Jewellery Appraisal Services v Belson & Ors

On an application for an interim injunction enforcing restrictive covenants, the court must first determine whether there is a serious issue to be tried. The claim need not appear likely to succeed, but it must have substance and reality rather than being merely hopeful. The evidence is assessed in its totality. Bare assertions may corroborate more substantial evidence, but ordinarily cannot establish a serious issue alone. If that threshold is met, the court must determine which course carries the least risk of injustice. Relevant considerations include the likely prejudice to each side, preservation of legitimate business activity outside the covenants, and the claimant’s undertaking in damages. The existence of a covenant does not automatically justify an injunction.

The claimant sought an interim injunction against three former vendors of a jewellery appraisal and replacement-jewellery business. The injunction was intended to restrain alleged breaches of five-year restrictive covenants concerning dealings with customers, solicitation of employees and competition. The covenant period had subsequently been shortened and was due to expire at the end of 2005.

The claimant relied on alleged approaches to insurers, employees and customers in 2004, and on a January 2005 valuation report concerning jewellery insured by Direct Line. The defendants denied breach and contended that the evidence consisted only of bare assertions. The central issues were whether there was a serious issue to be tried and, if so, whether the balance of convenience favoured interim relief.

1. Serious issue to be tried. Applying the principles in American Cyanamid v Ethicon [1975] A.C. 396, the claimant had to show a claim with substance and reality, rather than a mere hope of success. The 2004 evidence, taken cumulatively, constituted direct evidence from three individuals of statements capable of indicating breaches. It was therefore sufficient to establish a serious issue. The otherwise bare email from Mr Longfield could be considered only as corroboration.
2. The January 2005 Direct Line incident independently established a serious issue. The defendant’s own email referred to Direct Line’s inability to arrange a visit, stated that he was stepping in to assist, and said that his report was submitted on behalf of Direct Line and that he would invoice it. Those matters were capable of contradicting his explanation that he acted solely for the insured.
3. Balance of convenience. The relevant question was which course carried the least risk of injustice. The claimant had accepted that legitimate trade outside the covenants could continue, so there was no evidence of material prejudice to the defendants from an injunction. Conversely, failure to restrain activity within the covenants created a real risk of prejudice to the claimant. The claimant had also given an undertaking in damages, while the defendants’ financial position was unknown.
4. The existence of restrictive covenants did not automatically justify relief. Nevertheless, on the evidence, granting the injunction presented the least risk of injustice. The application was allowed in principle. The defendants were ordered to pay the claimant’s costs, with an interim payment of £3,500 and further sums subject to assessment.