Out-Law Guide | 05 Aug 2011 | 3:30 pm | 7 min. read
During the course of a legal dispute, it may be necessary for a party to seek a temporary remedy in the form of an injunction. By their nature, interim injunctions are a separate action within a larger claim, but they can be essential in circumstances where a party wishes to preserve the status quo – often ensuring that money remains in a bank account - until the dispute has been resolved.
An interim injunction is often sought where the other party, if unrestrained, might cause irreparable or immeasurable damage by continuing the conduct which has led to the dispute. Interim injunctions may become permanent if the claimant is successful at trial.
In general terms, when exercising its discretion to issue an injunction, the court will need to be persuaded that there is a good reason why the respondent's rights should be restricted before the court knows whether the applicant will succeed at trial. The applicant does not have to prove its underlying claim at the injunction hearing, but it must show that it has a good arguable case. The court will not pre-judge the litigation, but must be persuaded that there is a serious question to be considered. If this is established then the court has the discretion to grant the injunction.
In commercial disputes a court can make orders to restrain actual or threatened:
Breach of the injunction can amount to a contempt of court, which is punishable by a fine or imprisonment. In an emergency, an injunction can be obtained very quickly without giving notice to the other party. Urgency arises most often where the other party would take advantage if given notice of the application or where further damage would result from any delay in making the application. Freezing injunctions are often obtained in this way.
Injunctions may include confidentiality restrictions to prevent disclosure of the detail of the injunction, particularly where they have been obtained without notice to the respondent (see below). In the case of so-called 'super injunctions', which restrain publication of confidential applicant, the injunction may also prohibit disclosure of the identity of the parties or the fact that an injunction has been obtained.
Balance of convenience
Once it is satisfied that there is a serious question to be considered in the underlying claim, the court will exercise its discretion according to what it regards as the 'balance of convenience'. The court will weigh the likely inconvenience or damage which would be suffered by the applicant if the injunction is not granted against the likely inconvenience or cost for the respondent if it is.
An important factor in this balancing exercise is whether any potential injustice could be adequately compensated for by damages. If the adverse effect of the injunction on the respondent is measurable in financial terms then the court will be more content to grant the injunction while seeking an undertaking from the applicant to pay financial compensation if it turns out that the injunction was wrongly granted. Similarly, if the applicant's inconvenience in failing to obtain the injunction could be adequately compensated by damages after the trial then the court will be more likely to refuse the injunction.
Financial compensation is unlikely to be a sufficient remedy for such an injustice if:
An application for an injunction is usually made by giving the other party notice of the application, but, as discussed, it can be without notice if there is a real emergency or need. Any order made in this way will only take effect for few days until a return hearing, at which the court will hear arguments and evidence from both sides.
All applications for injunctions must be supported by evidence – either in the form of an affidavit (if the application is for a freezing injunction) or a witness statement, setting out the facts relied on and attaching all relevant documents. All important documents should be included in the evidence.
The affidavit or statement will be sworn or signed as appropriate by the applicant, or an officer of the applicant company – it will not be sworn or signed by solicitors. The evidence will usually have to be prepared quickly, but accurately.
An injunction can often be avoided by giving undertakings to stop the conduct which the applicant seeks to restrain, at least until the dispute can be resolved.
Duty of full and frank disclosure
Where an urgent injunction is sought without notice to the other party, the court places a great deal of trust in the applicant to tell the full story – not just the facts that support its case. That person or company must be extremely careful to avoid misleading the court whether by action or omission, and to disclose all the relevant facts whether these are helpful or harmful to the application.
The duty of disclosure applies to facts actually known to the applicant and to any additional facts which should have been known if proper enquiries had been made. The person or company seeking the injunction has a duty to correct any misinformation or omissions as soon as these become apparent, and to notify the court of any changes in circumstances which become apparent before the hearing. If an application is made without giving notice to the other party, then any facts that are harmful to the application must also be disclosed. The duty of disclosure is ongoing.
The consequence of failing to disclose a material fact may be that the injunction, if granted, will be set aside and the applicant will have to pay any costs incurred by the respondent together with any loss suffered as a result of the injunction. This may be the case even if the omitted fact would not have affected the court's view of the merits of the application.
If an injunction is obtained or contested with the help of untrue evidence, then the person who swore the affidavit or signed the statement could be charged with the criminal offence of perjury.
Undertakings - damages
Injunctions are serious restrictions on the respondent's rights. They are usually ordered before the merits of the parties' cases have been fully considered at trial, and the court will be concerned that it may ultimately be shown that the injunction should not have been granted when the full facts emerge.
Because of the risk of this injustice, the court is very strict about the terms on which injunctions are granted. In particular the applicant will have to promise to compensate the other party for any loss caused by the injunction being wrongly granted. This 'cross-undertaking as to damages' can be enforced against the applicant if it is later shown that the injunction should not have been granted or if the applicant fails to establish its rights at the trial. The applicant will usually have to provide evidence that it can comply with this undertaking financially if it is enforced and may be required to provide security for the undertaking.
Undertakings - costs
Some injunctions, in particular freezing injunctions, require the applicant to give an undertaking to compensate third parties affected by the terms of the injunction - for example, banks who have to comply with the terms of a freezing injunction – for any costs they may incur in complying. The court may ask the applicant to provide security in support of any undertaking, and the duty to make full and frank disclosure outlined above extends to facts which affect the value of that security.
Any delay in making an application will reduce the likelihood of obtaining an injunction. The longer the applicant has managed without an injunction, the less likely the court is to be convinced of the need for one. An injunction is unlikely to be granted if there is any delay which cannot be satisfactorily explained.
Contempt of court
A party who deliberately disobeys an injunction will be in contempt of court. Similarly, a third party with notice of the injunction, which assists a party to disobey it, may also be in contempt. The injunction will usually contain a 'penal notice', which means that failure to obey its terms could result in court proceedings leading to imprisonment for contempt.
Proceedings for contempt of court are the only remedy available for breach of an injunction. A contempt of court does not of itself allow the other party to seek damages for any loss arising from breach of the injunction, although there may be a right to damages if liability is established in the main proceedings.
In addition to the undertakings as to damages and costs, the applicant will normally have given an undertaking to the court to comply with certain procedural matters - for example, an undertaking to issue and serve proceedings. Failure to comply with any one of the undertakings included in the injunction is not only a contempt of court, but may also result in the injunction being set aside.
Advantages and Disadvantages
Injunctions are, by their nature, urgent and time-consuming, even in clear-cut cases. Preparation, witness and document examination, service, further hearings and enforcement are all essential parts of the process. The costs of making an application for an injunction can therefore be high, although a large amount of the work may ultimately have been necessary for the purpose of the litigation itself and the injunction process may lead to a resolution of the underlying dispute without the need for a trial.