We work in a commercial free market economy, where businesses can compete relatively unrestricted and everyone is entitled to earn a living. But what if someone is trying unfairly to use your trade secrets, or poach your clients or your staff?
Injunctions are often used in these types of situations to stop someone from using confidential information, whether that be trade secrets or customer lists.
Injunctions can stop the person who might infringe their duty but can also prevent the new employer from inciting that person to do something in breach of a legal obligation.
Some litigants apply for litigation funding to pay their legal costs because without it they would not be able to afford to pursue an action at all. But this is not the only situation in which litigants seek to use litigation funding.
Businesses no longer need to invest and risk their own capital to fund a legal claim. FISCUS is the funding package that we can offer clients to help manage the financial risk of litigation and move those costs off your balance sheet.
Find out more about litigation funding options available to you.
What is an injunction?
To obtain an injunction you need to be able to show a cause of action, perhaps breach of a duty of confidentiality or breach of a specific contractual obligation such as a post termination restrictive covenant. You also need to demonstrate that damages after the event are not enough to prevent the damage and that you have acted quickly to obtain the injunction; if you have not the Court may well consider that there is no real urgency and an injunction is not really necessary for protection.
An injunction is a powerful Court Order and anyone breaching it can be liable in contempt of court and imprisoned for up to 6 months. The court therefore exercises its discretion to issue injunctions carefully.
We see them frequently being used against leaving employees where those employees are suspected of breaching restrictive covenants. In any business where the main asset is the goodwill of customers (for example, the client list), senior employees are often restricted as to what they can do after they leave.
For any restraint to be enforceable it must be no wider than strictly necessary to protect the legitimate business interests of the ex-employer. This might mean an employee is not allowed to solicit clients or deal with them for 6 months after they leave, but these periods can be 12 months or longer for very key individuals. If they are wider than necessary they will be unenforceable on grounds of public policy though. We also act for businesses where trade secrets have been stolen. An injunction can require data to be ‘delivered up’ or destroyed.
- Affinity – we acted for 26 IFAs who left their financial advisory business following a third party takeover. The business issued injunctions against 5 IFAs alleging breach of various post termination restrictive covenants and sought damages of around £10m. We defended the claims at trial, on the basis that the covenants were too wide to be enforceable and were void because they unreasonably restrained trade. The claims were abandoned part way through trial and indemnity costs were awarded against our clients.
- Tenon v Cawley – we acted for a former employee of a facilities management business who was said to have breached covenants by recruiting other employees. The claimant could not show a signed contract nor consideration for the covenants and the claim failed. We secured a very generous costs order in our client’s favour.
- Another IFA business – we issued an injunction against a leaving IFA employee who was using our client’s data to recruit customers. The matter subsequently settled at mediation on very good terms for our client.
We regularly act in the IFA sector and have also advised clients recently in the insurance, recruitment, IT and care sectors on similar issues.
There are many types of injunction but the most common are as follows:-
- Orders preserving property.
- Search Orders (requiring a party to admit another party to premises for the purposes of preserving evidence).
- Freezing Order (to restrain disposal of assets).
- Orders for disclosure of documents before proceedings (where it appears to the Court to be likely that a potential party to proceedings has in their possession documents which are relevant to a claim).
- Orders of disclosure of documents by a non-party.
- Springboard Relief (An injunction to prevent a former employee who has used confidential information to their own advantage from gaining a head start in competition with their former employer).
- Prohibitory Injunction (requiring a party to refrain from doing a specific act). A prohibitory injunction may be interim whereby a provisional measure is taken at an early stage in proceedings and remains in force until discharged by the Court. Alternatively, it may be final which tends to be granted after the conclusion of proceedings to last perpetually or until a specific date.
Wright Hassall successfully acted for one of four Defendants (Ms Susan Cawley) in an application for injunctive relief (brought by Tenon FM Limited) that was described as “completely disproportionate” by a Judge in the High Court.Read case study
Wright Hassall was instructed by a group of 27 Independent Financial Advisers (IFAs) who sought advice on the enforceability of a set of restrictive covenants in their consultancy agreements.Read case study
Due to the time and work involved in applying for an injunction, the costs can be high, but it is often better to incur costs early so as to reduce the risk of spending more in the long term.
We will always scope out estimates for matters and provide you with a view of the likely costs associated with applying for or defending injunctions and then advise you on the best way to progress your matter.
Employment and consultancy contracts often contain clauses restricting an individual’s working activity when they leave ...Read article
Wright Hassall successfully acted for one of four Defendants (Ms Susan Cawley) in an application for injunctive relief (...Read article