Jurisdiction(s):
United Kingdom

Prohibitory injunctions to enforce negative covenants: Court of Appeal sets starting point, rejects damages bar, confirms discretion and burden on respondent (England and Wales)

Published on: 19 February 2016

Published by a LexisNexis Dispute Resolution expert

Legal News

Article summary

Practical implications

It is widely accepted that the prime authority on prohibitory injunctions is the House of Lords ruling in American Cyanamid, which lays down broad criteria the court should ordinarily address when deciding whether to grant such relief. In exercising its discretion, the court will ask:

Is there a serious issue to be tried?
Would compensation be an adequate remedy?
Where does the balance of convenience fall?
Is this an exceptional case?

The present decision examines the particular situation in which an employer seeks to uphold a restrictive covenant through an injunction, though the analysis could arguably extend to most cases where a respondent proposes to do exactly what he has freely promised not to do. By way of illustration, similar reasoning could arguably be applied to non-compete terms in a commercial agreement. In those circumstances:

the default position is that a prohibitory injunction ought to be granted
it is no obstacle to relief that the applicant cannot point to any measurable loss
as a prohibitory injunction is discretionary, there are scenarios in which refusing relief would be appropriate
the burden of showing

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