Injunction claimant’s spectacular own goal

Conduct is often referred to as relevant to the court’s power to grant an injunction, but rarely does it arise in practice. However, in two recently reported High Court decisions in Create Financial Management LLP -v- Lee & Anor [2020] EWHC 1933 (QB), [2020] EWHC 2046 (QB), matters of conduct played an unusually important role. Flint Bishop’s commercial litigation partner, Nick Wells, and Gideon Roseman of Ten Old Square, who acted for the defendants, discuss the decision below.

In the first judgment, Mr. Justice Morris ruled that the claimant’s conduct was “misjudged and unnecessarily obstructive” and that there was “some substance” to the contention that the claimant had misled its clients as to the effect of the initial injunction agreed by consent. The judge stated in the judgment that “going forward the claimant must be very careful to explain the terms of the injunction clearly and precisely”.

However, the judge did not believe that the misconduct was significant enough to warrant a refusal for the injunction to be granted on the basis that the claimant did not come to the court with clean hands. A non-solicitation injunction was therefore granted to the claimant, with further argument required on the identity of the claimant’s clients that could not be solicited.

The application was due back before the court a few days after the first judgment to deal with the ancillary matters, including matters concerning the way in which the claimant had communicated the effect of the injunction to third parties.

On the day before the hearing, the claimant’s skeleton argument was lodged stating that the claimant “has taken the judge’s comments on board, is exercising extreme care and there is no complaint made by the Ds in relation to communications that [the claimant] has sent to third parties following the judgment and order“. On that same day, it transpired that the claimant had sent communications to its clients in precisely the same terms as had been previously criticised in the first judgment.

At the subsequent hearing and in the second judgment, Mr. Justice Morris admonished the claimant for its conduct and, in particular, questioned the basis for the claimant’s submissions referred to above in light of the further misconduct coming to light. The judge requested an undertaking from the claimant to the court to write corrective emails to all of the clients it had misled, informing them that they were free to transfer their business to the defendants and provide a list of all such clients to the defendants.

Nick Wells commented:

“In the context of a non-solicitation injunction, where suppression of competition is the key, a claimant being forced into writing to its clients to inform them that they have been misled and that they are free to transfer their business to the very people they seek to suppress is unusual and significant.

“This fundamentally undermined the benefit of the injunction sought by the claimant in the first place, as the claimant ultimately ended up advertising the defendants’ new business for them. A few days after the second judgment, the proceedings settled, and the injunction was discharged in full.”

Gideon Roseman added:

“Even though Mr. Justice Morris did not refuse the injunction on the clean hands argument, he clearly did not like the disregard shown by the claimant for his initial warnings. He made the claimant pay for this in a way that was both embarrassing and damaging to its business.

“This is a lesson to injunction claimants that their conduct matters and can be the difference between success and failure.”

The first judgment can be read here and the second judgment here.

Please note, the information included in this update is correct at the date of publishing.