9] Graham –v- Delderfield [1992] FSR 313, CA

[10] Unigate Dairies Ltd –v- Bruce, The Times 2nd March 1988

[11] Talaris (Sweden) AB –V- Network Controls International Ltd [2008] EWHC 2930 (TCC)

[12] Series 5 Software Ltd –v- Clark [1996] 1 All ER 853

[13] Lawrence David –v- Ashton [1989] ICR 123

[14] [1991] 1WRL 251, CA

[15] CPR 25.2(1).

[16] CPR 25.2(2)(a) and (b)

[17] PD 2B.2.2

[18] PD 2B.2 and PD 25A.1.2

[19] PD 2B.2.4 and PD 25A.1.3

[20] PD 2B.2.4

[21] CPR 23.2

[22] CPR 23.7(1)

[23] PD 23A 4.2

[24] [2012] EWHC 1524

[25] CPR R25.3(1)

[26] Siporex Trade SA v Comdel Commodities [1986] 2 Lloyd’s Reports 428

[27] Marc Rich & Co Holding GmbH v Krasner Court of Appeal 15 January 1999

[28] Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350

[29] Sita UK Group Holdings Ltd & Another v Serruys & Others [2010] EWHC 698

[30] Thane Investments Ltd v Tomlinson [2002] EWHC 2972

[31] Lawrence David Ltd v Ashton (n 13)

[32] CPR R 81.9(1)

[33] CPR R23.991) and (2)

[34] CPR 81.9 (1) and 81.6

[35] CPR 81.8.(1) See for example Hydropool Hot Tubs Ltd v Roberjot & Another [2011] EWHC 121 (Ch)

[36] Elliot v Klinger [1967] 1 WLR 1165

[37] R v City of London Magistrates Court, ex p Green [1997] 3 ALLER 551

[38] Sectorguard Plc v Deinne Plc [2008] EWHC 2693 (Ch)

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