Summary
- An injunction is a court order that either compels a party to take a specific action or prohibits them from doing so; businesses most commonly seek injunctions to protect confidential information, trade secrets, and intellectual property from unlawful disclosure or misuse.
- The three main steps in obtaining an injunction are seeking legal advice, sending a letter before action, and commencing formal court proceedings, which typically involve both an interim and a final hearing at significant cost.
- In exceptional circumstances, a without notice injunction may be sought, but courts grant these sparingly and require full and frank disclosure of all material facts; failure to comply may result in the injunction being set aside and cost penalties being imposed.
- This article is a plain-English guide to obtaining injunctions to protect sensitive business information for Australian businesses, prepared by LegalVision, a commercial law firm.
- LegalVision specialises in advising clients on intellectual property protection and commercial litigation.
Tips for Businesses
Never attempt to apply for an injunction without legal advice – errors in court documents or a weak claim can result in a costs order against you. Always send a letter before action first. Only proceed to formal proceedings if you have a strong case, as injunction litigation is costly and the interim hearing outcome will often signal your prospects at the final hearing.
Your business will likely store a sizeable amount of sensitive information. Most business owners label valuable information as confidential information, trade secrets or Intellectual Property (IP). The loss of these data types can cause your organisation sizeable reputational and financial loss. This article will explore the use of injunctions to help protect your sensitive and valuable information and consider the three main steps in obtaining an injunction for your business.
What is an Injunction?
In brief, an injunction is a court document ordering a party to act in a certain way. The majority of court injunctions order one (or both) of the following:
- ordering a party to refrain from performing a particular act, such as disclosing trade secrets to a competitor, known as a freezing order; or
- compelling a party to act in a specific way, such as deleting all copies of confidential information in their possession within five days.
Are There Different Types of Injunctions?
Yes, there are two main types of court injunctions. The first is a mandatory injunction that orders a party to perform a specific action. The other is a prohibitory injunction, which prohibits the party from doing a specific thing.
It is possible to bring an action seeking an order for action and prohibiting conduct. For example, suppose an employee unlawfully takes a draft manuscript for a much-awaited book home with them. After resigning, they threaten to sell it to a newspaper. Accordingly, the publishing house is likely to seek an injunction which orders:
- the deletion of the manuscript (and any additional copies); and
- a prohibition on contact with any media outlet regarding the manuscript’s contents before publication.
Now that we know the types of injunction available let us consider the three main steps of pursuing one at the High Court.
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1. Obtaining Legal Advice
Applying for injunctions is a complex and convoluted process. Therefore, a business rarely attempts to do so themselves. Instead, most business owners seek legal advice from an expert lawyer. This is advisable due to an injunction application’s high cost and time-consuming nature.
Lodging an injunction claim against another party can be very expensive, particularly since most courts will order your business to pay the other party’s costs if your claim is unsuccessful. A lawyer can help advise you on taking a commercial approach and weighing whether the financial cost and potential chance of defeat are worth the advantages gained by winning.
2. Sending Letters Before Action
A lawyer will likely advise your business to send the other party a ‘ letter before action ‘. This seeks to warn the other party against a specific action without the need for formal legal action.
Most business owners engage a lawyer to draft this letter. Whilst letters are unique to the individual’s circumstances, most of them will include some of the following:
- a summary of the alleged unlawful conduct or breach of contract;
- an explanation of why this gives rise to a potential injunction and the type of injunction;
- the likely impact of the commercial injunction order on them;
- the fact that any successful application for an injunction would likely give rise to them paying the legal costs incurred obtaining the court order; and
- an explanation of what the party needs to do to avoid an injunction. For example, returning certain documents or signing a document confirming they will not perform a particular action.
3. Starting Formal Legal Proceedings
Unsurprisingly, the final step is lodging a claim with the relevant court. Again, drafting and lodging a formal injunction application is complex, and most businesses ask their lawyer to do so.
There usually are two hearings within an injunction process:
- an interim injunction hearing; and
- the main injunction hearing.
The interim injunction hearing is crucial because it usually gives the parties an indication of what will happen at the final hearing. Commonly, judges at an interim hearing comment on the likely success of the injunction at the final hearing. This is because the judge will consider whether to grant a temporary interim injunction based on the chance of success. They may also grant what is known as an interim injunction, i.e., an injunction in the meantime. If one is granted, it will remain in place until the main hearing can take place.
If a judge feels that the injunction is unlikely to be granted at the final injunction hearing, they are unlikely to grant an interim injunction. In this scenario, a lawyer will likely advise your business to strongly consider a settlement before the final injunction hearing. The opposite may be true if your company successfully obtains an interim injunction. Additionally, with two hearings comes twice the cost. Injunction proceedings are extremely costly and only usually worth entering into if the information is very valuable.
Without Notice Injunctions
In exceptional circumstances, your business may apply for an injunction without first notifying the other party. This is called a without notice application. It was formerly known as an ex parte application. Courts grant these applications sparingly and only in specific circumstances.
You must show that notice would undermine the injunction’s purpose. For example, the respondent may take action before the court hears the application. Alternatively, you must show extreme urgency. This means there is genuinely no time to give notice.
Even so, you should usually give three days’ clear notice. If this is not possible, you should still notify the respondent informally. You only avoid notice where you reasonably believe secrecy is essential.
You must also give the court full and frank disclosure. This means presenting all material facts, including facts that may weaken your position. If you fail to do this, the court may set aside the injunction. Your business may also face substantial cost penalties.
If the court grants the injunction, it will usually list a further hearing within days. The respondent can then attend and challenge the order. These applications are complex and require urgent legal advice.
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Key Takeaways
It is always helpful to obtain expert legal advice when your company is considering an injunction against another party. Failing to do so could lead to mistakes within the complex court forms and your business having a weak injunction claim and at risk of paying the other party’s sizeable legal costs. Sending letters before action is good practice because they do not bind your organisation into starting court proceedings. Accordingly, you should only lodge a formal injunction application when you have a strong case.
If you need help obtaining advice and assistance with injunctions, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Why are losing parties usually required to pay the other party’s legal costs?
Losing parties usually have to pay the other side’s legal costs because of the expensive nature of bringing or defending injunction claims. Therefore, if a business brings an injunction action and fails, the other party should have its financial losses reimbursed. However, if the injunction is successful, this amounts to a finding of wrongdoing against the defending party. Accordingly, they should provide an adequate remedy to the business harmed.
Why do we have interim injunctions and final injunctions?
Because our courts recognise that swift action is sometimes necessary to prevent harm to the applicant’s business. Using the publishing house example above, that business will require an immediate ban on contact with the media rather than waiting months for a final hearing. Holding a quick interim hearing is the court’s way of ensuring speedy justice.
What happens if the other party ignores my letter before action?
You can proceed to apply for an injunction through the court. Their failure to respond may actually strengthen your case, as it demonstrates they are unwilling to resolve the matter voluntarily. However, you should ensure you’ve given them reasonable time to respond before filing your application, as courts expect parties to attempt resolution before commencing proceedings.
Can I get an injunction to stop a former employee from working for a competitor?
Possibly, but only in limited circumstances. You can seek an injunction to enforce a valid restrictive covenant in the employee’s contract, such as a non-compete or non-solicitation clause. However, the restriction must be reasonable in scope, duration and geographical area to protect legitimate business interests like trade secrets or client relationships. Courts will not enforce overly broad restrictions that simply prevent someone from earning a living in their chosen field.
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