Court of Appeal considers extent of judicial discretion when awarding damages in lieu of an injunction

David Whitehead

On 12 February 2016, the Court of Appeal considered an appeal against an injunction enforcing a negative obligation, and expressed doubts about applying the guidance on the discretionary exercise involved in deciding whether or not to grant an injunction given by the Supreme Court in Coventry (t/a RDC Promotions) v Lawrence [2014] UKSC 13.

D v P concerned an appeal against a decision enforcing post-termination restrictive covenants in an employment contract. Both the judgment at first instance and the appeal were heard in private in order to protect confidential information belonging to the respondent (“D”).

Following the guidance set down in Lawrence, the Judge considered that although the appellant (“P”) had acted in good faith and honestly, injunctive relief was the appropriate remedy.  He therefore granted an injunction enforcing the restrictions in the contract.  P sought to challenge the soundness of the Judge’s conclusion, arguing he had made substantive errors in the manner in which he approached the exercise of his discretion, and that an injunction should not have been granted.

The guidance in Coventry v Lawrence

The Supreme Court in Lawrence recommended that a flexible approach should be taken when considering whether or not to award damages instead of an injunction in response to the commission of a tort (in that case, nuisance).  The Justices considered that although the prima facie position was that an injunction should be granted, the court’s power to award damages should be a matter of discretion and not be fettered.

The appeal

The Court of Appeal found that the facts in D v P were materially different to those of Lawrence, as they concerned a contractual claim to enforce a negative restriction to which the other party had voluntarily agreed.  It concurred with the Judge’s original finding that the restrictive covenants were reasonably necessary to protect D’s confidential information, and that the restraint was in the interests of both parties, not contrary to the public interest and enforceable.

Furthermore, in cases such as this damages were not the remedy an employer wanted. The damage potentially sufferable by the covenantee would usually be unquantifiable and rarely, if ever, would damages be an adequate substitute for an injunction.

The Court affirmed, however, that an injunction was a discretionary remedy, and that the type of circumstances in which it might be appropriate to refuse an injunction turned on the facts of each case. The approach to the exercise of discretion was not a “mechanistic” one, and the burden of showing why an injunction should not be granted was on the covenantor.

While the Court doubted that the guidance in Lawrence was directly applicable in this case, the Judge’s adoption of that guidance had not resulted in an incorrect approach to the exercise of his discretion, and accordingly, the appeal was dismissed.  The Court reaffirmed that the starting point in a claim by an employer to enforce an employee’s negative covenant was that the ordinary remedy would be an injunction.  It would not necessarily, however, be the finishing point.

D v P [2016] EWCA Civ 87

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