If you are thinking to apply for an injunction, you may find this article appealing.
First and foremost, what is an injunction? It is a Court order granted by the Court against a company or person pending trial (known as interim injunctions) or at the trial (known as final injunctions).
There are three types of interim and final injunctions:
- Prohibitory or negative injunctions which prevent the defendant from doing something;
- Mandatory injunctions which require the defendant to do something (see the case of Pugh v Howells ); and
- Quia timet injunctions requiring the defendant to take certain measures to prevent harm from occurring.
The latter are a particular type of prohibitory injunctions that, following the case of Redland Bricks Ltd v Morris , may be granted by the Court if the respondent is threatening and intending to take steps which would cause irreparable harm to the applicant or where the applicant, who has already been recompensated for the damage he suffered, alleges that the respondent’s action could be harmful in the near future.
Moving further, what is the procedure for obtaining interim injunctions?
Interim injunctions are granted by the Courts between the issue of the claim and the trial, pursuant to The Civil Procedure Rules 1998 with particular reference to Parts 23 and 25. It should, however, be noted that interim injunctions before the start of proceedings can only be granted when the matter is urgent or if it regarded as necessary in the interest of justice.
The general procedure requires the applicant to make an application on notice which would clarify the order the applicant is seeking and the reason. It is also important to specify the date, time and place of the hearing. The application should always be supported by evidence in the form of a witness statement and by a draft order including the penal notice. Everything must be filed at least three days before the scheduled hearing.
An applicant who wishes to make an application without notice to the respondent should carefully investigate all the facts of the case before disclosing them to the court. In any case, this is only possible if the matter is extremely urgent or the respondent would take steps to harm the applicant upon receipt of the notice.
Another distinction should also be made in relation to “ex parte” or "inter partes" applications. In the first ones, only the applicants have the possibility to argue its case to the courts while in the second type of applications, the courts will hear the arguments of both parties.
You should always remember that the courts have the power, at all times, to vary or set aside an injunction on the application of any party.
What is an undertaking and why is it relevant?
As highlighted above, interim injunctions are granted by the courts based on the evidence presented at the interim hearing and therefore any liability is not fully investigated until the final trial of the case. For this reason, the defendant against whom the injunction was granted may win the case and seek compensation.
In light of the above, before the interim injunction can be granted, the applicant must promise to the courts to compensate the defendant for any harm caused by the injunction if it is discharged at a later date and, to this end, he should provide sufficient evidence of his financial circumstances. This is known as “claimant’s cross-undertaking” which can be enforced by applying for a court inquiry after having proven the occurred loss. The claimant is then required to compensate the counterparty even if he acted in good faith.
Exceptions in relation to cross-undertakings apply to the Department of State, local authorities or to the Securities and Investments Board.
The American Cyanamid guidelines
The guidelines laid down by the House of Lords in the American Cyanamid Co v Ethicon Ltd  are always followed by the courts before granting interim injunctions.
Briefly speaking, the following grounds should be considered:
- the applicant must be able to show that there is a serious question to be tried and the defendant should be able to demonstrate that there is an arguable defence; if not
- damages must be an inadequate remedy to resolve the case and the claimant’s cross-undertaking must be supported by financial evidence; if not
- granting an injunction could cause less harm to the defendant compering to the likely harm the applicant would suffer from the refusal of such injunction.
The above factors should be assessed based on the circumstances of each case and, where such factors are equal, the courts will try to uphold the status quo. It means that the position of the parties must be restored as it was just before the application was issued (refer to the case of Garden Cottage Foods Ltd v Milk Marketing Board ).
You should finally be aware that The American Cyanamid principles are not applicable for freezing injunctions and search orders.
A freezing injunction is an exceptional method preventing the defendant from disposing of or dealing with its assets until the case comes to trial. Hence, the application is often made before the issue of court proceedings.
Other than that, it is usually made without serving notice on the respondent otherwise the defendant may dispose of his assets before the injunction is granted.
At the first hearing the applicant is required to disclose all relevant information to the Court and, in the event of omissions, the injunction may be set aside and the claimant may be ordered to pay compensation for any loss suffered by the other party. To this end, the applicant should bear in mind that misleading the court could lead to a criminal charge of perjury.
Soon after the hearing, the injunction must be personally served on the defendant to be enforceable, together with the application, any evidence and a brief report of the hearing.
Freezing injunctions usually apply to assets within England and Wales, but courts may, in exceptional circumstances, make orders where the bulk of the defendant’s property is outside the jurisdiction. In this case, the injunction must be registered or recognised by the foreign court of competence to be enforceable.
It should be considered that freezing injunctions can freeze only those assets over which a judgment can be attached and therefore they are usually limited to the value of the claim. Nevertheless, they may be limited to a specific assets or unlimited to all the defendant’s assets.
The court will only be able to grant a freezing injunction in the following circumstances:
- the applicant has a cause of action;
- the assets should be sufficient to meet the amount of the claim;
- the applicant proves the existence of a real risk of disposing or dealing of the assets by the defendant; and
- the applicant provides the court with a cross-undertaking.
It is always important to remember that an injunction is an equitable remedy and, therefore, it is discretionary which implies that your application may be rejected even if you have a good claim in law!
Also, breaking an injunction is equal to being in contempt of court and the breach can be punished by imprisonment or by severe financial penalties.
Lastly, but not less important, if you are thinking to apply for an injunction you should always seek legal advice from solicitors fully familiar with the relevant rules and Practice Directions.