Insurmountable interruptions or insignificant irritations? The challenges of interim injunctions were discussed by Doug Robertson, partner, Restructuring and Insolvency, and Ben Gildea, senior associate solicitor, Real Estate Disputes at law firm Irwin Mitchell. See end for Case Study.
 
Introduction to injunctions

• An injunction is a court order which either:
  • prohibits a party from doing something (prohibitory); or
  • requires a party to do something (mandatory)
• Breach of an injunction is contempt of court and so a criminal offence
• Injunctions are either:
  • “interim” designed to last for a temporary period of time (usually until the trial of the case) and granted at an initial summary hearing. The court will decide the application without fully scrutinising the case.
  • “permanent” which are granted at the trial of the case as a final remedy to resolve the dispute
• Court has very wide jurisdiction to grant injunctions – “whenever it is just and convenient to do so” (section 37(1) of the Senior Courts Act 1981)
• The Court will not exercise its discretion and grant an injunction unless:
  • the Claimant has a legal cause of action against the Defendant
  • the Claimant has acted promptly in seeking the injunction – there must be no delay
  • damages are not a suitable alternative to an injunction
  • the injunction is capable of being complied with – the court will not grant injunctions which are impossible or cannot be enforced

 
On Notice v Without Notice Applications

• “On Notice” – where the respondent is served with the papers ahead of the hearing and able to attend
• “Without Notice” (ex parte) – where the respondent does not know of the application until it has been decided
  • There must be a good reason
  • Additional duties on the applicant and their lawyer of full and frank disclosure and to keep a full record of the hearing
  • There will be a “return date” where the parties can be present and the court decides whether to continue or discharge the injunction

 
The Test in American Cyanamid v Ethicon [1975] 1 AII ER 504
This case tests if there is a serious issue to be tried, if damages would be an adequate remedy and where the balance of convenience lies.
 
Is there a serious issue?

• The threshold is different to the “balance of probabilities” which applies at trial – there need only be a serious issue not “frivolous or vexatious” – nonsense legal arguments will not be sufficient
• The Applicant must at least show a real prospect of succeeding at trial – an injunction is unlikely to be granted if the Defendant is able to establish a defence that raises serious issues
• The court will not embark on a detailed consideration of the strengths and weaknesses of the case. There should not be a “mini-trial”.
• There must be an actual or threatened breach of the applicant’s rights

 
Are damages an adequate remedy?

• Where damages would be an adequate remedy and the respondent is in a position to pay them, irrespective of the strength of the claim, an interim injunction will not be granted
• The Applicant will therefore need to establish irreparable or unquantifiable harm
• Excessive use of a right of way which caused danger to children, pets and animals “was not of the sort which would be readily compensated by damages” (Bucknell v Alchemy Estates (Holywell) Limited [2021] EWHC 1544 (Ch)

 
Where does the balance of convenience lie?

• Assessment of all factors and taking the course of action which presents the lowest risk of injustice
• The Claimant needs to establish that it would suffer irreparable or unquantifiable harm itself, otherwise intervention by the court by granting an interim injunction would not be justified (Evalve Inc v Edwards Lifesciences Ltd [2019] EWHC 1158 (Pat))
• Where an interim injunction will effectively decide the case meaning there is no need for a trial, the court does not consider where the balance of convenience lies but will pay closer attention to the merits of the case. An injunction has been granted in this situation where:
  • There was an “exceptional case” (Cambridge Nutrition v BBC [1990] 3 All ER 523)
  • “Very good prospect of success” (Horlick v Taylor [2018] EWHC 4034 (Ch))
  • “Clearly no defence to the action” (Merritt v Thurrock Council [2021] 3

 
Undertakings

• Applicants for interim injunctions must make certain promises to the court in return for the order known as undertakings.
• The most important is the cross-undertaking in damages whereby the applicant undertakes to pay damages that the court may order if the respondent suffers loss as a result of the injunction that the court later decides was wrongly granted.
• This is known as the price of an injunction

 
 
CASE STUDY Interim Injunctions
 
Background

• Borrower purchased 4 properties between 2004 and 2007
• This case study concerns 2 properties:
  • First property was bought in 2006 with a loan from the Bank for £175,000
    Second property was bought in 2007 with a loan from the Bank for £190,000
• Bank has a charge over the 4 properties and made demand from the Borrower in March 2003 with a total outstanding amount of £2,521,183
• Receivers appointed in April 2023
• Exhaustive attempts by the Bank and Receivers over 6 months to reach an amicable resolution
• Receivers taken possession of the properties to inspect, carry out safety inspections and to sell with vacant possession but borrower and/or persons unknown broke back in on 3 occasions
• The Borrower was not in a position to redeem – he had only produced 2 offers in principle which were subject to valuation and other searches
• There could be no guarantee that the loans would proceed and could be months before able to draw down
• The 2 properties were listed for auction in October 2023
• The borrower’s solicitors threatened an interim injunction to restraint the sale on the basis that:
  • He had asked for an up to date redemption statement which had not been provided;
    The Receivers were selling the properties without an EPC certificate (despite the Receivers having requested access to undertake the survey to which the borrower had not responded)
    That both the Receivers and the appointing lender had acted in breach of their duties to the Borrower

The Borrower’s Case

• Borrower proceeded to issue an application for an interim injunction against the Receivers and lender to restrain the sale by auction and to allow 28 days for him to redeem
• The Claim issued on Tuesday afternoon and listed for a hearing at 10:30 am on the Wednesday morning. Hearing listed before Joanne Wicks KC.
• The Judge directed that the borrower had to serve the papers by e-mail on Tuesday meaning that the application was “on notice”
• The borrower claimed within his application that:
  • The Receivers were in breach of their duties of care to the Claimant
  • The Receivers appointment was not made in good faith and did not continue in good faith after attempting to evict the Claimant’s tenants
  • The Claimant was ready and willing to discharge the debt

 
Application of the Test in American Cyanamid v Ethicon

• Serious Issue - the borrower argued that there was a serious issue to be tried in respect of the lender’s and Receiver’s conduct as they had:
  • Allegedly appointed unfairly and without engaging with the Borrower
  • Allegedly evicted tenants without court orders
  • Insisted on selling at auction even through the borrower had funding to redeem
  • Put the properties up for auction without an EPC
• Were damages appropriate? No, because land is specific and unique, and once sold the Claimant cannot seek its return
• Balance of convenience - the borrower argued that even if the borrower failed to redeem there will be other opportunities to sell, the borrower is liable for the costs of the auction and marketing in any event and the borrower was willing to offer an undertaking in damages

 
Outcome of the Hearing
 

• The Judge looked in detail at CPR 25.2, the requirement for urgency
• Found that the Borrower had been on notice of the auction date from as early as 15 August 2023
• Borrower had failed to issue proceedings until the day before the auction date
• Therefore did not satisfy the test as to urgency. Under CPR 25.2, the court may grant an interim injunction before a claim has been made if the matter is urgent. Delays raise questions about the necessity of the injunction and make it unjust for the injunction to be granted.
• It is a long established principle that courts will not grant an injunction if the applicant has delayed. In Legends Live Ltd v Harrison [2016] EWHC 1938 (QB) the court refused to grant an injunction due to a delay of 2 months
• HHJ Wicks also went on to say that having decided the application was not urgent, this was sufficient to dismiss it but she would also deal briefly with the Borrower’s other arguments:
• Alleged breach of duty by the Lender, the Judge noted correspondence from the lender indicating numerous attempts were made to contact the Borrower and/or agreement for short term payment plans which the Borrower failed to adhere to. Therefore she felt the case for a breach of duty by the lender was unlikely to succeed
• Alleged breach of duty by evicting the tenants, the Judge could not make a finding on the evidence before her as to whether or not the evictions were lawful, but noted the Receivers had attempted to take possession on a number of occasions to secure the properties and to ensure they were safe and habitable
• Further comments from HHJ Wicks:
  • In respect of the alleged breach of duty in selling without an EPC (and further argument from the Borrower that selling when not in possession and/or able to provide full details as to the Property was also a breach of duty) – it was noted that the Receivers had sought on a number of occasions to secure the properties and/or invited the Borrower to allow access for the EPC’s to be obtained
  • In respect of the Borrower’s allegation that they were in a position to redeem. HHJ Wicks commented that there was strength in the Receiver’s solicitors submission that all they had were unsubstantiated offers in principal, subject to valuation, legals etc and therefore they were not in cleared funds to immediately redeem
• The application was accordingly dismissed