THE LAW OF INJUNCTIONS

Transcription

1 THE LAW OF INJUNCTIONS INTRODUCTION TO THE LAW OF INJUNCTIONS The source of the jurisdiction of the High Court to grant an injunction (whether interim or final) is s.37 of the Senior Courts Act 1981 and of the county court to do so iss.38 of the County Courts Act The jurisdiction is exercisable even where it interferes with the exercise of statutory powers expressly conferred on one of the parties (Coventry City Council v PGO [2011] EWCA CIV 729). An injunction may be granted in support of any legal or equitable right known to English law (including directly enforceable rights arising under English law). Such rights include, in addition to causes of action at common law or under statute, directly enforceable rights arising out of the treaties constituting the European Union and Directives issued by the Commission pursuant to the treaties (Garden Cottage Foods Ltd v Milk Marketing Board [1984] A.C. 130; Argyll Group Plc v Distillers Co. Plc [1986] 1 C.M.L.R. 764; Cutsforth v Mansfield Inns Ltd [1986] 1 W.L.R. 558). An injunction may also be granted: As an interim remedy under s.25(1) of the Civil Jurisdiction and Judgments Act 1982 (as amended by the Civil Jurisdiction and Judgments Act 1991 s.3 and Sch.2 paragraph 12 and the Civil Jurisdiction and Judgments Order 2001 (SI 2001/3929) made in pursuance of Council Regulation (EC) No. 44/2001, and extended by the Civil Jurisdiction and Judgments Act 1982 (interim Relief) Order 1997 (SI 1997/302)). To restrain the commencement of threatened or intended and the continuation of actual proceedings before courts in England and Wales, or before foreign courts, or arbitration proceedings (Mann v Goldstein [1968] 1 W.L.R. 1091; Stonegate Securities Ltd v Gregory [1980] Ch. 576 restraint of presentation of winding up petition; British Airways Board v Laker Airways Ltd [1985] A.C. 58; The Sennar [1985] 1 W.L.R. 490, HL; The Angelic Grace [1995] 1 Lloyd s Rep. 87; Bremer Vulcan v South India Shipping Corporation Ltd [1981] A.C. 909 arbitration). The discretion to grant or withhold an injunction is exercised after a trial on settled principles. An injunction to restrain a threatened breach of a clear negative obligation (such as a negative covenant in a lease) will be granted to a claimant almost as of right: Docherty v Allman (1878) 3 App. Cas 709. The reason is that the injunction amounts to an order for specific performance of a negative bargain between the parties. Sees also Araci v Fallon [2011] EWCA Civ 668. In that case, a jockey had 1

2 entered into an agreement with a racehorse owner that had placed him under a positive obligation to ride the owner s horse when asked, and a negative obligation not to ride a rival horse. The court granted an interim injunction preventing him from breaching his obligations by riding a rival owner s horse in the Epsom Derby. In other cases, there are certain factors which are recognised as affecting the discretion to grant or withhold an injunction. In Shelfer v City of London Electric Lighting Co. [1895] 1 Ch. 287 at , A.L. Smith, L.J. said that an injunction may be refused if: (1) the injury to the plaintiff s legal rights is small; and (2) it is one which is capable of being estimated in money; and (3) it is one which can adequately be compensated by a small money payment; and (4) the case is one in which it will be oppressive to the defendant to grant an injunction. These four factors are cumulative and all must be present before the court can order damages in lieu of an injunction (Jacklin v Chief Constable of West Yorkshire [2007] EWCA CIV 181). These principles are not to be treated as an exhaustive statement of the circumstances in which damages may be awarded instead of an injunction: Jaggard v Sawyer [1995] 1 W.L.R. 269 at 287. However, damages in lieu of an injunction should only be awarded in very exceptional circumstances (Watson v Croft Promo-Sport Ltd [2009] EWCA CIV 15). The slightness of the damage may, if the defendant threatens to repeat his wrongful act indefinitely, be the very reason why an injunction should be granted : see John Trenberth Ltd v National Westminster Bank Ltd (1980) 39 P. & C.R Where title is not an issue, a landowner is prima facie entitled to an injunction to restrain a trespass even if the trespass did not or will not harm him. Only if the defendant can show an arguable case that he had a right to do what the plaintiff sought to prevent, should the court go on to consider the balance of convenience, the preservation of the status quo and the adequacy of damages as a remedy (Patel v WH Smith (Eziot) Ltd [1987] 1 W.L.R. 853). INTERIM INJUNCTIONS The vast majority of applications for interim injunctions concern prohibitory injunctions as opposed to mandatory injunctions. It is only in exceptional cases that an interim mandatory injunction is granted. The effect of an interim is usually to hold the position until trial. The application for an interim injunction will normally be made to a High Court or county court judge. However, if the parties consent to the grant of an injunction in a case in the High Court, a Master or district judge may grant the injunction. (CPR PD25 Interim injunctions, para 1.2.) Instead of an injunction, a defendant may give an undertaking to the court. It is much more difficult for a defendant subsequently to obtain the 2

3 variation of an undertaking. (Cutler v Wandsworth Stadium [1945] 1 All E.R. 103 and Pet Plan Limited v Protect-A-Pet Limited [1988] F.S.R. 34.) In either case, the claimant will impliedly (if not expressly) give a cross-undertaking as to damages (See para 5.22 of the Chancery Guide as regards undertakings. If the claimant also gives an undertaking to the court, consideration should be given to including an express cross-undertaking as to damages from the defendant) so that if it is found at trial that the injunction or undertaking should not have been granted or given, then the loss caused can be recovered from the claimant. In order to determine the amount of any such loss, an inquiry can be ordered. It is not possible to discontinue all or part of a claim in which an interim injunction has been granted or an undertaking has been given save with the consent of the court. (CPR, r38.2(2)(a)). American Cyanamid The CPR do not change the substantive law relating to the grant of interim prohibitory injunctions. In the majority of cases, the guidelines contained in the House of Lords decision in American Cyanamid Co v Ethicon Limited ([1975] AC 396) will still govern the grant of such injunctions. These guidelines were intended to remove the need for a mini-trial at the stage of the injunction hearing and thus save judicial time (an objective which has become even more important under the CPR). There is greater scope now for obtaining effective directions for a speedy trial with the more active management by the court and, in some cases, that course may be a more appropriate alternative than a contested interim injunction application. Following the decision, the claimant was no longer required to prove a prima facie case. Now, in the normal case, the guidelines are as follows. (1) The claimant is only required to show that there is a serious question to be tried or, as it is sometimes put, that there is a real prospect of success at trial. In consequence, the court must not carry out a detailed consideration of the merits of the claim. (2) If the claimant passes this test, it is necessary to consider the damage that he will suffer if no injunction is granted, whether this damage can be adequately compensated at trial if he succeeds, and whether the defendant is able to pay such compensation. If the defendant is able to pay any damages and these damages are regarded as providing adequate compensation to the claimant for the loss caused by an injunction not being granted, then the court will not make such an order. (3) If damages would not be adequate protection for the claimant, then the court needs to consider the loss that the defendant would suffer if an injunction is granted and whether the 3

4 cross-undertaking as to damages would be an adequate compensation and whether the claimant is able to pay it. If it is an adequate protection, then, in the normal case, an injunction should be granted. (4) It is doubtful whether damages would be an adequate protection, then the court needs to consider what is described as the balance of convenience. Lord Diplock has described this as being the balance of the risk of doing an injustice (NWL Limited v Woods [1979] 1 WLR 1294 at 1306). (5) If the case is evenly balanced, the court may act so as to preserve the status quo. This need not be the status quo at the hearing, but may be an earlier date if, for example, one party has sought to defeat the intervention of the court. There are still exceptional cases in which the American Cyanamid principle will not be followed: (1) interim mandatory injunctions; (2) cases in which the court s grant or refusal of an injunction will effectively decide the outcome of the case and it will not go to trial (NWL Limited v Woods, above and Cayne v Global Natural Resources Plc [1984] 1 All ER 225), for example, a claim to enforce a restrictive covenant in an employment contract by seeking an injunction to retrain a former employee acting for a competitor may be an example of such a case if the trial will not take place before the expiry of the restraint period then the court can consider whether the covenant is prima facie enforceable (John Michael Design Plc v Cooke [1987] 2 All ER 332); if the trial can take place before a large part of the restraint period has run its course, then the American Cyanamid principles will be applied (In Lawrence David Limited v Ashton [1991] 1 All ER 385 a speedy trial meant that the injunction would not have long to run); (3) cases in which the circumstances are so unusual that the normal guidelines are inappropriate (an example would be a case which involves a matter of public interest) (R v Licensing Authority ex parte Generics (UK) Limited [1998] Eu L.R. 146, which concerned the ability to market a drug for the benefit of the public.); (4) freezing injunctions; and 4

5 (5) if there is no arguable defence to the claim (Official Custodian Charities v Mackey [1985] 1 Ch. 168) (for example, unless there are exceptional circumstances, a landowner whose title is not in issue will be entitled to an interim injunction to prevent a trespass), Patel v WH Smith (Eziot) Limited [1987] 2 All ER 569. MANDATORY INJUNCTIONS The court has jurisdiction to grant an interim mandatory injunction (SCA 1981, s 37(1)). However, the court is much less likely to grant an interim mandatory injunction than an interim prohibitory injunction. The general approach was set out by Megarry J in Shepherd Homes Limited v Sandham ([1971] 1 Ch 340) that such an injury will be granted only if the case is unusually strong and clear (Ibid, at p. 349 B.C.) and the court must feel a high degree of assurance that at the trial it will appear that the injury was rightly granted (Ibid, at p 351 G-H). This is higher than a prima facie case. It means that the guidelines laid down by the House of Lords in the American Cyanamid case ([1975] A.C. 396) do not apply to mandatory injunctions. (Locabail International Finance Limited v Agroexport [1986] 1 W.L.R. 657) The need for the case to be unusually strong and clear has been emphasised by Dillon L.J. (Dillon L.J. in Leisure Data v Bell [1988] FSR 367 at 372.) Whether or not to grant a mandatory injunction is always a matter of discretion and the court will not make such a grant as a matter of right even to enforce a clearly infringed right such as a broken covenant. The court will balance the nature of the damage to the claimant if an injunction is not granted with the damage that an injunction would cause to the defendant. It will further compare such loss to the defendant with the benefit that would be conferred on the claimant. The fundamental principle is to achieve justice (Hoffman L.J. in Films Rover International Limited v Cannon Film Sales Limited [1987] 1 W.L.R. 670). There is a higher risk of injustice in the case of a mandatory injunction. There are also greater problems of formulation and uncompensatable loss. The higher degree of assurance that the claimant will succeed indicates that there is less risk of causing injustice in granting the mandatory injunction. (Nottingham Building Society v Eurodynamics System [1993] FSR 468.) Chadwick J set out the following guidelines: (Ibid., at page 474). (1) the overriding consideration in any application is which course is likely to involve least risk of injustice if it turns out wrong; (2) if a party is required to take a positive step, it is more likely to carry with it a greater risk of injustice; 5

6 (3) it is legitimate for the court to consider whether it feels a high degree of assurance of success at trial as this means that there will be less risk of injustice; and (4) even if it did not feel a high degree of assurance, the court could still grant a mandatory injunction if it considered that the circumstances justified it. Circumstances in which a mandatory injunction is granted to include: (1) cases in which the defendant has sought to steal a march on the claimant by acting before the court intervenes (Esso Petroleum Co Limited v Kingswood Motors (Addlestone) Limited, above.); (2) when the matter cannot wait until trial and there is a need to decide the matter at the hearing of the application; and (3) if there is a greater risk of injustice if the mandatory injunction is not granted (Films Rover International Limited v Cannon Film Sales Limited, above.) Mandatory injunctions may be granted after a trial to compel the performance of an act. This remedy is closely related to the remedy of specific performance, but the principles applied in granting or withholding a mandatory injunction differ slightly. In particular, the court is more ready to grant damages in lieu of a mandatory injunction, particularly in cases where the remedy would be disproportionate to the injury suffered by the claimant and the claimant has delayed in seeking relief. So, a mandatory injunction to require the demolition of houses built in breach of covenant is unlikely to be granted where the Claimant has stood by without seeking a negative interim injunction at an early stage: Wrotham Park Estate Co v Parkside Homes Ltd [1974] 1 W.L.R A mandatory injunction will be granted, however, if the consequences of withholding it are sufficiently serious; Abingdon Corporation v James [1940] Ch. 287 (houses wrongfully built over a water main). See also Assetco Plc v Shannon [2011] EWHC 816 (Ch), where a company was granted an interim mandatory injunction to compel a shareholder to vote in favour of an equity placement in circumstances where it was likely that the company would otherwise be put into administration. Some situations preclude the grant of a mandatory injunction: 6

7 - A covenant in a lease to carry on a business will not usually be so enforced: Co-operative Insurance v Argyll Stores [1998] A.C. 1; - Where the damage to the claimant is trivial: Sharp v Harrison [1922] 1 Ch In that case, the plaintiff was complaining of an act by the defendant in breach of a covenant which had been done on the defendant s own land. Compare with Viscount Chelsea v Muscatt [1990] 35 E.G. 63, where a tenant had lowered a parapet wall in clear defiance both of an absolute covenant and of the landlord s refusal to consent the Court granted summary judgment for a mandatory injunction for reinstatement of the parapet; - Where considerations of public policy and political controversy arise: Harold Stephen & Co. v Post Office [1977] 1 W.L.R FREEZING INJUNCTIONS Jurisdiction What used to be called a Mareva injunction (after the case in which such an injunction was first ordered) is now known as a freezing injunction The jurisdiction of the court to grant such an injunction was originally based on the court s inherent jurisdiction to prevent the process of justice from being frustrated, but has since been confirmed by statute (Section 37(3) of the Supreme Court Act 1981). The objective is to prevent a defendant from defeating any judgment that the claimant may obtain at trial by removing assets abroad or otherwise concealing or dissipating them. It operates by preventing the defendant from dealing with assets save in accordance with the order, so that the assets are preserved to provide a fund from wheelchair any judgment can be satisfied. The order does not act in rem against the assets but in personam against the defendant. It does not improve the position of the claimant as against any other creditors of the defendant. To obtain such an order the claimant must satisfy two conditions. First, the claimant must show that there is a good arguable case for a substantive claim which is within the jurisdiction of the court. In the Chancery Guide, it is stated that a strong case must be made out (Chancery Guide, para 5.19). Such orders are stated never to be granted as a matter of course. The American Cyanamid principle does not apply. There has to be one party against whom the claimant has a substantive claim, but this need not be so in respect of all the defendants. It is possible to obtain a freezing injunction which is ancillary to an injunction obtained against another defendant. For example, a freezing injunction may be obtained against a company controlled by the defendant against whom the claimant has the substantive claim (TSB Private Bank International SA v Chabra [1992] 1 WLR 231). 7

8 Secondly, it must be established that there is a risk that the defendant will dissipate or conceal assets if no injunction is granted. The defendant must have assets. Those assets may be outside the jurisdiction (Babanaft International Co SA v Bassatne [1990] 1 Ch 13). In such a case the court will be concerned to ensure that the order applies only to the defendant personally and not to any third party who is outside the jurisdiction (Babanaft International Co Saturday v Bassatne [1990] 1 Ch. 13). In such a case the court will be concerned to ensure that the order applies only to the defendant personally and not to any third party who is outside the jurisdiction. SEARCH ORDERS Scope Before the introduction of the CPR, a search order was known as an Anton Piller order (After the Court of Appeal decision which confirmed the jurisdiction of the court to grant such orders (Anton Piller KG v Manufacturing Processes Limited [1976] Ch 55). It orders a respondent to permit premises to be searched and property covered by the order to be removed or copied. In the Chancery Division, there are two types of case in which such orders are most frequently sought: cases involving the infringement of intellectual property and cases in which employers are seeking to enforce restraint provisions (express or implied) in employment contracts. In the former, the claimant may be seeking to find pirated copies of the claimant s product at the defendant s premises, whilst in the latter the claimant may be seeking to recover lists of customers or documents containing trade secrets. Jurisdiction Although judge-made law, the court s jurisdiction to make a search order has been confirmed by s7 of the Civil Procedure Act 1997 (CPA 1997). Under this section, an order may be made for the purpose of preserving either evidence or property which is or may be the subject-matter of proceedings (CPA 1997, s.7(1)). The order can be made only by a High Court judge or any other judge who is duly authorised (CPR PD25 Interim Injunctions, para 1.1). The order activities in personam against the named defendant in that it requires the named defendant and his employees and persons in control of the premises to permit persons authorised by the order to enter the premises specified in the order (CPA 1997, s.7(3)) and to carry out a search for or inspection of anything described in the order (CPA 1997, s.7(4)(a)). Pursuant to the order, a copy, photograph, sample or other record of anything described in the order may be taken (CPA 1997, s.7(4)(b)). The order may require the named defendant to provide or secure the provision of information (CPA 1997, s.7(5)(a)) (including giving 8

9 access to any computer) or to allow anything described in the order to be retained for safe keeping (CPA 1997, s.7(5)(b)). To obtain a search order, it is necessary to establish that: (1) the claimant has a strong prima facie case (the American Cyanamid (Ibid) principles do not apply); (2) the danger to be avoided is substantial; (3) there is real risk that the property will disappear or the evidence will be destroyed (it has to be shown that there is a risk that the defendant will not comply with an order requiring the preservation or delivery up of the property or evidence); and (4) the harm likely to be caused to the defendant by the making of the order is not out of proportion to the legitimate object of the order there must be proportionality between the perceived threat posed by the defendant and the harm caused by the remedy. QUIA TIMET ACTIONS/INJUNCTIONS Relief claimed in a quia timet action will entitle an applicant to pre-empt a state of affairs that might give rise to a cause of action by obtaining relief to prevent the state of affairs from ever arising. Quia timet injunctions The most common form of quia timet relief is a quia timet injunction. An applicant may apply for a quai timet injunction to prevent a defendant from doing an act that is threatened to be done, where that act is alleged to involve an interference with the applicant s rights. A quia timet injunction can also be applied for to cause the respondent to rectify the effects of a wrongful act in circumstances where damage has not yet occurred but will occur unless the situation is rectified. An example would be where there has been a removal of support to land which will cause damage if support is not restored (See Hooper v Rogers [1975] Ch 43). A quia timet injunction is a unique form of injunction because it cannot only be granted before the issue of proceedings but also before the accrual of a cause of action. For example, quia timet injunctions can be used to restrain a threatened breach of contract or the expected commission of a tort. It is considered that wherever a court with equitable 9

10 jurisdiction could restrain an act where that act had already commenced, it may, in the exercise of its discretion, restrain an act that had not yet commenced provided that the applicant could satisfy the court of its imminence (see Spry Equitable Remedies (5 th edn. Sweet and Maxwell, 1997) p.378.) A mandatory quia timet injunction may be granted where the applicant alleges that earlier actions of the respondent may lead to future causes of action (See Redland Bricks Limited v Morris [1970] AC 652 at 665, H.L., per Lord Upjohn). Generally, it will be of assistance to an applicant for a quia timet injunction if he can prove that a breach of his rights has already occurred. A court is unlikely to grant a quia timet injunction unless there is a substantial risk of the apprehended breach occurring and that that breach is imminent (Attorney-General v Manchester Corporation [1893] 2 Ch 87 at 92]). However, in circumstances where the likely consequences to the applicant of a breach occurring are significant when compared to the prejudice likely to be caused to the respondent by granting the injunction, a court may well grant a quia timet injunction notwithstanding uncertainties in the applicant s evidence. The court will look at each case on its own facts and consider all of the circumstances of the case (Hooper v Rogers [1975] Ch 43 at 50, per Russell L.J). Procedure An application for a quia timet injunction can be made without notice, with informal notice or with formal notice. Urgency often dictates that it is the first two types of procedure that will be used. An application for a quia timet injunction is identical to a pre-issue application for an injunction and this is dealt with in detail in Chapter 4 (CPR PD25, para 4.4). Other quia timet actions The court s power to grant quia timet relief is not restricted to injunctions. An action may be brought for a declaration rather than an injunction (See Hopkinson v Mortimer Harley & Co Limited [1917] 1 Ch 646). A guarantor may seek under a guarantee. Such declaratory relief may be combined with an order that the principal debtor pay the sum guaranteed. A claim for such relief may be started either by a Part 7 or a Part 8 claim. In cases where there is unlikely to be a substantial dispute of fact, a Part 8 claim will be the more appropriate procedure (CPR PD8, para 1.1. See also the Chancery Guide, Section A, para 2.11). 10