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Case law: Courts will not uphold injunction unless action it aims to prevent is deliberate

Businesses considering applying for an injunction to stop another party from breaching an agreement should consider whether such a breach would be deliberate. If a breach would only be accidental or inadvertent, or if there would merely be a commercial advantage in breaching it, the injunction may well not be granted.

Legal Alert

This update was published in Legal Alert - June 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

An IT developer contracted with a company to provide a communication system. The documentation signed by the company included a non-disclosure agreement.

The company later became a subsidiary of a competitor of the developer. The developer applied for, and was granted a 'without notice' injunction preventing the company from disclosing the developer's confidential information to a third party in breach of the agreement.

The High Court had to consider whether to continue the injunction. Since the injunction was to prevent a wrong that had not yet happened, the developer had to show that there was a real risk the company would breach the non-disclosure agreement.

The developer argued that the company could not complete any contracts with the third party without disclosing the developer's confidential information, and that it was not taking adequate measures to protect that information.

However, the company had repeatedly assured the developer that it had no intention of breaching the non-disclosure agreement, and the developer had not provided evidence that 'inadvertent loss or leakage' of the information was likely. Even if it had, the court pointed out that injunctions are to prevent deliberate wrongdoing, not accidental or inadvertent disclosures.

Therefore, even if the developer had been able to show a strong likelihood of an accidental or inadvertent breach, or that there was a commercial incentive for the company to breach the agreement, this would be insufficient to justify continuing the injunction.

Operative date

  • Now

Recommendation

  • Businesses considering an injunction to stop another party from breaching an agreement should consider whether the other party's breach would be deliberate. If such a breach was only accidental or inadvertent, or if there would merely be a commercial advantage in breaching it, the injunction may well not be granted

Case ref: Rafael Advanced Defence Systems Ltd v Mectron Engenharia, Industria C Comercio SA [2017] EWHC 597

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.