Are you in a dispute and facing an interim injunction? What should you do?
In this article we explain what the purpose of an interim injunction is and we review a recent case which highlights the importance of knowing when to contest an application for one.
What is an interim injunction?
Interim injunctions are orders made by the Court preventing someone from doing something which will in some way harm or prejudice another party. They are usually made in the context of a claim, and they help preserve the status quo pending the Court’s final decision.
How might an interim injunction impact your business?
Say you are a defendant to claim for damages and the claimant decides to make an application for an interim injunction to prevent any more damage being done pending the outcome at trial.
Before doing so, the claimant gives you a choice – if you want to avoid the risk of an injunction application, you can consent to it by providing appropriate undertakings (contractual promises you won’t do something). This then avoids the need for an interim injunction.
The risk for you here is that if undertakings are not given, and the application for an interim injunction is successful, you will have to pay the claimant’s costs of that application.
Should you agree to it?
It is therefore essential that you properly assesses the prospects of a proposed application before deciding (or not) to provide undertakings.
When doing so, you should also bear in mind that if an injunction is granted the claimant will also be required to provide a cross undertaking in damages. This means that if at trial the Court finds that the injunction should not have granted (i.e. the claim fails) then the claimant will have to compensate you for any losses you have suffered as a result of the (wrongly granted) injunction.
The recent case of Law By Design Ltd v Ali [2021] EWHC 3010 (QB) nicely highlights the importance of knowing when to contest an application for an interim injunction.
What happened in the case?
In this case, the defendant didn’t actually contest the claimant’s application for an interim injunction. They did provide undertakings, but they waited until the evening before the hearing of the interim injunction application before doing so. By this time the claimant had of course already incurred significant costs in making the application.
The claimant still applied for its costs in relation to the application on the basis that the defendant had no grounds on which they could have resisted the application and they should have consented much earlier. Unfortunately, the defendant was also a solicitor and the Court found that they should have known that was the case. Accordingly, the Court awarded the claimant its costs of the application in the sum of £50,000.
Moral of the story?
To avoid a similar outcome for those in the defendant’s shoes, it is essential to analyse whether there is a genuine basis for contesting an application for an interim injunction. Obtaining good advice by experienced lawyers is key.
If you would like to discuss a business dispute, please get in touch and our Commercial Dispute Resolution team would be happy to assist you.