Defence lawyers often grumble that the test in American Cyanamid, which merely requires a serious issue to be tried, sets the bar too low. They go on to complain that the message from Dairy Crest v Piggot – offer undertakings to a speedy trial – compounds the problem, leaving Defendants with little option but to submit to being pushed into a costly sprint towards a speedy trial.
However, the decision in Scott v Scott (Lawtel 08/10/2012) shows that the position of the Defendant is far from one of impotence. The Claimant sought to enforce covenants in a partnership deed, and successfully surmounted the American Cyanamid hurdle (no surprise there, defence solicitors will say). Nevertheless, Asplin J refused to grant an injunction. Why? Because, when striking the balance of convenience, the court took into account delay, issues relating to disclosure, and concerns about the value of the Claimant’s cross-undertaking in damages. Moreover, the impact of the injunction would be to prevent the Defendant from working at all.
By focussing on these matters, the Defendant was able effectively to shrug off the fact that there was a serious issue to be tried, and to transcend the significance of the fact that the Claimant could show that he would suffer irremediable damage.
The case offers no new or startling propositions of law, but is a highly educational example of a Defendant successfully finding ways to defend himself.
The law has recently revealed another source of peril for Claimants seeking an injunction – the duty of disclosure. In Speedier Logistics Co Ltd v Aardvark Digital Ltd LTL 4/9/2012 Eder J reminded practitioners that the duty of full and frank disclosure operated whether or not the application was made without notice. Fulfilling this duty is a tricky task, especially in fast-moving and urgent litigation when the stakes can be very high.
And, specifically in the context of post-termination covenants, the decision of the Court of Appeal in Arbuthnot Fund Managers v Rawlings [2003] EWCA Civ 518 emphasised the court’s capacity and willingness critically to examine the enforceability of covenants at the earliest moment in proceedings.
