Getting an injunction is more difficult, risky and expensive than most people think.
It is not just a matter of telling your lawyer to “get an urgent injunction” and expecting to receive one, because the Court will only grant an injunction in certain limited circumstances (set out below).
What is an injunction?
The usual type of injunction is an order of the Court which prevents a person from doing something, for example to prevent:
- the sale of land
- a breach of contract
- the disclosure of confidential information such as a trade secret
- an employee working for a competitor in breach of a restraint of trade clause
A less common type of injunction is the mandatory injunction, which compels a person to do something, for example:
- to demolish a wall or a house that was built unlawfully
- to give a consent to enable a property to be sold
- to publish a corrective advertisement
- to make a payment under a contract
Usually an injunction is sought on an urgent basis to maintain the ‘status quo’ pending a full hearing of all evidence and arguments at a trial.
This is known as an interlocutory injunction. The ‘status quo’ is the existing state of affairs.
- a building is about to be demolished, and there is a dispute between the owner and the Government about whether it should be protected under heritage legislation. To preserve the status quo (the existence of the building) the Court may grant an injunction in favour of the Government which prevents demolition, pending a full hearing of the evidence and arguments for and against heritage listing;
- a business owns a commercial property which it runs its business from. The property is about to be sold by a bank following a mortgage default, and there is a dispute about whether the bank has power to sell the property. To preserve the status quo (ownership of the property and the existence of the business) the Court may grant an injunction preventing the sale, pending a full hearing of the evidence and arguments for and against whether the bank has the power to sell.
An Affidavit Is Required To Support An Injunction
The person or company seeking the injunction must prepare an affidavit which sets out the evidence required to support the injunction.
The affidavit must attach all relevant documents (including contracts, emails, letters and so on), and set out all relevant facts and circumstances including meetings and conversations between the parties.
As you can imagine this is often a time-consuming exercise. However it is essential as the Court will not grant an injunction without sufficient evidence in support of one.
Conditions Required To Obtain An Interlocutory Injunction
An interlocutory injunction will not be granted unless:
1. the plaintiff has made out a ‘prima facie case’ or a ‘serious question to be tried’
Injunctions are not granted simply because of objectionable conduct by a defendant.
They are granted to enforce an existing legal or equitable right claimed by a plaintiff.
The plaintiff must show, based on the existing evidence, that there is a sufficient likelihood of success at trial to justify the preservation of the status quo pending trial.
How strong the probability needs to be depends on the nature of the rights that the plaintiff asserts and the practical consequences if the injunction is granted.
But the plaintiff does not have to show that it is more probable than not (greater than 50%) that the plaintiff will succeed at trial.
2. the ‘balance of convenience’ favours the grant of the injunction
The Court will balance the relative effect of an injunction on the plaintiff and the defendant.
The Court will apply this test: whether the inconvenience or injury the plaintiff would be likely to suffer if an injunction is refused outweighs the injury that the defendant would suffer if the injunction is granted. Or vice versa.
The Court may not grant an injunction if doing so would have a disproportionately large adverse effect on the defendant, as compared to the plaintiff.
The ‘balance of convenience’ test is related to the ‘prima facie’ case test, set out above. So if the plaintiff has a strong prima facie case, other things being equal, the balance of convenience may favour the plaintiff.
Also, as part of the ‘balance of convenience’ the plaintiff will generally have to show irreparable harm if the injunction is not granted, for which damages are not an adequate remedy:
- in the 1st example above, damages paid by the owner to the Government may be an inadequate remedy if the building is demolished, because the proper resolution of the dispute depends on the continued existence of the building
- in the 2nd example above, damages paid by the bank to the owner may be an inadequate remedy if the property is sold, if that would destroy the owner’s business.
Damages will also not be an adequate remedy if the defendant does not have the financial capacity to pay damages. In that case the balance of convenience would be more likely to favour the plaintiff.
3. the plaintiff provides an undertaking as to damages
Usually the Court will require the plaintiff to provide a formal undertaking as to damages in or similar to the following terms:
‘The plaintiff or defendant (as the case may be) undertakes to the Court that he will pay to any party restrained or affected by the restraints imposed by this interlocutory injunction, or this interlocutory undertaking to the court, or the caveat as extended by this order (as the case may be) or of interim continuation thereof, such compensation as the court may in its discretion consider in the circumstances to be just, such compensation to be assessed by the court or in accordance with such directions as the Court may make and to be paid in such manner as the Court may direct.’
The purpose of the undertaking as to damages is to ensure that the defendant will not be out of pocket if the Court grants an injunction but later decides that the plaintiff is not entitled to enforce the rights claimed.
Note that even if the defendant gives an undertaking as to damages, the Court may not give it much weight, if the defendant does not have the financial capacity to pay damages.
For a case where the Court ultimately ordered that the plaintiff pay substantial damages, read my article ‘A Victorian Court of Appeal Reminder on the Risks of Undertakings as to Damages’.
4. the Court decides to exercise its discretion to grant an injunction
Even if the above conditions are satisfied, the Court still has a discretion about whether to grant an injunction.
For example the Court may decide not to grant an injunction if:
- the plaintiff has delayed too long in seeking an injunction, so that it would be unjust to the defendant to grant an injunction
- the plaintiff has acquiesced in the conduct of the defendant being complained about
- some alternative order would do justice between the parties.
Even if an interlocutory injunction is granted, it is not the end of the matter. The Court will require the parties to turn up at a later date to present all their evidence and arguments about the rights claimed by the plaintiff.
The Court will then finally determine whether to enforce the rights claimed by the plaintiff, and decide whether to grant a final injunction, or make some other order.
Regarding the examples above:
- the Court may decide that the building is not protected by heritage legislation, in which case it would ‘lift’ the interlocutory injunction in order to enable the building to be demolished, OR the Court may decide that the building is protected by heritage legislation, in which case it would grant a final injunction to prevent the building from being demolished
- the Court may decide that the bank has the power to sell the property, in which case it would ‘lift’ the interlocutory injunction in order to enable the property to be sold, OR the Court may decide that the bank does not have the power to sell the property, in which case it would grant a final injunction to prevent the sale of the property.
As noted above, if the plaintiff loses the defendant may claim damages from the plaintiff for losses and damages suffered because of the injunction.
Seeking an injunction is costly and risky. Even if an injunction is granted, there is a risk that it may be ‘lifted’, with the consequence that the plaintiff will be exposed to damages claimed by the defendant. Legal advice really is essential before seeking an injunction.
“Contact me if you need an injunction, or someone has threatened you with an injunction.”
“I wouldn’t hesitate in recommending Greg to any client requiring expert commercial litigation assistance.“
Nicholas Marouchak, Principal, MKI Legal, Perth