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 https://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’ 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).
