Injunctions – what they are and how they can help your business

If your business is in a legal dispute, it can use injunctions to stop the other side getting rid of assets, in the UK or elsewhere, or otherwise dealing with them in any way that might stop you enforcing your rights. Find out when and how to get an injunction.

Businesses and individuals in a legal dispute can sometimes apply to the courts for injunctions to make the other side do something, or stop them doing something, on a temporary basis. The aim is usually to maintain the status quo for the time being so that neither side is disadvantaged pending settlement of a main dispute. Often, you can apply for an injunction before the court trial of the main dispute – particularly if it will give you a tactical advantage if one is granted.

In an emergency you can sometimes apply for an injunction without having to tell the other side – for example, where it would greatly increase the loss or damage to your business or interests if there was a delay, or where the other side is likely to do something to damage your case if they are given notice of the application.

Types of injunction

One type of injunction is a freezing injunction. These stop the other side disposing of, or dealing with, its assets (or some of them) until the main dispute is sorted out. 'Assets' could include bank accounts, land, shares, bonds and other financial instruments or vehicles, even if the other side is holding them on trust for a third party.

For example, in an intellectual property dispute a freezing injunction could be used to stop the other side:

  • continuing to sell products under your trade mark without your permission;
  • continuing to breach your copyright (for example, by using your images on their website);
  • using your patented invention.

Freezing injunctions can also be used to order the other side not to dispose of any such products (or anything else) that are likely to be needed as evidence.

A freezing order can also be made against the other side's bank (or any other financial institutions) if you can show there is a risk that the other side will try to hide or dissipate funds to avoid paying compensation if they lose.

The court will only grant a freezing injunction if it is 'just and convenient' to do so. You must show you have a good, arguable case, but do not have to prove that you will definitely win. It's vital that you give the court all the facts, and not just those that support your application. The court then balances your likely loss or damage if the injunction is not granted against the other side's likely loss or damage if it is.

In making this judgment the court takes into account whether money would be adequate compensation for you – if it would, you are less likely to get an injunction. There must also be a 'real risk' of the disposal or use of the assets. You will usually have to agree that you will compensate the other side (and sometimes third parties who will be affected) if it later turns out that the injunction should not have been granted.

You can apply for a freezing injunction for assets worldwide.

Another type of injunction is a search order. This goes further, as it allows you to go into the other side's premises to search for and take away documents, computers and other materials. For example, if you think there is a risk they will destroy computer records or documents which could be evidence in, say, a shareholders' dispute between you, a search order allows you to take them away so you can keep them safe. It is extremely difficult to get a search order – you need very strong evidence.

A third type of injunction is a 'Norwich Pharmacal' order, named after a legal case. These require another party (usually not the other side in your main legal claim) to disclose specified documents or information to you. These are only granted if it is 'necessary in the interests of justice', and are often used to work out who you should take to court, or to help you draft your claim.

When injunctions are used

Injunctions are often used in employment disputes. For example, to stop employees (or, more often, ex-employees):

  • breaching non-compete clauses in their contracts of employment by setting up rival businesses;
  • soliciting former clients or customers (or particular clients), or their former colleagues in their new job;
  • using or disclosing their (ex-)employer's confidential information and trade secrets, such as customer or pricing details.

Other circumstances when injunctions can be used include businesses stopping ongoing breaches of contract by the other side, shareholders forcing their companies to count their vote at shareholder meetings, landowners stopping ongoing activities that amount to a nuisance, and anyone stopping publication of defamatory and untrue comments.

Sometimes an injunction will include a clause stopping the other side from even disclosing that the injunction has been obtained against them, or by whom. The press call these 'super-injunctions'.

If the other side breaches an injunction, it is a contempt of court and they can be fined or, in serious cases, jailed.

For more information please contact Richard Wadkin at Shulmans on 0113 297 7728 or at rwadkin@shulmans.co.uk.