Agreeing injunctions is for teuchters

rangersIP Draughts won’t claim this as a full blog posting. The subject – clauses in which parties agree that an injunction may be obtained for breach of a confidentiality obligation – has been discussed in detail already in an earlier blog article. That earlier article is the most popular there has been on this blog, with over 26,000 viewings.

One of IP Draughts’ hobby horses (hmm… says Mr Pettifog, with unusual restraint) is that these clauses are largely pointless in the English courts, as the judge will not be interested in being told how to apply his discretion on the granting of an injunction.

What music it was, then, to IP Draughts’ eyes, to see the following statement by Mr Justice Peter Smith in a case reported last week. The case was partly about confidentiality undertakings given by the owner of Glasgow Rangers Football Club in favour of the owner of Newcastle United Football Club. A lot of balls, then. Although the judge was not being asked to interpret the undertakings, he couldn’t resist commenting as described them, pointing out that they were unilateral and that no consideration seemed to have been given for them. This stream-of-consciousness approach seems typical of Peter Smith J. What particularly caught IP Draughts’ eye was the following observation:

  • Paragraph 2 has an express statement that the Undertakers agree “that monetary damages may not be adequate compensation…. and accordingly any member of the SD Group shall be entitled to seek equitable relief including interdict, injunction and specific performance in the event of any actual or threatened breach to the provisions of this letter.”
  • I pause to observe that that self serving clause cannot in my view be used to override the principles which the courts apply when asked to grant such relief.

It is tempting to say, I told you so. But Mr Justice Peter Smith has a long record of shooting from the hip. It would have been better if a more mainstream judge had said this. But as the bard of Dartford said, you can’t always get what you want, but you get what you need.

13 Comments

Filed under Confidentiality, Contract drafting

13 responses to “Agreeing injunctions is for teuchters

  1. Thanks, mnemonomania. You may be right about the benefits of leading the judicial horse to water, in the hope that it will drink. I can only give an instinctive view, which is that:
    (a) the style of contract drafting in your example about dangerous knives is more discursive and conversational than I am used to seeing in English contract drafting – though I do remember, many years ago, a CEO with extensive US experience encouraging me to draft in that more explanatory style in a transaction with US parties on the other side.
    (b) an English court might be surprised to see statements that try to lead it in the direction of granting an injunction.
    (c) I wonder how often the court’s decision on whether to grant an injunction would be more influenced by wording of this kind in an agreement rather than in counsel’s argument, or that the issues would be so finely balanced as to make the express wording of the agreement an important factor. I suspect the answer is: not very often.
    (d) I wonder whether this discussion plays to the question of how far the courts are prepared to substitute their judgment for that of the literal words of the contract. Compared with Continential European courts, I think the English courts are relatively “hands off”, and don’t for example like to fill in the gaps of the parties’ contract. But perhaps compared to US courts they would be viewed as interventionist or even undemocratic?

    • Thank you for the thoughtful response. I’m afraid I haven’t the depth of experience to make intelligent reply, and so remain garrulously silent, except to ask the meaning of ‘substitute their judgment for the *literal* words of the contract’. Perhaps you are being diplomatic toward courts that do not hesitate to impose terms different from those the parties agreed?

  2. Thanks, Vance. You mention the only real work of the clause being the waiver of security. In the English courts, where this is not an issue, or at least cannot be achieved in the way you indicate, the clause becomes even less useful.

    And no, I would say that English law does not have a robust law of estoppel along the lines you suggest. Lord Denning tried to apply some steroids to the weakling version that we have, but this was one of the areas where more conservative-minded judges declined to follow him.

  3. For an agreement to say that a party may seek a certain kind of relief is rather weak tea, and it’s surprising to see the court “pause to observe” it. Trying by contract language to tie the court’s hands may be a fool’s errand, but agreeing to certain facts (rather than legal propositions) seems the better way to attempt it: “The parties jointly state that the breach of any duty of confidentiality established by this agreement will cause harm not adequately compensable by money damages, and that any court considering other relief may rely on this joint statement.”

    • If parties agree that:
      – they are the best of friends
      – the moon is made of cheese
      – the law is an ass
      – the criteria for a court to exercise its discretion have been met
      what notice should the court take of these things? This may be too large a subject for a comment, but my observation is that US parties seem to think that a court should place great store on what the parties say. This expectation is sometimes accompanied by muttering of the magic word estoppel, as a grown-up version of Izzy Wizzy Let’s Get Busy!
      In my experience, UK parties place less faith in “self serving” statements influencing the courts. Peter Smith J’s emotions may be close to the surface, but he may also be expressing what other judges think but are too judicial to say.

      • vrkoven

        I confess to being of two minds about this. Certainly, the parties can’t predetermine the law or how the law applies to a given set of facts, which is why my comment is basically the same as mnemonomania’s (love that handle). However, I did rather think that the purpose of contract law was to enforce the deal the parties have actually made, rather than the one the court thinks they rationally should have made. Plus, there are things that the parties are permitted to agree to that affect how the law applies; for example, in the clauses I write of the type under discussion here, using the identical weasel words of “might” and “seek,” the only real work being done is a waiver of security, which many US jurisdictions impose on a party seeking an injunction. Since parties may waive security, courts are not reluctant to enforce that part of the clause, while the rest is really no more than throat-clearing.

        As to estoppel, I don’t know whether English or Scottish courts have a robust doctrine of estoppel, but many US jurisdictions do (it helps move cases along), and so if a party acknowledges that a breach of confidentiality is likely to cause irreparable harm, my suspicion is that a court would, unless the contrary were apparent, consider that acknowledgment as part of the evidence supporting a finding of irreparable harm. As a footnote to this, I should mention that the way these clauses are often drafted can be self-defeating, as where a party is made to acknowledge that *any* breach of the confidentiality clause (which would usually include things like use restrictions and document retention) would engender irreparable harm, which is of course nonsense. If I were a judge and a claimant were seeking an injunction to get the other side to destroy confidential documents, I’d give the acknowledgment no weight at all.

      • Hypothetical contract language: ‘Acme shall not let children play with any of the knives Widgetco supplies to Acme under this agreement. Acme and Widgetco jointly state that knives are dangerous instruments, that letting children play with knives is a violation of the Don’t Let Children Play With Dangerous Instruments Act, that Acme letting children play with knives that Widgetco supplies to Acme under this agreement could subject Widgetco to criminal liability, and that Widgetco has an urgent interest in stopping Acme letting children play with knives supplied by Widgetco, should it ever happen’.

        Acme lets children play with knives supplied by Widgetco. Widgetco learns of it and seeks an injunction from Peter Smith J., who says, ‘Let’s have no nonsense about what the parties have agreed. If Widgetco wants an injunction, let it prove with proper evidence all the facts to which it wants the court to apply its discretion. Let’s begin with this business of knives being dangerous instruments. Widgetco, present your evidence’.

        Really? The parties’ agreements are foam to be brushed off the beer?

        Take it as given that parties can’t tie the court’s hands. The drafting question is: can the drafter do anything at all to ease the path to nonmonetary relief for an injured party in eg a breach of confidentiality case, and if so, what?

        Mark, I can’t tell whether you are saying (1) the drafter can do nothing useful in this situation, or (2) many drafters, especially US drafters, overestimate what contractual terms can do. If your position is the latter, what is the most a drafter can hope to do, and how can she do it?

      • vrkoven

        From a drafting standpoint, the best way to deal with this would be for the parties to agree that if Acme lets children play with the knives, it will be deemed a material breach of the contract, for which Widgetco may terminate it forthwith. Moreover, Widgetco can have Acme indemnify it for any liability it might have by virtue of having supplied Acme with knives that were used in violation of the statute. So if allowing children to play with knives were an actual violation of the statute, Widgetco would a) be protected from liability (to the extent of Acme’s assets) and b) if it had standing, be able to sue Acme *under the statute.* Granted that the latter is improbable, but what you’re looking at here is what parties routinely do with respect to breaches of data security that would violate, e.g., EU and member state regulations.

  4. vrkoven

    But surely the weasel words “may not” and “seek” would in any case preserve the application of whatever conditions a court would impose on the granting of relief (or remedies)?

  5. Thanks for your comments.

    I should have included a link to the case – now corrected. The judgment doesn’t reveal what law and jurisdiction applied to the confidentiality undertaking. The case was part of a long saga of cases in the English courts and this judgment was primarily about whether the Rangers chairman should be committed to prison for breach of an earlier court order.

    I agree that the wording that was quoted in this case has the appearance of having been drafted under English law and then had a few Scots legal terms added.

  6. One would be interested to read the choice of law & jurisdiction clauses of this agreement, as there is reference to both interdict and injunction.

    In Scots law of contract there is no rule of “consideration”; while the Scottish courts are no more likely to allow a contract to over-ride the principles they apply that the English courts,they would probably be more willing to accept the option of interdict rather than damages where a contract indicates the parties agreed it an appropriate remedy.

    Therefore, the major error in the agreement may be in permitting English courts deal with the matter rather than in failing to foresee how such a court would deal with it.

    Of course the use of “equitable relief” rather than “equitable remedies” and “specific performance” rather than “specific implement” does incline one to suspect that English law was primarily in the drafters mind, in which case the criticism is well founded.

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