Latest guidance on injunctions from the Court of Appeal

Posted by David Crockford on
Since the case of Coventry v Lawrence [2014] UKSC 13 there has been a greater degree of uncertainty as to whether the court will grant an injunction where there has been an infringement of property rights.

In contrast the case of D v P [2016] EWCA Civ 87 confirms that, where contracts are concerned, the court is as determined as ever to allow injunctive relief to hold parties to their bargains. 

This short judgment provides a useful guide to all those seeking to enforce restrictive covenants under commercial contracts.

Injunctions as a prima facie remedy

D v P first came before Snowden J in the High Court in 2015. He applied the test laid out in Coventry and granted the claimant an injunction in order to enforce the restrictive covenant in the defendant's contract of employment.

The subject matter of the litigation was considered sufficiently confidential for both the original trial judge and the Court of Appeal to hear the matter in private and to publish only short judgments.

The Court of Appeal stated that they had "respectful doubts" towards the applicability of Coventry when considering claims to enforce a contract. The decision in Coventry concerned a tortious claim (nuisance) which the court pointed out is materially different.

So, if Coventry is not applicable, what test did the court use when deciding whether to grant an injunction?

The court found that where a post-employment restraint was enforceable then the starting point was that the claimant was entitled to an injunction. This decision was supported by the long-standing principle that "contracting parties should ordinarily be held to their bargain".

The confirmation of an injunction as the starting point will undoubtedly be of great comfort to any party who is seeking an injunction to enforce a restrictive covenant.

No requirement to show damage 

However, an injunction remains a discretionary remedy and the Court confirmed that whilst this may be the correct starting point it is not necessarily the correct finishing point.

The court should be aware of the following factors when deciding whether there is any reason to depart from the usual starting point of granting of an injunction;

  1. Negative covenants will generally be enforced without proof of damage;
  2. But where "the granting of an injunction would be so prejudicial to a defendant and cause him such hardship that it would be unconscionable for the plaintiff to be given injunctive relief" without proof of damage then an injunction will be refused and, without proof of loss, there will be only very minimal compensation.
  3. The burden of proof rests with the 'covenantor' (the defendant) to give reasons why an injunction should not be granted and/or why damages would be an appropriate remedy.

In D v P it was held that damages were unquantifiable and were not what the claimant wanted. The decision of the claimant not to make a corresponding alternative claim for damages was endorsed (see A final thought below).

Summary

Both lawyers and non-lawyers are faced with contractual restrictive covenants on a daily basis. They are in our leases, our employment contracts and many other commercial contracts which we enter into.

Following the decision in Coventry it was expected that fewer injunctions would be granted. D v P makes it clear that whilst Coventry may impact claims in tort, the position in respect of claims to enforce a contract remains as stringent as ever.

The message of D v P is straightforward. If you have entered into a contractual agreement that contains enforceable restrictive covenants then be prepared for the court to hold you to your deal.

A final thought 

The claimant in D v P applied for an injunction without any alternative claim to compensation if that application was unsuccessful. This relied on damages being "unquantifiable" and an inadequate alternative to an injunction.

This means he or she would have only been required to pay a court fee of £480 and avoided an additional fee of up to £10,000.00 for damages. So if damages are a genuinely inadequate alternative, should you incur the court fee to claim them as a back-up? In my opinion, just like Coventry, this should be handled very carefully.

About the Author

David is a Senior Solicitor in our Property Litigation team based in Southampton. David is involved in recovery of residential and commercial units in order to facilitate a major redevelopment.

David Crockford
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