EE & Brian Smith (1928) Ltd v Hodson & Ors

Interim injunction applications must be decided and explained promptly, particularly where an appeal may follow. An order must be confined to the relief justified by the evidence and actually pursued. It should not inadvertently restrain conduct outside the claimant’s case, impose undefined restrictions on confidential information, or prevent performance of existing contracts without an appropriate exception. The balance of convenience must be reassessed as circumstances change. Where the restraint period is short and a suitable undertaking, together with a speedy trial, provides adequate protection, refusing further interim relief may carry the lower risk of injustice. The appellate court may leave the validity of restrictive covenants to trial where that issue cannot properly be determined in isolation.

EE & Brian Smith (1928) Ltd sought interim injunctions against former employees Claire Hodson and Christopher Morgan, and against their new company, The Juice Machine Ltd. The injunctions were intended to enforce post-employment restrictive covenants and protect confidential information, customers and suppliers.

Calvert-Smith J granted extensive relief after reserving judgment, announcing the decision by letter on 19 October 2007 and giving reasons on 5 November 2007. The defendants appealed from that decision, reported at [2007] EWHC 2753 (QB). The appeal concerned the delay and manner of granting the injunction, its breadth, the balance of convenience as circumstances changed, and whether the validity of the covenants should be determined before trial.

1. Appeal and relief. The substantive appeal was allowed and the judge’s order was set aside. The court accepted Ms Hodson’s limited undertaking not to solicit business from or deal with the claimant’s suppliers or customers, and refused further interim relief.
2. Delay and reasons. Interim applications require prompt decisions. Where judgment is reserved, the decision and reasons should follow without undue delay, especially where an appeal may be brought. The three-to-four-week delay in announcing the decision, followed by a further delay in giving reasons and the refusal to suspend the order, was unacceptable. However, the separate reasons challenge, relying on Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 and English v Emery Reimbold & Strike Ltd [2002] 1 WLR 2409, failed because the eventual judgment was adequately reasoned.
3. Width of the order. The injunction was too wide. It appeared to restrain Mr Morgan’s dealings with Beckers even though the claimant no longer pursued relief against him concerning that supplier. The confidential-information restrictions lacked sufficient definition and evidential support. Restrictions on suppliers and customers also required an exception for contracts entered into before the order.
4. Balance of convenience. The balance had to be assessed at the date of the decision and in light of subsequent developments. At the original hearing the issue was finely balanced, but the later end of the selling season, the short period remaining on Mr Morgan’s covenants, the continued development of the new business, Ms Hodson’s undertaking and the proposed speedy trial shifted the balance decisively against interim relief. Applying the approach in Films Rover International v Cannon Film Sales Ltd [1987] 1 WLR 670, accepting the undertaking carried the lower risk of injustice.
5. Further issues and costs. The court declined to determine in isolation whether the “Key Employee” restriction was an unlawful restraint of trade or could be severed by blue-pencilling. Those issues were better dealt with at trial. The costs of the appeal and the application below were reserved to the trial judge.

• Court of Appeal (Civil Division): Allowed the substantive appeal, set aside the interim injunction, accepted Ms Hodson’s undertaking and reserved costs.
• High Court of Justice, Queen’s Bench Division: Calvert-Smith J granted the interim injunction and ordered a speedy trial in [2007] EWHC 2753 (QB).