In Q Ltd v The Commissioners for Her Majesty’s Revenue and Customs  EWHC 3637 (QB), the High Court confirmed the correct test to be applied when deciding whether to grant an interim injunction pending an application for a full injunction prior to an appeal to the First Tier Tax Tribunal (“FTT”).
The applicant in this case was an authorised warehouse keeper who wished to appeal against HMRC’s decision to revoke its licence for the warehousing of duty suspended goods. In light of (i) the financial and reputational effect of having to tell its customers that it could not warehouse duty suspended goods from 2 January 2019 following the revocation of its licence; and (ii) the fact that there is no automatic right to damages for an administrative decision of this kind, the applicant asked the court to impose an initial injunction. This injunction would preserve Q Ltd’s position by suspending the revocation of its licence until it had put together sufficient evidence in support of its application for a full injunction, pending its appeal.
It was accepted that the evidential test for obtaining a full injunction was, in the circumstances, the more stringent test set out in the case of ABC Ltd and another v HMRC  EWCA Civ 956. This test required the provision of compelling evidence in support of the alleged prejudice that would be suffered by a refusal to grant an injunction, going beyond a narrative statement from the director of the business speaking of the dire consequences of delay. Such a statement needed to be supported by:
- documentary financial evidence;
- a statement from an independent professional doing more than reformulating his client’s opinion;
- material providing a proper insight into the prospects of success in an appeal; and
- detailed evidence of the attempts made to secure expedition of the appeal in the FTT and the reasons why those attempts failed.
However, the applicant did not yet have the above evidence available, and asked the Court to impose an initial injunction preserving its position while it put this evidence together. The Court had to decide what test to apply in respect of such an application – whether it is the more stringent test set out above, or whether it is the usual American Cyanamid “balance of convenience” test that should be applied.
The case of American Cyanamid Co v Ethicon Ltd  A.C. 396 established the four questions to be answered prior to the granting of an interim injunction, namely:
- Is there a serious question to be tried?
- Would damages be an adequate remedy?
- Where does the balance of convenience lie?
- Are there other special factors?
The Court concluded that at this preliminary stage, where a company genuinely wished to put together the evidence required for a full injunction hearing, the “balance of convenience” test is the right one to be applied. In considering the balance of convenience, the Court needed to decide whether it would do greater damage to the applicant if the injunction were wrongly refused than it would do to the respondent if the injunction were wrongly granted. In this case the Court was satisfied that the applicant intended to make such an application and it was not prevaricating or seeking to buy more time; and that there was a real risk that if the initial injunction were not granted, there was a real risk of damage from which it would not recover. Accordingly, the balance of convenience lay with the applicant and the initial injunction was granted for a short period of time, pending the submission of the evidence in support of the application for a full injunction pending the applicant’s appeal to the FTT.