Rafael Advanced Defense Systems Ltd v Mectron Engenharia, Industria E Comercio SA

A quia timet injunction requires a serious issue to be tried that the defendant presents a real risk of committing the threatened breach. An incentive or opportunity to breach a confidentiality obligation does not itself establish that risk. The court must assess whether the defendant’s stated intention to comply is dishonest or unreliable. Injunctive relief is directed principally to deliberate wrongdoing, rather than accidental or inadvertent leakage. Where the defendant has consistently acknowledged its obligations and the evidence supports its good faith, the injunction should not be continued.

Rafael sought continuation of a without-notice injunction restraining Mectron from assigning a supply contract and from permitting third parties to use Rafael’s confidential information and intellectual property. The dispute arose from the sale of Mectron’s communications business to AEL, which had links with Elbit, a competitor of Rafael. Rafael argued that performance of the Brazilian defence project created a real risk that Mectron would disclose or transfer Rafael’s BNET technology in breach of the supply contract.

Phillips J had granted interim relief on 3 March 2017. The central issue was whether the evidence established a serious issue to be tried as to a real risk of deliberate misuse or disclosure before the final arbitral award.

1. The injunction was not continued. Rafael failed to establish a serious issue to be tried that Mectron intended, unless restrained, to transfer or disclose Rafael’s intellectual property in breach of the supply contract.
2. For a quia timet injunction, the relevant question is whether there is a real risk that the defendant will commit the threatened act. Mectron had repeatedly confirmed its confidentiality and non-disclosure obligations, both before and after the injunction. Its commercial incentive to use the BNET technology did not establish that it would succumb to that temptation.
3. The court rejected the submission that Mectron’s evidence showed dishonesty, disingenuousness or lack of frankness. The contractual arrangements and amendments appeared specifically structured to protect Rafael’s intellectual property. The evidence did not show a real risk that Mectron’s stated position was false.
4. The alternative case based on inadvertent loss or leakage of confidential information was insufficient. An injunction is principally directed to restraining deliberate wrongdoing, although it may incidentally encourage greater care.
5. Damages would not have been an adequate remedy for Rafael. Had it been necessary to decide the balance of convenience, it would have favoured continuation of the injunction. The application of section 44 of the Arbitration Act 1996 did not otherwise require refusal on grounds of self-induced urgency. Rafael’s delay in commencing the arbitration was criticised, but the court did not decide whether that delay independently justified refusal of relief.

On 3 March 2017 Phillips J granted a without-notice injunction. The present first-instance ruling refused to continue that injunction until final arbitral award.