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01 March 2016
A recent High Court decision(1) has confirmed that when faced with an injunction application, the court will examine the precise nature of the order sought in considering whether to grant an injunction, rather than simply relying on how the applicant might characterise it. This arises from the fact that, as a matter of Irish law, different standards apply depending on whether the order sought is prohibitory or mandatory in nature. The decision also usefully recites the general principles applicable to the granting of injunctions.
The case involved an injunction sought by a shopping centre's owner, landlords and management company, as part of proceedings against the owner and operators of a grocery store occupying the anchor unit. The defendants had announced that they intended to close the store before the end of the lease. Arising from the claimed "irrevocable and irreparable damage to the plaintiffs and to third party businesses currently located in the centre", the plaintiffs sought an interlocutory injunction restraining the defendants from closing the store in breach of a 'keep open' covenant in order to maintain the status quo ante pending the full trial of the dispute.
Judge Hedigan observed that the principles applicable to the granting of an injunction were helpfully set out by Judge Clarke in Okunade v Minister for Justice,(2) which were summarised as follows:
Based on this summary, Hedigan noted that the court must first ascertain the nature of the order sought. He explained that where a prohibitory order is sought, the question is whether the plaintiff raises a fair, serious or bona fide question to be tried, which he accepted was a low hurdle. However, where the order sought is mandatory, then the court must refrain from acting unless the plaintiff has established "a strong case that is likely to succeed at hearing".(3)
Here, although the plaintiffs had characterised the order sought as prohibitory, Hedigan felt that its effects in substantive terms would be to compel the defendants to keep operating the store until the end of the lease. He felt that this could not realistically be merely prohibitory and was clearly a mandatory order. Therefore, the plaintiffs had to demonstrate a strong case that was likely to succeed at trial.
He also noted that the application further raised the fundamental question as to whether the court could order a party to carry on a business that is a losing concern. In answering that question, he recognised that there was no clear Irish authority on the point. However, the UK House of Lords had considered it in Co-Operative Insurance v Argyll Stores Holdings Ltd,(4) where Lord Hoffman made the following statement:
"No authority has been quoted to show that an injunction will be granted enjoining a person to carry on a business, nor can I think that one ever would be, certainly not where the business is a losing concern… Specific performance is traditionally regarded in English law as an exceptional remedy, as opposed to the common law damages to which a successful plaintiff is entitled as of right… From a wider perspective, it cannot be in the public interest for the courts to require someone to carry on business at a loss if there is any plausible alternative by which the other party can be given compensation."
Hedigan noted that one Irish case had involved granting an injunction to compel a defendant to keep a store open, but this crucially involved a commercial decision to relocate a store which was not trading at a loss to another premises 400 yards away.(5)
Ultimately, Hedigan felt that, although the plaintiffs had identified an arguable case and a bona fide question, because what they sought was in nature a mandatory order, they needed to demonstrate a strong case that was likely to succeed at trial. Hedigan held that legal criterion had not been met and therefore the application must fail.
For the sake of completeness, he went on to outline that he would have also refused the injunction by reference to other elements of the applicable test – in particular:
In answer to his fundamental question, he concluded that the court would have:
"grave doubts over the wisdom of forcing companies that are trading at a loss to continue to do so. It seems a proposition that flies in the face of commercial standards of conduct. It seems to be something futile and impractical fraught with all manner of consequential difficulties."
Although the decision helpfully reiterates the test applicable to the award of an interlocutory injunction, it is of most significance because it highlights that in considering the making of the order sought, the court will engage in an exercise to establish the true nature of the order. How the applicant characterises it or dresses it up in the pleaded case is not determinative and, if it is truly mandatory in nature, a strong likelihood of success at trial is required.
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