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On 12 February 2016, in D v P [2016] EWCA Civ 87, the Court of Appeal considered the approach that should be taken to granting injunctions to enforce restrictive covenants. The judgment – available at http://www.bailii.org/ew/cases/EWCA/Civ/2016/87.html - is short, because the hearing was held in private, and the full judgment is also private.

Craig Rajgopaul considers three interesting practice points that arise from the open judgment.

Littleton Chambers’ Naomi Ellenbogen QC and Sam Neaman represented the Appellant.

Private hearings to protect confidentiality

First, the Court of Appeal affirmed that it can be (and on the facts was) appropriate to hold hearings in private where a party asserts confidentiality both in the information itself, and also in the "very existence of [the] information”. The Court approved the principle that, where the effect of publicity would be to destroy the subject matter of litigation as to a secret process, it may well be that justice could not be done at all if it had to be done in public. In those circumstances, the general rule as to publicity of Court proceedings must yield to the interests of justice. It is well worth advisors bearing this in mind when dealing with confidential information cases, and making the appropriate applications at the earliest opportunity.

Decision not to seek Damages

Secondly, the Claimant in D v P sought an injunction, without making an alternative claim for damages. Many clients are currently balking at the idea of paying the £10,000 court fee for issuing a Claim Form, particularly given that, as the Court of Appeal recognised, "in cases such as this damages are not what the employer wants.”

However, in practice it necessary to include a realistic (and often unliquidated) sum in the Claim Form, in circumstances where:

  • the employer’s case is necessarily that damages are difficult to quantify (and may have to be assessed for the purposes of the Claim Form on the basis that no interim injunction is obtained);
  • the High Court in Lewis v Ward Hadaway [2016] 4 WLR 6 recently stringently criticised as an abuse of process the device of including an artificially low figure for recovery on the Claim Form in order to avoid paying the full fee; and
  • the Claim Form contains a statement of truth.

However, the fee for a ‘non-money’ claim is currently £480. If a claimant is genuinely only concerned about obtaining injunctive relief, it may well be worth issuing a claim solely for permanent injunctive relief accompanied by an application for interim relief, without any alternative claim for damages. Careful consideration will of course need to be given to the impact that not seeking damages might have on matters such as settlement discussions/what the client will ultimately recover.

Injunctive relief without the need for proof of damage

Finally, in words which will no doubt frequently be cited in support of applications for injunctive relief, the Court of Appeal gave ringing endorsement to the principle that the Court’s approach to a claim in respect of an (enforceable) restrictive covenant should reflect "a firm recognition that the remedy to which [the claimant] ought prima facie to be entitled is an injunction”, holding that:

  • "The damage potentially sufferable by a covenantee such as D by a breach of the relevant restraint will usually be unquantifiable and will rarely, if ever, provide the covenantee with an adequate substitute for an injunction”;
  • Lord Cairns LC’s well known dictum from Doherty v Allman (1878) 3 APP. Cas. 709 in support of granting an injunction to enforce a contractually agreed restraint on doing something that the parties have entered into, for valuable consideration, with their eyes wide open "is bottomed in the recognition of the basic principle of which sight should not readily be lost, namely that contracting parties should ordinarily be held to their bargain, which is all that D was asking for by claiming the injunction that he did”;
  • Whilst absence of damage to a claimant will not generally be a bar to injunctive relief, since injunctive relief is a discretionary remedy there may be circumstances in which the Court would refuse to grant relief in the absence of damage, for example: (i) where the granting of an injunction would be so prejudicial to the defendant and cause him such hardship that it would be unconscionable for the Court to grant injunctive relief if the claimant could not prove damage; or (ii) the covenant was imposed to protect the employer’s confidential information, but by the time of trial all of the information was in the public domain (without any wrongful disclosure by the former employee).

The possibility that the Court may still refuse to grant relief in the absence of proof of damage means that applicants for injunctive relief will continue to need to include in witness statements sections dealing with the difficulty of quantifying damages, and the loss and damage that the applicant expects to suffer. However, P v D  should assist applicants in focusing the Court’s mind on whether or not the restrictive covenants are enforceable, and obtaining injunctive relief where the Court concludes that they are (or, at the interim stage, that there is a good arguable case that they are enforceable).


Posted: 23.02.2016 at 17:09
Tags:  Comments  Employment Law  Articles
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