Household Global Funding Inc & Ors v British Gas Trading & Ors

On an interlocutory injunction application, the court must assess the likely consequences of granting or withholding relief, including the adequacy of damages and the practical preservation of the relevant commercial value. The status quo is not an inflexible requirement, particularly where substantial change is inevitable. The overriding consideration may be preserving the value of a business as a going concern until the underlying rights are determined. A reasonable undertaking or offer capable of avoiding catastrophic disruption is a material factor in the balance. Where an existing agreement is specifically enforceable, a party may be required to preserve the subject matter of a sale pending completion, without being compelled to enter a new agreement.

The parties were engaged in complex litigation concerning the termination of a joint venture involving the Goldfish credit-card business and the construction of a Receivables Purchase Agreement. Lightman J had held that the agreement entitled the British Gas side to acquire debts but not the business as a going concern. British Gas appealed that decision, with the appeal to be heard later.

Hart J refused to continue an interim injunction restraining HFC Bank from communicating with Goldfish cardholders about replacement cards. British Gas sought permission to appeal and, if permission were granted, an immediate appeal. The central issue was whether the injunction should be restored to preserve the commercial value of the business pending the forthcoming appeal.

1. Permission to appeal was granted and the appeal was allowed. An injunction was granted until the conclusion of the forthcoming appeal, subject to further submissions on its terms and to an undertaking as to damages.

2. Hart J had correctly approached the application on the principles in American Cyanamid v Ethicon [1975] AC 396. The court had to consider the likely damage resulting from the competing courses, rather than treat any single factor as decisive.

3. The judge had seriously overestimated the damage likely to be caused to HFC by a short delay. Catastrophic damage would arise only if cardholders were left without an operable card. The open offer by British Gas to continue the existing arrangements for a limited period was reasonable and materially reduced that risk.

4. The proper object of interim relief was to preserve the goodwill and intangible assets of the credit-card business intact for the few weeks before the appeal. The concept of the status quo was difficult to apply where drastic change was inevitable. The important consideration was preservation of the value of the business as a going concern for whichever party was ultimately entitled to it.

5. Although HFC could not be compelled to enter a new agreement, if the Receivables Purchase Agreement properly required the portfolio of cardholder agreements to be sold and transferred, the seller could be required under the existing agreement to take care of the subject matter of the sale until completion, assuming specific enforceability.

6. The undertaking as to damages was substantive and could result in substantial liability if British Gas ultimately failed in the underlying appeal.

• Court of Appeal (Civil Division): Permission to appeal granted; appeal allowed; injunction granted pending the forthcoming appeal.
• Queen's Bench Division: Hart J refused on 12 July 2001 to continue an interim injunction restraining communications to Goldfish cardholders.
• Queen's Bench Division: Lightman J had given judgment on 29 June 2001 concerning construction of the Receivables Purchase Agreement. Lloyd J had earlier refused both sides' applications for summary judgment under Part 24 on 24 April 2001.