A cautionary and costly tale for respondents seeking to contest applications for interim relief

Law By Design Ltd v Ali [2021] EWHC 3010 (QB)

Overview – costs in business protection disputes

In Business Protection disputes, sensible applications for interim injunctions pending a speedy trial should not be contested. The balance of convenience is almost always in the applicant's favour, speedy trials can usually be listed quickly and a respondent invariably has the protection of a cross undertaking in damages, guaranteeing compensation from the applicant in the event that the application later fails. The court's time and the parties' resources would usually be better spent preparing for trial or negotiating a sensible solution. 

But, the reality is that often respondents refuse to consent to such applications (or do so at the doors of court). This is caused in part by practitioner inexperience in this specialist area of the law leading to poor advice. But they are also fought because, often, in these types of cases the disputes are very personal and adversarial. Put simply, emotions run high and rational decision making is often lacking.

When applications are fought, provided the application is sensibly put, the applicant invariably wins. Having unnecessarily incurred substantial costs, the applicant should then be entitled to costs. The two leading authorities are:

• Neuberger J in Picnic at Ascot v Derigs [2001] FSR 2 who found that: where "the balance of convenience is so clear, and the outcome of the hearing of the application for the interlocutory injunction should be so plain to the parties, that the court should conclude that an order should be made against the defendant for wasting time and money in fighting the issue (whether or not the defendant eventually concedes)"; and
• Balcombe LJ in Lawrence David v Ashton [1989] IRLR 22 who found that: "A defendant who has entered into a contractual restraint which is sought to be enforced should seriously consider when the matter first comes before the court offering an appropriate undertaking until the hearing of the action provided that a speedy hearing of the action can be fixed and the plaintiff is likely to be able to pay any damages on his cross-undertaking. It is only if a speedy trial should not be possible that it would then be necessary to have a contest on the interlocutory application."

BACKGROUND TO THIS DECISION

In Law By Design Ltd v Ali [2021] EWHC 3010 (QB), the respondent did not contest the application but rather failed to provide appropriate undertakings until the evening prior to the interim injunction hearing. Accordingly, the applicant sought the costs it had wasted.

The court concluded that the case fell within the Picnic at Ascot exception as the respondent had all the information she needed to realise that she had no realistic grounds to resist the application. Further, the respondent, as a specialised employment lawyer, ought to have been aware of the sort of undertakings that would be appropriate if it became clear that a speedy trial was possible. There was also no doubt that the respondent's delay in agreeing the undertakings had caused costs to be wasted. It was therefore held that the applicant should be granted its costs on the standard basis in the sum of £50,000. In another instance where a respondent's actions were wilfully obstructive rather than just inadequate, as they were in this case, the court may well be willing to award costs on an indemnity basis.

PRACTICAL ADVICE 

Law By Design Ltd v Ali [2021] EWHC 3010 (QB) is a classic example of how not to respond to an application for an interim injunction in a Business Protection dispute and the proper cost consequences of refusing to agree terms of an interim injunction at an early stage. The decision should be welcomed by experienced practitioners in this area who can be frustrated when respondents appear to "get away" with unreasonably opposing applications for interim injunctions.  

For respondents the message is clear: get good advice at an early stage, pick the right battles and act quickly to neutralise the risk of a contested application. 

For applicants the case is a useful reminder of the correct approach to costs. It also provides a helpful example of how to maximise the prospects of recovering costs from an unreasonable opponent through well drafted correspondence.

Addleshaw Goddard is recognised as the market-leading Business Protection Practice. Our team’s work focuses on advising organisations on team moves and helping employers to manage the risks stemming from employees and third parties who pose a threat to their legitimate interests, by taking action to enforce the employer’s rights and protect confidential information ranging from securing undertakings or obtaining injunctive relief, to pursuing claims for damages/loss of profits.

For further information about our Business Protection Practice please contact Nick Ashcroft or Michael Leftley.