Injunctions are a potent legal remedy in business disputes. They prohibit a party from doing a specified act or, less frequently, force a party to act in a particular way. When faced with a business dispute, you may need to consider whether injunctive relief is a suitable remedy in your case.
This guide will take you through the key issues to take into account when considering the suitability of an injunction in your situation. We explain when an injunction might be useful and the circumstances in which one might be granted. We consider the different types of injunctions available, the process and costs involved and how injunctions can be enforced. Finally, we discuss when an injunction might be set aside or varied.
The guide covers injunctions against companies based in England and Wales, but it is possible to obtain an injunction in certain circumstances against a company based in another jurisdiction.
- What is an injunction?
- When would an injunction be required?
- Can you apply for an injunction before court proceedings begin?
- What are the different types of injunction?
- When will the Court grant an injunction?
- What is the process for obtaining an interim injunction?
- How much does it cost to apply for an injunction?
- Enforcing and modifying an Injunction
What is an injunction?
Injunctions can be mandatory or prohibitive.
Prohibitive injunctions, the more common of the two, prevent a respondent from acting in a certain way, for example, disclosing confidential information about their ex-employer’s business.
Mandatory injunctions compel the other party (known as the ‘respondent’) to carry out a specific act, such as delivering goods or making alterations to a property.
Injunctions are a discretionary remedy, meaning that the Court does not have to order one in any given case, and will only do so if they believe it is fair.
Breaching an injunction is a serious matter. It constitutes contempt of Court which may result in imprisonment. It is, therefore, important to carefully consider whether an injunction is a proportionate, suitable response in the context of your dispute.
When would an injunction be required?
An injunction might be required in a number of situations. For example, you might need to prevent a competitor from using your confidential business information or trade mark in connection with their own services, or publishing defamatory comments about your business. Injunctions are also a valuable tool in preventing the other party in a dispute from dissipating their assets to avoid paying any Judgment debt.
Can you apply for an injunction before court proceedings begin?
Litigation can be a lengthy process with cases often taking many months and even years to come to trial. The nature of injunctive relief means that it is usually required urgently and certainly long before the Court has had an opportunity to decide the matter.
It may be that a party is acting, or likely to act, in a way that could cause damage that could not be adequately dealt with by an award of monetary compensation, such as damage to reputation. Another example is where a party may try to hide their assets to avoid paying you. In these circumstances you cannot wait months for an Order prohibiting them from doing so. In cases involving such urgency, injunctions are commonly sought before any proceedings have been issued.
Injunctions obtained before the case has been decided are referred to as ‘interim injunctions’. They are intended to maintain the status quo until the Court has had an opportunity to consider the merits of either side’s case. Interim injunctions remain in force until discharged by the Court.
Interim injunction can be obtained by applying to the Court either ‘on notice’ or ‘without notice’.
When you apply ‘on notice’, the other party is notified of your application and told when it will be heard by the Court. ‘Without notice’ applications, as their name suggests, are made without giving the other party notice of your application.
If the Court subsequently agrees that the injunction is warranted, it will make a ‘final’ or ‘perpetual’ injunction. This type of injunction continues indefinitely.
'Without notice' applications
To persuade the Court to hear your application for an injunction ‘without notice’, you must have strong reasons for not notifying the other party, supported by compelling evidence. For example, if you can convince a Court that there is a real risk that a respondent may hide evidence (for example in a fraud claim) or will dissipate their assets if they become aware of the proceedings, the Judge might agree to grant a ‘freezing injunction’ without notice to the respondent, restricting their ability to deal with their assets.
Usually, when a Judge grants an interim injunction without notice, they will fix a ‘return date’ when both parties can attend Court and present arguments as to whether the interim injunction should remain in force until a later date, such as trial, or be discharged.
A cross-undertaking as to damages
Anyone seeking an injunction will be expected to provide a ‘cross-undertaking as to damages’. This is a somewhat technical term which simply means that you agree to financially compensate the other party if it subsequently transpires that the injunction should not have been granted.
The requirement to give a cross-undertaking as to damages is a serious consideration when assessing the suitability of an injunction in your case, since the potential damages due could be significant. Our expert disputes resolution solicitors are adept at identifying the circumstances in which an injunction is appropriate and will advise accordingly.
You may need to demonstrate your ability to pay any damages that might be ordered under your cross-undertaking, and the Court will take this into account when deciding whether to grant the injunction.
Breaching a cross-undertaking as to damages is a serious matter and constitutes contempt of Court.
What are the different types of injunction?
There are several different types of injunction, and the one required in your case will depend entirely on the circumstances. Our disputes solicitors will discuss your options with you once they have reviewed the evidence.
Examples of some common types of injunctions include:
- Freezing Injunction (prohibitory in nature)
This type of injunction prevents the respondent from dealing with or dissipating their assets, including monies held in bank accounts, property and vehicles. It ensures those assets are available to satisfy any Judgment you subsequently obtain against them.
The Court recognises the draconian nature of freezing injunctions and the potential issues they can cause for respondents. To successfully obtain a freezing injunction, you will, therefore, need to prove you have a substantial cause of action, a good arguable case and that there is a real risk of the respondent removing, dissipating or hiding the assets in question.
- Search Order (mandatory in nature)
This type of injunction permits you or your representatives to enter the respondent’s premises to search for and seize information – usually documents or computers holding electronic documentation. Search Orders can be useful in cases where there is a real risk that the other party will destroy documents harmful to their position.
Again, the threshold for successfully obtaining a Search Order is high and it is strongly recommended that legal advice is sought from an experienced dispute resolution solicitor urgently if this action is contemplated.
- Privacy injunction (prohibitory in nature)
Privacy injunctions prevent the publication of sensitive or confidential material. A well-known type of privacy injunction is the much publicised ‘super injunction’ which not only prohibits the publication of the private information in question, but also any reference to the existence of the injunction itself.
- Springboard injunction (prohibitory in nature)
A ‘springboard injunction’ is intended to prevent an ex-employee from misusing information – usually confidential information gleaned during their time working with your business - to obtain an unfair commercial advantage or ‘head start’.
Specific legal criteria apply to springboard injunctions and our disputes solicitors will advise on the likelihood of the Court granting one in your situation.
- Insolvency injunction (prohibitory in nature)
The presentation of a winding-up petition can be catastrophic for your business. So, if a creditor threatens to proceed in this way without due cause, you may be entitled to injunctive relief prohibiting them from doing so.
To obtain an insolvency injunction, you must show that there is a genuine dispute between the parties, or that you have an arguable counterclaim.
This is not an exhaustive list of the types of injunctions available. The Court has a wide discretion as to the cases in which injunctive relief might be appropriate. Speak to our business dispute solicitors if you are in any doubt as to whether your situation lends itself to obtaining an injunction.
When will the Court grant an injunction?
Whilst the Court has complete discretion when deciding whether injunctive relief is appropriate in any given case, there are some general principles that a Judge will consider when determining whether your application for an injunction, either interim or final, should succeed. They include:
- Is there a serious question to be tried?
When applying for an interim injunction, you must demonstrate a substantive cause of action, meaning one that the Court can decide. Your claim must not be frivolous or vexatious and the other party must be either threatening to jeopardise, or has already jeopardised, your rights, or to behave unconscionably.
- Is it 'just and convenient' to grant the injunction?
A Claimant is not entitled to an injunction as of right; it is a discretionary remedy that the Court will grant only when it considers it ‘just and convenient’ to do so. Factors the Judge will consider include the Claimant’s conduct and any delay in applying for the injunction.
- Would damages be an adequate remedy?
An injunction is a powerful remedy and can have far-reaching, severe effects on a respondent’s business. So, if the Court considers that you can be adequately compensated for the other party’s unlawful acts, it will likely award damages instead of an injunction.
Sometimes though, an injunction is the only suitable remedy. Examples of cases in which the Court has granted injunctions include forcing a respondent to cease their unauthorised use of intellectual property rights, to prevent a tenant from undertaking building works in breach of their lease or to prohibit a breach of employment obligations such as restrictive covenants.
What is the process for obtaining an interim injunction?
You can only apply for an interim injunction when you intend to issue a claim against the other party.
An Application must be made to the Court in which the related proceedings will be heard. The Application should usually contain and exhibit to it the following:
- Details of the Order you are seeking.
- The reasons why you are seeking the Order.
- The time, date, and place of any hearing (if one has already been listed).
- Any evidence in the form of a witness statement or affidavit. This should contain all material facts and any documents you wish to rely on.
- A draft of the Order you are seeking.
Our disputes solicitors have extensive experience in obtaining interim injunctions on behalf of our clients. They understand that injunctive relief is often needed urgently and will act swiftly and decisively to protect your position.
How much does it cost to apply for an injunction?
Injunctions offer an invaluable remedy in many situations, although they can be costly and will usually require the involvement of a barrister. If you are considering making an Application for an injunction, early legal advice is strongly recommended. If your application for an injunction fails, there will be cost consequences. There are situations in which injunctive relief is the only viable option, but there may well be other remedies available that will resolve your dispute in a more timely and cost-effective fashion.
Enforcing and modifying an Injunction
Whilst an injunction is a powerful remedy, it is of little use if the respondent does not comply with its terms. Recognising the often-crucial need for compliance, the Court has a wide discretion when faced with a respondent’s breach of an injunction. The sanctions that can be imposed include imprisonment, a fine and the confiscation of the respondent’s assets.
Injunctions should include a ‘Penal Notice’ notifying the respondent and third parties of the consequences of any breach. The usual remedy sought is the committal of the respondent to prison for contempt of Court. When an Application for committal is made, the criminal burden of proof applies. It must be established beyond all reasonable doubt that the respondent has breached the injunction. However, the Court does not shy away from committing a respondent in breach of an injunction to prison, particularly where their breach is continuous and wilful. In some circumstances, a director can be imprisoned for their company’s breach of an injunction.
A respondent has the right to challenge an injunction that has been granted against them. Where the injunction was made ‘without notice’, the respondent can apply to set it aside. In practice, they usually do so at the return hearing that will have been listed when the injunction was granted, but can do so at any time on 24 hours’ notice to the other party. Where the injunction was made ‘on notice’, the respondent can appeal by applying to Court at any time. Given the far-reaching effects of an injunction, such appeals are often heard quickly.
Examples of situations in which an injunction might be set aside include if the Claimant failed to provide the Judge with all material facts when making their Application, or the injunction has become oppressive. However, since injunctions are granted at the discretion of the Judge hearing the Application, they can be tricky to challenge. There may be cases where a respondent has no reasonable chance of successfully setting aside the injunction but may have due cause to require its terms to be varied. In the context of freezing injunctions, for example, they may consider the extent of the assets frozen to be too wide and not an accurate reflection of the claim’s value. Often, the parties will agree the requested variation between themselves. If they do not, the respondent can apply to Court.
Injunctions offer an invaluable form of relief in business disputes. In some cases, an injunction is the only remedy that can protect your commercial interests. However, the law and procedure relating to injunctions is complex and difficult to navigate. If you get it wrong, the consequences can be disastrous, both tactically and financially. It is, therefore, vital to take expert legal advice from a business disputes solicitor to understand whether an injunction is suitable and how likely the Court is to grant one.