Dream Doors Ltd v Lodge

For an interlocutory injunction, a rectification claim raises a serious issue to be tried where the evidence is assessed on the whole factual canvas. The inquiry is not confined to events immediately surrounding the disputed signature. It includes discussions leading to drafting and execution, the surrounding circumstances of signatures, and relevant earlier agreements. The injunction threshold is distinct from the strike-out test under Civil Procedure Rules 1998, rule 3.4(2)(a). A finding that no serious issue exists does not determine whether a claim discloses no reasonable grounds. A judge acting of his own motion should not strike out without giving the claimant an opportunity to consider its position.

Dream Doors Ltd v Lodge appealed from the decision of His Honour Judge Seymour QC in the Queen’s Bench Division, reported at [2012] EWHC 1663 (QB). Dream Doors sought an interlocutory injunction against Martin Lodge to enforce covenants in an alleged franchise agreement. The High Court held that Mr Lodge was not personally a party, rejected the alternative rectification claim as fanciful, refused the injunction and struck out the claim against him of its own motion.

The appeal challenged the construction of the agreement, the approach to rectification, the relationship between the injunction and strike-out tests, and the fairness and procedural legality of the own-motion strike-out.

1. Appeal allowed. Both orders made against Mr Lodge were set aside. The application for an injunction and the question of amendment were remitted to the Queen’s Bench Division for hearing by a different judge.
2. Lord Justice Munby held that the High Court judge had plainly erred in assessing the rectification claim. The relevant evidence was not limited to the events immediately surrounding Mr Lodge’s signature. The court had to consider the wider canvas, including discussions leading to the drafting and execution of the document, the circumstances surrounding the claimant’s signature, and the earlier franchise agreement. The judge had ignored the claimant’s evidence and therefore was wrong to describe the rectification claim as fanciful and unsupported. The material before him plainly established a serious issue to be tried.
3. The judge had also erred in relation to construction. His treatment of consideration as a decisive point was wrong, and it was far from obvious that Mr Lodge’s proposed construction was the only sensible construction, particularly if it rendered substantial parts of the agreement otiose. This point did not need to be finally determined because the rectification ground was sufficient.
4. The test for an interlocutory injunction, namely whether there is a serious issue to be tried, is distinct from the strike-out test under Civil Procedure Rules 1998, rule 3.4(2)(a), namely whether the claim discloses no reasonable grounds. The former finding could not determine the latter without separate consideration.
5. Even if the injunction had properly been refused, it was unfair to strike out the claim without allowing Dream Doors an opportunity to consider whether to amend or discontinue. Possible non-compliance with Civil Procedure Rules 1998, rule 3.3 was not finally determined. Lord Justice Tomlinson additionally observed that the parties’ performance of the agreement for several years was relevant to construction and had been overlooked.

• Court of Appeal (Civil Division): Allowed the appeal unanimously, set aside the refusal of the injunction and the strike-out order, and remitted both matters to the Queen’s Bench Division for hearing by a different judge.
• High Court, Queen’s Bench Division: In [2012] EWHC 1663 (QB), refused the injunction against Mr Lodge and struck out the claim against him.