Unilateral Injunctions
Cases
Irish Bank Resolution Corporation Ltd v Quinn
[2013] IEHC 437
Judgment of Mr Justice Michael Peart delivered on the 6th day of August 2013:
1. Interlocutory injunctions are in place in these proceedings (“the Conspiracy proceedings”) on foot of one order made on the 20th July 2011 by Clarke J., and two orders made by Kelly J. on 25th July 2011 and 31st July 2011 respectively. Broadly speaking the former prevents the “personal defendants” from dealing with certain assets described as “IPG assets”, while the latter are Mareva-type orders, including the appointment of a Receiver over those assets. The order of Clarke J. dated 20th July 2011 notes that the personal defendants gave certain undertakings to the Court in terms of a number of paragraphs in the interim injunction order made previously by Clarke J. by way of ex parte application. The reference to “the personal defendants” is a reference to the first to seventh, ninth and twentieth defendants. The eighth defendant, Peter Darragh Quinn is not a party to the present application. The first named plaintiff “IBRC” gave the usual undertaking as to damages to the Court when applying for these orders.
2. On the 13th February 2013 the Irish Bank Resolution Corporation Act, 2013 became law. On that date the Minister for Finance, pursuant to powers provided by the Act, made a Special Liquidation Order in respect of IBRC, and joint Special Liquidators were appointed.
3. The personal defendants seek now to have the injunctions discharged on the basis that the undertakings as to damages are worthless given that IBRC is now by definition insolvent, unable to pay its debts as they fall due, and in liquidation. They submit that the injunctions would not have been granted if the undertakings as to damages had not been given and refer to the fact that Mr Wallace, one of the appointed Special Liquidators, has conceded on affidavit that IBRC is insolvent, and that he has stated publicly that historical claims against the bank will rank only as unsecured debts in the liquidation.
4. The plaintiffs oppose the present application for the discharge of the injunctions on a number of grounds:
5. Firstly, they refer to the fact that the joint Special Liquidators have on affidavit confirmed the undertakings as to damages previously given to the Court.
6. Secondly, they are offering now, if required by this Court, a fortified undertaking as to damages by ring-fencing a sum of €5,000,000 of the liquidation assets, which they say is more than sufficient to satisfy any claim which could possibly arise in the event that it is concluded in due course that the injunctions in question ought not to have been granted. The personal defendants on the other hand say that the potential value of such claims is more like US$700,000,000 (being the value they place on the IPG assets), and that the offered fortified undertaking is hopelessly inadequate.
7. Thirdly, IBRC submits that even if there is some doubt about the sufficiency of the confirmed undertakings as to damages, or the amount of the fortified undertaking being proposed, it does not entitle the personal defendants to an order discharging the injunctions. They submit that even if the undertakings are considered to be inadequate, the Court, before making the orders sought by the personal defendants, would have to be satisfied that, notwithstanding any such deficiency, the balance of convenience lies in favour of discharging the orders. As part of that consideration, it is submitted that the Court would have to take into account that it has already been found by Dunne J. that the personal defendants had put together a deliberate and premeditated scheme in order to dissipate the IPG assets to ensure as best they could that those assets are not available to the plaintiffs in order to satisfy any judgment to which they may be found entitled in the future, and that this was the reason why the orders had to be applied for.
8. The personal defendants say that when they gave certain undertakings to the Court in the form of the orders made by Clarke J. for the interlocutory injunctions, and when they consented to the Mareva injunctions granted by Kelly J., they took account of and relied upon the undertakings as to damages given to the Court by IBRC.
9. They refer to the fact also that on the application before Clarke J, Aoife Quinn on behalf of the personal defendants averred in paragraph 96 of her affidavit that as Anglo Irish Bank was an insolvent bank able to continue only with the support of its shareholder, the Minister for Finance, the personal defendants were apprehensive that at some point that shareholder would withdraw its support, and considered that in such circumstances the undertaking as to damages would be worthless. She stated that “an undertaking as to damages unsupported by a parent or shareholder undertaking is not acceptable to the defendants”. It is submitted that the very thing which they feared at that time has now come to pass, and that they should not now be adversely affected by that occurrence by the continuation of the injunctions which are now unsupported by any meaningful undertaking as to damages.
10. Ms. Quinn has referred also to the fact that in certain proceedings in Cyprus, the plaintiff bank had resisted an application for an injunction against it on the basis that “Anglo” was a State-owned bank and that it was in a position to pay any damages that might be awarded against it, and that references to Anglo being insolvent were untrue.
11. She refers also to an averment in an affidavit of Richard Woodhouse grounding the ex parte injunction application herein where he stated that IBRC’s solicitors had explained to him that “IBRC is required to provide an undertaking as to damages in the event of the interim relief sought being granted” and that he understood the nature and purpose of such an undertaking, and that he was duly authorised to give such an undertaking. The word “required” in that averment is something emphasised by the personal defendants on the present application.
12. The plaintiffs submit that in estimating the potential value of their claims against the plaintiffs on foot of their undertakings as to damages in the amount of US$700,000,000 the personal defendants are confusing two separate and distinct concepts, namely the value of any claim for losses arising from the granting of the injunctions, and the alleged value of their claims being made against the bank in totally separate proceedings, which have been referred to as “the main proceedings”, being proceedings wherein the personal defendants seek to have the loans to them by Anglo declared to be invalid, and that the bank’s security is therefore unenforceable.
13. In his replying affidavit, Special Liquidator Kieran Wallace denies that the personal defendants have set forth any basis for claiming that any losses they might suffer as a result of the granting of the various injunctions. He refers to the fact that on each occasion that an injunction was granted, the Court was satisfied that there was a serious issue to be tried, and that the balance of convenience lay in favour of granting the injunctions. He refers also to the fact that on each such occasion the personal defendants did not file any replying affidavit to dispute the facts put forward by IBRC in support of the applications, and that the position remains that there is no real dispute as to the facts. Mr Wallace believes that it is appropriate that a fortified undertaking in the amount of €5 million be proffered and that this is more than adequate to cover any possible claim arising from the granting of the injunctions, the more so in circumstances where he believes that the personal defendants have not put forward any credible basis for claiming that any such losses will arise.
Tola Capital Management LLC v Linders [2014] IEHC 316
Judgment Title: Tola Capital Management LLC -v- Linders & anor
Neutral Citation: [2014] IEHC 316
High Court Record Number: 2014 4500 P
Date of Delivery: 05/06/2014
Court: High Court
Composition of Court:
Judgment by: Cregan J.
Status of Judgment: Approved
Neutral Citation: [2014] IEHC 316
THE HIGH COURT
[2014 No. 4500 P]
BETWEEN
TOLA CAPITAL MANAGEMENT LLC
PLAINTIFF
AND
JOSEPH LINDERS AND PATRICK LINDERS
DEFENDANTS
(NO.1)
JUDGMENT of Mr. Justice Cregan delivered on the 5th day of June, 2014
Introduction
1. In this case the plaintiff seeks the following interlocutory injunctive reliefs against the defendants:-
(1) An order restraining the defendants from completing a debt purchase agreement with Ulster Bank in respect of the properties the subject matter of these proceedings otherwise than in trust for the plaintiff.
(2) An order restraining the defendants from placing on the market, selling, transferring, assigning, disposing of, charging or otherwise dealing with the properties the subject matter of these proceedings save in accordance with the terms of Method A: Loan structure of the Binding Option Agreement between the parties dated 6th February, 2014;
(3) An order directing the defendants to provide evidence confirming that the defendants alternative financing for the debt purchase agreement entered into with Ulster Bank consisted entirely of debt with no third party equity participation.
Factual Background to the Application
2. The plaintiff is a limited liability company incorporated under the laws of Delaware United States. It has its principal place of business at 299 Park Avenue, 16th Floor, New York in the United States.
3. The defendants are sued in their personal capacities. However, at para. 8 of the grounding affidavit of Ronan Dodd, solicitor for the plaintiff, it is averred that:-
“The defendants or companies controlled by them are the owners of the following properties (hereafter collectively referred to as the “properties”) described in the Binding Option Agreement as: [The details of certain properties are then set out].”
4. The defendants wished to enter into an agreement with Ulster Bank to buy back certain loans which they owed to Ulster Bank and which were secured on properties which either they, or companies controlled by them, owned. In order to buy back these loans they needed to obtain finance from alternative financiers. One possible financier was the plaintiff and, according to the defendants, the role of the plaintiff in the renegotiations of the defendants’ refinancing of their loans with Ulster Bank was that the plaintiff would provide evidence of alternative funding to Ulster Bank.
5. The plaintiff alleges that the parties entered into a Binding Option Agreement on 6th February, 2014.
6. Under the terms of the option agreement, the defendants granted the plaintiff an exclusive option to acquire certain properties. The agreement also set out two possible structures to purchase the properties (the subject of the option) as follows:-
(1) Method A – Loan Structure
(2) Method B – Partnership Structure
7. Paragraph 1 of the option agreement provided that the Linders would negotiate the purchase of the loans from Ulster Bank in return for a full and final release by Ulster Bank of all claims over the companies, the individuals and the properties. Tola agreed to provide the Linders with letters demonstrating proof of funds which the Linders were authorised to present to the bank in connection with negotiating a price for the purchase of the loans.
8. Paragraph 2 of the agreement provided that for a period of thirty to forty five days after the date in which the Bank provided written notice of its acceptance of the purchase price, the parties would negotiate to reach an agreement for the purchase of the properties under the terms of Method B: Partnership Structure” set out in the agreement.
9. It was also agreed that if the Linders terminated negotiations for the purchase of the properties prior to the expiration of the negotiation period and prior to the execution by the parties of a legally binding contract, “then the Linders shall pay the sum of €500,000 to Tola within thirty days of the Linders’ notice to terminate the negotiations or at the time of the closing of the transaction with the bank, whichever occurs earlier”.
10. Paragraph 3 of the option agreement provided that, in the event that the parties were unable to reach agreement on the terms of the purchase of the properties under Method B: Partnership Structure, “then Tola shall have the right, but not the obligation, to purchase the properties under the terms of Method A: Loan Structure” as set out in the agreement. It also provided that Tola could exercise its option by a notice of intent to purchase to the Linders within seven days of the expiration of the negotiation period.
11. However, the critical clause in the contract and one which is at the heart of the dispute between the parties is at para. 4 which provides as follows:-
“Notwithstanding the foregoing, the Linders may, within seven days of receipt of the notice from Tola exercising the option to purchase, elect not to proceed with a purchase pursuant to the terms of Method A: Loan Structure by notice of intent to decline the Loan Structure purchase to Tola so long as all of the following conditions are met:
(a) The Linders shall have obtained alternative financing comprised entirely of debt with no third party equity participation, sufficient to allow the Linders to effect the purchase of the loans from Ulster Bank, and
(b) The Linders pay the sum of €500,000 to Tola within thirty days of the Linders notice to decline the purchase.” (Emphasis added)
12. The plaintiff subsequently provided the defendants with letters demonstrating proof of funds.
13. Subsequently, the defendants entered into an agreement with Ulster Bank for the repurchase of their loans on 23rd April, 2014. The terms of this agreement were clearly confidential but were given to the plaintiff by the defendants in good faith
14. The parties then entered into negotiations to see if they could agree a partnership structure under the Binding Option Agreement.
15. However, these negotiations proved inconclusive and on 18th April, 2014, the defendants (through a Mr. Tuite), sent an email confirming that the defendants were withdrawing from the negotiations.
16. On 22nd April, 2014, the plaintiffs then, by notice, exercised its option to purchase the Tola properties in accordance with Method A: Loan Structure set forth in the option agreement.
17. On 28th April, 2014, the defendants gave notice of their intention to decline to proceed with the purchase by the plaintiff of the Tola properties in accordance with Method A; they stated that they had obtained alternative financing comprised entirely of debt with no third party equity participation which would allow them to complete the debt purchase agreement with Ulster Bank and requested the plaintiff’s bank details in order to make a payment of €500,000 pursuant to clause 4(b) of the Binding Option Agreement.
18. By letter dated 28th April, 2014, the plaintiff confirmed receipt of the defendants notice declining to proceed with method A and sought documentary confirmation that the requisite alternative financing (i.e. entirely debt with no equity participation) had been obtained as required by the option agreement.
19. Further correspondence took place between the parties and on 14th May, 2014, solicitors on behalf of the defendants wrote to the plaintiff stating that the defendants’ sole remaining obligation under the option agreement was to make a payment of €500,000 to the plaintiffs, and asserted that the plaintiff had no entitlement to demand further information. However, the plaintiff contended that the defendants were under a contractual obligation to provide specific information to the plaintiff to confirm that the defendants had, indeed, met the precondition for declining the exercise of the plaintiff’s option to purchase, (i.e. that they had obtained alternative debt financing from another financier without any equity participation). The plaintiff also stated in its affidavit that the defendants’ failure to provide this information was unreasonable and that the only conclusion to be drawn from the refusal to supply such information was that the defendants had not complied with clause 4. More importantly, the plaintiff contends that there is a binding agreement for the purchase of the properties under Method A: Loan Structure.
20. Thus, the defendants are of the view that the Option Agreement has been terminated (and that all they need to do is pay the plaintiff the sum of €500,000); the plaintiff, on the other hand, maintains that it is still entitled to exercise its option to purchase certain properties in accordance with the terms of Method A: Loan Structure.
21. Given the impasse between the parties, the plaintiff issued a plenary summons on 16th May, 2014. The plenary summons seeks, inter alia:-
1. An order for specific performance of the option agreement entered into on 6th February, 2014;
2. A declaration that the plaintiff holds the benefit of a contract for the purchase of the Tola properties and a charge over the Linders properties from the defendants in accordance with the terms of Method A: Loan Structure of the Binding Agreement; [the Tola and Linders properties are set out in the plenary summons]
3. A declaration that the defendants hold the properties in trust for the plaintiff;
4. An order restraining the defendants from completing a debt purchase agreement with Ulster Bank in respect of the properties otherwise than in trust for the plaintiff; and
5. Orders similar to orders one, two and three of the notice of motion;
6. Damages and other reliefs.
22. Mr. Joseph Linders swore a replying affidavit on behalf of the defendants and set out the background to the involvement of the plaintiff in the commercial affairs of the defendants and their associated companies. In the first instance, however, Mr. Linders stated that he took grave exception to certain averments in the plaintiff’s affidavit which, he said, disclosed sensitive financial and commercial information which had been given to the plaintiff by the defendants in good faith as part of a due diligence exercise entered into between the plaintiff and the defendants prior to the option agreement being entered into. Mr. Linders stated that the plaintiff was now seeking to use this sensitive commercial information – which was clearly confidential – to exert pressure on the defendants and to extract a commercial advantage from the defendants subsequent to the termination of the option agreement by the defendants.
23. Mr. Linders stated that the option agreement between the parties was entered into on 6th February, 2014 before the defendants entered into their refinancing agreement with Ulster Bank. Mr. Linders stated that the role of the plaintiff in the renegotiation of the financing arrangements with Ulster Bank was to provide evidence of funding to demonstrate that the defendants were in a position to purchase and/or refinance their liabilities with Ulster Bank. Mr. Linders stated that, in this way, the plaintiff provided a financial service to the defendants for which the defendants were prepared to pay them “handsomely” in the sum of €500,000. Mr. Linders also stated that the option agreement would only become operable and effective on certain events occurring and agreement being reached between the parties.
24. Mr. Linders stated that the defendants had entered into a confidential agreement with Ulster Bank on 23rd April, 2014, the essential terms of which were that it was agreed between Ulster Bank and the defendants that the defendants would seek to effect a refinancing of their overall liabilities with Ulster Bank.
25. Mr. Linders also states at para. 9 of his affidavit:-
“The defendants have procured third party debt financing from a reputable firm of international financiers which will facilitate the refinancing and/or purchase of our lending arrangements with UBIL. This is addressed in further detail below. This was envisaged by the purported option agreement and it naturally follows that the plaintiff can have no further role in the refinancing and/or purchase of our indebtedness from UBIL. It seems to be the gravamen of the plaintiffs case that they are retrospectively seeking to insert or imply into the terms of the agreement, particularly clause 4(a) thereof, that third party debt financing from an independent entity must be, in some way, subject to their approval or the terms or conditions of which should be examined by them in advance in some way and in some other way approved by them. This is not what the parties agreed…Bearing in mind the manner in which the plaintiff has abused the confidential information we have already provided them access to, I have no doubt but that the plaintiff would use that information to try and damage our contractual arrangements with our financier and/or UBIL.”
26. Thus, Mr. Linders interpretation of the agreement was that it was an option agreement entered into between the parties, that the plaintiff provided evidence of funds, that the defendants were able to use that evidence of funds in their negotiations with Ulster Bank, that there was a debt financing agreement between the defendants and Ulster Bank and that the defendants for their own good reasons decided to terminate the option agreement with the plaintiffs as they say they were entitled to do within the terms of the option agreement. The defendants say that they have obtained alternative financing from an alternative financier and, therefore, they were in a position to terminate the option agreement with the plaintiffs. Mr. Linders stated that he was of the view that the actions of the plaintiff were an opportunistic attempt to take advantage of the defendants’ position and to seek to put in place an arrangement which was manifestly contrary to the agreement between the parties.
27. The various further affidavits filed on behalf of both parties are replete with assertions of what the various clauses in the option agreement mean or purport to mean. The issue of the construction of the option agreement is clearly not a matter for the court to decide at the interlocutory stage. The various interpretations and construction of the agreement are a matter for the final trial of the action.
The Nature of the Relief Sought – Prohibitory or Mandatory?
28. The plaintiff submitted that paras. 1 and 2 of its notice of motion were seeking prohibitory rather than mandatory injunctions.
29. This was vigorously contested by counsel for the defendants who submitted that the reliefs sought at paras. 1 and 2 of the notice of motion were essentially mandatory in nature.
30. The plaintiff also indicated to the court that it did not wish to proceed with an application under para. 3 of its notice of motion.
31. It is necessary, therefore, to consider the reliefs sought at paras. 1 and 2 of the notice of motion.
32. Paragraph 1 of the plaintiff’s notice of motion seeks an order restraining the defendants from completing a debt purchase agreement with Ulster Bank in respect of the property the subject matter of these proceedings “otherwise than in trust for the plaintiff”.
33. Having heard submissions from both parties in respect of para. 1, it is clear, in my view, that the order sought is, in substance, an order that the defendants should complete the debt purchase agreement with Ulster Bank in such a manner that, at the closing, the defendants should hold the relevant properties in trust for the plaintiff. This does not simply restrain the defendants from doing what they intended to do; it means that they must take active steps at the closing of their debt buy back agreement with Ulster Bank to ensure that these properties are held in trust for the plaintiff. This could mean, for example, that declarations of trust might have to be executed in respect of each property. In any event, it would mean that, at the closing, instead of the title to the properties passing back to the defendants, the defendants would have to take steps to ensure that the title would pass to the defendants on trust for the plaintiff. That is clearly a dramatic alteration in the contractual relationship between the defendants and the plaintiff. Moreover, it could also clearly have a significant and damaging effect on the agreement which the defendants have with their new financier. It is clear that the Linders intend to obtain new finance from a new financier; part of the security for this new financing would be the title to the relevant properties. However, if the Linders were, in fact, holding these properties in trust for the plaintiff, the new financier could well take the view that the security being provided by the Linders was simply not adequate and refuse to finance the buy back of the loans. Therefore, the effect of such an injunction would be to frustrate the contract which the defendants have entered into with Ulster Bank. This Court would be very slow to grant any interlocutory relief which would have such an effect. Thus, what is sought by the plaintiff is clearly in substance, and in essence, a mandatory injunction.
34. Moreover, it is also clear that the defendants have, in fact, entered into a debt purchase agreement with Ulster Bank on 23rd April, 2014, and that this debt purchase agreement is due to complete in or about August, 2014. Thus, the effect of the orders sought by the plaintiff is either (i) to set aside the contract entered into between the defendants and Ulster Bank or (ii) to amend the terms of the contract entered into between the defendants and Ulster Bank to ensure that the defendants hold the properties in trust for the plaintiff. When stated in this form, also, it is clear that the reliefs sought at para. 1 are mandatory in substance.
35. The relief sought at para. 2 is an order restraining the defendants from selling, transferring, assigning, disposing or otherwise dealing with the property except in accordance with the terms of Method A of the option agreement entered into between the parties on 6th February, 2014. Again, it is clear to me – having heard submissions by both parties in respect of this matter – that the substance of what is being sought by the plaintiff is an injunction directing the defendants to contract with the plaintiff on the terms of the Method A: Loan Structure of the option agreement entered into between the parties. Again, although it purports to be a prohibitory injunction, it is, in substance and in essence, a mandatory injunction directing the defendants to enter into a particular contractual agreement with the plaintiff on particular terms.
The Criteria for the Grant of a Mandatory Injunction
36. The criteria for the grant of a mandatory interlocutory injunction have been the subject of much case law. In Maha Lingham v. Health Service Executive [2006] ELR 137, the plaintiff applied to the High Court for an interlocutory injunction restraining the defendant from dismissing him from his position as a temporary surgeon at Cork University Hospital. The High Court (Ms. Justice Carroll) refused the application for an injunction and the plaintiff appealed to the Supreme Court.
37. Fennelly J. giving judgment on behalf of the Supreme Court stated as follows at p. 140 of the judgment:-
“The second [legal matter] is that the implication of an application of the present sort is that in substance what the plaintiff/appellant is seeking is a mandatory interlocutory injunction and it is well established that the ordinary test of a fair case to be tried is not sufficient to meet the first leg of the test for the grant of an interlocutory injunction where the injunction sought is in effect mandatory. In such a case it is necessary for the applicant to show at least that he has a strong case that he is likely to succeed at the hearing of the action. So it is not sufficient for him simply to show a prima facie case and, in particular the courts have been slow to grant interlocutory injunctions to enforce contracts of employment.”
38. This Supreme Court decision in Maha Lingham was applied by Clarke J. in Bergin v. Galway Clinic Doughiska Ltd [2008] 2 IR 205. In these proceedings the plaintiff initiated High Court proceedings seeking an injunction against the defendant restraining his dismissal. Clarke J., in the High Court, granted an interlocutory injunction restraining the defendant from dismissing the plaintiff and from appointing another Chief Executive, except on terms which would allow the plaintiff to return to his duties should the court ultimately make such an order.
39. At para. 16 of his judgment, Clarke J. noted that the first legal issue which arose between the parties was what was the appropriate standard to be applied in assessing the case which the plaintiff has to make out at the interlocutory stage and stated:-
“It is clear from cases such as Fennelly v. Assicurazioni Generali [1985] 3 I.L.T. 73 and Maha Lingham v. Health Service Executive [2005] IESC 89, that a plaintiff may be entitled to injunctive relief which would have, to some extent, the effect of continuing his or her employment but only, it would seem, where the plaintiff concerned can establish a strong case.”
40. Likewise, at paras. 19, 20 and 21 of his decision (in considering Maha Lingham and Naujoks v. National Institute of Bioprocessing [2006] IEHC 358, a decision of Laffoy J.), Clarke J. states as follows:-
“19. Applying Maha Lingam v. Health Service Executive [2005] IEHC 89 in Naujoks v. National Institute of Bioprocessing Research and Training Ltd [2006] IEHC 358, Laffoy J. undoubtedly applied the strong case test in determining that the plaintiff had not discharged the onus in relation to what was described as the first strand of the plaintiff’s case.
20. Laffoy J. went on to consider a second strand of the plaintiff’s claim which relates to fair procedures. It is suggested by counsel on behalf of the plaintiff herein that Laffoy J. in relation to that strand applied the ordinary or lower standard of fair issue to be tried. I am not satisfied that Laffoy J. did in fact apply a lower standard. Indeed it would be difficult to see the logic of so doing. The basis for the higher standard is that the substance of the relief sought is a mandatory order requiring the employer to keep the employee in employment. The order remains a mandatory order even though the plaintiff claims that a purported termination of his employment is unlawful by reason of a finding of wrongdoing having been arrived at in breach of the principles of natural justice. However, couched the substance of the relief is the same. I am not, therefore, satisfied that different standards apply depending on the nature of the claim advanced on behalf of the plaintiff concerned. Where a plaintiff seeks to prevent an employer from exercising a prima facie entitlement to terminate a contract of employment, then that employee is, in substance, seeking a mandatory order requiring that his employment continue and that his employment entitlements are met.
21. It follows, in my view, that, in order to determine whether the first step towards granting such an order has been met, it is necessary that the plaintiff concerned establish a strong case.
41. In Shelbourne Hotel Holdings Ltd v. Torriam Hotel Operating Company Ltd [2010] 2 IR 52, Kelly J. also reviewed the principles applicable to the granting of a mandatory injunction. At para. 72 of his judgment he states as follows:-
“72. The parties are in disagreement as to the principles which ought to be applied by the court in considering an application for interlocutory mandatory relief.
73. On the one hand the plaintiff contends that the test is that prescribed by the Supreme Court in Campus Oil v. Minister for Industry (No. 2) [1983] I.R. 88. It is the same test as that prescribed by the House of Lords in American Cyanamid v. Ethicon Ltd. [1975] AC 396. The test requires that in order to obtain such an interlocutory injunction the plaintiff has to demonstrate a serious issue for trial, inadequacy of damages and the balance of convenience lying in favour of the grant of the order.
74. The defendant contends that a different test must be met on the first of those three issues. It argues that it is not enough to show a serious issue for trial but rather, the issue must be such as to allow the court to feel a high degree of assurance that the injunction is being rightly granted or, to put it another way, a likelihood or strong likelihood of success at the trial.”
42. The learned High Court Judge then reviewed other authorities in Ireland the UK and stated as follows:-
“[77] Campus Oil v. Minister for Industry (No.2) [1983] I.R. 88 was itself a decision given on an application for a mandatory interlocutory injunction. It has been followed in such a context on many occasions for example the decision in Cronin v. Minister for Education [2004] IECH 255 [2004] 3 IR 205, which I have just mentioned as well as the decision of Carroll J. in A & N Pharmacy Ltd v. United Drug Wholesale Ltd [1996] 2 ILRM 42 and the decision of Peart J. in Sheehy v. Ryan (Unreported, High Court, Peart J., 29th August, 2002).
[78] There have however been other dicta suggestive of the necessity to demonstrate a strong or clear case redolent of the language used by Megarry J. in Shepherd Homes Ltd. v. Sandham [1971] Ch. 340 where he spoke of the necessity for the case to be “unusually sharp and clear” before a mandatory injunction would be granted.
[79] Indeed, the approach of Megarry J. was subsequently approved by the Court of Appeal, per Mustill L.J., in Locabail International v. Agroexport [1986] 1 W.L.R. 657. There that judge noted that, although the judgment of Megarry J. antedated the decision in American Cyanamid v. Ethicon Ltd. [1975] AC 396, nonetheless the statement of principle in relation to the case of a mandatory injunction was not affected by what the House of Lords said in that case. Mustill L.J. went on to prescribe the test applicable to applications for interlocutory mandatory injunctions by reference to a passage from Halsbury’s Laws of England (4th ed.) which states as follows at para. 948:-
“A mandatory injunction can be granted on an interlocutory application as well as at the hearing, but, in the absence of special circumstances, it will not normally be granted. However, if the case is clear and one which the court thinks ought to be decided at once … a mandatory injunction will be granted on an interlocutory application.”
[80] That very passage was cited with approval by Costello J. in Irish Shell v. Elm Motors [1984] I.R. 200.
[81] In Boyhan v. Beef Tribunal [1993] 1 I.R. 210, Denham J., then a High Court Judge, described a mandatory injunction as a powerful instrument and said that:-
“In seeking this exceptional form of relief, a mandatory injunction, it is up to the plaintiffs to establish a strong and clear case – so that the court can feel a degree of assurance that at a trial of the action a similar injunction would be granted.”
[82] This approach has been adopted by the Supreme Court in Lingam v. Health Service Executive [2005] IESC 89.” (and the learned High Court Judge set out the quote of Fennelly J. set out above).
“[83] This approach seems very different to that adopted by the Supreme Court in Campus Oil v. Minister for Industry (No. 2) [1983] I.R. 88 and by Laffoy J. in this court in Cronin v. Minister for Education [2004] IEHC 255, [2004] 3 IR 205. It is more in harmony with the approach of the English courts beginning with the observations of Megarry J. and culminating more recently in the Court of Appeal decision in Zockoll Group Ltd. v. Mercury Communications Ltd. [1998] FSR 354 where that court said at p. 366:-
‘… the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be ‘wrong’ in the sense described by Hoffmann J.
Secondly, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo .
Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish his right at a trial. That is because the greater the degree of assurance that the plaintiff will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.’”
43. At para. 85 Kelly J. continued:-
“[85] To return to Ireland, there seems to be an inconsistency of approach on the standard that must be met in order to obtain an interlocutory mandatory injunction. On one view it is the demonstration of a fair case or serious issue for trial, on the other, a higher standard of proof must be achieved that has variously been described as a strong case likely to succeed at the hearing of the action or a strong and clear case.
[86] Faced with these conflicting approaches and pending a final determination of the issue by the Supreme Court, I am much attracted by the approach of Hoffmann J. in Films Rover Ltd. v. Cannon Film Sales Ltd. [1987] 1 W.L.R. 670 where he took the view that the fundamental principle on interlocutory applications for both prohibitory and mandatory injunctions is that the court should adopt whatever course would carry the lower risk of injustice if it turns out to have been the “wrong” decision.
[87] Whatever standard applies it is clear that the grant of mandatory interlocutory relief is exceptional. In many if not all cases, the mandatory nature of the relief will also be a factor to be taken into consideration when the balance of convenience falls to be considered. ”
44. In AIB v. Diamond & Ors [2011] IEHC 505, Clarke J. stated as follows at para. 5.1:-
“5.1 The criteria for the grant of interlocutory injunctions has been well settled in this jurisdiction since the decision of the Supreme Court in Campus Oil. In Shelbourne Hotel Ltd. v Torriam Hotel Operating Co. Ltd. [2010] 2 IR 52 Kelly J. noted a number of authorities from the United Kingdom which suggested an approach based on assessing where the least risk of injustice lay. Kelly J. did not find it necessary to reach any definitive conclusions on the point. As it happens, at much the same time, writing extra judicially in the foreword to Kirwan – Injunctions Law and Practice (1st Ed. 2008), I noted the same developments and suggested that a high value might be placed on an assessment of where the greatest risk of injustice might lie in future applications for interlocutory injunctions. As such, it is important to emphasise a number of points.
5.2 First, the Campus Oil jurisprudence is now so well established in the case law of the Supreme Court and, indeed, this Court, that it would, in my view, be impermissible for this Court to depart from it unless and until any judgment of the Supreme Court so authorised. However, on analysis, it seems to me that it is, perhaps, more appropriate to characterise the “greatest risk of injustice” criteria not so much as a different test to that which has become established in the Campus Oil jurisprudence but rather as the underlying principle which informs the more detailed rules which have been worked out in accordance with that jurisprudence.
5.3 It is inevitable that a court having to decide whether to grant or refuse an interlocutory injunction will be faced with some risk of injustice. The whole point of interim or interlocutory injunctions is that they are designed to be granted or refused after a very early and often quite brief hearing with a view to deciding what state of play should subsist until the court has an opportunity to conduct a full hearing. Against that background it is inevitable that there will be cases where an injunction will be granted but where it will turn out, after trial, and with the benefit of full evidence and argument, that the plaintiff who obtained the interlocutory injunction was in the wrong and should, with the benefit of hindsight, never have had the advantage of a restraining order. Likewise, it may transpire that a plaintiff who is refused an interlocutory injunction may succeed at trial and will have suffered whatever injustice flows from not having had the benefit of a court order in the intervening period.
5.4 Obviously, the extent to which there may be a risk of injustice can vary hugely from case to case and, within one case, from party to party. However, it seems to me that it is an acknowledgment by the court of that risk of injustice that informs the detailed rules that have evolved by reference to which the court decides whether to grant or refuse an interlocutory injunction. If a plaintiff cannot establish a fair issue to be tried, then there is obviously a huge risk of injustice in imposing an injunction on a defendant where there is, at least at the time of the interlocutory hearing, no real basis for supposing that the plaintiff will ultimately succeed.”
45. Clarke J. also stated at para. 5.8:-
“5.8 On the basis of that analysis, it might be said that giving consideration to the least risk of injustice does not really add much to the overall picture for it might be seen simply to justify the existing set of rules. However, it seems to me that a “least risk of injustice” analysis has perhaps some additional benefits. First, it can be a useful measure for deciding whether a somewhat different approach to normal is needed in particular types of cases. It is now well settled that in cases involving a mandatory injunction the court will normally require a higher level of likelihood that the plaintiff has a good case before granting an interlocutory injunction (see for example Lingam v Health Service Executive (Unrep., Supreme Court, Fennelly J. 4th October, 2005). It may well be that the logic behind that departure from the normal rule can be found in the added risk of injustice that may arise where the court is asked not just to keep things as they were by means of a prohibitory injunction but to require someone to actively take a step which may, with the benefit of hindsight after a trial, turn out not to have been justified. The risk of injustice in the court taking such a step is obviously higher. In order to minimise the overall risk of injustice the court requires a higher level of likelihood about the strength of the plaintiff’s case before being prepared to make such an order. Likewise, in cases such as Evans v. IRFB Services (Ireland) Ltd [2005] IEHC 107 and Bergin v. Galway Clinic Doughiske Ltd [2008] 2 IR 205 the attempt to fashion an interlocutory order which minimised the overall risk of adverse consequences might be seen to be examples of the same underlying principle.
5.9 Given that, based on the above analysis, the detailed rules which have evolved for considering interlocutory injunction applications can be said to stem from an attempt by the court to work out the course of action which gives rise to the least risk of injustice, then it may well be that that underlying principle can be a useful tool or measure to be applied where the court is confronted with a difficult situation.”
46. In Okunade v. Minister for Justice, Equality and Law Reform, Ireland and the Attorney General [2013] 1 ILRM 1, Clarke J. giving the judgment of a unanimous Supreme Court stated as follows at para. 9.7 of the judgment:-
“9.7 It is fair to say that much of the detailed analysis of the Campus Oil test has occurred in the context of injunction proceedings which at least have a significant commercial contractual or property character. The basic rules for the grant or refusal of such injunctions at the interlocutory stage are well settled. The test perhaps finds its most detailed exposition in the judgment of McCracken J. in B&S Limited v. Irish Auto Trader Limited [1995] 2 I.R. 142 at 145 which has been approved by Laffoy J. in Symonds Cider v. Showerings (Ireland) Limited [1997] 1 ILRM 481 and Quirke J. in Clane Hospital Limited v. Voluntary Health Insurance Board (Unreported, High Court, Quirke J., 22nd May 1998).”
The learned judge then set out the test at para. 9.8 of his judgment. He states at para. 9.13:-
“9.13 It is unnecessary for the purposes of this judgment to analyse in detail each of the types of cases where a refinement of what might be described as the “pure” Campus Oil test has evolved. However, some examples are illustrative of the fact that such refinements and variations can be seen as a response to the need to minimise the risk of injustice in the context of the particular types of issues which are likely to arise in special cases.
9.14 A first example may be found in relation to mandatory interlocutory orders. As Megarry J. observed in Shepherd Homes Ltd. v. Sandham [1971] Ch.340 at 359:-
“In a normal case the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted; and this is a higher standard than is required for a prohibitory injunction.”
O’Higgins C.J. made similar comments about the difficulty in granting mandatory orders at an interlocutory stage in Campus Oil itself. Perhaps the area where mandatory interlocutory orders have received their most extensive recent consideration in this jurisdiction is in the field of so called employment injunctions (that is applications brought by plaintiffs seeking to restrain either dismissal or certain steps being taken in a disciplinary process) where the courts have applied a test which involves a variation on the “pure” Campus Oil principles. Where, for example, the substance of the order sought in those cases involves something which, in substance, is a mandatory order (as to which see Bergin v. Galway Clinic Doughiske Ltd [2008] 2 IR 205 and Giblin v. Irish Life and Permanent plc [2010] IEHC 36), the courts have required the plaintiff to establish not just a fair or arguable case but rather the higher standard noted by this Court in Maha Lingam v. Health Service Executive [ 2006] 17 ELR 137.”
47. In my view, therefore, it is clear from this review of the authorities that, in the case of mandatory injunctions, there is what Clarke J. has described as “a refinement” or “a variation” of the “pure” Campus Oil test. This variation has been applied to mandatory injunctions in two recent Supreme Court decisions – Maha Lingham and Okunade. In my view, it appears from the decision of Fennelly J. in Maha Lingham and the decision of Clarke J. in Okunade that where the order sought is a mandatory order, then the appropriate test is that the plaintiff must establish, in the words of Fennelly J. in Maha Lingham, that he has “a strong case that he is likely to succeed at the hearing of the action”.
48. It also appears to be the case that, where a mandatory injunction is being sought, the court should also particularly adopt “whatever course would carry the lower risk of injustice” as stated by Kelly J. in Shelbourne Hotel and Clarke J. in Okunade.
49. Therefore, I am of the view in this case that the plaintiff must establish a strong case that it is likely to succeed at the hearing of the action before it is entitled to an injunction.
Specific Performance of a Loan Agreement
50. The main relief sought by the plaintiff in a plenary summons is specific performance of the option agreement entered into between the parties. Whilst the exact nature of the option agreement is a matter for trial of the action, it appears to be a loan agreement, albeit of an unusual kind.
51. In general, however, it appears that the courts lean against specific performance of loan agreements. Thus, in Gorringe v. The Land Improvement Society [1899] 1 I.R. 142 Porter M.R. stated as follows:-
“As a general proposition it is correct to say that a mere agreement to lend money even upon security will not be specifically performed. If money is lent, the lender may call it in again and therefore specific performance will be futile. Money compensation in such a case affords an adequate and indeed the best remedy and goes nearer to complete restitutio in integrum than the enforcement of a loan which the lender might straightaway proceed to require back leaving the borrower in no better position after the interference of the court.”
52. In Duggan v. Irish Allied Building Society (Unreported, High Court, Finlay P., 1st March, 1976), Finlay P. stated at p. 15 that a court could not and should not grant a specific performance of a contract to advance money.
53. However, the question of whether there is an absolute rule that the courts will never in any circumstances make an order for specific performance of a loan agreement is unclear. In “Specific Performance in Ireland” (Buckley, Conroy & O’Neill), the authors state at para. 7.23:-
“Damages will overwhelmingly remain the normal and proper remedy but any absolute rule to the effect that specific performance of the loan agreement will never be granted must be doubted. High English authority has described as an “untenable contention” the proposition that “specific performance of the contract to make a money payment was not available” See Beswick v. Beswick [1968] 1 A.C. 58 per Lord Hodson at 81.”
54. Likewise, at para. 7.24 the authors state:-
“Sir Garfield Barwick in a strong dissent in the New Zealand case of Loan Investment Corporation of Australasia v. Bonner [1970] NZLR 724 considered that the complexities of modern commerce might well throw up situations where an order for specific performance could be required.”
55. It is, of course, not necessary that the court should decide this principle at the interlocutory stage. However, the fact that, in general, courts will not grant specific performance of loan agreements is a factor to which a court can have regard in assessing whether a strong case has been made out.
56. Thus, given the nature of the plaintiff’s case and the current state of the case law on specific performance, I am satisfied that the plaintiff has not fulfilled the test for a mandatory injunction, i.e. the plaintiff has not established that it has a strong case that it is likely to succeed at the hearing of the action.
The Issue of whether Damages are an Adequate Remedy
57. Counsel for the plaintiff submitted that the actual test of whether damages were an adequate remedy consisted of two limbs:-
A. Whether damages were an adequate remedy for the plaintiff, and
B. Whether, if so, the defendants were, as he put it, “a mark” for any damages award obtained by the plaintiff.
58. Counsel for the plaintiff relied on American Cyanamid v. Ethicon Ltd [1975] AC 396 where Lord Diplock stated at p. 408:-
“As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendants continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be an adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted however strong the plaintiff’s claim appeared to be at that stage.”
59. Counsel for the plaintiff also relied on Westman Holdings Ltd v. McCormack [1992] 1 I.R. 151 where the Supreme Court considered whether the plaintiff could be adequately compensated in damages where personal defendants were unlikely to have the means to meet the award. The Supreme Court held that even though the plaintiff’s potential loss was entirely pecuniary, compensation would not be an adequate remedy and Finlay C.J. stated:-
“Having regard to the decision of this Court in Campus Oil v. the Minister for Energy (No.2) and in particular to the judgment of O’Higgins C.J. in that case, I am satisfied that once a conclusion is reached that the plaintiff seeking an interlocutory injunction has raised a fair question to be tried at the hearing of the action in which, if he succeeded, he would be entitled to a permanent injunction that the court should not express any view on the strength of the contending submissions leading to the raising of such a fair and bona fide question but should proceed to consider the other matters which then arise in regard to the granting of an interlocutory injunction. They are firstly as to whether the plaintiff could, in the event of being refused an injunction and succeeding in the action be adequately compensated by damages. That question raises two separate issues potentially in every case. The first is the question as to whether damages would be an adequate remedy and the second is as to whether there is a defendant liable to pay such damages who is able to do so and thus the appropriate compensation could actually be realised.”
60. Counsel for the plaintiff conceded that damages would be an adequate remedy for the plaintiff. However, he submitted that, on the evidence before the court, the defendants were not “a mark” for such damages and, therefore, damages were not an adequate remedy.
61. In this regard the plaintiff submitted that the defendants (and their companies) were indebted to Ulster Bank, that all of the properties involved in the option agreement were currently pledged as security (and would be pledged as security with any future third party funder or financial institution); and that any judgment or award which the plaintiff might obtain against the defendants would rank behind secured debt and were unlikely to be satisfied. He also submitted that the profits which the plaintiff would have made on the option agreement would have been substantial and would be far in excess of what the defendants could afford to meet on any award of damages.
62. However, Mr. Linders in his second affidavit stated that the defendants were both solvent and had substantial means. He also stated that his solicitors were in a position to hand into court, in a sealed envelope, a summary of the defendants’ net worth. The plaintiff’s counsel objected to such a course of action and submitted that the court had no jurisdiction to receive such a sealed envelope. In any event, I indicated to the parties that it was not my intention to consider the contents of a sealed envelope. Mr. Linders also stated that he was unwilling to put this information on affidavit lest it be abused by the plaintiff in a similar manner to the manner in which it had abused other confidential financial information which it had obtained from the defendants.
63. Moreover, Mr. Linders stated in his first affidavit that if the defendants were allowed to complete the debt purchase agreement, then the defendants would be “in extraordinarily robust financial health into the future”. The defendants submitted that the plaintiff’s application would, if successful, completely destroy the debt repurchase agreement which they are seeking to complete with Ulster Bank. They submit that catastrophic financial results would ensue for the defendants and their companies.
64. In these circumstances – and given the case law – I am of the view that the court is entitled to consider whether the defendants would be in a position to meet any possible award of damages (which the plaintiff might obtain at the trial of the action) at the determination of the plenary action rather than at the time of the application for an interlocutory injunction.
65. In this regard, Mr. Linders stated at para. 65 of his first affidavit that any settlement or purchase of debt by any third party funder with Ulster Bank “will give rise to significant financial advantage which would ensure the financial independence and stability of the defendants and the related companies and significant equity”. He also stated that the defendants controlled very large property portfolios and that the proceeds of rent and further operating profits were more than adequate to discharge any damages that might arise in the plaintiff’s favour. Mr. Linders also stated that if the defendants were successful in obtaining the debt write down, the reduction and servicing costs on the lower debt level and the increase in commercial values would ensure that the defendants and/or companies controlled by them would be in a position to meet any judgment which the plaintiff obtained. Mr. Linders also stated that the surplus rental income enjoyed by the defendants and their associated companies over the repayment of bank commitments was considerably in excess of €2m a year.
66. Counsel for the defendants also submitted that the plaintiff had not made any attempt to quantify the damages which it thought it might suffer as a result of the defendants’ alleged wrongdoing. He also submitted that it would be possible for the plaintiffs to quantify such a loss, but they had deliberately chosen not to do so as a tactic in its application for interlocutory relief. His submission was that, in effect, the plaintiffs sought to argue that their damages were not possible to calculate at this stage, but that they would be significant and that the defendants would not have the financial wherewithal to meet such a significant damages award. This, counsel for the defendants submitted, was not an appropriate tactic in an interlocutory application. The plaintiffs could have calculated any alleged damages award which they thought they might recover and if such a figure had been put before the court, the defendants could have sought to satisfy the court that they were a mark for any such award. However, the defendants submitted, what the plaintiff could not do was to make a generalised claim for a significant but unstated amount for damages and then simultaneously claim that the defendants would not be able to meet such a sum. This submission was rejected by the plaintiff who argued that certain information about the valuations of property had been put before the court which would provide some yardstick by which the court might assess the measure of damages which the plaintiff might suffer as a result of the defendants alleged breach of contract if the plaintiff was successful at trial.
67. In Curust Financial Services Ltd v. Loewe – Lack – Werk Gmbh [1994] 1 I.R. 450, the Supreme Court held that difficulty, as distinct from complete impossibility, of assessment was not a ground for characterising the award of damages as an inadequate remedy.
68. In the present case the plaintiff has accepted that damages are an adequate remedy for the plaintiff. Despite this concession, which in my view was properly made, the plaintiff has not been able to put forward a figure as to what its damages might be. However, given that it has accepted that damages are an adequate remedy, it follows as a matter of logic that the plaintiff should be in a position to assess at least a range of what those damages might be. The burden of proof is on the plaintiff so to do if they wish to argue that the defendants are not in a position to meet such an award. However, given that it has not done so in this case, it seems to me that it cannot argue, that the defendants cannot meet an award of damages when that amount is an unknown.
69. In any event, given the evidence on affidavit of the defendants, it appears that the defendants will be in position to meet an award of damages which the plaintiff might obtain.
The Balance of Convenience
70. In assessing the balance of convenience the court has to have regard to all the factors in the application.
71. Firstly, as Kelly J. remarked in Shelbourne Hotel Holdings Ltd v. Torriam Hotel Operating Company Ltd:-
“In many if not all cases the mandatory nature of the relief will also be a factor to be taken into consideration when the balance of convenience falls to be considered.”
72. In my view, the nature of the relief being sought is certainly a factor which I am entitled to take into account. The relief sought by the plaintiff would, in effect, completely undermine the agreement entered into between the defendants and Ulster Bank. The court should be extremely slow to grant orders which could have such an effect.
73. Secondly, as was stated by McCracken J. in B&S Ltd v. Irish Auto Trader Ltd [1995] 2 I.R. 142 at p. 146:-
“While Lord Diplock only used the phrase “balance of convenience” when considering the position if damages were not an adequate remedy for either party, I would be more inclined to the view that the entire test rests on a balance of convenience, but that the adequacy of damages is a very important element and may frequently be the decisive element in considering where the balance of convenience lies.”
74. Given that, as here, the plaintiff has accepted that damages are an adequate remedy for it (albeit with the reservation that it believes the defendants may not be “a mark”), I am of the view that this also is a factor which weighs in the balance of convenience against the granting of an injunction.
75. Thirdly, as was stated in Ó Murchu v. Eircell Ltd (Unreported, Supreme Court, 21st February, 2001) Geoghegan J. stated at pp. 9 and 10 of the decision as follows:-
“…I am satisfied that the balance of convenience favours refusing the injunction. First of all there is the well known principle that in general the courts will not grant an injunction which would involve ongoing supervision. A court is therefore very slow to grant injunctions in either service contracts or trading contracts because it is very difficult to assess, at any given time thereafter as to whether such injunctions are being obeyed or not. It is also usually impractical and undesirable that two parties be compelled to trade with one another when one, for reasons which are perfectly rational, does not want to carry on such trading.”
76. The defendants in this case have stated clearly on affidavit that all necessary trust and confidence between the parties has broken down and they clearly do not wish to contract with the plaintiff. (See also Sheridan v. Louis Fitzgerald Group Ltd (Unreported, Clarke J., 4th April, 2006) where Clarke J. relied upon similar factors to refuse an injunction and also referred to Ó Murchu v. Eircell Ltd). In my view, this is also a factor to which I have regard in assessing the balance of convenience.
77. Fourthly, as was stated by Clarke J. in Okunade, as follows:-
“9.10 The test of the balance of convenience is, of course, itself expressly directed to deciding where the least harm would be done by comparing the consequences for the plaintiff in the event that an interlocutory injunction is refused but the plaintiff succeeds at trial and the consequences for the defendant in the event that an interlocutory injunction is granted but the plaintiff fails at trial.”
I, therefore, turn to compare the consequences for both parties in the event that an injunction is granted or refused.
78. In respect of the balance of convenience, the plaintiff submitted that the defendants would suffer no prejudice other than being delayed in their transaction with a third party funder.
79. However, the defendants in their affidavits clearly stated that if an injunction were obtained by the plaintiff, it would have catastrophic results for the defendants (and the companies they controlled) for the following reasons:-
1. The relief being sought had the potential to completely undo the protracted and careful negotiations between the defendants and Ulster Bank in relation to a debt purchase agreement.
2. As a result of the agreement between the defendants and Ulster Bank there was a timetable under which a number of requirements had to be met, including delivery of security.
3. If the defendants were unable to meet that timetable and complete the purchase of debt by mid August, Ulster Bank would then become entitled to enforce their security and effect a sale of the properties on the open market, thus, utterly setting at nought the debt purchase agreement which the defendants had entered into with Ulster Bank.
4. Enforcement by Ulster Bank against the defendants in respect of these properties would also constitute an act of default in relation to separate and substantial borrowings which Linders of Smithfield Ltd, (a company in which the defendants are two of the three shareholders), had from another lender secured on another suite of properties and would trigger potential enforcement in respect of that matter.
5. The companies which owned the properties referred to in the option agreement are trading companies, including companies operating the heating and motor car trades in which up to 60 people are employed and their jobs and livelihoods would be at risk in the event of an injunction. An injunction would, therefore, raise in their words “the very real prospect of the bank enforcing against the companies”.
6. Mr. Linders stated that “the potential for damage is incalculable and potentially catastrophic not just by reason of the loss to the defendants which would potentially be all of the assets, but to the risk of the livelihood of numerous individuals not party to the option agreement.
7. Mr. Linders also stated that “I have no doubt that the plaintiff has sought these orders in the full knowledge that if the defendants are stopped financing from its preferred financier, the agreement with UBIL cannot be completed and the defendants face the loss of all their businesses”.
8. He also referred to the “extraordinarily calamitous and adverse circumstances which would arise if the court made such an order”.
80. Subsequently, after the application had been heard but before judgment had been delivered, counsel for the plaintiff sought liberty to file an additional affidavit to exhibit a letter sent from the plaintiff to the defendants after the hearing of the injunction application. This application was opposed. However, counsel for the plaintiff submitted that the plaintiff would suffer significant prejudice if it was not permitted to put that letter before the court. It was submitted that it was relevant to the court’s assessment of the balance of convenience. Given this submission, I granted leave to the plaintiff to file a supplemental affidavit solely for the purposes of exhibiting a letter dated 26th May, 2014, from the plaintiff’s solicitors to the defendants’ solicitors and I gave liberty to the defendants to file a replying affidavit exhibiting their reply.
81. The plaintiff in its letter of 26th May, 2014, offered to pay the relevant amount to Ulster Bank – essentially in lieu of the third party financier which the defendants had obtained to finance the buy back of its loan from Ulster Bank. It also suggested that if this offer was accepted, the security held by Ulster Bank over the properties could be assigned by Ulster Bank to the plaintiff pending the trial of the action, and if the plaintiff was unsuccessful then the plaintiff would assign back the said security rights to the defendants or its nominee for the same consideration.
82. By letter dated 26th May, 2014, the plaintiff’s proposal was rejected for a number of reasons. Firstly, the defendants stated it had actively terminated all contractual and commercial relations between the parties; secondly, all necessary trust and confidence had broken down between the parties and, therefore, it was not the intention of the defendants to enter into any further contractual relations between the parties.
83. It is difficult in my view to see how such a proposal would add to the balance of convenience in favour of the plaintiff. Having considered the correspondence, I am of the view that it does not provide any basis which would change the balance of convenience in favour of the plaintiff. If anything, it simply serves to emphasise the difficulties of operating any contractual arrangements between the parties if an injunction were granted.
84. Having considered all the evidence set out on the affidavits and having considered the submissions of both parties, I am in no doubt that the balance of convenience in this matter clearly favours the refusal of the injunction sought.
Conclusion
85. In the circumstances, I will refuse the reliefs sought by the plaintiff in the notice of motion.
14. Mr Wallace believes that in so far as the personal defendants claim that they may suffer losses from the granting of the injunctions, they would be a consequence of the enforcement by IBRC of its security, and not of the injunctions.
15. He refers to the appointment of a share receiver on the 14th April 2011 over, inter alia, the shares in Quinn Finance Holdings, which is the company through which the Quinn family members held their beneficial interest in the IPG assets. He states that from the 14th April 2011 the personal defendants no longer held any legal or beneficial interest in or control over the IPG assets, and that if any detriment to the personal defendants arises, it arises because of the enforcement steps taken by IBRC on foot of that security, and not as a result of the injunctions granted.
16. He refers to the fact also that the need for the injunctions arose because, even though after 14th April 2011 the personal defendants no longer had any legal or beneficial interest in the IPG assets, they nevertheless took steps deliberately designed to ensure that IPG would be stripped of assets so that the IBRC security would be worthless. He describes in detail how that was done. Mr Wallace refers also to the fact that the personal defendants have deposed on affidavit that the steps taken in that regard were taken before the orders of Clarke J. were made, and in the belief on their part that their actions were justified on the basis that the security held over those assets is invalid. Mr Wallace submits that the claim that they might suffer loss by reason of the injunctions must be viewed in that light.
17. Mr Wallace has referred also to the fact that at an earlier stage the personal defendants have stated that as part of the scheme to put assets beyond the receiver they engaged third parties who would retain control of the assets in question, but that they no longer have any control over the third parties who, they say, reneged on the arrangements to hold the assets on their behalf. He refers to the orders made in the contempt proceedings whereby it was ordered that certain steps be taken to undo or unravel the scheme, and to the response made on affidavit and through Counsel at the time that they were powerless to undo or unravel the scheme or to retrieve any of the assets. Mr Wallace suggests that this is in stark contrast to what is now stated by Aoife Quinn on affidavit on the present application, namely that it is the interlocutory injunctions and Mareva injunctions which have caused them loss and damage which would have been recoverable on foot of the undertakings as to damages given to the Court. He does not believe that the personal defendants have demonstrated any way in which they have or will suffer losses as a result of the granting of the injunctions in question.
18. Ms. Quinn states that while the first injunctive order (Clarke J.) prevents the personal defendants from dealing with the IPG assets, it does not stop the the plaintiffs from doing so, and therefore does not maintain the status quo ante since IBRC and now the Special Liquidators can pursue their efforts to dispose of IPG assets.
19. She goes on to say that neither she nor her co-defendants are aware of what sales or other disposals of IPG assets have been effected by the plaintiffs as they have not been kept informed in that regard, and they fear that some of those assets may have already been disposed of.
20. She makes the point also that the IPG assets were not purchased by the Quinn family as a short term investment, but rather as longer term investments for the benefit of the Quinn family and future generations, and that the sale of those assets in the present economic climate will undermine that investment strategy and result in sales at an undervalue, thereby causing significant losses to the Quinn family. It is submitted that if the injunctions had not been granted, those losses would have been prevented, and that now, having the benefit of the injunctions, the plaintiffs are in a position to dispose of all of the IPG assets before the main proceedings are determined, hence the inadequacy of the undertakings as to damages, including the proposed fortified undertaking.
21. As far as the Mareva injunctions are concerned, Ms. Quinn avers that each of the personal defendants has been adversely affected by those orders in different ways, and she has given certain examples such as the inability to service standing orders on bank accounts, and the inability of her brother Sean Quinn Junior to service the mortgage on his family home notwithstanding that the account from which those payments were to be made was in credit. That has resulted in the bank in question issuing proceedings against him, and appointing a Receiver. These difficulties have apparently given rise to the need to make applications to Court from time to time, and have prevented the personal defendants from contemplating new business ventures and employment. Other prejudice and inconvenience resulting from the existence of the Mareva injunctions are described by Ms. Quinn in her grounding affidavit on the present application.
22. Mr Wallace accepts that some inconvenience is caused to the personal defendants by the Mareva injunctions, but points to the fact that they were granted by consent. He refers to variations to those orders which have been made from time to time to facilitate the personal defendants, and to which IBRC consented.
23. In all the circumstances Mr Wallace submits that the fortified undertaking in the form of a ring-fenced sum of €5,000,000 to be lodged if necessary into a designated bank account is more than sufficient to meet any possible claim by the personal defendants arising from the granting of the injunctions which they seek to have set aside. He submits that the need for the injunctions remains, so that IPG assets are not further dissipated and removed from the reach of the liquidators by the personal defendants as happened in the past, and he submits that the balance of convenience remains in favour of the injunctions remaining in place.
24. Ms. Quinn has responded to Mr Wallace’s replying affidavit by affidavit sworn on the 5th March 2013. She says that it is her belief that upon the liquidation of IBRC the undertakings as to damages no longer exist, and she refers to the fact also that by letter dated 14th February 2013, their solicitors withdrew the consents given to the Court when the injunction orders were made in view of the insolvency of IBRC, describing those undertakings as being “so fundamental to the consents provided to our clients”.
25. I do not intend to set forth all that Ms. Quinn states in response. But it is fair to say that she reiterates the personal defendants’ belief that the proposed fortified undertaking as to damages falls far short of what is required, and she stands by her earlier assertion that the amount of those losses is potentially as high as US$700,000,000.
26. She does, however, say that Mr Wallace’s contention that she is confusing the losses which may accrue as a result of the injunctions with the losses that may be suffered for other reasons ignores the issues to be determined in what are referred to as “the main proceedings”, being those wherein the Quinn family members seek to establish the illegality opf the loans and that the security held over the family’s assets is void and unenforceable, and that those assets therefore were never lawfully transferred or charged to Anglo Irish Bank, and that all enforcement of same is unlawful as a result.
27. She avers that the personal defendants are prevented by the interlocutory injunction granted by Clarke J. from taking any steps to protect their interest in the IPG assets pending the hearing of the Bank’s present proceedings, and that if those assets are disposed of by the liquidators at undervalue or at all the personal defendants stand to suffer losses they would not have suffered if the injunction turns out to be one that ought not to have been granted when these proceedings have been finally determined.
28. Martin Hayden SC for the personal defendants submits that the argument put forward by the plaintiffs that the losses that the personal defendants claim they will suffer are not losses that will result from the granting of the injunctions but rather losses resulting from the enforcement of security over the IPG assets is an artificial argument only, and one based on the fact that instead of making its conspiracy claims against the personal defendants by way of Defence and Counterclaim in the so-called main proceedings, they instead instituted separate proceedings (“the Conspiracy proceedings”) against the personal defendants on the 28th June 2011, and delivered their Defence in the Main proceedings one month later on the 27th July 2011.
29. The point being made is that if that strategy had not been adopted, and instead, the conspiracy claims were made by way of defence to the main proceedings, any injunction sought in order to protect the counterclaim would have been granted in the main proceedings, supported by an undertaking as to damages which would cover any losses resulting from the granting of the injunction in those proceedings.
30. Mr Hayden describes this as a deliberate strategy adopted by IBRC whereby it seeks to separate its defence of the main proceedings from the injunctive relief which it sought in the conspiracy proceedings. He submits that on IBRC’s own case the injunctions obtained in the conspiracy proceedings are necessary in order to safeguard the assets it claims to be entitled to if it is successful in defending the main proceedings. He suggests that this is made clear by Mr Wallace in his first replying affidavit at paragraph 15 thereof where he states that in the absence of the injunctions the personal defendants’ stated aim of placing assets beyond the reach of IBRC could continue unfettered, thereby setting IBRC’s security at nought and in addition “in the event that IBRC is successful in defending separate proceedings before this Court (Ciara Quinn & others v. IBRC and Anor, bearing record No. 2011/4336P), the enforcement of its security would be rendered nugatory”. Mr Hayden refers to other statements to similar effect in paragraphs 19 and 70 therein.
31. In these circumstances he submits that this Court on the present application should consider the purpose of the injunctions in the overall context not simply of the conspiracy proceedings, but also the main proceedings. Otherwise, it is submitted, any success which the personal defendants may obtain in the main proceedings will be nugatory if by then the special liquidators have disposed of the IPG security assets. It is submitted that protection should work both ways as part of the exercise of balancing the rights of parties when the issues between the parties have yet to be determined, and that this is the purpose served by an undertaking as to damages as the price required of an applicant for an interlocutory injunction.
32. In relation to the adequacy of the proposed fortified undertaking in the sum of €5,000,000, Mr Hayden points to the fact that there is no particular or evidential basis put forward as to why this amount is considered sufficient.
33. Quite apart from the estimate by the personal defendants that their potential losses could amount to the entire value of the IPG assets, he submits that even to date the personal defendants have been deprived by the injunction granted by Clarke J. of the benefit of certain rents receivable from a shopping mall outside Istanbul (Prestige Shopping Mall). They have been deprived of that rent for a period of two years thus far, and that rent alone amounts to some €9,000,000 over that period. This is a property in respect of which there was no allegation that the personal defendants have attempted to put it beyond the grasp of the Receiver. It is submitted that any loss in respect of this rent therefore results from the injunction granted, and would have been recoverable on foot of the undertaking as to damages. It is submitted that this rent claim alone exceeds the proposed fortified undertaking as to damages, and will exceed it by many millions more by the time the issues between the parties are decided. That is just one of several examples put forward as to why the proposed fortified undertaking is considered to be hopelessly inadequate. I shall return to that matter in due course.
34. Mr Hayden submits that the giving of an undertaking as to damages is an essential prerequisite to the granting of an interlocutory, since no conclusions can be reached on the substantive issues between the parties at that stage, and so that the status quo can be maintained. In this regard he has referred to the statement by Neill LJ in Cheltenham & Gloucester Building Society v. Ricketts [1993] 4 AER 276 at p. 281 that “save in special cases an undertaking as to damages is the price which the person asking for an interlocutory injunction has to pay for its grant”. He has referred also to the statement by Laffoy J. in Pasture Properties Ltd v. Evans [1999] IEHC 214 where she stated:
“The plaintiff cannot get an injunction unless it can give an undertaking as to damages. If an injunction is wrongly granted at this stage and it so transpires at the hearing of the action, the plaintiff must undertake to adequately indemnify the defendant against any loss incurred by the defendant by reason of the injunction being wrongly granted”.
35. Mr Hayden submits that if the undertaking as to damages had not been given when the application for injunctive relief was made, those orders would not have been granted, and therefore, as a corollary, where they are now accepted as being worthless, the orders should be discharged.
36. He has submitted that any undertaking as to damages which is offered to the Court must be a real and meaningful undertaking, if it is not to be hollow and useless to the party injuncted. He has referred to the judgment of O’Sullivan J. in Martin v. An Bord Pleanala [2002] IEHC 82, in which he refused a stay to an applicant on the basis that while the applicant had given an undertaking to the court there was no detail from which the Court could assess it as a realistic undertaking when balanced against the prospective losses which could be suffered by the notice party in the proceedings if the applicant was ultimately unsuccessful in the case. He regarded the undertaking as “nothing more than a pro forma compliance with the usual requirement of the court in this type of application”.
37. He submits also that where an undertaking is given to support an injunction, it must not be restricted as to amount, and has referred to the judgment of O’Flaherty J. in O’Mahony v. Horgan [1995] 2 IR 411. In that case, the High Court had required an undertaking as to damages on an application for a Mareva injunction, but then limited it to a sum of £25,000 in circumstances where the amount of the fund sought to be protected by the injunction (the proceeds of an insurance policy) was £71,000. The Supreme Court allowed the appeal, but on grounds that the applicant had failed to prove an intention on the part of the defendant to dispose of his assets with a view to evading his obligation to the plaintiff. But in the course of his judgment, O’Flaherty J. made the following remarks, albeit obiter:
“Nonetheless, it needs to be emphasised that the Mareva injunction is a very powerful remedy which if improperly invoked will bring about an injustice, something that it is designed to prevent. It may put a person or a company out of business. It may contribute to delay in bringing litigation to a head. It may be used as a diversionary tactic and be part of the skirmishes that increasingly occur in much litigation. It may – as in the case here – take on a life of its own while the main litigation is becalmed … .
As regards the undertaking as to damages, I know of no case where a limit has been put on the amount that may be required to be paid, if it is held that the injunction was improperly obtained, nor do I think it right in principle that such a limit should be placed in view of the far-reaching implications involved in any restraint that is imposed on a party by reason of such an injunction prior to judgment.”
38. This is a view with which Blayney J. agreed in his judgment in the same case, and with which Hamilton CJ was “[inclined] .. to the views in this regard expressed in the judgment about to be delivered by Mr Justice O’Flaherty”.
39. Mr Hayden has referred to a number of cases which have highlighted the important purpose of a meaningful undertaking as to damages, and without which an injunction will rarely be granted, including Cheltenham & Gloucester Building Society v. Ricketts [supra] and Pasture Properties Ltd v. Evans [supra]. In addition he has referred to judgments to like effect in Australia in First Netcom Pty Ltd v. Telstra [2001] 179 ALR 725, and Combet v. Commonwealth of Australia [2005] 221 ALR 621. Authority from Canada has also been referred to – all stressing the importance of the requirement that an undertaking as to damages be given to the Court if an interlocutory application for injunctive relief is to be granted.
40. He refers to the endorsement by Clarke J. in Estuary Logistics and Distribution Company Ltd v. Lowenergy Solutions Ltd and anor [2008] 2 IR 806, of the principles stated by Neill LJ in Cheltenham & Gloucester relating to undertakings as to damages, having noted that there seemed to be no Irish authority on the enforcement of an undertaking as to damages in circumstances where the underlying injunction is discharged prior to the hearing of the substantive proceedings. Those principles are called in aid by Mr Hayden. It is the first four which appear to me to have relevance for his submission as to the importance of the requirement for an undertaking as to damages in exchange for the granting of an interlocutory injunction:
a. Save in special cases an undertaking as to damages is the price which the person asking for an interlocutory injunction has to pay for its grant The court cannot compel an applicant to give an undertaking but it can refuse to grant an injunction unless he does.
b. The undertaking, though described as an undertaking as to damages, does not found any cause of action. It does, however, enable the party enjoined to apply to the court for compensation if it is subsequently established that the interlocutory injunction should not have been granted.
c. The undertaking is not given to the party enjoined but to the court.
d. In a case where it is determined that the injunction should not have been granted the undertaking is likely to be enforced, though the court retains a discretion not to do so.
41. The importance of the undertaking as to damages to the person injuncted is further underlined, in the submission of the personal defendants, by the judgment of Laffoy J. in Shell E & P Ireland Limited v. McGrath and others [2007] IEHC 144. That was a case where the plaintiff company, the recipient of an interlocutory injunction, subsequently sought the leave of the court to discontinue the proceedings, and, inter alia, the question arose at the behest of some of the defendants as to the enforcement against the plaintiff of its undertaking as to damages given when it applied for injunctive relief. Laffoy J. in her judgment, while dealing principally with the application for leave to discontinue, stated at page 24 of her judgment:
“It is clear on the authority of Newcomen v. Coulson [1878] 7 Ch. D. 764] that, as a matter of law, the defendant’s entitlement to an inquiry as to damages on foot of the undertaking given by the plaintiff on the application for the interlocutory injunction is not affected by the discontinuance of the plaintiff’s claim. Such an entitlement as the defendants have to such an inquiry will survive the discontinuance of the plaintiff’s claim.”
42. In Mr Hayden’s submission an enforceable and meaningful undertaking as to damages is of paramount importance in the balance to be struck between the rights of the plaintiff to protection and the right of the defendant not to be unreasonably prejudiced or damaged by the grant of injunctive relief. He submits further that therefore any attempt by the plaintiffs to reduce their exposure by limiting the extent of the undertaking in the manner sought by these plaintiffs should be refused by the Court, as it will upset that delicate balancing of rights in favour of the plaintiffs and result in the inability of the personal defendants to recover reasonably foreseeable losses arising from the granting of the injunctions as averred to by Ms. Quinn on behalf of the personal defendants.
43. It is submitted that the plaintiffs are seeking to limit now the extent of any claim which can be made later on foot of the undertaking, in circumstances where the extent of the potential losses cannot now be ascertained or estimated with certainty, and must await the conclusion of the trial. In such circumstances, it is submitted, the amount of any such claim should be taken at its highest, and not on the unscientific basis put forward by Mr Wallace and for which there is no evidential basis whatsoever. Mr Hayden has referred to the fact that the Court has always been called upon in applications for interlocutory relief to examine the capacity of the plaintiff to give and discharge a meaningful undertaking as to damages to the court. I have already referred to the judgment of O’Sullivan J. in that regard. He has referred to the judgment of Finnegan P (as he then was) in Riordan v. Minister for the Environment, unreported, High Court, 26th May 2004 where the plaintiff sought certain injunctive relief. The facts of the case are not relevant, but one of the issues which the learned judge considered was the adequacy of an undertaking as to damages by the plaintiff. When refusing an injunction he stated the following:
“Finally I take into account the following circumstance. The plaintiff frankly admits that an undertaking as to damages would be worthless in that he has not the means to satisfy the same if called upon to do so. While not determinative of the application it is a factor which I must take into account. I take into account the expense which has been incurred by the defendants and I also take into account the expense which has been incurred by other candidates and indeed their efforts in their election campaigns. They will not be recompensed for these should the plaintiff ultimately fail in these proceedings.”
44. Further support for these submissions is urged by reference to a judgment of Mr Justice Laddie in the Chancery Division of the High Court in England in Staines v. Walsh, as reported in Times Law Reports, 1st August 2003, where the judge is reported as having stated:
“So long as an asset-freezing order was in force, there was a continuing obligation on a claimant not only to be willing to honour his undertaking in damages, but to disclose to the defendant any material change for the worse in his financial position … who could then either seek the voluntary removal of or reduction in the order, or apply to the court for the same”.
Laddie J. concluded that since the claimant had hidden his severely changed financial position it would be “wholly inappropriate to extend the freezing order” and that “had there been an application before the court to discharge the freezing order, the court would have given it serious consideration”.
45. The personal defendants accept that there can be circumstances where a plaintiff who is impecunious or insolvent can be permitted to fortify the undertaking as to damages in a way that meets the requirement of fairness to the defendants. However, in the present case, they say that it cannot be appropriate to limit the extent of that fortification in the manner sought because it is impossible to anticipate in a meaningful way the extent of the losses that might flow from the granting of the maintaining in place of the injunctions. This is particularly so, in their submission, where the clear purpose of the injunctions is to ensure that the status quo ante is maintained. They submit that there is no reality to the undertaking limited to €5,000,000 in circumstances where it is admitted by Mr Wallace that the amount is not arrived at by any scientific calculation. In essence it is simply a sum which he believes or even guesses on no stated basis is sufficient to cover any possible loss.
46. Mr Hayden has stated that in this jurisdiction the question of the fortification of an undertaking as to damages has not arisen for consideration often in the courts. But he has referred to the judgment of Barr J. in Caudron v. Air Zaire [1986] ILRM 10 where, albeit in very different circumstances where the plaintiff had no connection with this country, he required the plaintiff to provide a bond to cover any losses that the defendants might suffer in the event that the injunction ought not to have been granted, and he indicated that he would discharge the injunction in the event that a suitable bond was not forthcoming. Mr Hayden has referred to the fact that the defendants in Caudron appealed successfully to the Supreme Court. It appears however that the successful appeal was against an order that had been made for service of the proceedings on the defendant outside the jurisdiction under Order 11 RSC. In those circumstances, the question of requiring a bond by way of fortification of an undertaking as to damages was not considered or decided on appeal as the proceedings simply fell away on the jurisdiction issue.
47. Mr Hayden accepts that the issue herein has not come before the courts previously, but has referred to the statement by Kelly J. in Harding v. Cork County Council [2006] 1 IR 294 in which the question of the need for a fortified undertaking by the plaintiff arose. In making his application for an injunction pending his application for leave to seek judicial review on notice pursuant to section 50(3) of the Planning and Development Act, 2000, the applicant offered the usual undertaking as to damages. In considering the balance of convenience the learned judge stated that he did not find any evidence to indicate that the undertaking was either useless or worthless. He went on to state that a fortified undertaking was “most unusual” and he agreed with a view expressed by Herbert J. in O’Connell v. Environmental Protection Agency [2001] 4 IR 494 that “the occasions on which a court might properly require what is described as a ‘fortified undertaking to pay damages’ must be very few”. But Kelly J. went on to state that “if such a fortified undertaking as to damages is to be required then a proper evidential basis has to be set for it and such does not exist in the present case”. Mr Hayden submits that in the present case a clear evidential basis exists in the instant case since Mr Wallace himself has accepted that IBRC is insolvent and unable to pay should that be required.
48. Reference has been made also to the judgment of Laffoy J. in Broadnet v. Director of Communications Regulation [2000] 3 IR 281. in addressing the need for the applicant to provide an undertaking as to damages pending the determination of those judicial review proceedings she stated at p. 302:
” … if no undertaking is exacted, the respondents and the notice parties will have no redress against the applicant for the loss that they have incurred as a result of the existence of the applicant’s unsustainable proceedings. It would be patently unfair and unjust to allow the proceedings to continue without the applicant carrying the risk of the loss occasioned thereby, if they are unjustified”.
49. Having concluded that it was an appropriate case in which to require that an undertaking as to damages be given, the question arose then as to whether a fortified undertaking should be required in the form of a guarantee from the applicant company’s financial backers, given that it was acknowledged during the course of argument in relation to an application for security for costs that the applicant company alone would not be in a position to discharge an order for costs. Laffoy J. stated as follows:
“In support of their contention that the undertakings should be fortified, the parties seeking the undertakings have relied on the following passage from Bean on Injunctions (7th ed.) at p. 29:-
‘But where there are doubts about the plaintiff’s resources, the court has discretion to require either security or the payment of money into court to ‘fortify’ the undertaking, or (as an alternative) an undertaking from a more financially secure person or body. This might apply if the plaintiff is legally aided; or a minor or patient …; or resident outside the jurisdiction (Harmon Pictures NV v. Osborne [1967] 1 W.L.R. 723); or an unquoted company. In cases where the plaintiff is a subsidiary of a large company and apparently lacking funds it is common for the parent company to be invited to guarantee the undertaking in damages in writing’
It is undoubtedly the case that an undertaking from the applicant would be worthless unless secured. Using the terminology used by the first respondent, it seems to me that the applicant’s ‘backers’ should guarantee each undertaking required in the instant case. I will hear further submissions as to how this can be best achieved. A number of devices occur to me. Assuming the backer is a holding company, the holding company could be joined as a co-plaintiff in the judicial review proceedings for the purpose of giving the undertakings. Alternatively, the holding company could give a guarantee in writing of the undertaking as to damages.”
50. In the present case, it is suggested by Mr Hayden that the Minister for Finance who is the equivalent of the ‘backer’ of the Special Liquidators, who are the Minister’s agents, should be required to give a guarantee in respect of the undertakings as to damages which were given by IBRC prior to its liquidation, or indeed be joined as co-plaintiff for the purpose of replacing the present undertakings with undertakings from him. It is submitted that the interests of the personal defendants would be protected by such undertakings in just the same way as they were under the undertakings previously given, and in a way which is far superior to the very limited offer of a fortified undertaking limited to the sum of €5,000,000.
51. The personal defendants submit that this Court cannot at this stage of the proceedings estimate with any accuracy how much the losses to them may turn out to be whenever that exercise may have to be conducted. Neither, it is submitted, is the Court entitled to presume that no losses will be incurred, or to presume that the figure put forward by the plaintiffs, namely €5,000,000, will be sufficient in circumstances where it is accepted by the plaintiffs that it is not scientifically based, and where the personal defendants have demonstrated even by reference to one rent-roll from the Prestige Shopping Mall in Istanbul that the figure is already far exceeded by that item alone. They point to the fact that the liquidators are intent in realising the IPG assets as and when they can, and as soon as they can, and that the personal defendants are powerless to prevent that happening, with the result that if they are in due course successful in the “main proceedings” and succeed in having the loans declared illegal, and the security set aside and declared unenforceable, they will be unable to recover on foot of the undertaking as to damages, even if fortified in the sum proposed.
52. Brian Murray SC for the plaintiffs has submitted that in fact there seems to be little between the parties as to the legal principles applicable in relation to the requirement to provide an undertaking as to damages when seeking an interim or interlocutory injunction, and as to the fortification of same in certain circumstances, and that the differences which exist are more questions of emphasis and as to their application in this case.
53. Mr Murray accepts that generally speaking an undertaking will be the price that an applicant will pay for being granted an interlocutory injunction, though he submits that it is not an absolute requirement in all cases, since there can be exceptional circumstances where a court will dispense with the need for one, and grant the injunction nonetheless. He notes in the present case that Mr Wallace has confirmed the undertakings which were given when these orders were granted, and that they remain extant.
54. He accepts also that the purpose of the undertaking is to provide a means by which the defendant who is the object of the injunction may be compensated for losses suffered as a result of the injunction if in due course it turns out that it was wrongly granted. He emphasises however that the losses recoverable under the undertakings are losses caused by the injunction only, and that the undertaking is not some form of general indemnity to the defendant in relation to losses which the defendant thinks he will suffer more generally. He emphasises also that a court will not in all cases enforce the undertaking against the plaintiff even where the plaintiff has not been successful in the substantive case, since the Court has a discretion. In that regard it is to be noted that the undertaking as to damages is one which is given by the plaintiff to the Court and not to the defendant. It is not a contract between the parties, but is a commitment given to the Court by the party seeking the injunction. Mr Murray has emphasised also the need for the defendant to show a causal link between any losses anticipated or claimed and the granting of the injunction.
55. It is submitted also that while a defendant will in most cases have a strong case for arguing that an undertaking as to damages should be required of the plaintiff as a condition for the grant of injunctive relief pending the hearing of the substantive case, a defendant has no such strong claim to a fortified undertaking simply because the plaintiff may not be in a position to pay on foot of the undertaking given. This is an issue on which he accepts that he and Mr Hayden may disagree. Mr Murray submits that even where the plaintiff may be shown to be in a weak financial position, it nevertheless remains a question to be taken into account by the Court when weighing the competing rights of the parties and the balance of convenience.
56. Other factors that the Court will in his submission have regard to are the strength of the plaintiff’s case and the conduct of the defendant which it is sought to restrain. Mr Murray places considerable emphasis on the conduct of the personal defendants in this case who on their own admission were intent on taking steps to implement a scheme whereby IPG assets would be disposed of in such a way as to remove them from the reach of the share receiver appointed in April 2011, and had taken such steps prior to the granting of the injunctions.
57. Mr Murray has referred to the fact that the personal defendants never moved in April 2011 to seek to restrain the share receiver from dealing with the IPG assets following his appointment, even though they quickly thereafter commenced what have been referred to as ‘the main proceedings’ in June 2011. He submits that this must be seen as a deliberate decision on their part, given the fact that they had legal advice available to them. He suggests that the reason may be that by seeking to restrain the receiver from dealing with the IPG assets they would in effect have been acting inconsistently with their own actions in seeking to put the assets beyond reach of the receiver, and he suggests also that the reason why no move to seek an injunction was made is that the steps being taken by them to put assets beyond the receiver would have been uncovered.
58. It is submitted therefore that their decision not to seek an injunction to restrain the receiver has resulted in the situation whereby the receiver remains lawfully entitled to deal with the IPG assets. It follows in his submission that any losses which the plaintiff claim they will suffer for the purpose of the undertaking as to damages are losses which they will suffer because the receiver is free to deal with the IPG assets, and not because of the injunctions which are in place. In effect what the defendants seek to do, in the plaintiffs’ submission, is to obtain now by this new route a means of protection which they clearly resolved not to try and achieve by way of injunction application in the main proceedings in April 2011 or subsequently. He has referred also to the fact that in Sweden a bankruptcy receiver was appointed in July 2011 over Quinn Investments Sweden AB, and its 31 subsidiaries, which has resulted in the personal defendants losing control over those assets, resulting in them not being unable to deal with them. Therefore in his submission no losses in that respect can be attributed to the injunctions which are in place, and therefore no losses in respect of those assets would be recoverable on foot of the undertakings as to damages.
59. Mr Murray has referred also to the fact that in the contempt proceedings before Dunne J. in July 2012, Sean Quinn made averments that he along with other defendants had taken steps to remove assets from the IPG in order to frustrate the bank’s efforts to enforce its security in circumstances where they were disputing the validity of the bank’s security. During the course of his affidavit outlining the scheme being undertaken, Mr Quinn stated that he accepted that it was entirely their own actions which had resulted in them losing control of the IPG assets. This was the reason being put forward at that time as to why they were not in a position to comply with the coercive orders which had been made. These were the steps which they themselves decided to take unilaterally and secretly, instead of seeking injunctive relief themselves following the institution of the main proceedings. It was apparently the discovery of these activities that caused the plaintiffs to institute separate proceedings against the personal defendants, and apply for injunctive relief, rather than to address the issues which had come to light by way of a counterclaim in the main proceedings, given the fact that the events giving rise to the claims in the present conspiracy proceedings involved actions and wrongdoing by the personal defendants which were unrelated to the claims in the main proceedings. Mr Murray rejects any suggestion that the reason for the commencement of separate proceedings was in order to avoid the possibility that the undertakings as to damages would cover claims in the main proceedings.
60. In the circumstances which have become known in relation to the scheme put in place and advanced by the personal defendants it is submitted by Mr Murray that this may very well be one of those exceptional cases in which, given the defendants’ egregious conduct as admitted, no undertaking as to damages should be required at all, never mind a fortified undertaking of the kind being offered to the Court. That submission is made with even more force given the fact that it has been concluded by Dunne J. in the contempt proceedings that the injunction orders put in place were deliberately breached by some of the defendants after they were put in place.
61. It is submitted that no losses can possibly arise to the personal defendants in circumstances where the personal defendants themselves have admitted that through their own actions they have lost control of the IPG assets. Mr Murray refers also to the averment by Mr Wallace that the only IPG asset which remains in the control of IBRC is a building known as the Leonardo building in Kiev. He refers also to the fact that Ms. Justice Dunne in the contempt proceedings stated that there was an admitted sum of €455,000,000 owing to IBRC, and that in such circumstances there can be no doubt that IBRC is entitled to secure assets to satisfy that sum. He has submitted that in certain affidavits by Ms. Quinn she has made that admission, but that is not accepted by Mr Hayden for the personal defendants in his submissions in reply.
62. Mr Murray has made the point also that when considering the potential losses to the personal defendants on this application one must not confuse a claim in respect of losses to them personally with a claim to losses accruing to the corporate entities that own the assets, and that any cause of action in respect of a loss to a corporate entity is vested in that entity and not in any individual shareholder thereof.
63. In support of the submission that it does not automatically follow from the fact that a plaintiff may be impecunious that a fortified undertaking be required, Mr Murray has referred to the judgment of Denning M.R. in Allen v. Jambo Holdings [1980] 2 All ER 502 in which he commented, inter alia, that he did not see why a poor plaintiff should be denied a Mareva injunction just because he was poor, whereas a rich plaintiff would get one. In similar vein is the judgment of O’Donnell J. in Minister for Justice v. Devine, unreported, Supreme Court, 2012 where he stated:
“It would clearly be wrong that the deserving plaintiff with a good claim would be denied an injunction simply because they were without assets. In such a case, the court must take into account the unlikelihood of such a party being able to satisfy an undertaking as to damages as one of the factors in considering the grant of an interlocutory injunction but may, and on occasion does, proceed to grant an injunction in such circumstances without such an undertaking … … … .
The picture which emerges, therefore, is not of a mechanical rule, but rather of the exercise of the discretionary jurisdiction in which the presence or absence of an undertaking as to damages may be significant, and in many cases decisive”.
64. It has been submitted also that even if it was to be concluded that the personal defendants may suffer losses as a result of the injunctions being in place, they have failed to discharge the onus which is upon them to establish evidentially what those losses will be. Mr Murray submits that the personal defendants have simply come to court and said that the potential losses which they may suffer has to be what they say is the value of the IPG assets. It is submitted that is simply a baseless assertion on their part which confuses the losses to the corporate entities as a result of the enforcement of security, with losses arising from the existence of the injunctions. He has referred to the statement of Hardiman J. in Dunne & Lucas v. Dun Laoghaire Rathdown County Council [2003] 1 IR 567 where in relation to a figure of anticipated losses of €144 million estimated by the defendant as the likely losses it would suffer if the injunction was granted , he stated:
“The mention of the huge sum of €144,000,000 as the contract price of the South Eastern motorway is, no doubt, properly calculated to make any court hesitate on the threshold of interlocutory relief. But neither this figure nor the much smaller, still very significant, weekly figure quoted above have been related in any way to the actual scope of the proposed injunction … … … . In my view, it is not sufficient, either from the point of view of establishing a balance of convenience or attacking the undertaking, simply to mention huge sums of money without relating them to the specific relief sought or to the specific liability for which the plaintiffs, by virtue of their undertaking, may become liable.”
65. Mr Murray relies on the judgment of Millett J. in In re D.P.R. Futures Limited [1989] 1 WLR 778 in relation to the onus of proof – that onus being not limited to establishing the need for a fortified undertaking, but also its quantification.
Conclusions:
66. According to the first affidavit of Mr Wallace, IBRC sought these injunction orders in June and July 2011 because following the appointment of a share receiver over, inter alia, the shares in Quinn Finance Holdings (the company through which the personal defendants held their beneficial interests in the IPG) the personal defendants proceeded to take steps to ensure that the IPG was stripped of its assets thereby rendering IBRC’s security worthless. He describes how this was achieved, and says that those steps were taken before the interim and interlocutory orders were made by Clarke J. In fact, this seems to be accepted by the personal defendants. Thus, it is contended that no losses in respect of those assets can be attributed to the orders of Clarke J. Nevertheless an undertaking as to damages was given to the court when those orders were applied for, as is the normal practice.
67. Following the appointment of Mr Wallace as Share Receiver on 14th April 2011 under a number of share pledges executed by certain of the personal defendants as a condition of certain loan facility by Anglo Irish Bank in June 2008, certain of the Quinn family members, and who are part of the personal defendants group in the present proceedings, commenced the so-called main proceedings in which they seek declarations that the purported share charges executed by them in favour of Anglo Irish Bank are invalid, unenforceable and of no legal effect; declarations that the appointment of Mr Wallace as Share Receiver under those charges is invalid, unenforceable and of no legal effect; and declarations that certain undated guarantees executed by them in respect of liabilities of certain Cypriot companies are invalid, unenforceable and of no legal effect. They also seek damages.
68. It is pleaded in the Statement of Claim in the main proceedings that the effect of the appointment of Mr Wallace as Share Receiver is to deprive them of their rights qua shareholders of ownership of the Quinn Group and what is referred to in the Statement of Claim as the QF Group, which according to the Statement of Claim owns properties in “the Commonwealth of Independent States, Ukraine, Turkey and India”, but is not part of the Quinn Group.
69. The basis on which these declarations are sought is that the underlying purpose of the loans in question was to support the Anglo share price in breach of The Market Abuse Regulations, and in breach of Section 60 of the Companies Act, 1963, and is therefore an illegal purpose.
70. Nevertheless, as I have already referred to, the plaintiffs in those proceedings did not upon the issue of those proceedings seek any injunctive relief in order to restrain the Share Receiver from taking steps on foot of his appointment in relation to the assets. Nor even is a claim for injunctive relief contained within the Plenary Summons or Statement of Claim, which suggests that they at no stage intended to seek such relief, notwithstanding that the Receiver was in situ.
71. Mr Murray has submitted that this is unsurprising since they were in the process of taking their own measures to secure their position by taking steps to put the assets beyond the reach of the Receiver, and that any such application ran the risk of exposing their activities in this regard.
72. When these steps were discovered, the present proceedings were instituted and the orders in question were sought and obtained, and undertakings as to damages were given to the court.
73. It is known by now also that after the order was made by Clarke J. further steps were undertaken in breach thereof to continue the effort to put assets beyond the Receiver. That resulted in the contempt of court proceedings before Ms. Justice Dunne in respect of Sean Quinn Senior, Sean Quinn Junior and Pater Darragh Quinn, and which resulted in her judgment given on the 26th June 2012 when she found them to be in contempt of court.
74. It is unavoidable that the present application to have the injunctions discharged should be viewed against this background. It would be wrong in my view to view the application only by reference to the fact that IBRC has been put into liquidation pursuant to the Act of 2013. That is of course the immediate reason which gives rise to the application, but the fact that IBRC is in liquidation, is not determinative of whether the injunctions ought to be discharged, thus enabling the personal defendants to continue to implement their strategy to place assets beyond the reach of the Special Liquidators, who are acting in the interests of the creditors of IBRC.
75. It is necessary to consider the nature of the undertaking as to damages, and its purpose. What is said by Lord Diplock in F. Hoffmann-La Roche & Co. ASG v. Secretary of State for Trade and Industry [1975] AC 295, and also by him in American Cyanamid Co v. Ethicon Limited [1975] AC 396 is useful in that regard. As explained, the need for the plaintiff to give an undertaking as to damages is to strike a fair balance as far as possible between the plaintiff’s right to be protected from damage and loss which could not be adequately compensated by an award of damages against the defendant, and the defendant’s right to be compensated for loss and damage he may suffer as a result of the injunction, in the event that the plaintiff is unsuccessful at trial, and if it is shown that the injunction ought not to have been granted. It is part of the Court’s consideration as to where lies the balance of convenience.
76. It is also clear that the undertaking is not intended as a complete indemnity to the defendant. It is not a contract between the plaintiff and the defendant. It is an undertaking which the plaintiff gives to the Court. Indeed, a breach of the undertaking may be considered to be a contempt of court. It must be borne in mind that at the stage when an applpication for an interlocutory injunction is being considered there are often unresolved disputed facts between the parties. Each party will have sworn affidavits. In the event of a dispute on important facts, the Court is simply not in a position to resolve those facts at that point in the proceedings. Inevitably, therefore, there will be occasion where, although the Court is satisfied that a plaintiff has a serious issue to be tried, it cannot in justice reach a conclusion as to the probability of success. It is in such circumstances that the Court must weigh the competing prejudices if an injunction is or is not granted. As Diplock LJ stated in Hoffmann-La Roche at page 361:
“… the defendant may have suffered loss as a result of having been prevented from doing it while the interim injunction was in force; and any loss is likely to be damnum absque injuria for which he could not recover damages from the plaintiff at common law. So unless some other means is provided in this event for compensating the defendant for his loss there is a risk that injustice may be done.
It is to mitigate this risk that the court refuses to grant an interim injunction unless the plaintiff is willing to furnish an undertaking by himself or by some other willing and responsible person ……… .”
Diplock L.J. went on at page 361:
“[The Court] retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so, but if the undertaking is enforced the measure of damages is not discretionary. It is assessed on an inquiry into damages at which principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction”.
77. It will be noted that the Court enjoys a discretion not to enforce the undertaking as to damages if the defendant’s own conduct would make it unjust/inequitable to do so, even though the normal practice will be to do so absent special circumstances. Peter Gibson L.J. in his judgment in Cheltenham & Gloucester Building Society v. Ricketts [supra] gives examples of a number of cases in which, despite the defendant’s success at trial and the discharge of the injunction, the Court exercised its discretion not to enforce the undertaking as to damages given by the plaintiff. The circumstances include delay by the defendant in seeking to enforce the undertaking, the unmeritorious conduct of the defendant, and the “inequitable conduct” of a defendant.
78. The fact that upon the failure of the plaintiff’s case at trial the judge retains a discretion not to enforce the undertaking as to damages so as to do justice between the parties, begs the question whether there can be circumstances where the Court upon an application for an interlocutory injunction may grant the injunction notwithstanding that there is no undertaking of substance or worth forthcoming from the plaintiff. In normal circumstances, the Court cannot insist on an undertaking, but in the absence of one being offered the injunction will normally be refused, because an undertaking is the price which a plaintiff pays for the granting of the injunction.
79. There is no doubt that the Court can refuse to grant an injunction which would otherwise be granted, where it is satisfied that the undertaking as to damages offered by the plaintiff is of no real value. See for example the judgment of Laffoy J. in Pasture Properties Limited v. Evans [supra] where she was not satisfied as to the adequacy of the undertaking offered by the plaintiff company. The converse has been held to apply also in some circumstances. Indeed, Hoffmann La Roche was just such a case where the Crown was absolved from the requirement to give an undertaking on the basis that it was enforcing the law of the land as opposed to exercising some proprietary right. No such undertaking was forthcoming from the Secretary of State for Trade and Industry. Similarly in Kirklees Metropolitan Borough Council v. Wickes Building Supplies Ltd [1993] A.C. 227, the House of Lords held that it was within the discretion of the Court not to require an undertaking as to damages from the plaintiff council in circumstances where it was seeking the injunction to restrain the defendant from trading on Sundays in breach of Section 47 of the Shops Act 1950. The defendant resisted the claims on the basis that the section was in conflict with article 30 of the E.E.C Treaty. But the council refused to give any undertaking as to damages as a condition of interlocutory relief, since it could not afford to. The House of Lords held that there was no absolute rule that the Crown was exempt from giving an undertaking as to damages, and that the discretion in this regard which the Court had, extended to other public authorities when they were exercising the function of law enforcement.
80. Both of these cases are referred to by O’Donnell J. in his judgment in Minister for Justice, Equality and Law Reform v. Devine [supra] from which I have set forth a passage relied upon by Mr Murray, where the learned judge stated that it was well established that an injunction could be granted where the undertaking as to damages was of little real value, and instanced the case of an impoverished plaintiff such as the widow of a deceased in Allen v. Jambo Holdings Ltd [supra].
81. If that be the position, and it appears to be, one might ask why then should an injunction be discharged simply because an undertaking as to damages has become worthless due to the impoverishment of the plaintiff occurring after the undertaking was given? Putting that in the context of the present case, one could envisage that after the Special Liquidators were appointed following the passing of the Act of 2013 they might discover some efforts by some creditor of IBRC to put assets beyond the reach of the liquidator, requiring injunctive relief to restrain that activity in the interests of the creditors as a whole. A worthwhile undertaking as to damages may not be available, yet the claim by the liquidators may be seen as raising a serious issue to be tried, or even may appear to be a very strong case as put by the plaintiff on a prima facie basis. Leaving aside completely for the moment the possibility of some sort of bond or other fortified undertaking, it would seem to me, based on the authorities to which I have referred, that the Court in such a case would have a discretion to allow the injunction to be granted notwithstanding the obvious frailty in any undertaking as to damages which might be given. The authorities are clear that the Court enjoys such a discretion, so that it can weigh up all the circumstances of the case, and consider where the justice of the situation lies.
82. The Court could in such a case require some sort of fortification to the liquidator’s undertaking in order to do justice as best it can to the restrained defendant. In order to consider such fortification, some attempt must be made by the court to estimate what losses might accrue to the defendant as a result of the granting of the injunction. That of necessity at that stage of the case will be an inexact science in many cases. The present case is one such example, where Mr Wallace has candidly admitted that the figure of €5,000,000 is not based scientifically. In reality he is saying that the personal defendants can suffer no loss attributable to the injunctions, but that in any event that sum will be more than sufficient comfort to the Court to whom the undertakings have been given and confirmed, by way of fortification of the undertakings.
83. In the present case the undertakings were given in good faith and at a time when they had substance. The Court accepted them. There was no necessity at that time to consider their worth or the amount of any losses which might be claimed to flow from the injunctions should it be found in due course that that the injunctions ought not to have been granted. I add at this point that the fact that the plaintiff ultimately fails in the proceedings does not inevitably lead to a conclusion that the injunctions should not have been granted, and/or that the losses claimed are recoverable on foot of the undertaking as to damages. At that time, all the circumstances of the case must be considered, perhaps in the light of evidence which may have emerged at the hearing. But it would appear that at that stage one of the matters which the judge deciding whether or not to enforce the undertaking as to damages will have regard to is the conduct of the defendants. I would add also that the decision to enforce the undertaking is a separate and preliminary step to the actual assessment of the damages itself. Only if the Court concludes in the first instance that the undertaking ought to be enforced does it proceed to the second stage of assessing what those losses are.
84. It is the personal defendants upon whom the onus lies to now satisfy the court not only that the balance of convenience lies in their favour in having the injunctions discharged, notwithstanding the confirmation of the undertakings already given and the fortification of same to the extent of a ring-fenced sum of €5,000,000, but also as to the extent of the likely losses to them as a result of the injunctions having been granted, should it be concluded at a later stage that those injunctions ought not to have been granted.
85. On the balance of convenience, and looking at that question in the context of the present application, and at this point in time, this Court is entitled to take a view on events which are known to have taken place since the injunctions were put in place. It has been found by Dunne J. that those injunctions were breached by at least some of the personal defendants in pursuit of their scheme to place assets beyond the reach of IBRC. The implementation of the scheme was not just feared at the time that the injunctions were applied for. They were already known to have taken steps in that regard, and the orders sought to restrain that activity. The breaches of the injunctions were found to constitute a contempt of court. Dunne J. was not satisfied that the defendants in question had made sufficient effort to purge their contempt and remedy the situation they had contrived, and committal orders were made.
86. It is hard to see why, even if no realistic undertaking as to damages had been available at the time the injunctions were sought, the injunctions would not have been granted in any event, in the light of what was known by the share receiver at the time. The Court might well have been justified in considering that the balance of convenience was so clearly in favour of the plaintiffs that the absence of a solid undertaking as to damages could be overlooked in the interests of justice. It could also have taken into account the undoubted fact at that time that the main proceedings were already commenced and that those plaintiffs had not sought to restrain the share receiver from dealing with the assets which are behind the security which they claim in those proceedings is unenforceable.
87. I have no doubt that on the present application the balance of convenience remains in favour of leaving the injunctions in place. That view is enhanced by the existence of the fortified undertaking, but it is not decisive in my view. It is additional comfort. In the circumstances of this case, where the injunctions were sought because the personal defendants had taken steps to remove assets, the balance of convenience is clearly in favour of the injunctions remaining in place in order to ensure that such unlawful activity would not resume. The fact that the personal defendants claim that the loans are illegal does not mean that they can decide for themselves that the assets should not be available to the receiver lawfully appointed. If they have a point on the legality of the loans, that issue must be determined by the courts. There is no injunction in place on the main proceedings, or even applied for.
88. In any event, as I have said, the onus is upon the personal defendants to quantify as best they can the losses which may accrue to them as a result of the injunctions being in place, and in doing so not to confuse losses that they may suffer generally as a result of the securities being in place, and those attributable to the injunctions.
89. They have contended that the plaintiffs in these proceedings have abused the court process by making their conspiracy claims in these separate proceedings rather than by way of Defence and Counterclaim in the main proceedings. It is suggested that this is a deliberate ploy on their part to avoid any undertaking as to damages covering losses arising in the main proceedings if the injunctions were granted in those proceedings, should the plaintiffs succeed.
90. I do not agree. The Statement of Claim in the main proceedings was delivered on the 8th June 2011. The application for injunctive relief was applied for by the plaintiffs in the present proceedings on the basis of urgency on the 27th June 2011, and it was only the following day in fact that the Plenary Summons appears to have issued. The plaintiffs herein cannot reasonably have been expected to wait until it was in a position to deliver its Defence and Counterclaim before seeking urgent injunctive relief to restrain the sort of activities which were known by them to be in train by the personal defendants, and which have been admitted. In any event the parties to the present proceedings are different to those named in the main proceedings, and the issues are very different. It is more appropriate that they be addressed in separate proceedings.
91. The personal defendants have gone to great lengths in their affidavits to try and establish that the losses which these injunctions will cause them in the event that the plaintiffs lose the case are in the order of €700,000,000, being in effect their estimated value of the IPG assets. There have been extensive affidavits filed on both sides of the argument. I have set out earlier much of the controversy arising. Underlying their arguments is the claim that in their opinion the loans in question were for an illegal purpose and that the securities underpinning the loans are therefore unenforceable, and therefore that if the assets are realised by way of enforcement of the securities before the Court determines that the loans were illegal, the personal defendants will be left with a worthless undertaking as to damages, or at least one limited to €5,000,000. One is brought straight back to the question posed earlier as to why the plaintiffs in the main proceedings did not seek injunctive relief in those proceedings to prevent the share receiver from dealing with the security assets, or at least requiring him to preserve the value of any assets realised, pending the determination of the issue of the legality of the loans. The share receiver was appointed on the 14th April 2011 following a default on the loans in question. It follows therefore that thereafter the personal defendants did not hold any legal or beneficial interest in the IPG assets, and lost control over them. It is difficult, if not impossible, therefore to argue that any losses could arise for them as a result of the injunction granted to restrain them from taking steps to remove those assets from the reach of the receiver in the manner in which it has been shown they did. Their argument must rely upon their claims in the main proceedings.
92. As I have already mentioned, the personal defendants claim that they are at the loss of a rent- roll from the Prestige Shopping Mall in Istanbul, owned by a Turkish company, and from their share of another building referred to as the Leonardo Office Block in Ukraine which is owned by Quinn Properties Ukraine of which the Quinns themselves own 15%. Ms. Quinn has stated that the annual rent-roll from the Prestige property is in the order of €4.5 million, and that already the rent from that development which they are deprived of by reason of the injunctions in place is over €9,000,000. The loss of a share of the rent from the Leonardo is put at 15% of an annual rent-roll of US$9.6 million. These specific alleged losses are submitted to far exceed the value of the fortified undertaking being offered, and alone render it worthless to the personal defendants, leaving aside altogether the total losses claimed to arise. She has averred that as the personal defendants did not take any steps to put these assets beyond the reach of the receiver, their inability to deal in these assets and benefit from the rent is solely the result of the first injunction put in place and that losses must therefore result from the granting of that injunction.
93. Mr Wallace addresses these claims at paragraphs 12 et seq. in his second affidavit. He states that IBRC has mortgages over these properties. He states that the value of the mortgage over the Prestige property far exceeds the value of the asset, and that while the value of the mortgage over the Leonardo property does not exceed the value of the asset, any surplus will be retained by Quinn Life Direct and other investors as to 85%, with the remaining 15% being held by Mr Baecklund, the bankruptcy receiver appointed over Quinn Investments Sweden AB. He states that the personal defendants have no entitlement to the proceeds of any sale and he makes the point also that the validity of the IBRC lending on the Leonardo building has already been acknowledged to the bank in a letter written on behalf of parties, including the Quinn family, namely a letter dated 7th March 2011 from Messrs. Eversheds to McCann Fitzgerald. He states further that in Sean Quinn Senior’s own bankruptcy petition in Northern Ireland, the latter listed an undisputed loan of $44,000,000 in respect of the Prestige Shopping Centre. Mr Wallace goes on to state that the loan on the Leonardo building is in default, and that the bank is entitled to enforce its security and recover its loan via a bankruptcy process in Ukraine and that this would have the effect of significantly decreasing any equity that might otherwise be available.
94. Mr Wallace also does not accept that no efforts were made by the personal defendants to put these two assets beyond the reach of the receiver. He sets out his reasons for this belief in paragraphs 14 and 15 of his second affidavit. He refers also to the fact that the first injunction was granted on the 27th June 2011 but that the bankruptcy receiver in Sweden was appointed on the 5th July 2011, meaning that in any event any claim for losses on foot of the undertaking in these respects must be confined to a period of just over a week between 27th June 2011 and 5th July 2011. He states also that in any event the injunction did not prevent the personal defendants from asserting their rights over the assets in the Swedish bankruptcy, and instances that they challenged the appointment of Mr Baecklund in the Swedish Court of Appeal, albeit unsuccessfully.
95. There are other specific assets in respect of which Ms. Quinn averred that no steps had been taken to remove them beyond the reach of the receiver, and she refers to those individually in her second affidavit. Mr Wallace by way of reply does not accept that no steps were taken, and he explains why he believes that to be the case.
96. In so far as Ms. Quinn also referred to a number of assets in respect of which she says that IBRC have no security and yet are covered by the first injunction, Mr Wallace deals with that at paragraph 24 of his second affidavit. He accepts that they are covered by the injunction, but states also that the properties which she has referred to are neither referred to in the pleadings nor in the schedule of assets referred to in the injunctions granted by Kelly J. But nevertheless he states that in any event they are controlled not by IBRC but by the Swedish bankruptcy receiver over the assets of Quinn Investments Sweden AB, and that this control is independent of the injunctions. Mr Wallace also states his belief that in fact the personal defendants did take steps to dissipate these assets prior to the injunctions being granted.
97. Ms. Quinn takes issue with a great deal of what is stated by Mr Wallace in his second affidavit. These matters cannot be determined finally on this application. In so far as they remain relevant issues at the substantive hearing they will have to be determined after a full hearing at that stage. But I am satisfied on the basis of the affidavits filed by Ms. Quinn and Mr Wallace that the likelihood is that the losses claimed by the personal defendants to arise are, if they do in fact materialise, unlikely to result from the granting of the injunctions, and are more likely to result from the enforcement of the loan securities, including under the bankruptcy in Sweden. In my view the personal defendants have not established a causal link between the losses they claim will arise and the granting of the injunctions themselves.
98. It is impossible to reach definitive conclusions in this regard on the present application, no more than it is possible to do so when the Court is considering the adequacy of an undertaking as to damages at either interim or interlocutory stage. But the Court must do its best on the available evidence in an effort to determine where the balance of convenience lies, and how to ensure the least chance of injustice arising.
99. It will be recalled that Mr Hayden referred to the obiter remarks of O’Flaherty J. in O’Mahony v. Horgan, and in particular the second paragraph thereof where he stated:
“As regards the undertaking as to damages, I know of no case where a limit has been put on the amount that may be required to be paid, if it is held that the injunction was improperly obtained, nor do I think it right in principle that such a limit should be placed in view of the far-reaching implications involved in any restraint that is imposed on a party by reason of such an injunction prior to judgment.”
The other members of the court were inclined to agree with what he stated in this regard.
101. I have considered these remarks in the context of the present application. The first thing to be said is that of course the remarks are obiter. But they must also be seen in the context in which they were made, namely a case where a limitation had been placed on the undertaking as to damages where the full amount payable on the insurance policy in question was clear and ascertained. There seems to have been no apparent reason stated for limiting the extent of the undertaking as to damages to £25,000 in the face of a possible claim on the undertaking in the sum of £71,000. The present case is very different, where the amount of any possible claim is not easily ascertained. In fact it cannot be ascertained at this stage. The undertakings remain in place and they are unlimited in nature. The problem arises as to their real value, and I have dealt with all that. But the question for consideration is whether the fortification offered should be found acceptable by the Court in all the circumstances. It is a different set of circumstances than those in O’Mahony v. Horgan.
102. Another matter raised by Mr Hayden is whether the Minister for Finance should be required to provide an undertaking as to damages or to underwrite in some way the undertaking as to damages already in place, and as fortified, as a condition of the injunctions remaining in place. I am not satisfied that such a condition should be imposed in this case. It might be different perhaps if I had been satisfied to the required extent by the personal defendants, upon whom the onus rests, that losses which could accrue to them as a result of these injunctions being in place were likely to exceed by a significant amount the amount of the fortified undertaking offered. I am not so satisfied, for the reasons which have already been given. It is mere assertion and based on a premise that is incorrect for the purposes of these present proceedings, namely an estimate of the current value of the IPG assets.
103. In my view, that balance of convenience/balance of justice lies in favour of refusing the present appplication, and to order that the plaintiffs lodge in court the sum of €5,000,000 being offered to the Court by way of fortification of the undertakings as to damages which are in place pending further order of the Court, and I will so order.
Garda Representative Association v Minister for Public Expenditure & Reform
[2014] IEHC 237
Judgment of Mr Justice Michael Peart delivered on the 7th day of May 2014:
1. In these judicial review proceedings, the applicant association has recently been granted leave by this Court to challenge the lawfulness of the Public Service Management (Sick Leave) Regulations, 2014 (S.I. 124 of 2014) which came into operation on the 31st March 2014 on the ground that they are ultra vires the respondent Minister. It is contended that they have been brought into effect in breach of fair procedures and/or the legitimate expectation of the applicant. That leave was granted on foot of an ex parte application brought under the provisions of Order 84 RSC.
2. Before the Court now is an application for an interlocutory injunction, brought on notice to the respondent, whereby the applicant seeks to restrain the respondent Minister from operating the 2014 Regulations in respect of members of An Garda Siochána pending the determination of these proceedings. The applicant does not seek to have the Minister restrained from operating the 2014 Regulations in respect of other public servants to whom they apply.
3. There is no doubt that the 2014 Regulations introduce a sick leave regime for all public servants (excluding a member of the judiciary, a member of the Defence Forces, and a member of staff of the Central Bank of Ireland) which is radically different from those previously operating, and all the more so in respect of An Garda Siochána whose sick leave arrangements were particularly favourable historically.
4. It appears that as far back as May 2012 the Minister announced proposals to reform the sick leave in the public service, including An Garda Siochána, as part of the State’s obligations under the Memorandum of Understanding between the Government and the Troika. According to the affidavit evidence before me the cost of sick leave in the public service in the year 2011 was more than €500,000,000, and the cost of sick leave within An Garda Siochána alone for the year 2012 was €27,000,000. The Minister’s aim was to effect changes to sick leave arrangements by January 2014.
5. The May 2012 proposals were the subject of a consultation process between the GRA and the Minister for Justice and the Minister for Public Expenditure and Reform. That process took place during 2012 and 2013. Part of the process involved a Working Group which presented its recommendations to the respondent Minister in November 2013. An Garda Siochána indicated its view that there should be a derogation for members of An Garda Siochána in any new sick leave regime for public servants. The GRA in its grounding affidavit has stated that it was assured that any changes to pay and conditions for its members would negotiated through the Conciliation and Arbitration Committee. However, no such derogation was provided for by the Oireachtas in the Public Service Management (Recruitment and Appointments) (Amendment) Act, 2013.
6. The applicant says that it was given an assurance by email dated 3rd December 2013 that its members would not be included in the proposed new Regulations in the first instance. However, the respondent says that immediately thereafter he announced that the new Regulations would include An Garda Siochána, but that those new Regulations would be deferred until the end of March 2014. The Minister believes that the GRA and its members were aware of this, and in addition says that he made that position clear in speeches to the Dáil and Seanad on the 12th and 18th December 2013.
7. The Minister considers that sufficient time and opportunity for consultation and discussion was provided to the applicant and its members. He says also that their views were considered, but that the case for a derogation for An Garda Siochána under the Act and the Regulations to be made thereunder was rejected by him.
8. The applicant is not making the case that the Minister does not have the power to make the regulations which have now come into force, including without a derogation for its members. Rather, it is submitting that it was given an assurance amounting to a legitimate expectation, that the Minister would not do so prior to the conclusion of the Conciliation and Arbitration process, and/or that he would not so act prior to the conclusion of the Haddington Road Agreement negotiations which commenced in September 2013 and were due to conclude in June 2014.
9. I think it is fair to say that the primary ground on which the applicant seeks to challenge the 2014 Regulations is on the basis of this alleged legitimate expectation that its members would not be included in the new Regulations in the first instance. It does so also on the ground of fair procedures based on a lack of full and proper consultation. In addition it is contended that the Minister failed to have regard to a relevant consideration, by failing to consider the need to protect the health of public servants in so far as he failed to consider the case put forward on behalf of members of An Garda Siochána. Finally, the applicant has submitted that the Regulations, and in particular Regulations 9 and 10 are incomprehensible as to their meaning, and in so far as a meaning can be gleaned from the plain and ordinary meaning of the words used, they do not in fact achieve the stated intention of the Minister, namely to effect significant reduction in the cost of public service sick leave. The Minister rejects that the Regulations are in any way opaque or unclear, and is confident that they achieve his purpose.
10. This Court granted leave to seek the reliefs contained in paragraph D of the Statement of Grounds. As I have stated, that was pursuant to an ex parte application. On the present application for an interlocutory injunction, the Court must be satisfied that a fair issue arises for the Court’s determination. It is not to be concluded from the mere fact that leave has been granted that a fair issue has been raised for the purposes of an interlocutory injunction application. On the present application, both sides are present unlike on an ex parte application. On the ex parte application the Court proceeds on the basis of prima facie facts and submissions, and on the basis that by virtue of the decision in G v. DPP the applicant must show that he has an arguable case. That is accepted to be a low threshold. It is inevitable that on an application to set aside leave, and when the respondent has an opportunity to put before the Court other facts than those disclosed by the applicant on the ex parte application, or puts forward legal submissions even on the same or agreed facts, the Court hearing the set aside application can come to the conclusion that having had the opportunity to hear the respondent, the applicant has not in fact established an arguable case for the purpose of leave being granted, and can make an order setting aside that leave order.
11. A fortiori on the present application, it is submitted by the respondent that the Court should consider, by reference to a threshold higher than mere arguability and in the light of facts appearing in its replying affidavit as well as in the light of the respondent’s legal submissions, whether the applicant has established a serious or fair issue to be tried. In fact the respondent submits that the applicant in reality seeks a mandatory injunction requiring the Minister to continue to apply to members of An Garda Siochána the previous and more favourable sick leave regime pending the determination of these proceedings, and accordingly that the test to be applied is whether the applicant has made out a strong case that is likely to succeed, in accordance with the judgment of Fennelly J. in Maha Lingham v. Health Service Executive [2006] 17 ELR 137.
12. The first matter to address is the issue of locus standi which has been raised against the applicant by the respondent. The applicant association was established under the Garda Siochána (Associations) Regulations, 1978 (S.I. No. 135/1978) in the following terms:
“4. An association to be known as the Garda Representative Association is hereby established for the purpose of representing members of the Garda Siochána holding the rank of Garda in all matters affecting their welfare and efficiency.
13. The reference to “welfare” therefore must be seen as enabling the association to represent the interests of is members in negotiations and discussions with the relevant Minister in relation to any proposed changes to sick leave arrangements.
14. The respondent accepts that the GRA has the necessary standing to bring a challenge to the new Regulations on the basis of its legitimate expectation and on the basis that it would be consulted as alleged. But he does not accept that such standing extends to an entitlement to seek an injunction on behalf of all its members to suspend their operation pending the determination of that challenge, and in so far it seeks an injunction it does so only on the basis of a ius tertii. It is submitted that only an individual member who stands to be personally affected by the new Regulations could have an entitlement to seek such an injunction as part of a challenge to their lawfulness, since only in such a case could the Court realistically consider matters such as the adequacy of damages, the balance of convenience and the worth of any undertaking as to damages which may be available on the application.
15. In this regard, Eileen Barrington SC for the respondent has referred to the judgment of McCracken J. in Construction Industry Federation v. Dublin City Council [2005] 2 IR 496. That was a case where the applicant association brought a challenge on behalf of its members (being construction firms and property developers in the State) to a certain scheme whereby such members could be required as a condition of a planning permission to make a financial contribution towards the costs of public infrastructure and facilities to be provided by a local authority in its area whether or not same would benefit a particular development. In the High Court Gilligan J. decided that the applicant federation has standing to bring the challenge, but found against the applicant on the merits. The applicant appealed, but before deciding the substantive appeal, the Supreme Court directed a preliminary issue in relation to locus standi, and concluded that although there could be circumstances in which the general ius tertii rule might not apply, nevertheless, as in that case, where the applicant federation could not point to any damage to itself which might be caused by the impugned decision, then the Court was being asked to deal with a hypothetical question and furthermore there was no evidence that the members of the federation were financially incapable of mounting a challenge in their own right. In reaching this conclusion, McCracken J. (Murray CJ. and Fennelly J. concurring) stated at pp. 526-527:
“In the present case the applicant claims to have a sufficient interest on the basis that the proposed scheme affects all or almost all of its members in the functional area of the respondent and, therefore, the applicant has a common interest with its members. However, it appears to me that to allow the applicant to argue this point without relating it to any particular application and without showing any damage to the applicant itself, means that the court is being asked to deal with a hypothetical situation, which is always undesirable. This is a challenge which could be brought by any members of the applicant who are affected and would then be related to the particular circumstances of that member ………”.
16. The applicant on the other hand seeks to distinguish the present case, and for that purpose points to the remainder of that quoted paragraph where McCracken J. went on to state:
“The members themselves are, in many cases, very large and financially substantial companies, which are unlikely to be deterred by the financial consequences of mounting a challenge such as this. Unlike many of the cases in which the parties with no personal or direct interest have been granted locus standi, there is no evidence before the court that, in the absence of the purported challenge by the applicant, there would have been no other challenger. Indeed the evidence appears to be to the contrary.”
17. Feichin McDonagh SC for the applicant submits that unlike the builders and developers who made up the membership of the CIF, ordinary rank and file members of An Garda Siochána are not wealthy individuals to be expected to be in a position to bring individual challenges to these Regulations. While I have no evidence of that, it is a fair submission to make, and perhaps it is something of which I can have judicial notice. Nevertheless, and in line with the concession made by the respondent in this regard, that factor is sufficient to enable the Court to conclude that the GRA should be considered to have the necessary standing for the purpose of the challenge to the Regulations, certainly on the basis of the asserted legitimate expectation and the alleged entitlement to be further consulted before the Regulations were brought in respect of its members. But it does not in my view get over the question of standing to seek an injunction to prohibit the application of the new regime, or in effect to provide for a derogation from the new regime for members of An Garda Siochána, pending the determination of the proceedings.
18. To grant an injunction as sought would be to do so on a hypothetical basis, and on an assumption that in all the cases which might arise damages would not be an adequate remedy for any individual member on sick leave. A line of jurisprudence has developed in employment law cases where a dismissed teacher, for example, may be granted a mandatory injunction requiring his/her salary to be paid pending the determination of a claim that his/her dismissal is unlawful, but that is a discrete area where the Courts have taken into account that the employee’s salary is his/her only means of support, and the likelihood of resultant destitution, and has taken the view that despite the distinct possibility that it may not be possible for the defendant to recoup from the employee the amount of salary paid as a result of the injunction, in the event that the plaintiff ultimately fails in the claim, the balance of convenience rests in favour of granting the injunction (see Fennelly v. Assicurazioni Generali Spa [1985] 3 I.L.T 73). That is a far cry from the present case.
19. However, I accept that under the new Regulations it is possible that an individual Garda officer might, given his or her particular sick leave history, be entitled to no sick leave pay under the new Regulations should he/or she have become ill again after the 31st March 2014. But that possibility is insufficient itself to give standing to the GRA to seek an injunction generally in respect of the 2014 Regulations pending the determination of these proceedings. It is perfectly possible for such a Garda if sufficiently adversely affected by the new Regulations, to seek to be joined in the present proceedings for the purpose of seeking an interlocutory injunction to enable him to receive sick pay under the old regime, but it would be dependent upon the actual facts and circumstances of his particular case. It is safe to assume, I think, that the GRA would continue to fund and pursue its proceedings even though it had another passenger on boards. Alternatively if preferred he or she could bring an individual challenge, and therein seek an injunction. But the Court would have to be satisfied on Campus Oil grounds that an injunction was warranted. Indeed, the higher Maha Lingham test might have to be surmounted, albeit ameliorated perhaps by reference to considerations of possible Fennelly-type destitution arguments referred to above. But it is inescapable that the Court must reach conclusions in relation to any such injunction restraining the operation of the 2014 Regulations by reference to a particular case and particular facts and circumstances affecting a particular Garda. Only then can the Court consider the matters I have adverted to already, namely the adequacy of damages, the balance of convenience, and the sufficiency of any undertaking as to damages required. I add now that in the present case no undertaking as to damages is on offer from the GRA.
20. I am not satisfied that the applicant has standing to seek injunctive relief, and for that reason alone I refuse the application.
21. However, I would like to go further and say that even if locus standi was not a problem for this applicant, and even if I assume for present purposes that the applicant has raised a serious or fair issue or issues for determination, and that damages are not an adequate remedy, I am disinclined to conclude that the balance of convenience lies in favour of granting the injunction sought. In that regard I refer to the judgment of Finlay CJ in Pesca Valentia Limited v. The Minister for Fisheries and Forestry and others [1985] IR 193. That was a case in which the plaintiff succeeded in obtaining an injunction restraining the enforcement of an impugned condition attaching to its fishing licence (which included the prosecution of an offence) pending the determination of proceedings in which the plaintiff sought a declaration that, inter alia, the section under which the licence was issued was unconstitutional. In his judgment, Finlay CJ. was satisfied that there was no impediment to the Court granting an injunction pending the determination of a claim with regard to the constitutionality of a statute, even where a consequence was to postpone or suspend the trial of an offence under the impugned legislation. In that regard he stated that “in particular, it seems to me that this power must exist in an appropriate case where the form of action is under a penal section and involves conviction of and the imposition of a penalty for the commission of a criminal offence”. In the present case, one is not of course dealing with penal legislation or Regulations made under any penal legislation. There is that distinction to be drawn with Pesca Valentia. But in addition it is noteworthy that at page 201 Finlay CJ expressed his view that the consequences that might flow from the granting of an injunction which prevents the Executive from carrying out its powers under a statute which enjoys the presumption of constitutionality is a factor to be taken account of in the consideration of the balance of convenience. In that regard he stated:
“I am, therefore, satisfied that the presumption of constitutional validity which applies to the Fisheries (Amendment) Act, 1983, expressly authorising the insertion of this condition in these licences is material in relation to the determination by the Court as to whether the plaintiff has established a fair question to be tried at the hearing of his action. I am also satisfied that the consequence arising from the making of an interlocutory injunction of preventing the Executive from carrying out powers vested in them by a statute enjoying that presumption and, in particular, the consequence of postponing the bringing to trial of a criminal offence created by such a statute, is a matter for consideration on the balance of convenience. I am not, however, satisfied that there is any special principle applicable to an application for an interlocutory injunction of this kind.”
22. In his judgment in D v. Ireland and others, [2009] IEHC 206, Clarke J. emphasised that while such a jurisdiction clearly existed it was nevertheless one which ought to be exercised “most sparingly”. He explained the reasons why this should be so at pp. 5-6 as follows:
“The reasons for this are obvious. Legislation which has been passed into law by the Oireachtas enjoys a presumption of constitutionality. If it were to be the case that persons who were able to establish a fair case to be tried concerning the validity of the relevant legislation having regard to the provisions of the Constitution (which is not a particularly high threshold) were able to obtain an injunction preventing, in practice, the application of the legislation to them until the proceedings had been determined, then it would follow that legislation could, in practice, be sterilised pending a final determination of the constitutional issues raised. Those considerations apply with equal force where the statute concerned is one which creates a criminal offence.
While, in general terms, the principles applicable to the grant or refusal of an interlocutory injunction in a case such as this are no different from those which apply in the case of any other interlocutory injunction, it has to be emphasised that a very significant weight indeed needs to [be] attached, in considering the balance of convenience, to the desirability that legislation once coming into force should be applied unless and until such legislation is found to be invalid having regard to the Constitution. It should only be where significant countervailing factors can be identified or where it is possible to put in place measures which would minimise the extent to which there would be any interference with the proper and orderly implementation of the legislation concerned, that a court should be prepared to grant an injunction which would have the effect of preventing legislation which is prima facie valid from being enforced in the ordinary way.”
23. Clarke J. revisited this point in his judgment in Okunade v. Minister for Justice, Equality and Law Reform [2012] 3 IR 153, albeit in the context of a challenge to a deportation order. At paragraph 92 he stated:
“However, there is a further feature of judicial review proceedings which is rarely present in ordinary injunctive proceedings. The entitlement of those who are given statutory or other power and authority so as to conduct specified types of legally binding decision making or action taking is an important part of the structure of a legal order based on the rule of law. Recognising the entitlement of such persons or bodies to carry out their remit without undue interference is an important feature of any balancing exercise. It seems to me to follow that significant weight needs to be placed into the balance on the side of permitting measures which are prima facie valid to be carried out in a regular and orderly way. Regulators are entitled to regulate. Lower courts are entitled to decide. Ministers are entitled to exercise powers lawfully conferred by the Oireachtas. The list can go on. All due weight needs to be accorded to allowing the systems and processes by which lawful power is to be exercised to operate in an orderly fashion. It seems to me that significant weight needs to be attached to that factor in all cases ……….. An order or measure which is at least prima facie valid (even if arguable grounds are put forward for suggesting invalidity) should command respect such that appropriate weight needs to be given to its immediate and regular implementation in assessing the balance of convenience.”
24. In the present case, the new Regulations have been introduced by the respondent Minister in order to reduce the very significant cost to the taxpayer of the sick leave arrangements for public servants including An Garda Siochána, and at the same time meet obligations arising from the Memorandum of Understanding entered into by the Government with the Troika. This must be regarded as a pressing need in the national interest. That consideration need not in all circumstances trump the interest of any particular litigant who may seek to challenge a measure and seek an injunction to restrain its effect upon him or her pending the determination of proceedings commenced, but it must weigh heavily in the balance when the Court comes to consider the balance of convenience. In the present case, the GRA will not suffer any direct loss as a result of the new Regulations coming into operation. I have addressed that question as part of the locus standi issue already. But even if one was to overlook that question and consider the question of an injunction from the standpoint of an individual member of An Garda Siochána who is represented by the GRA, the question of the adequacy of damages would loom large. It seems to me that if any individual member seeks to challenge the new Regulations on the same or similar basis as the GRA has, the Court would have to consider whether that individual is likely to suffer loss pending the determination of the proceedings which could not be compensated in damages. Such an individual may, under the new Regulations, have a more limited entitlement to paid sick leave or indeed no entitlement, after 31st March 2014, and he/she will suffer financial loss and even hardship while the litigation is pending if no injunction is granted. But the losses are easily quantifiable, and there could be no question of any risk that damages would not be recoverable. That adequacy of damages would be sufficient in my view to disentitle such an individual member to an interlocutory injunction, barring some exceptional circumstance which any particular individual member may be able to demonstrate. But it would be an exceptional case, and indeed might well be one capable of being dealt with in a way which did not interfere with the general application of the Regulations.
25. If the Court got as far as having to consider the balance of convenience, I have no doubt that, again barring some truly exceptional circumstances in an individual and exceptional case, the balance of convenience must lie against prohibiting the operation of measures which are prima facie lawful pending a determination of the issues arising. In this regard I refer to what Clarke J. has stated at paragraphs 93 and 94 of his judgment in Okunade.
26. I want to refer also to what he stated at paragraphs 95-98 of his judgment in relation to the role which can be played by an assessment of the strength of the plaintiff’s case in judicial review proceedings “where the risk of injustice may be evenly balanced”. In that regard, he stated as follows:
“Finally, so far as the cases where the risk of injustice may be evenly balanced are concerned, it does seem to me that there may be greater scope, in the context of judicial review proceedings, for the court to take into account the strength of the case, as it appears on the occasion of the application for a stay or injunction, then may apply in an ordinary injunction case. I have already set out the reasons why it is neither desirable nor practicable in ordinary cases for the court to have to routinely form an assessment of the strength of the case. However it is of some interest to note the way in which this question was put as far back as the decision of the House of Lords in American Cyanamid v. Ethicon Ltd [1975] AC 396. At p. 407, Lord Diplock said the following: –
‘It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.’
It is well worth recalling that Lord Diplock spoke of the court refraining from deciding questions of disputed fact or “difficult” questions of law. In the context of an application for an interlocutory injunction in the commercial, contractual, property or allied fields the wisdom of those remarks is obvious. If it were to be otherwise then the problems referred to earlier, as noted in Allied Irish Banks Plc v. Diamond [2011] IEHC 505, [2012] 3 I. R. 549, would loom large. However, those considerations may be of significantly less weight in judicial review applications. First, it is rarely the case that questions of fact as such are an issue in judicial review proceedings. Even if the decision maker had to decide facts, then the only question which can arise before the court in a judicial review challenge to the decision in question is as to whether the decision maker could rationally (in the sense in which that term is used in this jurisprudence) have come to the conclusion of fact concerned. On that question the only matters that the court ordinarily needs to consider are the materials which were before the relevant decision maker.
In addition, while there may well be some judicial review proceedings which could come within the parameters of what Lord Diplock spoke of as “difficult” questions of law, many such cases involve either very in net questions of law or involve the application of well-established principles to the circumstances of the case. It seems to me, therefore, that in considering whether to grant a stay or injunction pending the progress of judicial review proceedings, the court can have regard to the strength of the case at least where, as will frequently be the case, the challenge does not involve issues of fact as such or the sort of complex questions of law which, in the words of Lord Diplock at p. 407 “call for detailed argument and mature considerations”.
27. While in the present case I do not consider the question of the greater injustice to be evenly or even finely balanced, I want to say that if on the other hand I had done so, then in order to tip the scales towards refusing an injunction I would have considered that the applicant’s case, as argued at this stage at least, has weaknesses even though its arguability to the low threshold of arguability required at ex parte leave stage was considered to be surpassed. I mentioned much earlier that it appears to me that the main plank of the applicant’s case is based on the alleged breach of the applicant’s legitimate expectation, arising out of certain assurances, that members of An Garda Siochána would not be included in the new proposed Regulations in the first instance, and that any changes to pay and conditions would be proceeded with by way of Conciliation and Arbitration. I cannot actually recall if on the ex parte application seeking leave the provisions of section 7 of the Act of 2013 which provides for the insertion into the Principal Act of Part 7A after Part 7 thereof was opened or referred to. But Part 7A contains sections 58A, 58B, and 58C, the last of which provides:
“58C. – This Part has effect notwithstanding –
(a) any provision made by or under —
(i) any other Act,
(ii) any statute or other document to like effect of a university or other third level institution,
(iii) any circular or instrument or other document,
(iv) any written agreement or contractual arrangement, or
(b) any verbal agreement, arrangement or understanding or any expectation” [emphasis added]
28. It seems to me that even if the applicant can establish the necessary ingredients of a legitimate expectation arising from such assurances and other communications made to it during the consultation process which took place since May 2012, paragraph (b) above excludes the possibility that it could prevent Part 7A from having effect. It is hard at this stage to see what deus ex machina might be contrived in order to rescue the applicant’s case on legitimate expectation from the apparently fatal embrace of paragraph (b). Absent such an escape on that issue, the applicant is left with a case on lack of consultation which, on the facts, cannot be the strongest limb of the case, as well as an argument that the provisions of Regulations 9 and 10 are worded in such a way as to be incomprehensible and unworkable and such as not to achieve the stated purpose of the Minister, and the argument that the Minister failed to have regard to a material consideration, namely the Minister’s obligation to have regard to the need to protect the health of public servants. I do not of course express any concluded view on the ultimate merits of all these arguments. I am merely stating that if I was to have to resort to assessing the strength of the applicant’s case as part of the balancing of justice or balance of convenience between the parties, I would, based on what has been urged to date, consider that the case is not a strong case.
29. For these reasons I refuse the application for an interlocutory injunction.
Baínne Aláinn Ltd v Glanbia Plc
[2014] IEHC 482JUDGMENT of Mr. Justice Max Barrett delivered on the 24th day of October, 2014
1. This is an application for an interlocutory injunction restraining Glanbia plc and its servants or agents from taking certain actions in respect of either or both of the plaintiffs. There is also a related application to discharge an interim injunction that was granted on 1st September last in terms similar to the proposed interlocutory injunction. The discharge is sought on the basis of an alleged failure by the plaintiffs and their advisors to disclose material information when making the ex parte application for the interim injunction. Any views expressed in this judgment are tentative in terms of the strength or weakness of any case that might be made by either side at plenary hearing.
Plaintiffs
2. The application is brought by Mr. Shay Hayden and Baínne Aláinn Limited. The latter is a company that Mr. Hayden has incorporated in the furtherance of his dairy distribution business and is the company to which, for example, Glanbia issues the regular statements of account arising from its dealings with what is, in effect, Mr. Hayden’s dairy distribution business. There is some suggestion from Glanbia that it ought properly to be construed as having dealt at all times with Mr. Hayden and not with Baínne Aláinn Limited. Any confusion arising in this regard, at least on the part of Glanbia staff, is perhaps understandable. Mr. Hayden established his dairy distribution business, later incorporated a company to operate some or all of that business, left in his own name at least one significant agreement under which that business is operated, and remains the principal actor in the dairy distribution business. So it may be that in their everyday dealings Glanbia staff consider themselves always to be treating with Mr. Hayden in a personal capacity. However, it is clear from the statements of account that issue from Glanbia that it, as a company, recognises itself to be dealing directly, at least sometimes, with Baínne Aláinn Limited. Any such dealings as there are between Glanbia and Baínne Aláinn Limited appear to proceed on exactly the same basis as dealings between Glanbia and Mr. Hayden and thus it would seem appropriate that any injunction that issues pursuant to the instant proceedings ought to affect Glanbia, its servants and agents in respect of their dealings with both Mr. Hayden and Baínne Aláinn Limited.
Background
3. Sometime around 1991, Mr. Hayden started delivering ‘Snowcream’ dairy products in Wexford, the Snowcream milk plant then being owned by Waterford Foods plc, the ownership of which subsequently devolved to Glanbia. In order to commence in business, Mr. Hayden bought his own van and built up a dairy-round through dint of his own efforts. In the years since, he has built up business partly by acquiring new clients and partly by buying up the dairy-rounds of other individuals as they come up for sale. He has worked hard and he has done reasonably well.
4. In terms of buying up other dairy-rounds, Mr. Hayden’s first foray in this regard came in 1993. At the time he made this first acquisition, Mr. Hayden did so with the comfort that the relevant dairy products supplier, then Premier Dairies, knew what was being done and made no objection to same. The distribution arrangements between Mr. Hayden and Premier Dairies were subsequently documented in a distribution agreement of 20th September, 1995, which agreement is returned to later below. Following the 1993 acquisition, a flurry of later acquisitions further swelled Mr. Hayden’s burgeoning dairy distribution business. All of these acquisitions, it is claimed, were done with the knowledge of, and without any objection from, Premier Dairies or indeed by Glanbia, after the latter came ultimately to own the Premier business. In affidavit evidence provided on behalf of Glanbia, reference is made to “approval” being given to an acquisition that took place in 2010.
5. There is some controversy in the affidavit evidence as to whether certain persons named by Mr. Hayden could in fact have indicated any lack of objection or granted any approval to all of Mr. Hayden’s dairy-round acquisitions over the years. The court accepts that the individuals so named could not have been involved in all of the alleged pre-purchase discussions for the simple reason that all of them were not employed by Premier and/or Glanbia at the relevant times. The court notes that some of the named individuals are acknowledged in the affidavit evidence supplied by Glanbia as having interacted with Mr. Hayden prior to his acquisition of the Gorey round in 2010, i.e. the round that is at the core of the present dispute, and as having given their prior approval to same.
6. In late-2010, Mr. Hayden was approached by an individual who was seeking to sell his dairy-round in Gorey. This round was three times the size of Mr. Hayden’s existing total rounds. Buying it involved considerable commercial risk for Mr. Hayden, yet its ownership held out the promise of a certain economic security for him and his young family. Before making any final decision as to the acquisition, Mr. Hayden met with representatives of Glanbia at a hotel venue in Dublin. Mr. Hayden maintains that at this meeting he was encouraged by Glanbia to proceed with the acquisition. At the least, it would seem that Mr. Hayden was not discouraged. In the absence of objection from Glanbia, he subsequently acquired the Gorey round. Following this acquisition Mr. Hayden was now a distributor of Glanbia produce in Gorey, Tara Hill, Ballymoney, Craanford, Inch, Coolgreany, Kilanerin and Hollyfort; all places in County Wexford. He had to take on another worker and was continuously busy expanding his business, and that of Glanbia, throughout the county.
7. Relations between Mr. Hayden and Glanbia somewhat soured in 2012 when Glanbia discovered that Mr. Hayden had been sourcing certain butter supplies from another supplier, yet claiming a credit and delivery allowance from Glanbia in respect of same. This resulted in Glanbia demanding repayment of certain monies in July, 2012, and warning that a further instance of such behaviour would likely result in a termination of the distribution arrangements between Mr. Hayden and Glanbia. It would appear that the monies were repaid, certainly business continued between the parties, though Glanbia staff could be forgiven if the episode left something of a taste in their mouths for a time, and not the taste of fresh creamery butter.
8. Referring to this last episode in his grounding affidavit, Mr. Hayden states that “The only issue between this Deponent and the Defendant over the years was one involving commission on butter delivery which was resolved amicably.” Glanbia contends that this last averment is misleading as to the seriousness of what occurred in 2012. Mr. Hayden contends that as the issue was resolved, no like issues have arisen, and the course of dealings between the parties has continued regardless, it is correct to describe matters as having been resolved “amicably”, though his counsel indicated at the hearings that perhaps it was not the most felicitous choice of wording. To the court it seems merely to be another instance, so often encountered in life, where two rational parties honestly describe the same event in entirely different terms. The court does not consider that Mr. Hayden’s use of the word “amicably” in a context in which Glanbia would not apply the same description must have as its explanation that Mr. Hayden sought to mislead the court or yields the consequence that he did in fact do so. Neither does it consider that Mr. Hayden’s actions in this regard have the effect that he is in breach of the longstanding equitable principle that ‘he who comes to equity must come with clean hands’. Nor does the court consider that the underlying episode, what might be described as the ‘butter battle’ of 2012, has that immediate and necessary relation to the present application as would justify the refusal of injunctive relief by reference to the said principle. It is perhaps in the nature of court proceedings that both sides will make much ado about every aspect of their opponent’s case to which objection might conceivably be made. However, insofar as the foregoing criticism of Mr. Hayden’s grounding affidavit is concerned, the court considers it to be much ado about little.
9. In February, 2014, came the first rumblings of the storm that has latterly unfolded between the parties. A complaint was made to Glanbia by a sizeable customer in Gorey as to the operation by Mr. Hayden of his dairy-round in that town. Though matters were swiftly resolved, mention was made to Mr. Hayden for the first time by Glanbia that, given its pending takeover of Wexford Creamery, there would be change ahead in how the Gorey route was operated. Specifically it was mentioned that another agent operating in the Gorey area would need somehow to be accommodated. Mr. Hayden made no comment when this prospect was first raised. Matters progressed, however, in August, 2014, when Mr. Hayden met with Glanbia and was advised that as a consequence of the acquisition of Wexford Creamery by Glanbia and the need to accommodate the Wexford Creamery agent, Mr. Hayden’s Gorey round was to be cut, with a substantial portion going instead to the Wexford Creamery agent. Further details of the proposed arrangements and increased supply volumes on other routes that were to be put in place by Glanbia were supplied by the latter at a meeting between the parties on 21st August. There was also a meeting on 27th August at which, Glanbia maintains, an offer of financial compensation to Mr. Hayden was made. This last meeting has acquired a special significance in these proceedings because Glanbia claims that the failure to detail this meeting in the affidavit that grounded Mr. Hayden’s ex parte application for an interim injunction was a material non-disclosure. For his part, Mr. Hayden disputes that any financial compensation was offered at the meeting on 27th August, he notes that there is a reference in one of the attachments to his grounding affidavit to contact between the parties on that date, and he has indicated that so far as he was concerned no special significance attached to the meeting of the 27th because it did not feature an offer of compensation and merely replicated the previous discussions between the parties. The dispute between the parties as to the substance of the meeting of 27th August and the absence of any detailed reference to same in the affidavit that grounded Mr. Hayden’s ex parte application for an interim injunction is considered further below. Suffice it for now to note that the court does not consider that such non-disclosure as arose in this context justifies the discharge of the interim injunction or the refusal of the interlocutory injunction that is now being sought.
10. Continuing with the sequence of facts arising, Mr. Hayden was advised by Glanbia that, notwithstanding his objections, the proposed revised distribution arrangements were to occur on 1st September last. However, Mr. Hayden secured on that day an ex parte injunction whereby it was ordered by the court that:
“[Glanbia] its servants or agents be restrained from taking any action to remove [Baínne Aláinn Limited and Mr. Hayden]…each or either of them their respective servants or agents from their current duties of distributing [Glanbia’s]…dairy products in the County of Wexford or in any other manner breaching the terms of the said distribution agreement until further order.”
11. Mr. Hayden’s objections to the proposed revised distribution arrangements can perhaps be summarised as follows. First, he claims that the proposed arrangements are in breach of his existing contractual arrangements with Glanbia. Second, he claims that if the Gorey round is reduced as proposed he will suffer an immediate and ongoing financial loss, placing his home and personal finances in jeopardy. Third, he claims that as a consequence of Glanbia’s proposed changes it would no longer be financially viable for him to continue in the only business that he has ever known. Fourth, he maintains that it was he who through dint of his own efforts procured or acquired at least part of the distribution business which is now proposed to be moved to the Wexford Creamery agent. In this regard Mr. Hayden distinguishes between ‘contract business’ whereby he distributes Glanbia produce to Glanbia customers and gets paid commission for that work, and ‘private business’ whereby Mr. Hayden himself buys and sells Glanbia produce to third parties with whom he has established dealings. Mr. Hayden appears to accept that the contract customers are Glanbia customers but maintains that the private customers comprise a business that he alone has established and which belongs to him alone. Fifth, Mr. Hayden contends that once any business is lost to the Wexford Creamery agent, it will be impossible to recover that business because once the shops involved are serviced by or for Glanbia they will have no further need of Mr. Hayden. Sixth, Mr. Hayden claims that a natural consequence of the proposed distribution arrangements will be a loss of commercial reputation and also of the value of the goodwill in his existing business.
12. Insofar as the contractual arrangements between Mr. Hayden and Glanbia are concerned, Mr. Hayden, as mentioned above, entered into a distribution agreement with Premier in 1995. When Glanbia later came to own Premier Dairies, its dealings with Mr. Hayden were governed, at least in part, by the 1995 agreement. By 2010, Glanbia had standard agreements that it issued as a matter of form with persons distributing its products. However, Glanbia did not execute such a standard-form agreement with Mr. Hayden. As for the vendor of the Gorey dairy-round, there is an averment in affidavit evidence provided to the court by Glanbia’s Distribution Manager that there was no contract between Glanbia and this individual. It is averred that:
“[The vendor] was an independent contractor providing milk distribution and agency services to Glanbia…[T]here is no evidence that Glanbia was in any way bound to provide a certain volume of product to [this individual]…nor is there any evidence of exclusivity.”
13. Glanbia contends that the Gorey route, because it was acquired in 2010, must have been governed by the standard-form distribution agreements that it issued around that time, though it appears to accept that the 1995 agreement has some applicability to its dealings with Mr. Hayden. He, for his part, contends that the 1995 agreement applies to the entirety of his dealings with Glanbia and that Glanbia by its actions or proposed actions in relation to the Gorey route is acting in breach of same.
14. What are the ill-consequences for Glanbia if the interlocutory injunction that is now being sought is in fact granted? Glanbia’s contentions in this regard can perhaps be summarised as follows. First, its attempts to integrate the Wexford Creamery business into its existing business will be partly frustrated, albeit it seems as regards Mr. Hayden and the Creamery distributor only. Second, it would result in Mr. Hayden being treated in a different manner to any other distributor whom Glanbia has previously encountered, all of whom have apparently been amenable to proceeding as Glanbia has wished. Third, it would have the effect of rendering it impossible for Glanbia to alter the volumes of product supplied to Mr. Hayden unless this was to be agreed between them. Fourth, it will yield a situation in which for the duration of the injunction, Glanbia will be presented with a cumbersome and, it contends, unsustainable situation in which two distributors will be providing Glanbia products to the same stores. Fifth, Glanbia contends that compliance with the injunction may result in legal difficulties for it with the Wexford Creamery distributor whom Glanbia has thus far sought to facilitate if that distributor considers that his contractual arrangements with Glanbia are not being honoured, with the result that Glanbia may lose the services of the Creamery distributor.
15. One last matter needs to be mentioned in this consideration of the facts presenting in this case. It is suggested in the affidavit evidence that a Glanbia employee, in the course of a business call placed on 3rd September, 2014, two days after the issuance of the interim injunction, sought somehow to intimidate Mr. Hayden. The allegation arises because in the course of this business call the Glanbia employee volunteered his privately held opinion that the approach being adopted by Mr. Hayden towards Glanbia was too adversarial and might antagonise certain senior Glanbia staff, that Mr. Hayden ought to accept the financial assistance which Glanbia claims to have offered, and that Mr. Hayden had received poor legal advice. The court accepts that these elements of the telephone conversation had nothing to do with the business purpose of the call, did not comprise an authorised Glanbia communication and, while perhaps best left unsaid, were not intended to intimidate Mr. Hayden, though the court accepts that Mr. Hayden’s alarm at what was communicated to him during the call was genuinely felt.
Application for discharge of interim injunction
16. The court proposes to consider first the alleged failure by the plaintiffs and their advisors to disclose material information at the ex parte application for an interim injunction and the consequent application for discharge of that interim junction. As mentioned in the above account of the facts arising in this case, Glanbia claims that there were two instances of material non-disclosure in the affidavit grounding Mr. Hayden’s ex parte application, viz. his statement that the 2012 ‘butter battle’ had been resolved “amicably”, and the failure to mention the meeting of 27th August last, at which, Glanbia claims, financial compensation was offered by it to Mr. Hayden.
17. The decision of Clarke J. in Bambrick v. Cobley [2005] IEHC 43 outlines in some detail the principles to be applied by the court in an application for discharge such as that now before it. That case involved an application for an order freezing part of the proceeds of a land sale in circumstances where the plaintiff was seeking damages from the defendant consequent upon an alleged delay in closing the transaction. At the interlocutory stage it was claimed by Ms. Cobley that, inter alia, Mr. Bambrick had failed to disclose in the affidavit grounding the ex parte application that there had been detailed discussions concerning the terms upon which monies might be retained to meet the possible claim. In his judgment, Clarke J. commences his consideration of the issue of lack of candour with a reference to Tate Access Floors Inc. v. Boswell [1990] 3 All E.R. 303 in which Browne-Wilkinson V-C observes, at p. 316, that:
“No rule is better established, and few more important, than the rule (the golden rule) that a plantiff applying for ex parte relief must disclose to the court all matters relevant to the exercise of the court’s discretion whether or not to grant relief before giving the defendant an opportunity to be heard. If that duty is not observed by the plaintiff, the court will discharge the ex parte order and may, to mark its displeasure, refuse the plaintiff further inter partes relief even though the circumstances would otherwise justify the grant of such relief.”
18. Clarke J. then proceeds, at p.8 of his judgment, to reduce this so-called ‘golden rule’ to two questions: (1) did the plaintiff fail to make appropriate disclosure; and (2) if he did so fail, what consequences should follow? To the extent that there is a breach of the ‘golden rule’, and perhaps by way of tacit acknowledgement that the rule does not demand the impossible – it demands absolute candour of a plaintiff, not absolute perfection – the courts are prepared to countenance lapses in the information furnished by a plaintiff, provided they are not material. Having considered a number of relevant authorities, Clarke J. concludes in this regard, at p. 9, that:
“Taking those authorities it would seem that the test by reference to which materiality should be judged is one of whether objectively speaking the facts could reasonably be regarded as material with materiality to be construed in a reasonable and not excessive manner.”
19. Moving on, Clarke J. considers what the consequences of material non-disclosure should be. He notes that typically a defendant in respect of whom an adverse ex parte order is made absent full disclosure will seek discharge of that order. He notes too that in the ordinary course of events, as is the case in the instant proceedings, an application for discharge will come on for hearing at the same time as the application for an interlocutory injunction. Following a consideration of relevant case-law, Clarke J. concludes that the court to which application is made in such circumstances has a discretion to refuse to grant the interlocutory injunction, and to discharge the already granted interim injunction, but is not obliged to do so.
20. What criteria ought a court to apply when it comes to the exercise of this last-mentioned discretion? The answer, per Clarke J., at p. 11 of his judgment, is that:
“Clearly the court should have regard to all the circumstances of the case. However the following factors appear to me to be the ones most likely to weigh heavily with the court in such circumstances:-
1. The materiality of the facts not disclosed.
2. The extent to which it may be said that the plaintiff is culpable in respect of a failure to disclose. A deliberate misleading of the court is likely to weigh more heavily in favour of the discretion being exercised against the continuance of an injunction than an innocent omission. There are obviously intermediate cases where the court may not be satisfied that there was a deliberate attempt to mislead but that the plaintiff was, nonetheless, significantly culpable in failing to disclose.
3. The overall circumstances of the case which lead to the application in the first place.”
21. To summarise the foregoing, it appears that the following are the questions to be considered and resolved by a court when it is presented, as in the present case, with a claim that an ex parte injunction has been obtained in breach of the ‘golden rule’ and is seeking to determine what consequences ought to follow. First, at the ex parte stage of proceedings did the plaintiff fail to disclose to the court all matters relevant to the exercise of the court’s discretion whether or not to grant relief? Second, objectively speaking could the facts that were not disclosed reasonably be regarded as material, with materiality to be construed in a reasonable and not excessive manner? Third, if the answer to each of the previous questions is ‘yes’, what is the appropriate course of action for the court to adopt having regard to (i) all the circumstances of the case, and in particular (ii) the materiality of the facts not disclosed, (iii) the extent to which it may be said that the plaintiff is culpable in respect of a failure to disclose, and (iv) the overall circumstances of the case which led to the application in the first place?
22. As to the first of these three questions, it is not at all clear that there was any failure on the part of Mr. Hayden as regards disclosure of relevant facts. He maintains that he sought to present the complete facts of this matter to the court at the ex parte stage. He did not, it is true, expressly mention the meeting of 27th August in his grounding affidavit; however, Mr. Hayden maintains that this is because he attached no especial significance to that meeting and that there is no deficiency in the facts as presented by him in his grounding affidavit, with the meeting of 27th August, he claims, merely replicating what had previously been discussed between the parties. The special significance of the meeting of the 27th, according to Glanbia, was that at that meeting it made an offer of financial compensation to Mr. Hayden such as would ease him through any difficulties presented by Glanbia’s intended changes to the existing distribution arrangements. Mr. Hayden “strongly disputes” that any offer of financial compensation was made to him at this meeting and claims that his affidavit evidence encapsulates correctly what transpired between the parties. Thus, so far as Mr. Hayden is concerned, there is no omission in what he stated. Even if Mr. Hayden is mistaken as to what transpired at the meeting of 27th August, it would appear that he is honestly mistaken, and thus any, if any, failure to address in detail the substance of that meeting seems to the court to be entirely unworthy of censure. As to the second question, the facts that were not disclosed could reasonably be regarded as material, not least because any, if any, offer of compensation, was clearly of relevance to the court’s consideration of the situation in which Mr. Hayden professed to find himself. As to the third question, the court has already indicated that it does not consider an innocent misrepresentation, if misrepresentation there was, of relevant facts, to be worthy of censure and thus does not consider that the discharge of the interim injunction would be justified by reference to same.
Law applicable to granting of interlocutory injunctions
23. The court has been referred to a wealth of precedent on interlocutory injunctions, starting unsurprisingly with the judgment of Lord Diplock in American Cyanamid v. Ethicon Limited [1975] AC 396, and the consideration therein of various principles that might usefully inform a court’s consideration of whether or not to grant an interlocutory injunction. However, before moving on to consider American Cyanamid and other cases to which the court has been referred, it is worth noting that pursuant to Order 50, r.6 of the Rules of the Superior Courts (1986), the court at all times retains the jurisdiction to grant an interlocutory injunction “in all cases in which it appears to the court to be just or convenient so to do…[and] either unconditionally or upon such terms and conditions as the Court thinks just.” Moreover, while there are obvious advantages to the court complying with such recognised guidelines as may be drawn from case-law in this area, not least in terms of ensuring certainty and avoiding arbitrariness, that case-law has long been informed by the common-sense recognition, evident in the just-quoted extract from the Rules of the Superior Courts, that the question as to whether or not to grant an interlocutory injunction is one in respect of which the court ultimately retains a degree of flexibility and discretion that is unconstrained by strict criteria, though subject of course to the rules of precedent. This necessary flexibility and discretion is reflective, at least in part, of the fact that the life of the law is not logic, it is experience, and experience teaches that even ostensibly similar facts can sometimes require entirely dissimilar treatment when viewed through the prism of context.
24. In American Cyanamid, the appellant before the House of Lords, American Cyanamid Co., held a patent which it alleged would be breached by a product that Ethicon was about to release on the British market. Ethicon disputed this and counterclaimed for revocation of the patent in issue. American Cyanamid sought an interlocutory injunction that was granted in the High Court, successfully appealed before the Court of Appeal, and eventually restored by the House of Lords. The House considered that provided a claim is not frivolous or vexatious, in other words that there is a serious question to be tried, a court before which an application for an interlocutory injunction is made should go on to consider whether the “balance of convenience” lies in favour of granting or refusing the interlocutory relief sought. In case-law this last-quoted phrase is often employed and seldom explained. In short, it bears the following meaning: the object of an interlocutory injunction is to protect a plaintiff from violation of a right in circumstances where the plaintiff could not, if he succeeded at trial, be adequately compensated in damages for such violation; however, the plaintiff’s need for protection in this regard must be weighed against a defendant’s corresponding need to be protected against any injury that would result from preventing the defendant from exercising legal rights for which the defendant, if successful at trial, could not be adequately compensated by way of damages payable pursuant to that undertaking for damages which is typically required by a court of a plaintiff in return for ordering an injunction; the court before which application for injunctive relief is made must weigh one need against the other and decide where the “balance of convenience” lies between the two.
25. Insofar as the undertaking as to damages just referred to is concerned, there are at least two good reasons why such an undertaking is typically sought of a person seeking an interlocutory injunction. The first is referred to by Lord Diplock in American Cyanamid, at p.408, where he quotes nineteenth-century precedent to the effect that requiring an undertaking as to damages upon the grant of an interlocutory injunction aids a court in doing that which is its great object, viz. “abstaining from expressing any opinion upon the merits of the case until the hearing.” The second reason, evident from American Cyanamid and later case-law, is that requiring such an undertaking diminishes the obvious risk of unfairness to a respondent against whom an interlocutory injunction is ordered at a time when the issues have not been fully determined and when usually all the facts have not been ascertained.
26. It might perhaps be contended that the usual requirement whereby a successful applicant for an interlocutory injunction must provide an undertaking for damages in return for the granting of the injunction is a requirement that the wealthy are always more likely to be able to satisfy, and thus a requirement that has the potential to close, or at least make less readily attainable, to those whom life has not endowed with riches sufficient to sustain potentially protracted and invariably expensive litigation, a form of relief or mode of justice that may be made available to a wealthier person who presents with exactly the same case. In other words it might perhaps be contended that the availability of interlocutory injunctive relief tends presently to be rationed on the basis of financial circumstance. In truth, however, there are a number of bases on which, if presented with the right set of conditions, a court could, by reference to, and in conformity with, existing law and precedent, grant injunctive relief to an applicant of limited or middling means without imposing a requirement as to an undertaking for damages. It appears to the court that there are at least three bases on which a court might do so:
– first, as mentioned above, under O.50, r.6 of the Rules of the Superior Courts (1986), the court always retains the jurisdiction to grant an interlocutory injunction in all cases in which it appears “just or convenient so to do”, i.e. not just those cases where an applicant has the resources to back up any undertaking as to damages.
– second, it is clear from the unqualified endorsement that O’Higgins C.J. gives in Campus Oil v. Minister for Industry (No. 2) [1983] I.R. 88 at p.107 to “the views expressed by Lord Diplock” that this includes Lord Diplock’s reiteration, at p.409 of his judgment, that in addition to the general principles identified in American Cyanamid as relevant to the decision as to whether or not to grant an interlocutory injunction “there may be many other special factors to be taken into consideration in the particular circumstances of individual cases”. Presumably this would extend to the injustice that could result through undue insistence on the requirement as to an undertaking in damages in a case where an applicant has substantial cause but not especially substantial means.
– third, in the relatively recent decision of the court in Whelan Frozen Foods Limited v. Dunnes Stores [2006] IEHC 171, a case which the court considers in greater detail hereafter, McMenamin J. mentions a number of criteria relevant to the issue of whether or not to grant an interlocutory injunction but which could also be relied upon to justify not requiring an undertaking as to damages in appropriate cases, viz: (1) the “general rule” that a court should where possible strive to maintain the status quo ante between the parties; (2) the relative financial standing of the parties; and (3) the balance of the risk of doing an injustice.
27. The court does not mean to suggest in the foregoing that an undertaking as to damages should never be required where an interlocutory injunction is to be granted; the consensus in the case-law to date has been that such an undertaking ought typically to be required. However, just because something is typically done does not mean that it must always be done. It is almost impossible, if indeed it is possible at all, to make any general rule of law but that it shall fail in some case. Just as the general may yield to the particular, so the law must be applied in context. In the right circumstances there is adequate basis afforded by existing law and precedent whereby, in conformity with that law and precedent, an interlocutory injunction could be granted without an undertaking as to damages being required. In this way the courts can ensure that the levelling influence of the law invariably pertains and that equitable relief is not unfairly denied to those whom the Fates have perhaps treated inequitably.
28. Turning to a more general consideration of American Cyanamid, in that case Lord Diplock identified a number of principles that arise when determining where the balance of convenience may lie in any one case, writing, at p.408 et seq., that:
“[U]nless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.
As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiffs’ undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.
It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.
Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.
Save in the simplest cases, the decision to grant or to refuse an interlocutory injunction will cause to whichever party is unsuccessful on the application some disadvantages which his ultimate success at the trial may show he ought to have been spared and the disadvantages may be such that the recovery of damages to which he would then be entitled either in the action or under the plaintiff’s undertaking would not be sufficient to compensate fully for all of them. The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies; and if the extent of the uncompensatable damage to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each party’s case as revealed by the affidavit evidence on the hearing of the application. This, however, should only be done where it is apparent upon the facts disclosed by evidence as to which there is no credible dispute that the strength of one party’s case is disproportionate to that of the other party. The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party’s case.”
29. The various principles espoused by the House of Lords in American Cyanamid were adopted in this jurisdiction by the Supreme Court in Campus Oil v. Minister for Energy (No. 2), and have been referred to as “well settled” by Clarke J. in the recent Supreme Court decision in Okunade v. Minister for Justice [2012] 3 IR 152 at 180. These principles are sometimes reduced to a three-point rule of thumb, viz. (1) Is there a serious issue to be tried? (2) Are damages an adequate remedy? (3) Does the balance of convenience favour the granting rather than refusing of an injunction? However, while this is a useful check-list, it does not capture the rich substance of the guidance provided by the House of Lords, as later embellished upon by the Irish courts in various cases of interest that are considered hereafter. By way of more fulsome summary, it appears to the court that the American Cyanamid principles ought to prompt the following queries on the part of the court when it is presented with an application for an interlocutory injunction:
– first, does the material available to the court at the hearing of the application fail to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial? Unless the material available does so fail, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.
– second, if a plaintiff were to succeed at the trial in establishing his right to a permanent injunction, (a) would he be adequately compensated by an award of damages in the measure recoverable at common law for any loss arising to the time of trial from the non-issuance of the interlocutory injunction and (b) would the defendant be in a financial position to pay them? If the answers to each limb of this question are ‘yes’, then no interlocutory injunction should normally be granted. If the answer to either limb is ‘no’, then the court needs to proceed further with its enquiry.
– third, if such damages aforesaid would not provide an adequate remedy for the plaintiff in the event of his succeeding at trial, and the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, (a) would the defendant be adequately compensated under an undertaking by the plaintiff as to damages for such loss as the defendant would sustain by virtue of the issuance of the interlocutory injunction against the defendant, and (b) would the plaintiff be in a financial position to pay them? If the answers to each limb of this third question is ‘yes’, there would be no reason upon this ground to refuse an interlocutory injunction.
– fourth, is there any doubt as to the adequacy of the respective remedies in damages available to either party or to both? If the answer to this fourth question is ‘yes’, the question of balance of convenience arises and the relevant factors and the weight to be attached to them in determining where the balance lies will vary from case to case. However, the extent to which the disadvantages to each party would be incapable of being compensated in damages is a significant factor in assessing where the balance of convenience lies.
– fifth, do the various factors that present in a case appear to be evenly balanced? If the answer to this fifth question is ‘yes’, then it would generally be prudent to take such measures as are calculated to preserve the status quo ante.
– sixth, is it the case that (a) the extent of the uncompensatable disadvantage to each party would not differ widely, and (b) upon the facts disclosed by evidence there is no credible dispute that the strength of one party’s case is disproportionate to that of the other party? If the answer to each limb of this sixth question is ‘yes’, Lord Diplock suggested that it may not be improper to take into account, in tipping the balance in favour of one or other party, the relative strength of that party’s case as revealed by the affidavit evidence that is adduced. However, notwithstanding the apparent wholesale incorporation of the American Cyanamid principles into Irish law by way of Campus Oil, it appears from the Supreme Court decision in Westman Holdings Limited v. McCormack [1992] 1 I.R. 151 that once an Irish court concludes that a party seeking an interlocutory injunction has raised a fair question to be tried it is inappropriate to make any further reference to the relative strength of the case presented by each of the parties, at least, per Clarke J. in Okunade at p.183, “in the commercial context”. Thus, notwithstanding the broad similarity between the principles which apply to the granting or withholding of interlocutory injunctions here and in England and Wales, it seems safe to conclude that at least that part (b) which is referred to above has been excised from Irish law insofar as commercial cases such as the present proceedings are concerned.
30. Various elaborations upon the American Cyanamid principles occur in post-Campus Oil case-law. Some of the leading cases of relevance are considered hereafter.
31. In Curust Financial Services Limited v. Loewe-Lack-Werk [1994] 1 I.R. 450, the High Court and, on appeal, the Supreme Court, were presented with a case in which the facts arising were not entirely dissimilar in their essence to those which arise in the instant proceedings. Curust and Loewe were longstanding business partners between whom there was an exclusive manufacture and distribution agreement whereby Loewe granted Curust the sole and exclusive licence to manufacture, market, sell and distribute ‘Loewe Rust Primer’ in Ireland. In the early-1990s a dispute arose between the parties concerning the agreement and, as part of the subsequent litigation, Curust sought a series of injunctions restraining Loewe, its servants and agents from what Curust claimed were breaches of the agreement. Further injunctions were sought against the second defendant, referred to in the Supreme Court judgments as Sales Limited, from carrying out activities that would in effect constitute a breach of the agreement and an infringement of what was alleged to be the sole right of Curust to manufacture, sell and distribute the products covered by the agreement. The High Court granted the relief sought; its decision was reversed on appeal. It is on the issue of adequacy of damages that the Supreme Court made various pronouncements that are of particular relevance in the instant proceedings. Finlay C.J., having posed the question whether damages were an adequate remedy for Curust, made the following observations, at p.468 et seq:
“The loss to be incurred by Curust if it succeeds in the action and no interlocutory injunction is granted to them, is clearly and exclusively a commercial loss, in what had been, apparently, a stable and well-established market. In those circumstances, prima facie, it is a loss which should be capable of being assessed in damages both under the heading of loss actually suffered up to the date when such damages would fall to be assessed and also under the heading of probable future loss. Difficulty, as distinct from complete impossibility, in the assessment of such damages should not, in my view, be a ground for characterising the awarding of damages as an inadequate remedy.
With regard to the particular question of the agreement of damages in respect of any period after the granting of a permanent injunction to Curust while its share of the market is being recovered, it does not seem to me that insuperable difficulties of quantification could arise. The extent of the market to which Curust was accustomed before an interruption in its exclusive rights of sale and distribution is ascertainable…Evidence in such a situation could surely be adduced which would permit a judge to make a reasonable forecast of the period during which Curust may suffer a continued diminution of trade and the approximate extent of that. In those circumstances, I do not see, by reason of difficulties in quantification, any ground for holding that damages are not an adequate remedy…
There remains the question as to whether, on the evidence which was before the learned trial judge, it was open to him to conclude that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment necessarily involved until after the determination of the action, would lead to the collapse, from a financial point of view, of Curust…[The Chief Justice then considers the factual information contained in the affidavit evidence that is relevant to this last issue]…If the injunction were now set aside, Curust would not be deprived of access to the market in rust primer, but rather would be obliged to share it in competition with Sales Ltd…[I]t is necessary that I should reach a conclusion on the affidavit evidence as to whether it has, as a matter of probability, been established at this stage for the purpose of the interlocutory injunction that damages would not be an adequate remedy, by reason of the real risk of the financial collapse of the Curust companies. In my view, having regard to all the factors which I have outlined, there has not been established such a case as a matter of probability. No information is forthcoming about the general position of the companies with regard to their indebtedness or net assets situation. No attempt has been made to assess the probable result of competition between Curust and Sales Ltd. in relation to this market for rust primer, except an averment on affidavit that Sales Ltd. is underselling Curust with regard to the cost of the rust primer being offered for sale. In these circumstances, where damages can be quantified, the loss is quite clearly a commercial loss, there is no doubt about the capacity of the defendants to pay any damages awarded against them and there is no element of new or expanding business which may make quantification particularly difficult, as a matter of principle, I conclude that damages must be deemed to be an adequate remedy in this case”.
32. Echoing the Chief Justice’s judgment, O’Flaherty J. writes, at p.472:
“I then turn to the question of the balance of convenience. That involves as a first inquiry whether damages would be an adequate remedy for Curust should Curust ultimately succeed at the plenary hearing. I agree with the Chief Justice’s reasoning that it would be in the circumstances of this case. The crucial matter, in my judgment, is that Curust is not to be deprived of access to the market in rust primer, but rather would be obliged to share it in competition with Sales Ltd.
Were it not for that factor I would hold that the matter was so finely balanced as to require a further inquiry as to where the balance of convenience lay.”
33. The court suggests hereafter that the above-quoted observations of Finlay C.J. and O’Flaherty J. can helpfully be reduced to a number of queries that might usefully be answered by the court when it is presented with an application for an interlocutory injunction and is seeking to act in compliance with the decision in Curust. Before moving on to do so, however, the court pauses to consider Finlay C.J.’s observation, at p.469 of his judgment, that “Difficulty, as distinct from complete impossibility, in the assessment of…damages should not, in my view, be a ground for characterising the awarding of damages as an inadequate remedy” and his later observation, at p.472 of his judgment, that “[W]here damages can be quantified, the loss is quite clearly a commercial loss” and so, prima facie, a loss that should be capable of being assessed in damages. Taking the first of these two observations, there are perhaps three categories of application for interlocutory injunction that will typically present before the court. The first is where damages are clearly the appropriate form of relief; in such cases the application for injunctive relief will be denied. The second is where the alleged loss of the plaintiff is not quantifiable or capable of being compensated by an award of damages; in such cases the application for injunctive relief will likely be granted, subject to such conditions as the court considers ought to be imposed. The third is where the alleged loss can conceivably be reduced to damages but where the quantification of these damages is not capable of reasonably precise estimate. In this last regard, nothing is impossible to an accountant or an actuary: if asked to quantify a loss he or she will do so but such estimates may and sometimes will be little more than informed guesswork. In other words one will reach a point where it is possible still to quantify the amount of damages but impossible to do so with any meaningful accuracy. It is this type of impossibility that the court understands Finlay C.J. to refer to when he speaks of “[d]ifficulty, as distinct from complete impossibility, in the assessment of…damages”, i.e. damages that are completely impossible to calculate with such a degree of accuracy as to represent the probable loss that a person will suffer absent injunctive relief.
34. To put matters in context, in the present case a significant loss that appears potentially to arise for Mr. Hayden is the loss of growth opportunities of a failed business that suffers a pre-wind-down diminution in its commercial goodwill and/or whose principal operator suffers a like diminution of his commercial reputation, in circumstances where that business might have survived and, indeed, expanded had such diminution/s not occurred. There is no doubt that a skilled accounting professional could seek to put some sort of estimated figure on this potential loss, and equally there is no doubt that such attempt would almost certainly be accompanied by significant caveats as to the accuracy of the figure arrived at or the degree of reliance to be placed on same. In the present context, can one say that because some form of quantification, however flimsy, may be arrived at, Mr. Hayden has failed to show the complete impossibility of assessing damages? Or should one conclude that it is completely impossible to arrive at an assessment of damages that evinces as a matter of probability the level of loss that Mr. Hayden may ultimately suffer and thus injunctive relief is appropriate? The court considers that the correct reading of Finlay C.J.’s observations in Curust suggests that the latter type of impossibility is the type of impossibility to which the Chief Justice intended to refer, and thus that in the present proceedings Mr. Hayden has shown that he will suffer damages which are completely impossible to quantify with the necessary degree of probability.
35. As to the second of Finlay C.J.’s observations referred to above, viz. that “[W]here damages can be quantified, the loss is quite clearly a commercial loss”, the court considers much the same issues to arise as have been considered immediately above. In one sense all damages can be quantified but there will come a point when the quantification of some damages is such a matter of estimate, perhaps ‘guesstimate’, even if done by a skilled accounting professional, that they can no longer be said to be damages that the plaintiff would be likely to suffer as a matter of probability were the actions or events that it is sought to injunct allowed to transpire. In such instances the court considers that the damages, though capable of being given some form of quantification, are not capable of quantification to a degree that would suggest they were likely to arise as a matter of probability and so are not commercial losses of the type to which Finlay C.J. intended to refer.
36. Moving on, it appears to the court that the above-quoted observations of Finlay C.J. and O’Flaherty J. ought to prompt a number of queries on the part of the court when presented with an application for an interlocutory injunction:
– first, is the loss arising clearly and exclusively a commercial loss and so typically capable of being assessed in damages under the heading of loss actually suffered up to the point when damages fall to be assessed and also under the heading of probable future loss?
– second, does such challenge as may arise in the assessment of damages reflect a difficulty, as distinct from a complete impossibility, in the assessment of same; a mere difficulty not being a ground for characterising the award of damages as an inadequate remedy?
– third, is it contended that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment until after the determination of the action would lead to the collapse, from a financial point of view, of the party so contending?
– fourth, if the injunction were refused, is it the case that the party seeking same would (a) be shut out from a market in which it has previously participated or (b) merely be obliged to share that market with another, with situation (a) justifying further enquiry as to the balance of convenience and situation (b) pointing to the possible adequacy of damages?
– fifth, if it is contended that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment until after the determination of the action would lead to the collapse, from a financial point of view, of the party so contending, is there evidence before the court, such as evidence regarding the general position of the parties with regard to their indebtedness or net assets or the probable result of increased competition, whereby the case so advanced has been established as a matter of probability?
– sixth, is there any doubt as to the capacity of the party against whom an injunction is sought to pay any damages awarded against such party?
– seventh, is there a new/expanding business dimension to the facts presented before the court that would make the quantification of damages particularly difficult?
37. In Fitzpatrick v. The Commissioner of An Garda Síochána (Unreported, Kelly J., High Court, 16th October, 1996), Kelly J. was presented with an application by Mr. Fitzpatrick, a member of An Garda Síochána then serving with the UN Civilian Police, seeking an interlocutory junction restraining his transfer or repatriation by the Garda Commissioner from Cyprus to Ireland. The case is of interest in the context of the present proceedings insofar as it is alleged that Mr. Hayden would suffer damage to his business reputation if Glanbia is allowed to proceed with its proposed course of action. As to the issue of reputation and damages, Kelly J. states that:
“[I]t seems to me that any embarrassment or loss of character or good name has already been sustained by all that has occurred…In any event, I am satisfied that if the Applicant is correct and his repatriation is unlawful, a determination by the court to that effect will completely vindicate him. Insofar as his constitutional entitlement to his good name and reputation is concerned, I see no reason why they cannot be adequately compensated by an award for damages. Damage to reputation as a result of libel or slander is regularly compensated in these courts by an award of damages.”
38. At first glance the decision in Fitzpatrick would appear to support the contention that, insofar as Mr. Hayden claims that he may suffer damage to his business reputation, any such damage is remediable by way of damages. Certainly, if one was to reduce the above-quoted text from Fitzpatrick to a single-line principle, it would appear that Kelly J. did not see a claim as to reputational damage to be one that would typically, if at all, justify injunctive relief. Notably, however, the form of reputation that arose to be considered by Kelly J. was personal reputation and not that business reputation which may attach to a trader or enterprise and comprise part of the commercial goodwill enjoyed by same. A rational distinction can be drawn between the two, and while there can of course be an inter-relationship between them, this need not always be so. It is, for example, entirely possible that an individual could have a bad personal reputation, yet enjoy a good business reputation. Given this distinction between personal reputation and business reputation, the relevance of the Fitzpatrick decision to a case such as that now before the court, which is focused entirely on business reputation, seems open to question. Moreover, it does not seem to the court that the loss caused by damage to business reputation will invariably be measurable in cash terms. In the present case, for example, it is not clear to the court that one could identify as a matter of probability the scale of damages that would compensate Mr. Hayden, in the event of his dairy distribution business failing, for the potential loss of growth that his business might have enjoyed if it had survived and if he and/or the company had not suffered a stinging loss of business reputation in the period prior to such failure.
39. In Noel Ó’Murchú t/a Talknology v. Eircell Limited (Unreported, Supreme Court, 21st February, 2001), the Supreme Court considered what proved ultimately to be an unsuccessful appeal from a decision of the High Court refusing a number of interlocutory injunctions, the effect of which injunctions, if granted, would have been to compel Eircell, until further order, to continue supplying or permitting the supply of ‘Ready to Go’ mobile phones to Talknology and to treat Talknology as an authorised agent for this purpose. Insofar as the adequacy of damages was concerned, Geoghegan J. made certain observations the relevance of which to the instant proceedings will be immediately apparent. Thus, per Geoghegan J., at p.8 et seq:
“I move now to the question of whether damages would be an adequate remedy. The learned High Court judge clearly thought it was and I would have to agree with him. In every case in which there is a breach of an agency or distribution agreement the task of assessing damages will be difficult, but that does not mean that it cannot be done. The respondent is a viable company and is financially in a position to meet any award in damages that may be made against it. The appellant’s loss is essentially financial. An interesting feature of the case is that much of the argument put forward on behalf of the appellant in the High Court was that the Christmas trade was absolutely vital and that without it, he would go out of business. The plaintiff is still in business. But even if he does go out of business, as a result of losing the agency, his losses can be assessed in money terms.”
40. There are perhaps two key points to be derived from this text. The first is that breach of an agency or distribution agreement will invariably present a difficulty as regards the calculation of damages. However, this does not mean that it cannot be done, and of course Finlay C.J. indicated in Curust that a mere difficulty in the calculation of damages, as opposed to an “impossibility” (the term has been considered above), is not a ground for characterising the award of damages as an inadequate remedy. The second is that even the losses arising from a complete failure of a business could, at least in the case before the Supreme Court in Talknology, be assessed in money terms. Notably, however, Geoghegan J. does not suggest that there will never be instances in which the complete failure of a business would have consequences that render the calculation of damages impossible and thus merit the invocation and application of injunctive relief.
41. The judgment of McMenamin J. in Whelan Frozen Foods considers a number of authorities and makes various observations that are of interest in the context of the present proceedings. Whelan Frozen Foods had supplied Dunnes Stores with stock over a quarter-century long period. In the proceedings before McMenamin J., Whelan made various claims against Dunnes Stores, including that the latter had sought to make unilateral variations of contracts entered into between the two parties, had unlawfully withheld certain sums due to Whelan, and had caused Whelan to incur certain losses. A consequence of the alleged transgressions was that Whelan came to the High Court seeking injunctive relief. It is when it comes to the question of the adequacy of damages that the case is of the greatest interest in the context of the present proceedings. In the course of his judgment, McMenamin J. considers a number of relevant precedents, including the decisions in the American Cyanamid, Curust and Talknology cases, before reaching the following conclusions:
“First, as a principle…in the balance of convenience it is clear that as a general rule a court should where possible strive to maintain the status quo. However, this is but one element in weighing the balance of convenience. Second, the court must always have regard to the fact that as illustrated in Curust the onus lies upon the plaintiff to establish as a matter of probability that damages will not be an adequate remedy. There should be evidence which establishes this proposition, both as to the general position of the company, its indebtedness and net asset situation and whether a real risk exists to solvency…
The issue of the balance of convenience involves as an inquiry, whether damages would be an adequate remedy. On the basis of the plaintiffs evidence even when balanced against that of the defendant, the issue is as to the risk of insolvency as contrasted to the maintenance of the status quo which in this case inter alia involves the long trading relationship which existed between the parties….
A further issue to be borne in mind is the financial standing of each of the parties. The plaintiff is solely and entirely dependent on the defendant for its business. The court should have regard to the effect of the absence of an injunction on the respective positions of the plaintiff and the undoubtedly financially secure defendant, and on the evidence on those points referred to, then look to the justice of the case.
Where there is doubt as to the adequacy of damages, then the court should look at the question of the balance of convenience. It will be a matter for the court to determine the relative weight in establishing or deciding where the balance lies. Where other factors appear to be evenly balanced, it is a counsel of prudence to take such measures as are calculated to preserve the status quo. One of the tests which the court must apply is the ‘balance of the risk of doing an injustice’…The adequacy of damages as a remedy must been seen as predicated on the continued existence of the parties as going concerning to the trial of the full action….A further issue to which the court may also have regard is a degree of uncertainty as to when the hearing of the plenary action will take place, even having regard to the desire of both parties to achieve an early hearing. The court cannot ignore the difficulties which may arise in the preparation of discovery or the assignment of a date when the court calendar will be free.” [Underline in original].
42. Briefly put, McMenamin J. reiterates the principle identified by the Supreme Court in Curust that the onus lies upon the plaintiff to establish as a matter of probability that damages will not be an adequate remedy, then raises various points that can be reformulated into queries which can usefully be considered by the court when presented with an application for an interlocutory injunction:
– first, is the court’s assessment of damages predicated, as it must be, on the continued existence of the parties as going concerns to the trial of the full action?
– second, in its determination as to where the balance of convenience lies, is the court attaining insofar as possible the maintenance of the status quo ante?
– third, in its determination as to where the balance of convenience lies has the court had regard to (a) the financial standing of each of the parties and (b) the effect of the absence of an injunction on the respective positions of the plaintiff and the defendant, and (c) the justice of the case, bearing in mind the evidence as to points (a) and (b)?
– fourth, in its determination as to where the balance of convenience lies has the court had regard to the balance of the risk of doing an injustice?
– fifth, in its determination as to where the balance of convenience lies has the court had regard to the degree of uncertainty as to when the hearing of the plenary action will take place, even having regard to the desire of both parties to achieve an early hearing, it not being open to the court to ignore the difficulties which may arise in the preparation of discovery or the assignment of a date when the court calendar will be free?
Summary of principles arising
43. The court considers that the following are the queries that the judgments in American Cyanamid, Curust and Whelan indicate to arise in an application for an interlocutory injunction. It is not intended as a list of all the queries that can arise for consideration in an application for an interlocutory injunction. Such a list would be impossible to assemble. This is because, as Lord Diplock noted in American Cyanamid, at p.409, individual cases may present special factors that require to be taken into consideration. Moreover, as mentioned above, Order 50, r.6 of the Rules of the Superior Courts and the broad thrust of applicable case-law point to the court ultimately retaining a degree of flexibility and discretion as regards the granting or refusal of injunctive relief that is untrammelled by strict criteria, though its exercise of this discretion is of course subject to the rules of precedent. All that said, it appears to the court that the queries identified below provide a useful checklist by which to assess whether an interlocutory injunction ought to issue in a case such as that now before it:
(1) Does the material available to the court at the hearing of the application fail to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial? (American Cyanamid)
(2) If the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, (a) would he be adequately compensated by an award of damages in the measure recoverable at common law for any loss arising to the time of trial from the non-issuance of the interlocutory injunction and (b) would the defendant be in a financial position to pay them? (American Cyanamid)
(3) If such damages aforesaid would not provide an adequate remedy for the plaintiff in the event of his succeeding at trial, and the defendant were to succeed at the trial in establishing his right to that which was sought to be enjoined, (a) would the defendant be adequately compensated under an undertaking by the plaintiff as to damages for such loss as the defendant would sustain by virtue of the issuance of the interlocutory injunction against the defendant, and (b) would the plaintiff be in a financial position to pay them? (American Cyanamid)
(4) Is there any doubt as to the adequacy of the respective remedies in damages available to either party or to both? (American Cyanamid)
(5) Do the various factors that present in a case appear to be evenly balanced? (American Cyanamid)
(6) Is it the case that the extent of the uncompensatable disadvantage to each party would not differ widely? (American Cyanamid)
(7) Is the loss arising clearly and exclusively a commercial loss and so typically capable of being assessed in damages under the heading of loss actually suffered up to the point when damages fall to be assessed and also under the heading of probable future loss? (Curust)
(8) Does such challenge as may arise in the assessment of damages reflect a difficulty, as distinct from a complete impossibility, in the assessment of same; a mere difficulty not being a ground for characterising the award of damages as an inadequate remedy? (Curust)
(9) Is it contended that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment until after the determination of the action would lead to the collapse, from a financial point of view, of the party so contending? (Curust)
(10) If the injunction were refused, is it the case that the party seeking same would (a) be shut out from a market in which it has previously participated or (b) merely be obliged to share that market with another, with situation (a) justifying further enquiry as to the balance of convenience and situation (b) pointing to the possible adequacy of damages? (Curust)
(11) If it is contended that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment until after the determination of the action would lead to the collapse, from a financial point of view, of the party so contending, is there evidence before the court, such as evidence regarding the general position of the parties with regard to their indebtedness or net assets or the probable result of increased competition, whereby the case so advanced has been established as a matter of probability? (Curust)
(12) Is there any doubt as to the capacity of the party against whom an injunction is sought to pay any damages awarded against them? (Curust)
(13) Is there a new/expanding business dimension to the facts presented before the court that would make the quantification of damages particularly difficult? (Curust)
(14) Is the court’s assessment of damages predicated, as it must be, on the continued existence of the parties as going concerns to the trial of the full action? (Whelan)
(15) In its determination as to where the balance of convenience lies is the court attaining insofar as possible the maintenance of the status quo ante? (Whelan)
(16) In its determination as to where the balance of convenience lies has the court had regard to (a) the financial standing of each of the parties and (b) the effect of the absence of an injunction on the respective positions of the plaintiff and the defendant, and (c) the justice of the case, bearing in mind the evidence as to points (a) and (b)? (Whelan)
(17) In its determination as to where the balance of convenience lies has the court had regard to the balance of the risk of doing an injustice? (Whelan)
(18) In its determination as to where the balance of convenience lies has the court had regard to the degree of uncertainty as to when the hearing of the plenary action will take place, even having regard to the desire of both parties to achieve an early hearing, it not being open to the court to ignore the difficulties which may arise in the preparation of discovery or the assignment of a date when the court calendar will be free? (Whelan)
44. As the above queries and the cases from which they derive are all variations on a theme it is inevitable that some of them will overlap.
Should an interlocutory injunction be granted in this case?
45. The court turns now to apply the various legal principles and related queries identified above to the facts arising in the instant proceedings.
46. (1) Does the material available to the court at the hearing of the application fail to disclose that Mr. Hayden has any real prospect of succeeding in his claim for a permanent injunction at the trial? Mr. Hayden has raised various substantive issues, not least concerning the interpretation and operation of the distribution agreement of 20th September, 1995, that will require to be determined at the trial of the full action. The material available to the court does not fail to disclose that Mr. Hayden has any real prospect of succeeding in a claim for a permanent injunction at the trial of the action.
47. (2) If Mr. Hayden were to succeed at the trial in establishing his right to a permanent injunction, (a) would he be adequately compensated by an award of damages in the measure recoverable at common law for any loss arising to the time of trial from the non-issuance of the interlocutory injunction and (b) would Glanbia be in a financial position to pay them? For the reasons stated in its answer to Question (7) below, the court does not consider that if Mr. Hayden succeeds at the plenary hearings, damages would be adequate compensation for the non-issuance of an interlocutory injunction at this time. This is because the court considers that it is and would be impossible to calculate as a matter of probability the full extent of the damages that Mr. Hayden would suffer. As to the ability of Glanbia to pay such damages as might be awarded against it, no evidence has been adduced before the court in this regard. However, given that Glanbia is a large public company of considerable prominence in its sector, it seems likely that this is so.
48. (3) If damages would not provide an adequate remedy for Mr. Hayden in the event of his succeeding at trial, and Glanbia were to succeed at the trial in establishing its right to do that which Mr. Hayden has sought to enjoin, (a) would Glanbia be adequately compensated under an undertaking by Mr. Hayden as to damages for such loss as Glanbia would sustain by virtue of the issuance of the interlocutory injunction against Glanbia, and (b) would Mr. Hayden be in a financial position to pay them? It will be recalled that in Whelan, McMenamin J. indicates that any decision as to the adequacy of damages must be predicated on the continuing existence to the plenary hearings of the respective parties. The court concludes in its answer to Question (14) below that, as a matter of probability, if the injunction sought by Mr. Hayden is not granted, his business will not survive to the full trial of the action. Thus Question (3) seems moot in the present proceedings. That said, it appears to the court that any damages arising for Glanbia by virtue of the issuance of the injunction now sought would be relatively small. After all, Glanbia’s products would continue to be supplied. Moreover, if the volumes of produce to be supplied either increased or decreased, the relevant adjustments could be agreed between Mr. Hayden and Glanbia. Insofar as any operational difficulties may present, it seems from the affidavit evidence that these not insurmountable difficulties pertain to the injunction possibly making the supply process more cumbersome, rather than it making them significantly more costly. As to whether the injunction now sought would give rise to difficulty between Glanbia and the Wexford Creamery distributor, it might, but it seems to the court that any such difficulty is attributable ultimately not to any injunction being granted but due to the integration process arising from Glanbia’s decision to acquire Wexford Creamery on the assumption, correct or otherwise, that it could proceed as it has sought to do vis-à-vis Mr. Hayden and that other distributor. Given the relatively minor damages that would appear to arise for Glanbia in the event of the injunction that is now sought being issued, it does not appear from the financial evidence before the court that payment of damages to Glanbia would necessarily present an issue, though again it appears that Question (3) is redundant in light of the court’s answer to Question (14).
49. (4) Is there any doubt as to the adequacy of the respective remedies in damages available to either party or to both? For the reasons stated in answer to Question (7) below, the court does not consider that if Mr. Hayden succeeds at the plenary hearings, damages would be adequate compensation for the non-issuance of an interlocutory injunction at this time. Conversely, there is nothing in the evidence adduced or the argument made before the court that would lead it to conclude that damages would not be adequate compensation for Glanbia in the event that it were ultimately to succeed at the main trial of action following the issuance of the injunction now sought. It is worth recalling in this regard, and the court notes, the observation of Lord Diplock in American Cyanamid, at p.409, that:
“The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies.”
50. (5) Do the various factors that present in a case appear to be evenly balanced? It will be apparent from the court’s answers to the other questions considered in this section of its judgment that the court considers the answer to this question to be ‘no’. Thus, for example, it appears to the court that: any damages arising for Glanbia by virtue of the issuance of the injunction now sought would be relatively small whereas the potential losses arising for Mr. Hayden are potentially catastrophic, both as regards the continued existence of his business and his personal income; there is a significant imbalance in the financial standing of the parties; and in terms of balancing the risk of injustice it seems to the court that the potential injustice to be suffered by Mr. Hayden were the injunction refused would be greater than that to be suffered by Glanbia were it granted. All of these factors, it appears to the court, are further exacerbated, in terms of the potential serious adverse consequences they present or entail for Mr. Hayden, by the fact that the trial of the full action may not come on for some time.
51. (6) Is it the case that the extent of the uncompensatable disadvantage to each party would not differ widely? It is not clear to the court that the issue of uncompensatable damage arises for Glanbia at all, whereas it does appear to arise for Mr. Hayden.
52. (7) Is the loss arising clearly and exclusively a commercial loss and so typically capable of being assessed in damages under the heading of loss actually suffered up to the point when damages fall to be assessed and also under the heading of probable future loss? This query arises from the decision of the Supreme Court in Curust and the court has explained above why it considers that, when Finlay C.J. referred in Curust to the complete impossibility of assessing damages as a pre-requsite to injunctive relief, he meant to refer to the impossibility of calculating damages with a sufficient degree of accuracy as would identify the probable damages that would arise for an applicant in the event of certain behaviour on the part of a respondent not being enjoined by injunction. It appears to the court that, in the event of Glanbia proceeding as it has proposed, the loss that would arise for Mr. Hayden consequent upon the reduction of goodwill that he contends would arise for him, and/or Baínne Aláinn, would be impossible to calculate in the sense to which Finlay C.J. refers. That loss would have to be calculated in part by reference to a decreased ability to expand a now failed business thanks to a pre-failure diminution of goodwill and it is not at all clear how the relevant losses could be calculated with the necessary probability. There is also the fact that Mr. Hayden alleges, and the court concludes at Question (14) below, that the refusal of the injunction now being sought would on the balance of probabilities bring about the collapse of Mr. Hayden’s business, which is largely a ‘one-man show’, although he does have at least one employee. This collapse would have many consequences, including that Mr. Hayden, who has spent most of his adult life in the dairy supply business, would likely have to re-train for alternative employment and, at his age, might face limited employment opportunities, giving rise to various related difficulties, including an inability to service his home-loan, a particular concern to which Mr. Hayden makes specific reference in his affidavit evidence. Of course even were this disastrous series of events to unfold, most of the losses arising, were they in fact to occur, might conceivably be capable of some form of quantification at some future time. However, it is difficult to see how they could be assessed with the necessary degree of probability, and it would seem to fly in the face of reason and common-sense to describe these potentially significant and possibly irremediable losses of unknown extent as examples of those quantifiable ‘commercial losses’ for which damages would be an adequate remedy and to which Finlay C.J. intended to refer in Curust as offering a basis for the refusal of injunctive relief.
53. (8) Does such challenge as may arise in the assessment of damages reflect a difficulty, as distinct from a complete impossibility, in the assessment of same; a mere difficulty not being a ground for characterising the award of damages as an inadequate remedy? The court has considered above what Finlay C.J. means when he refers in Curust, at p.469, to “[d]ifficulty, as distinct from complete impossibility, in the assessment of…damages”, and has concluded that it considers that the impossibility to which Finlay C.J. refers does arise in relation to some of the damages that Mr. Hayden contends that he will suffer if Glanbia is allowed to proceed as it intends.
54. (9), (10) Is it contended that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment until after the determination of the action would lead to the financial collapse of the party so contending? Is it the case that, if the injunction were refused, the party seeking same would (a) be shut out from a market in which it has previously participated or (b) merely obliged to share that market with another, with situation (a) justifying further enquiry as to the balance of convenience and situation (b) pointing to the possible adequacy of damages? Mr. Hayden alleges, and the court concludes in its answer to Question (14), that the refusal of the injunction now being sought would on the balance of probabilities bring about the imminent collapse of Mr. Hayden’s business. Thus it would have the effect that he would be required to leave the market. Even were such a collapse not to come about, Mr. Hayden would nonetheless be excluded from that part of the market which he had once supplied but which now came under the ambit of a different distributor. There are two reasons why this is so. First, as Glanbia contends, it seems unsustainable commercially to have two distributors delivering the same supplier’s produce to a single store. Second, once that store is getting its dairy produce from an entity such as Glanbia which produces a wide array of dairy products, it would likely have no need to procure alternative dairy supplies from Mr. Hayden. One or both of these factors would have the end-result that, on the balance of probabilities, Mr. Hayden would find himself shut out from that part of the market which fell to be apportioned to the Creamery agent.
55. (11) If it is contended that damages would not constitute an adequate remedy by reason of a real risk that the postponement of their payment until after the determination of the action would lead to the collapse, from a financial point of view, of the party so contending, is there evidence before the court, such as evidence regarding the general position of the parties with regard to their indebtedness or net assets or the probable result of increased competition, whereby the case so advanced has been established as a matter of probability? The adequacy of the financial information provided by Mr. Hayden is considered in Question (14) below. Suffice it to note here that, having regard to such evidence as has been presented before it and to which reference is made in the answer to Question (14), the court concludes as a matter of probability that if the injunction sought is not granted, Mr. Hayden’s business will not survive to the full trial of the action.
56. (12) Is there any doubt as to the capacity of the party against whom an injunction is sought to pay any damages awarded against them? This has been answered in the court’s consideration of Question (2) above.
57. (13) Is there a new/expanding business dimension to the facts presented before the court that would make the quantification of damages particularly difficult? The court has broached this issue in its answer to Question (7) and considers that the answer to the query posed must be ‘yes’. Thus it appears to the court that the loss that would arise to Mr. Hayden consequent upon the diminution of goodwill that he contends, and the court accepts, would arise for him and/or Baínne Aláinn, in the event of Glanbia proceeding as proposed, would not be possible to calculate as a matter of probability, not least because the loss would have to be calculated in part by reference to Mr. Hayden’s life-long reduced ability to expand his onetime business on the strength of such goodwill as he and/or Baínne Aláinn had once enjoyed but which, as a result of the actions of Glanbia, would have suffered a diminution in value prior to the collapse of that business.
58. (14) Is the court’s assessment of damages predicated, as it must be, on the continued existence of the parties as going concerns to the trial of the full action? Mr. Hayden has over 20 years’ experience in the dairy distribution business and knows his own business intimately. He has averred in his affidavit evidence that the proposed revised arrangements would necessitate a costly upgrade of his existing transportation stock at a time of reduced trade. He has also, in his averments, provided concrete examples of the increased labour and running costs and associated inefficiencies that will arise for him if the proposed revised distribution arrangements are effected. He anticipates that he will suffer damage to his business reputation as well as a significant loss of goodwill in the business that he has built over the years. Having regard to all of the foregoing, Mr. Hayden has formed the view that the proposed revised distribution arrangements will have the effect that his business will no longer be commercially viable. He is so concerned in this regard that he has gone to the not inconsiderable expense of commencing the present proceedings. His concerns are partly grounded in certain financial analyses that he has commissioned from a named firm of accountants and exhibited with his affidavit evidence. For its part, Glanbia acknowledges that some financial difficulty may arise for Mr. Hayden and it has offered increased volumes on another route (though Mr. Hayden disputes the commercial viability of such an arrangement) and claims to have offered certain financial assistance (which Mr. Hayden claims was never offered). However, Glanbia does not accept that the Gorey route would render Mr. Hayden’s business unprofitable. Moreover, counsel for Glanbia has urged on the court that it should not have any regard to the financial analyses supplied by Mr. Hayden, these being hearsay evidence. But as Mr. McGrath notes in his learned text, “Evidence” (2005), at p.295, “It is well established that the application of the hearsay rule is relaxed in interlocutory proceedings”. This is echoed in Mr. Kirwan’s learned text, “Injunctions” (2008), at pp. 220 and 256. Indeed, Order 40, r.4 of the Rules of the Superior Courts expressly allows for the inclusion of hearsay in affidavits on interlocutory motions, even if the courts have typically, and rightly, been cautious as to placing undue reliance on such hearsay. Thus, albeit tempered with appropriate caution, the court has had regard to such financial analyses by a named firm of accountants as have been referred to by Mr. Hayden, and exhibited with his affidavit evidence, in support of his case that Glanbia’s proposed changes pose a real threat to the continuation of his business. To the extent that the facts or decisions in Curust or Whelan might be advanced to support the notion that more comprehensive financial analyses ought to have been supplied by Mr. Hayden, it appears to the court that those cases can be distinguished on the basis that they involved plaintiffs of some substance, in Curust a plaintiff engaged in the manufacture and distribution of the largest-selling rust primer in Ireland, and in Whelan, a plaintiff supplier that, if not quite a household name, was not far removed from that status. By contrast, Mr. Hayden operates a relatively small undertaking and has come to the court at a time when he perceives that his ‘back is against the wall’ and his relatively modest business, the only business he has ever known and which he has built up from nothing, is confronted with imminent collapse. In a ‘David and Goliath’-style battle, a ‘David’ may have little choice but to come to the fray armed less than perfectly, but that need not yield the conclusion that he has come ill-equipped or produce the result that he fails. The court considers that the evidence of an experienced and sober-minded businessman who has operated a business for over 20 years and has real and substantive concerns as to its continuing viability and who has furnished to the court some supporting evidence, albeit hearsay evidence, from a named source, is considerably more persuasive than the rather terse, and entirely unsupported, dismissal by Glanbia in its affidavit evidence of Mr. Hayden’s contention that the restructuring of the Gorey route would render his business unprofitable. Given the evidence adduced before it, the court concludes as a matter of probability that if the injunction sought is not granted, Mr. Hayden’s business will not survive to the full trial of the action.
59. (15) In its determination as to where the balance of convenience lies is the court attaining insofar as possible the maintenance of the status quo ante? It appears to the court that the only way of preserving the status quo ante between the parties is to grant the injunctive relief sought. Glanbia has made clear to Mr. Hayden its intention to proceed with its proposed amendments to the distribution régime, which he alleges are in breach of contract, and it appears that it is only the interim injunction which has stopped Glanbia from so proceeding. Glanbia continues to maintain that its view as to the contractual obligations arising between the parties is correct and so, absent injunctive relief, will likely proceed as it originally intended (certainly it has given no indication that it will not), thus upsetting the status quo ante and potentially causing significant damage to Mr. Hayden.
60. (16) In its determination as to where the balance of convenience lies has the court had regard to (a) the financial standing of each of the parties and (b) the effect of the absence of an injunction on the respective positions of the plaintiff and the defendant, and (c) the justice of the case, bearing in mind the evidence as to points (a) and (b)? The court has referred to the financial standing of the parties elsewhere above and would note again that Mr. Hayden is a small or medium-sized trader operating what is in effect a family business with a limited number of employees. Glanbia is a large public company that, at least by reputation – no evidence has been adduced before the court in this regard – has the appearance of being possessed of considerable financial resources or, at least, resources that are considerably greater than those of Mr. Hayden. The court has concluded above that the absence of the injunction would likely lead to the collapse of Mr. Hayden’s business and would free Glanbia to proceed as it has intended all along. Having regard to the foregoing, the relative financial strength of the parties and the potentially devastating effect that the absence of the injunction would have for Mr. Hayden and the related advantage that it would give to Glanbia to advance matters as it wishes and to a stage where Mr. Hayden might quickly lose the financial wherewithal to continue these proceedings, the court considers that the justice of the case requires that it grant the injunctive relief sought by Mr. Hayden.
61. (17) In its determination as to where the balance of convenience lies has the court had regard to the balance of the risk of doing an injustice? If the court grants the injunction it risks doing an injustice to Glanbia in that Glanbia could not proceed in a manner that it contends is in accordance with the contractual obligations between the parties. If the court refuses the injunction it risks exposing Mr. Hayden to the collapse of his business and the related personal difficulties that this would entail. It seems to the court that, having regard to the risk of injustice, the potential injustice to be suffered by Mr. Hayden were the injunction refused would be greater than that to be suffered by Glanbia were it granted. Consequently the balance of convenience favours Mr. Hayden in this regard.
62. (18) In its determination as to where the balance of convenience lies has the court had regard to the degree of uncertainty as to when the hearing of the plenary action will take place, even having regard to the desire of both parties to achieve an early hearing, it not being open to the court to ignore the difficulties which may arise in the preparation of discovery or the assignment of a date when the court calendar will be free? Even allowing for the possibility of an early hearing, the court has concluded that the likely consequence of refusing the injunction would be the imminent collapse of Mr. Hayden’s business. It is possible that his business could ‘limp on’ to the trial of the full action; however, it would likely have been irremediably damaged by that time. Thus it seems to the court that, whether prompt or protracted, the timing of the coming on of the main proceedings makes little difference to Mr. Hayden given the likely imminence of the collapse in his business, and thereafter his personal finances, that would be engendered by the implementation of Glanbia’s proposed revised distribution arrangements.
Conclusion
63. For the reasons provided in its answers to the various questions posed above, the court considers that it is appropriate to grant relief to Mr. Hayden by way of interlocutory injunction. The court notes that Mr Hayden has indicated that he is willing to give the usual undertaking as to damages. As it happens, the court considers that this case comes within that category of cases in which it would have been appropriate to grant the interlocutory relief sought even if such an undertaking was not forthcoming from Mr. Hayden. That an interlocutory injunction might be granted without any order as to damages is clear from the consideration of the relevant principles and precedents above. That such an approach would be merited in the present context seems clear from a consideration of the facts, not least among which is that, on the one hand, the court is presented with circumstances that threaten the imminent collapse of a family business and the consequent collapse of an individual’s personal finances, and, on the other, the court is presented with an apparently successful public company for which a delay in the implementation of its proposed revised distribution arrangements would appear to involve little financial loss, a certain loss of face, and some practical inconveniences that have been referred to above. The balance of convenience and the scales of justice in this case are weighted heavily in Mr. Hayden’s favour and, however one looks at matters, “it appears to the court to be just or convenient”, to quote the words of O.50, r.6 of the Rules of the Superior Courts, that the injunctive relief being sought in this application should issue in any event. That said, the court notes that Mr. Hayden has expressed a willingness to give the usual undertaking in damages, it appears that there is substance to his undertaking in the context arising, and the court is satisfied to accept his offer that such undertaking be given.
64. As indicated at the hearing of the application, the court does not consider that the exact terms of the injunction sought are appropriate in that, as was conceded by Mr. Hayden’s counsel at hearing, the proposed terms would capture actions the lawfulness and legitimacy of which is not in dispute. The court will consider with counsel the appropriate wording of the interlocutory injunction that is to issue pursuant to this judgment.
Pattison v Gifford (UK)
Chancery (1874) L.R. 18 Eq. 259; 43 L.J.Ch. 524; 22 W.R. 673
G. JESSEL M.R.: I do not think I can give the relief that the Plaintiff asks. . . . The Plaintiff in substance claims a right of shooting over some land with a covenant for quiet enjoyment, not actually under a demise, but under an agreement by letter, which in this Court amounts to a demise. He now comes for an injunction in effect, though not in terms, to restrain the Defendant from interfering with this right. I granted an interim injunction on an assertion in an affidavit that the Defendant was going to grub up and destroy the plantations, and if that had been proved, I should have continued the order. But the facts now established are wholly different. . . . If a man sells land in that way, telling the purchaser that during his tenancy another person has the right of shooting, and if it turns out that the land cannot be built on without interference with the right of shooting, he in effect tells the purchaser this: ” Recollect, you must make some arrangement with the person holding the right of shooting before you can build. All I say is, that the property is well situated for building, admirably situated for the erection of a house, only before you erect your house you must either get the leave of the person entitled to the right of shooting, or wait till the expiration of the lease of the shooting.” There is no representa tion to the purchaser that he can immediately proceed to build irrespective of that right.
Now, what are the principles upon which this Court interferes? I take it that, in order to obtain an injunction, a Plaintiff, who complains, not that an act is an actual violation of his right, but that a threatened or intended act, if carried into effect, will be a violation of the right, must shew that such will be an inevitable result. It will not do to say a violation of the right may be the result: the Plaintiff must shew that a violation will be the inevitable result…. Thperinciple is this: If you say the Defendant is going to do an unlawful act, you must prove that it is necessarily unlawful; it is not enough to say itmay be unlawful. Again, in the case of the Emperor of Austria v. Day ( (1861)
3 D.F. & J. 217, 240), the Lord Chancellor says: “I consider this Court has
Jurisdiction by injunction to protect property from an act threatened which, if completed, would give a right of action. I by no means say that in every such case an injunction may be demanded as of right; but if the party applying is free from blame and promptly applies for relief, and shews that by the threatened wrong his property would be so injured that an action for damages would be no adequate redress, an injunction will be granted.” Then, in Tipping v. Eckersley
( (1855) 2 K. & J. 264), which I hold to be good law, it is laid down, that if there
is an express covenant, such as a covenant for quiet enjoyment, then damage is not necessarily to be shewn, it is sufficient to shew that there is a breach of the express covenant; but at all events, you must shew that there is a breach. All these observations would apply if the Defendant were actually threatening to erect villas. It does not by any means follow as of necessity that the erection of one or two villas will injure the right of shooting; that depends upon the part of the estate on which the villas are built, the number of villas, and the size of them, and so on. There may or may not be injury, and I should hesitate long before I granted an injunction against a Defendant, over whose estate there existed a right of shooting, to prevent his building a single house. Of course a great deal would depend on the extent of the property, and the nature of the coverts, and so on; but I should require to be satisfied, according to the autho rities, that by the erection of a house, or even two houses if the estate was a large one, injury must necessarily and inevitably follow. When I say inevitably, I do not use the word in the sense of there being no possibility the other way, because I think Courts of justice must always act upon the theory of very great probability being sufficient;-all I mean is that there must be such a great probability, that, in the view of ordinary men, using ordinary sense, the injury would follow.
Forse & Ors v Secarma Ltd & Ors
[2019] EWCA Civ 215 (13 March 2019)
Sir Terence Etherton MR:
Introduction
This is an appeal from the order dated 30 November 2018 of Murray J, by which he granted, as part of a wider order, an interim springboard injunction against the appellants. The appellants are among a larger group of defendants alleged to be liable to the respondents for the tort of conspiracy to injure by unlawful means.
In broad terms, the alleged conspiracy is said to be an agreement or concerted action by the defendants, at a time when some of them were still employed by, and were directors of, the first and second respondents (together “Secarma”), to procure key employees of Secarma to resign and join one or more of the fourth and fifth appellants (together “Xcina”) and so build up a cyber-security business competing with Secarma.
The springboard injunction prohibited the defendants from doing a number of things damaging to the business of Secarma, and was intended to prevent Xcina from benefiting from the commercial advantage which the respondents claim Xcina had wrongly achieved from the alleged conspiracy.
Factual background
Xcina offers, among other things, cybersecurity advisory services, including penetration testing (“pen testing”), which includes its more sophisticated version “red teaming”. Pen testing involves testing and exposing weaknesses in the security of a client’s IT systems by deliberately trying to hack them. Those with the skills required to perform pen testing are in short supply. Until the events and matters of which Secarma complains, Xcina did not provide that service by using its own employees but outsourced the work, principally to Secarma.
The third appellant, Shearwater Group PLC (“Shearwater”), owns and indirectly controls the fourth and fifth appellants. The fourth appellant, Xcina Ltd, is a wholly owned subsidiary of the fifth appellant, Xcina Consulting Ltd.
Mr Mark Child, the second appellant, is the founder and managing director of Xcina Consulting Ltd.
Secarma carries on a cyber-security company specialising in pen testing. It provides that service by way of an in-house team of pen testers.
Mr Daniel Forse, the first appellant, was formerly employed by Secarma as a manager of a team of pen testers.
Secarma’s business was founded by Mr John Denneny, the first defendant, and Mr Mark Rowe, the second defendant. They have not appealed the Judge’s order. They sold that business on 30 June 2016. It is not necessary for the purpose of this judgment to recite in detail the various corporate entities that participated in that sale and its aftermath or to describe the various stages in the transaction. It is sufficient to say the business was subsequently carried on by Secarma and Mr Denneny and Mr Rowe continued to be employed by and were directors of Secarma and that the acquisition was effected by way of an Investment Agreement and a Share Purchase Agreement. Secarma’s share capital was divided between, among others, Mr Lawrence Jones, the CEO of UKFast.net Ltd (“UKFast.net”), the third respondent.
The Share Purchase Agreement imposed restrictive covenants on Mr Denneny and Mr Rowe requiring them to refrain, for three years following the completion date of the sale, from assisting any other business to compete with Secarma; from soliciting business from any person who, in the 24 months prior to completion, had been a customer of Secarma’s or in discussions with Secarma about becoming a customer; and from poaching any person who was at the time of sale or who had been employed by Secarma in the 24 months prior to completion. The covenants are due to expire on 29 June 2019.
On 30 June 2016, the same date the Share Purchase Agreement was completed, Mr Denneny and Mr Rowe entered into contracts of employment with Secarma. Clauses 18 and 19 of those contracts imposed duties of confidentiality and non-disparagement both during and at any time after termination of their employment. Clause 20 imposed 12 month post-termination restrictions preventing Mr Denneny and Mr Rowe from soliciting actual or prospective clients with whom they had dealt personally in the last 12 months of their employment and from dealing with them. They were also restricted from competing with Secarma and from poaching its employees.
On 14 February 2017 the third defendant, Mr Paul Harris, who has also not appealed the Judge’s order, was employed as Managing Director of Secarma. His contract contained the same restrictions as in Mr Denneny’s and Mr Rowe’s contracts of employment, except that the restrictive covenants lasted for six months rather than twelve following termination. His contract was amended on 12 July 2017 to add provisions that would place him on garden leave if either party terminated the agreement.
In a deed of adherence to the Share Purchase Agreement dated 2 October 2017 Mr Harris also agreed to be bound by the restrictive covenants contained in the Investment Agreement as though he had been a party to it.
There followed a series of resignations from Secarma. Mr Forse left on 28 March 2018. His employment contract did not contain any of the competition or poaching restrictions contained in Mr Denneny’s and Mr Rowe’s contracts. Following his resignation Mr Forse worked as a freelance pen tester. He subsequently joined Xcina. He is responsible for managing and recruiting new pen testers for Xcina.
Mr Denneny gave notice of resignation on 2 May 2018, and his employment terminated on 2 November 2018. Mr Harris gave notice of resignation on 13 June 2018, and was put on garden leave. His employment terminated on 13 September 2018. Mr Rowe gave notice of resignation on 23 July 2018. At the time of the hearing before the Judge his employment was due to terminate on 23 January 2019. There had been 28 resignations from Secarma as of mid-November 2018.
It is the respondents’ case that Mr Denneny, Mr Rowe and Mr Harris, while they were directors of Secarma and while they were bound by their restrictive covenants in favour of Secarma, unlawfully conspired with Mr Child and Mr Forse to poach Secarma’s employees, with the aim of building up an in-house pen testing business in Xcina. They allege further that, as part of the conspiracy, Mr Denneny, Mr Rowe and Mr Harris used their knowledge of the terms on which Secarma pen testers were employed so as to assist Xcina to offer either the same or more advantageous terms of employment.
It is alleged that, in pursuance of the conspiracy, Mr Forse and Mr Harris sought to recruit Mr Liam Harcourt, who was employed by Secarma as a pen tester. Mr Harcourt ultimately disclosed his conversations and bilateral WhatsApp chats with Mr Forse and Mr Harris to, among others, Mr Jones of UKFast.net and Ms Nicola Frost, the company secretary of Secarma and of UKFast.net. He also disclosed a group chat among certain employees of Secarma, including Mr Denneny and Mr Rowe, as well as Mr Forse and Mr Harris. The group chat was called “Order of the Phoenix”, in which recruitment to Xcina was discussed. Relevant excerpts from those bilateral and group chats appear in the schedule to our judgments. It was his disclosure which eventually led to the commencement of these proceedings.
The proceedings and the hearing before Murray J
The claim form was issued on 14 November 2018. On the same day Secarma and UKFast.net applied for an interim springboard injunction.
The application was heard by the Judge on 23 and 26 of November 2018.
Relevant witness statements for the hearing were made by Ms Frost, for Secarma, and by Mr Denneny, Mr Rowe, Mr Harris, Mr Forse and Mr Child and also, on behalf of the defendants, Mr Michael Stevens, CEO of Shearwater, and Mr Lorenzo Grespan, an Xcina employee who had formerly been employed by Secarma.
The Judge delivered an oral judgment on 30 November 2018.
After setting out background facts, and commenting on the various witness statements, including the WhatsApp messages disclosed by Mr Harourt, he said that he had regard to American Cyanamid Co v Ethicon [1975] AC 396 and Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 for the principles applicable to interim injunctions, and to the judgments of Haddon-Cave J in QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 (QB) and [2012] EWHC 116 (QB), [2012] IRLR 458, for the principles for springboard relief.
He held (at [21]) that there was sufficient evidence to provide prima facie support for the applicants’ case, and (at [27]) that there were serious issues to be tried in relation to each of the defendants. He considered the balance of convenience as follows:
“31 First, would damages be an adequate remedy? No. In my view there is a sufficient prima facie case that the Respondents have obtained an unfair head start that cannot be cured simply by reimbursing Secarma Limited for recruitment and related costs.
32 Would an undertaking as to damages provide adequate protection for the defendants? None of the Respondents have so far suggested otherwise.
33 Would the injunction help to preserve the present position? I find that it would.
34 I do not think there are any other particular factors that need to be taken into account. This is not a case in my view where the scales are so evenly balanced that I should give particular weight to the relative strength of the parties’ cases.
35 Accordingly, I find that the balance of convenience falls in favour of granting the applicants interim relief pending an expedited trial of their claim.
36 The principles that apply to springboard relief were discussed in detail by Haddon-Cave J in the QBE Management case …
37. Having taken account of all the circumstances … I consider that the springboard relief requested by the applicants is appropriate, fair and proportionate at this interim stage.”
As to the length of the springboard relief, the Judge said (at [38]) that, given the difficulties that Secarma faced in recruiting highly skilled pen testers in sufficient numbers to replace the ones that it had lost, the interim injunction should certainly extend until the start of an expedited trial, provided that happened on or before the end of April 2019.
The Judge also said that undertakings which had been offered by Mr Harris and the appellants – not to solicit any more of Secarma’s employees and not to deal with Secarma’s clients – were insufficient.
He then turned to the form of the order. The order made by the Judge is complicated in some respects. By way of a brief, broad and simple summary (and without elaborating by mentioning exceptions), so far as concerns the part of the order containing the interim springboard injunction, it prohibited (1) the enticing away from Secarma of any person who was an employee of Secarma immediately prior to the application, (2) the provision by the individual defendants, other than Mr Child, of any pen testing or red teaming services to Xcina, (3) the provision of pen testing or red teaming services to Xcina by any person who is, or was at any time since 1 March 2018, a Secarma employee and who was a participant in the Order of the Phoenix group chat, or was scheduled to be targeted by Mr Harris and Mr Forse or had been encouraged or enticed by them or Mr Denneny or Mr Rowe to leave Secarma, (4) the defendants from soliciting or dealing with any present client of Secarma or anyone who had been a client in the 12 months preceding 13 November 2018, (5) Mr Denneny, Mr Rowe, Mr Harris and Mr Forse from carrying out pen testing or red teaming for a business competing with Secarma, (6) the corporate appellants and Mr Child from carrying on any pen testing or red teaming business competing with Secarma.
Grounds of Appeal
There are ten grounds of appeal:
Ground 1: The Judge failed to determine the length of any springboard advantage that had been obtained by the appellants by reason of the alleged breaches of duty;
Ground 2: The Judge applied the wrong test for the grant of springboard relief, notwithstanding the respondents’ concession that the higher Lansing Linde test should be applied;
Ground 3: The Judge wrongly decided that the undertakings offered by the appellants were insufficient to protect the respondents from sustaining further losses by reason of past breaches of duty;
Ground 4: The Judge wrongly held that the respondents could not be compensated in damages for any losses sustained in the future by reason of the past solicitation of employees;
Ground 5: The Judge wrongly held that future losses might be suffered by the respondents other than by reason of dealings between the appellants and the respondents’ customers;
Ground 6: The Judge wrongly held that springboard relief could be granted to cancel out any advantage that would not cause additional future losses to the respondents prior to trial;
Ground 7: The Judge wrongly concluded that the prejudice or harm that would be caused to the respondents if he did not grant the springboard relief would exceed that caused to the appellants (and the appellants’ employees) if he did grant the relief;
Ground 8: The Judge wrongly concluded that the respondents had suffered substantial harm, by reason of the recruitment of employees by the appellants when, in fact, as the fresh evidence on appeal shows, the respondents have recruited 19 additional security professionals (including pen testers) and have increased their profitability since the events in question;
Ground 9: The Judge wrongly concluded that there was evidence to show that the appellants did not offer pen testing and red teaming services and/or that they were seeking to set up a new business offering pen testing and red teaming services;
Ground 10: In all the circumstances, the Judge ought to have held that the undertakings offered were sufficient, and that the relief granted in paragraphs 6(b), (c), (e) and (f) ought not to have been made.
Discussion
American Cyanamid is the leading authority on the requirements for an interlocutory injunction. They are described in the speech of Lord Diplock, with which the other members of the appellate committee of the House of Lords agreed, and may be summarised as follows.
(1) In the usual case, the court must be satisfied that the claim is not frivolous or vexatious, that is there is a serious question to be tried. If the court is satisfied on that point, it proceeds to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.
(2) If damages would adequately compensate the claimant, if successful at the trial, for loss sustained as a result of the defendant continuing to do what is sought to be enjoined between the time of the application for the interim injunction and the trial, and the defendant would be in a financial position to pay such damages, no interim injunction should normally be granted, however strong the claimant’s claim appears to be at that stage.
(3) If, on the other hand, damages would not provide an adequate remedy for the claimant in the event of success at the trial, the court then considers whether, on the contrary hypothesis that the defendant were to succeed at the trial, the defendant would be adequately compensated under the claimant’s cross- undertaking as to damages for loss that would be incurred by the defendant by being prevented from continuing the relevant activity between the time of the application for the interim injunction and the trial. If damages recoverable under the cross-undertaking would be an adequate remedy and the claimant would be in a financial position to pay them, there would be no reason upon that ground to refuse an interim injunction.
(4) Where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, the question of balance of convenience arises. The various matters to be taken into consideration in deciding where the balance lies will vary from case to case. The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of their success at the trial will be a significant factor in assessing where the balance of convenience lies.
(5) If the extent of the uncompensatable disadvantage to each party would not differ widely, it may be appropriate to take into account the relative strength of each party’s case as revealed by the evidence adduced on the hearing of the application, but this can only be done where there is no credible dispute that the strength of one party’s case is disproportionate to that of the other party. Where the material factors appear to be evenly balanced, the prudent course would be to take such measures as are calculated to preserve the status quo.
In a subsequent case, N.W.L. Ltd v Woods [1979] 1 WLR 1294 at 1306-1307 Lord Diplock observed that the balance of convenience threshold in American Cyanamid was not intended to apply to a case in which the grant or refusal of an interim injunction would, in effect, finally dispose of the action in favour of whichever party was successful in the application because there would be nothing left on which it was in the unsuccessful party’s interest to proceed to trial. He said that, in such a case, the degree of likelihood that the plaintiff would have succeeded in establishing his right to an injunction, if the action had gone to trial, is to be brought into the balance by the judge weighing the risks that injustice may result from deciding the application one way rather than the other.
That approach was applied by the Court of Appeal in Lansing Linde Ltd v Kerr [1991] 1 WLR 251, in which the plaintiff company commenced proceedings against the defendant, a former employee, for breach of a covenant preventing him for a period of 12 months after termination of his employment from being concerned directly or indirectly in any competitor business, subject to certain exceptions. The defendant had become employed by a competing company within a few weeks of the termination of his employment with the plaintiff. The Court of Appeal upheld the refusal of the first instance judge to grant an interlocutory injunction to enforce the covenant. It held that, since a trial could not have taken place until the 12 month restraint had almost expired, the judge had correctly assessed and taken into account the prospects of the plaintiff succeeding at trial and correctly formed the view that the world wide restriction in the covenant was probably too extensive to be valid.
Staughton LJ said (at [258]) that, if it will not be possible to hold a trial before the period for which the plaintiff claims to be entitled to an injunction has expired, or substantially expired, justice requires some consideration as to whether the plaintiff would be likely to succeed at a trial.
As explained above, the appellants comprise only some of the defendants. The appellants did not enter into covenants with Secarma restricting the business they could conduct or the employment they could undertake. Rather, the interim injunctions against the appellants were intended to prevent them taking unfair advantage of any springboard which they are alleged to have built up by unlawfully conspiring to persuade employees of Secarma to join Xcina.
Springboard injunctive relief is well established at the level of the Court of Appeal: see, for example, Roger Bullivant v Ellis [1987] FSR 172, P.S.M. International Ltd v Whitehouse [1992] FSR 489, 496, Willis Ltd v Jardine Lloyd Thompson Group plc [2015] EWCA Civ 450, [2015] IRLR 844. We were referred by counsel to a number of first instance decisions but, with no disrespect to the judges in those cases, it is not necessary to consider them for the purpose of disposing of this appeal. Springboard injunctions are necessarily limited to the period for which the advantage may reasonably be expected to continue: see generally Roger Bullivant at ([183]-[185]).
It follows that an interim springboard injunction effectively delivers to the claimant, in advance of the trial, all or part of the substantive relief which the claimant seeks. At the same time, it operates in restraint of the defendant’s freedom to trade or carry on business or to deploy their skills. Such an injunction may also have consequences for the defendant as regards third parties, whether employees or others, if the defendant is precluded from continuing to honour commitments to such third parties. For those reasons, save only where the time gap between the application for interim relief and the trial is insignificant, the court should adopt the approach in Lansing Linde on applications for an interim springboard injunction. The judge should assess and take into account the strength of each side’s case both as regards liability and also the length of time during which any unfair advantage from the springboard will continue. In carrying out that exercise, the judge cannot conduct a detailed mini trial on disputed evidence. He or she must, however, undertake a fair and reasonable evaluation of the evidence bearing in mind that there will have been no disclosure, and the witness evidence will be incomplete and untested by cross-examination. I will return to this issue in the context of the assessment of whether the period of unfair advantage would be likely to have expired before the trial has been completed.
In the present case the Judge made inconsistent statements about the extent to which he had assessed the strength of the claim that the defendants are liable for the tort of conspiracy to injure by unlawful means. He said (at [21]) that “there is sufficient evidence … to provide prima facie support for the applicants’ case”, and (at [27]) that there were “serious issues to be tried in relation to each of the respondents”, and (at [28]) that the claimants had met “the standard of a serious issue to be tried in relation to each of their principal allegations, including the allegation that here was an unlawful means conspiracy between all the respondents”. On the other hand, in the context of the balance of convenience, he said (at [34]) that the principles that apply to springboard relief were discussed by Haddon-Cave J (as he then was) in QBE Management Services (UK) Ltd. It is clear that Haddon-Cave J did make an assessment of the strength of the claimant’s case. Further, in his written reasons for refusing permission to appeal, the Judge said that “the evidence … meets the necessary standard in relation to springboard relief per the principles set out in [the QBE case]” and that he “applied [the QBE case] and did take account of the merits to the extent required under the principles outlined there at this interim stage”.
The lack of clarity on this aspect is unfortunate but it does not matter. It is clear that the evidence before the Judge disclosed a strong case against the appellants for conspiracy to injure through unlawful means, and even more so in the light of further evidential matters disclosed to this court by the appellants’ solicitors on the day before the appeal was due to start. Indeed, it is fair to say that Mr Tom Croxford QC, for the appellants, did not make any real attempt to persuade us otherwise. In the circumstances, I can deal with the legal merits of liability quite briefly.
It is not a ground of appeal that the Judge applied the wrong legal principles for establishing a claim for conspiracy to injure by unlawful means. They require an agreement, combination, understanding or concert of two or more to do a lawful act by unlawful means: Clerk & Lindsell on Torts (22nd ed) paras. 24-93 and 24-95. The parties do not need to understand the legal effects but must know the facts on the basis of which it is unlawful: ibid. In the present case, the alleged unlawful means comprise the breaches of duty and obligations of the defendant directors and employees of Secarma in securing the recruitment of Secarma employees by Xcina and procuring such breaches of duty and obligations.
There is implied in every contract of employment an obligation to serve the employer with “good faith and fidelity”: Robb v Green [1895] 2 QB 315 at 320. In the case of a director, the duty at common law and now the duty under statute is to act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and not to place himself or herself in a position of conflict with the interests of the company: Companies Act 2006 ss.172 and 175. Those statutory duties replace corresponding common law rules and equitable principles but are to be interpreted and applied in the same way as those rules or principles: Companies Act 2006 s.170(3) and (4), Burns v FCA [2017] EWCA Civ 2140, [2018] 1 WLR 4161, at [65]. As to the common law principles, see Item Software (UK) Ltd v Fassihi [2004] EWCA Civ 1244, [41]-[43], and British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523, in which Hart J said as follows:
“81. It is a fundamental duty of the director of a limited company to “do his best to promote its business and to act with complete good faith towards it”: see per Lord Denning in Scottish Co-operative Wholesale Ltd v Meyer [1959] AC 324 at 366. It is also his duty not to embark on a course of conduct in which his own interests will conflict with those of the company: see per Lord Cairns LC in Parker v McKenna (1874) 10 Ch App 96 at 118. He is also, like an employee, under a duty of fidelity to his company: see per Lord Greene MR in Hivac Limited v Park Royal Scientific Instruments Ltd [1946] Ch 169 at 174. …”
“89. … A director’s duty to act so as to promote the best interests of his company prima facie includes a duty to inform the company of any activity, actual or threatened, which damages those interests. The fact that the activity is contemplated by himself is … a circumstance which may excuse him from the latter aspect of the duty. But where the activity involves both himself and others, there is nothing in the authorities which excuses him from it. This applies, in my judgment, whether or not the activity in itself would constitute a breach by anyone of any relevant duty owed to the company. It does not, furthermore, seem to me that the public policy of favouring competitive business activity should lead to a different conclusion. … A director who wishes to engage in a competing business and not to disclose his intentions to the company ought, in my judgment, to resign his office as soon as his intention has been irrevocably formed and he has launched himself in the actual taking of preparatory steps. …”
At the hearing before the Judge the case and evidence for Secarma was set out in the first witness statement of Ms Frost. She said that there had been a deliberate and highly orchestrated scheme to poach many of Secarma’s employees, including its entire senior management team and many other key employees critical to its commercial and operational success, in order to recreate the business in Xcina as a direct competitor to Secarma. She said that since 1 March 2018 Secarma had received a total of 28 resignations, representing almost 50 per cent of Secarma’s workforce. She said that the key protagonists behind the unlawful scheme appeared to be the founder-owners who sold the business, that is to say Mr Denneny and Mr Rowe, and the former Managing Director of Secarma, Mr Harris. She said that the evidence pointed to a plan stemming from at least May 2018, and perhaps earlier than that.
Mr Denneny was employed by Secarma, and was its Global Sales Director and a board director, from the date of its sale until his employment terminated on 2 November 2018, following notice of his resignation on 2 May 2018. Mr Rowe was employed by Secarma and was its Technical Director and a board director from the date of its sale until 23 January 2018, following notice of his resignation on 23 July 2018. Mr Harris was the Managing Director of Secarma from 14 February 2017 until the termination of his employment on 13 September 2018 following a period of garden leave. He was a board director of Secarma between 8 March 2017 and 13 September 2018.
Mr Rowe made a witness statement but it was not placed before us on the hearing of the appeal. I understood from Mr Croxford that it contained no denial of the allegations made against him in Ms Frost’s witness statement.
Ms Frost’s evidence was that on 29 and 30 October 2018 Mr Harcourt, an employee of Secarma, alerted Secarma’s Operations Manager and Ms Frost and Mr Jones, to the efforts of Mr Harris to bring about a “team move” of Secarma’s employees to Xcina. Her evidence was that Mr Harcourt told them that Mr Harris messaged him out of the blue on 20 August 2018 and explained the plan regarding Xcina, that there was a schedule setting out who would resign from Secarma and when, and that in a WhatsApp message on 3 September 2018 Mr Harris had shown him the schedule. Ms Frost’s witness statement set out at length many further details of what Mr Harcourt explained had ensued. That evidence is corroborated by WhatsApp messages between Mr Harcourt and Mr Harris and Mr Forse and by the “Order of the Phoenix” WhatsApp group chat.
WhatsApp messages between Mr Harcourt and Mr Harris, and between Mr Harcourt and Mr Forse, commencing on 20 August 2018, show that Mr Harris was working closely with Mr Forse in planning a move of 21 named Secarma employees in four stages beginning on 3 September 2018, that he was seeking to secure the agreement of Mr Harcourt to move to Xcina, and that that the overall plan was disguised as a bowling championship – “the Hammer’s Bowling Championship”, of which Mr Forse was designated the “party planner”. The “Hammer” was a pseudonym given to Mr Child. In the chats Mr Harris, who was shown to have assumed the pseudonym “Vlad”, identified those who had “decided to enter” the championship. The chats with Mr Forse also indicated that a new company was to carry on the pen testing business from March 2019.
The participants in the group chat were Mr Forse, Mr Harris and various Secarma employees, including Mr Denneny and Mr Rowe. Evidence of what was said in the group chat begins on 21 August 2018, when Mr Harcourt joined it. The group chat contains detailed discussion about recruitment of the participants in the group chat and other Secarma employees to Xcina and how the arrangements for such recruitment were progressing. Mr Harris gave the other participants updates on the recruitment arrangements, apparently based on his discussions with Mr Child and others in Shearwater. The chats appear to show that Mr Child had assumed overall responsibility for the recruitment and that he was operating through Mr Harris, who was co-ordinating with Mr Forse. Mr Harris asked the participants in the group chat to make sure he was in their “contacts” as Vlad and nothing else. In one exchange with Mr Harris, Mr Denneny said he would speak to Mr Child about the possible recruitment of a particular Secarma employee. In another exchange, Mr Harris said: “We are the peoples front of Secarma”, and Mr Rowe responded: “PLA – Pentest Liberation Army”. In another exchange, a Secarma employee, Lorenzo Grespan, said he had given his notice of resignation and 21 October was the earliest he could start (with Xcina) and that it was the “End of an era”, to which Mr Harris responded: “Continuation of an era really”.
On one occasion there was a discussion about clearing the chats. A participant asked why the chat was to be cleared, to which Mr Grespan responded: “deleting chat is to reduce the chance of something leaking and Mark [scil. Child] getting shit to no end from LJ [scil. Lawrence Jones] and possibly legal consequences due to the non poaching clauses and all that”. Mr Forse gave instructions as to how to clear the chat. On 11 October 2018 there was a discussion about closing down the group chat. It was suggested by Mr Grespan, who said: “Do we still need this chat now that things are in motion? Reduces liability and people can keep in touch privately if necessary with Vlad and Dan [scil. Forse]”. Mr Forse, Mr Harris and others agreed with that suggestion. Mr Harris said: “So, seems like the only way to shut this chat group down is to remove everyone individually (or you can remove yourselves). Then it will die when I finally remove myself. See you all in another chat room”. It appears that the group chat was finally terminated the following day.
Mr Rowe and Mr Denneny were employees and directors of Secarma during the period of those chats. Mr Harris was an employee and director of Secarma until 13 September. In the absence of any denial by Mr Child or Mr Stevens, the strong probability is that they knew the status in Secarma of Mr Rowe, Mr Denneny and Mr Harris.
That is how the evidence stood at the hearing before the Judge. It strongly supported the claim of unlawful means conspiracy. The day before the hearing of the appeal, the appellants’ solicitors sent Secarma’s solicitors a letter which made that claim even stronger and showed that in certain respects the witness statements made by the defendants and placed before the Judge were seriously misleading.
The letter explained that the errors had come to the attention of the solicitors as a result of work on disclosure. They said that the material they had seen now showed the following. Mr Harris had approached Shearwater prior to 20 June 2018. Mr Child, Xcina and Shearwater were aware thereafter of Mr Harris facilitating the recruitment of Secarma employees by Xcina. The appellants were aware that Mr Harris discussed with some Secarma employees the possibility of their recruitment by Xcina, and that he sought to ensure that employees who he considered to be appropriate and who wished to leave Secarma would apply to join Xcina. Mr Harris met with one or more of the corporate appellants, including meetings with Mr Child, at which the recruitment of Secarma employees was discussed in general and at which Mr Harris sought to negotiate the terms of the contracts which those employees might in due course be offered by Xcina. Those meetings included one on 12 September 2018 (when Mr Harris was still an employee and director of Secarma) at which Mr Harris discussed the timing of offers to particular employees. Mr Harris expressed his opinion as to the appropriate terms to be offered to such employees and so implicitly disclosed that he believed that the salary of each such employee (as at 29 June 2018) was the same as or less than the figure proposed to be paid by Xcina. Mr Harris and Mr Forse expressed their opinions as to the desirability of recruiting particular Secarma employees, and encouraged Xcina to expedite the sending of offer letters to Secarma employees who had applied to Xcina.
As I have said, for obvious reasons, in the light of that further information, Mr Croxford did not seek to persuade us that the evidence was not cogent enough to support a strong prospect of success in the claim against the appellants for conspiracy to injure Secarma by unlawful means.
In accordance with the analysis of Lord Diplock in American Cyanamid the court at this point considers whether the balance of convenience lies in favour of granting or refusing the interim injunction. As to that issue, the first question is whether Secarma would be adequately compensated in damages for any loss sustained as a result of Xcina continuing to do what is found at the trial to have been unlawful activity. The Judge found that damages would not be an adequate remedy. It is, however, a ground of appeal that the Judge was wrong in making that finding.
I do not agree that the Judge was wrong on that point. It would be extremely difficult to calculate with any accuracy the loss sustained by Secarma by the business carried on by Xcina attributable to its unlawful springboard advantage. Damages for lost business which Secarma could have secured but for the unlawful conduct of defendants would presumably be assessed on the basis of loss of a chance, which is itself a very imprecise legal tool for determining recoverable loss.
Insofar as Secarma claims an account of profits in its Particulars of Claim, that is an alternative head of relief, for which Secarma does not have to make an election at this stage. In any event, the profit made by Xcina by virtue of its unlawful springboard advantage may be less than the loss suffered by Secarma and also might be difficult to calculate.
Turning, then, to the next issue in assessing where the balance of convenience lies in relation to the grant or refusal of the interim injunction, the Judge found that damages would provide adequate protection for the defendants. That is, on the face of it, a surprising conclusion. Mr Croxford suggested it may have been the result of a misunderstanding by the Judge. There is, however, no evidence from the defendants on the issue and it is not a ground of appeal.
Mr Croxford concentrated his submissions on two other matters. He submitted that an interim injunction which prevents Xcina from using the ex-Secarma employees in Xcina’s pen testing and red teaming business is not legitimate because their move to Xcina could not be undone and so the interim injunction could never preserve or restore the status quo prior to the alleged unlawful act; rather, the injunction should be limited to avoiding future loss. He further submitted that, in any event, springboard relief can properly only be directed at preventing loss to the claimant as a result of the unfair advantage obtained by the defendant; and so a springboard injunction should never be of a scope or length that punished the defendant rather than preventing loss to the claimant. He said that punishment is more appropriately addressed by the claims for an account of profits and exemplary damages.
The first of those submissions is, with all respect, quite plainly wrong. The object of an interim springboard injunction is to preserve the status quo, in the sense of freezing until trial, the relevant business activity of the defendant. On the assumption that damages would not be an adequate remedy, the interim injunction is necessary to hold the position between the parties so that further unfair competitive advantage cannot be obtained by the defendant between the application for the interim injunction and the trial. That includes the ability to obtain work from new clients. It is true that, at the same time as, and by virtue of, the interim injunction the claimant obtains substantive relief in the sense that it provides the claimant with a period of time to arrange its affairs – whether by persuading ex-employees to rejoin or recruiting new employees and securing expert or other resources – in order to remove the unfair competitive advantage obtained by the defendant. That, however, is why it is appropriate, on the application for the interim injunction, to take into account the relative strength of the claimant’s case.
On this part of the appellants’ case, I do not accept their contention that the proper analysis is that the corporate appellants were simply enhancing an existing business activity. Their existing activity was outsourcing pen testing and red teaming, for which they were not competitors of Secarma but rather they were clients of Secarma. The intended carrying out of pen testing and red teaming in-house was a new kind of business activity for the corporate appellants, specifically for which they wished to recruit Secarma’s employees. In carrying out that new business activity, the corporate appellants would be competing for the first time with Secarma both in relation to existing and past customers of Secarma and, critically, new clients.
Turning to the question of the scope and duration of a springboard injunction, whether interim or final, I agree with Mr Croxford that the object is not to punish the defendant: Roger Bullivant at [183]. The injunction must be no greater in scope and for no greater period than is reasonable to remove the unfair competitive advantage secured by the defendant.
In the present case, even though the Judge directed an expedited trial, it was contemplated that this would not take place until April 2019. In fact, it has now been fixed for 12 days commencing on 1 or 2 April 2019. At first sight, delay of over four months for an expedited trial is surprising. We were informed, however, that the delay was not because of the court’s inability to accommodate a trial sooner but because Secarma considered that it would need the time for preparation. Although there is no suggestion of this being the position in the present case, the court will no doubt be astute to ensure that a claimant does not artificially seek to extend the period of any interim springboard injunction by delaying the expedited hearing.
Since a springboard injunction should never last longer than is reasonable to remove the unfair advantage secured by the defendant, a judge granting an interim injunction must always do their best to estimate what is the length of the reasonable period. If it is shorter than the period before the trial will commence (the date of which should always be ascertained), they should specify the period and relief will be limited accordingly. If it is at least as long as the period prior to commencement of the trial, it will not normally be necessary to say more than that. In any case, the judge must always state the grounds for their conclusion. They should avoid being too prescriptive because the evidence will be incomplete and untested at the interim stage and, as the present case shows, it may prove to be incorrect and even knowingly false.
As for the length of the period necessary to remove the unfair advantage, it will all depend on the nature of the advantage and how it can reasonably be expected to be removed, bearing in mind that the object is not to punish the defendant but to correct the wrong to the claimant. In some cases it may be reasonable to take as a starting-point the length of time it has in fact taken the defendant to secure the advantage but the right period may in the circumstances of the case be either longer or shorter than that. By way of an example, if the defendant has taken several months surreptitiously and unlawfully to recruit employees of the claimant, but because of the closure of a competitor, the claimant is able to replace all its ex-employees with personnel of similar expertise and experience within a month of the hearing for interim relief, and there are no other special considerations such as misuse or potential misuse of confidential information, the springboard injunction would not necessarily be for the length of time it had in fact taken the defendant to carry out the unlawful recruitment. It all depends on the facts. If it would have taken the defendant more than one month lawfully to recruit the relevant personnel, the claimant could contend that the injunction should be for longer than a month in order to remove the advantage to the defendant of being able to compete sooner than would otherwise have been the case – an advantage which is matched by the disadvantage and consequential damage to the claimant of having to compete in a market with the defendant sooner than would otherwise have been the case. Depending on the facts, the judge will have to decide whether, as a matter of balance of convenience, to grant the injunction for the longer period or just the month, and, if the latter, leaving the claimant to a remedy in damages or account of profits for the balance of the period of unfair competition.
In the present case, the Judge’s only statement about the limit of the interim injunction was at [38] of his judgment as follows:
“As to the length of that springboard relief, given the difficulty that Secarma Limited is faced with in recruiting highly skilled pen testers in sufficient numbers to replace the ones that it has lost, I think it certainly should extend until the start of an expedited trial, provided that happens on or before the end of April 2019. I will be making an order for an expedited trial but if for any reason the trial does not commence by the end of April 2019 the respondents, of course, have liberty to apply.”
On the assumption that the defendants are liable for unlawful means conspiracy, that was a compressed and unsatisfactory analysis of the minimum time it would take to remove the unfair competitive advantage, bearing in mind that an injunction for the months until trial would be a substantial interference with the defendants and, in particular, the business of Xcina. As it happens, the evidence before the Judge indicated that the plans for the recruitment of Secarma’s employees and the execution of that plan took place over a number of months. The appellants’ solicitors’ letter of 30 January 2019, disclosing the misleading evidence in the witness statements before the Judge, shows that the plan may well have originated before June 2018. That was at least six months before the hearing before the Judge, when the recruitment of targeted Secarma employees was still in progress according to the schedules in the WhatsApp conversations, Mr Rowe was still under directors’ duties to Secarma, Mr Denneny, who had been under directors’ duties to Secarma until 2 November 2018, was still under restrictive covenant obligations to Secarma, and Mr Harris, who had been under directors’ duties to Secarma until 13 September 2018, was on the face of it also under restrictive covenant obligations to Secarma.
Ms Frost’s evidence was that pen testers are highly skilled and relatively rare in the market, and it is not easy to recruit to replace departing testers. She said that it is even harder to recruit where there is a new competitor in the market seeking to take over Secarma’s business. In view of those difficulties, the time it took the defendants to plan and execute the recruitment of Secarma’s employees would have been a reasonable starting point for assessing how long it would take to remove the unfair competitive advantage obtained by Xcina. Furthermore, the Judge would have been entitled and right to take into account that the defendants’ evidence on this aspect is incomplete and untested and possibly, as indeed it transpired, inaccurate. That is why it would have been wrong for the Judge to have been too prescriptive about the likely time that it would take to remove Xcina’s competitive advantage but, on the other hand, perfectly legitimate to conclude that it was likely to be not less than the period of some four to five months prior to the trial.
The appellants applied to file a further witness statement of Mr Stevens on the appeal, containing evidence that Secarma had “hired or [was] in the process of hiring” 19 security professionals, including senior managers, pen testers, red team and account managers to replace those who had left or were leaving and so had not been caused any substantial harm by Xcina’s recruitment of Secarma’s employees. The appellants further say that such evidence should have been disclosed by Secarma on the hearing before the Judge and that it shows that the extent of the risk of any future harm was not fairly stated by Secarma. Mr Croxford informed us that the current position is that 21 employees or former employees of Secarma have been made offers by Xcina and Secarma has recruited 21 replacements. I accept that the further evidence might have been difficult to obtain prior to the hearing before the Judge. It is relevant evidence and I would permit the appellants to rely on it.
The evidence, however, in the second witness statement of Ms Frost, in reply to the further evidence of Mr Stevens, is that very few of the new employees recruited by Secarma between 1 March 2018 and 13 November 2018 were replacements of the employees who have resigned and were named by Mr Harris as intended targets for recruitment by Xcina. Her evidence includes a detailed organogram of Secarma showing who has been replaced. It is impossible at this interlocutory stage to reject Ms Frost’s evidence. Mr Stevens’ further evidence does not, therefore, cast any doubt on the decision of the Judge.
Finally, I turn to the scope of the injunctive relief granted by the Judge. I reject the contention of the appellants that it would have been sufficient to require, and the Judge ought to have accepted, undertakings from the defendants equivalent to (a) and (d) of paragraph 6 of the order: namely, not to solicit any further employees of Secarma who were in post on 13 November 2018, that is to say the day before the application for the interim injunction; and not to solicit or deal with current clients of Secarma or those who were clients in the 12 months preceding 13 November 2018, subject to an exception for pre-14 November 2018 clients of Shearwater and Xcina. Those undertakings would not have protected Secarma from Xcina continuing to take the benefit of its unlawful springboard advantage by planning and building up an in-house business of pen testing and red teaming, using the ex-Secarma employees who had already been wrongly recruited, and unfairly competing with Secarma, not only for existing and former customers, but also new customers.
The Judge was correct to grant an injunction restraining the corporate appellants from carrying on pen testing in-house. That was a new type of business in the sense that it was a different business model from outsourcing, which is what the corporate appellants had done previously. It was that new business which the Secarma employees were to be recruited to undertake.
The scope of the injunction was too wide, however, insofar as it prevents the corporate appellants from carrying on pen testing and red teaming by outsourcing, as that was its existing business.
The injunction was also too wide insofar as it prevents Mr Forse from carrying on any particular activity as he was not subject to any covenants with Secarma restricting his post- employment activities and there is no evidence that, in joining Xcina, he was in breach of any of his employment obligations to Secarma. Mr Child is in the same position in his personal capacity, as distinct from his role as CEO of Xcina, as he was never under any directors’ duties or contractual obligations to Secarma. Nor should the injunction extend to prohibiting ex-Secarma employees from involvement in anything other than in-house pen testing and red teaming.
Conclusion
For all the reasons above, I would dismiss the appeal save to the extent that I have indicated the injunction granted by the Judge was too wide in its scope.
Lord Justice Underhill:
I agree that this appeal should be dismissed for the reasons given by the Master of the Rolls. At the heart of Mr Croxford’s submissions was the contention that, while the grant of relief in this case may have deprived Xcina, in the period covered by the injunction, of any advantage from having poached Secarma’s workforce, that was merely punitive because it did not prevent any ongoing loss to Secarma itself. But, as the Master of the Rolls points out at para. 55, that is not the case. Xcina (in respect of its new business) and Secarma were competitors: that is, they were both seeking to supply pen testing services in the same market. By keeping Xcina out of that market for (at least) the period up to trial the injunction did not simply deprive it of an advantage: it deprived it of a competitive advantage, because its unlawful conduct improved its ability, at the expense of Secarma’s, to secure clients in that market.
Like the Master of the Rolls, I was surprised that the application proceeded on the basis that a trial could not take place before April; but I was also surprised that, as we were told, Secarma said that it could not be properly prepared by the earlier date offered by the Court. In a case where a defendant is subject to an interim injunction of a kind which is of its nature damaging to its business claimants may reasonably be expected to pull out all the stops.
Lady Justice Nicola Davies:
I agree with both judgments.