Everyone will have heard of injunctions being sought in high profile cases reported in the media, but what are injunctions really about and how can they affect your disputes?
In short, injunctions are temporary court orders granted in time critical circumstances which relate to a greater, overall dispute between the parties. An injunction may require the receiving party to do something (a mandatory injunction) or stop them from doing something (a prohibitory injunction).
Purpose and process
The ultimate aim of an injunction is to maintain fairness in a dispute whilst it progresses and is eventually settled – either out of court or at a trial.
In the interests of fairness, when applying for an injunction, there is a strict obligation on the applicant to provide the court with all of the facts, including those which do not support its position. This is because the application, due to its urgent nature, will often be heard without the receiving party knowing that the applicant is seeking an injunction against it. Although in this case, the receiving party will be given the opportunity to put his own case before the Court to set aside the injunction.
Once granted, injunctions can also be served on third parties, who must abide by its terms. This is particularly useful in the case of a freezing injunction, where the defendant’s bank accounts can be frozen.
Breach of injunction is considered a contempt of court – a criminal offence for which the penalty is a fine or imprisonment.
Let us imagine that over the course of a dispute, a defendant realises he is going to lose the case and will have to pay the full value of the claim, as well as substantial legal costs. That defendant then begins to dispose of their assets, with the intention to frustrate the enforcement of any judgment against them. In that case, a freezing injunction will be obtained to prevent the receiving party from disposing of their assets. If the claimant becomes aware of this, they can apply to the court for a freezing injunction against the defendant’s remaining assets, including funds held in a bank account, preventing further disposal. If granted, the freezing injunction can ensure that the defendant will have enough funds to settle any Judgment against them.
In a dispute over the ownership of land, an injunction can be granted to prevent any building works being carried out whilst the ownership issue is resolved.
It is also possible to obtain an injunction to prevent someone using confidential information which has been obtained without permission or for someone to hand over assets which do not belong to them.
A company debtor who faces winding-up proceedings in relation to a disputed debt can obtain an injunction to prevent the presentation of a winding-up petition or its advertisement.
Word of caution
Applications for injunctions can be an expensive and high risk strategy. The court will require the applicant to give an undertaking to the Court to cover the receiving party’s damages and the receiving party’s losses, if it is found that the applicant was not entitled to that injunction to begin with. For instance, the claimant who obtained a freezing injunction fails to get judgment or the claimant who stopped building works turns out not to own the land in dispute.
Despite the risks associated with injunctions, they are an important weapon in a litigator’s armoury and are designed to protect legitimate interests from harm.