SDI Retail Services Ltd v Rangers Football Club Ltd

An injunction must be construed objectively from its language, read strictly because breach has penal consequences, but also in its relevant historical context and in light of the purpose disclosed by the court’s reasons.

A prohibition against assisting another party to perform a contract may extend to coercive steps which cause, facilitate or procure performance. Where an injunction is intended to undo a contract as far as possible, demanding, invoicing or suing for payment under that contract may constitute both assistance in the debtor’s performance and performance by the creditor. Merely asserting a defensive set-off does not necessarily have that character.

Rangers entered an agreement with Elite and Hummel without giving SDIR the contractually required opportunity to match the offered rights. The Commercial Court found a breach and granted an injunction requiring Rangers not to perform the Elite/Hummel agreement, not to assist Elite or Hummel to perform it, and to notify them that Rangers would not perform it.

Rangers later sought permission to recover fees and royalties due under that agreement. The Commercial Court, in [2020] EWHC 136 (Comm), declared that demanding or suing for payment would not amount to assisting Elite’s performance. SDIR appealed. The central issue was whether the injunction prohibited Rangers from invoicing, demanding or bringing proceedings for sums due under the prohibited agreement.

1. By a majority, the appeal was allowed. Phillips LJ delivered the leading judgment, with which Baker LJ agreed. Underhill LJ dissented.

2. An injunction is construed objectively. Its language must be given its natural meaning in the circumstances known when the order was made. The court’s reasons are admissible to identify the relevant context and purpose. Because disobedience carries penal consequences, the language must be construed strictly and restrictively. The first-instance judge’s personal understanding of his own order could have no subjective role in that exercise.

3. The injunction was intended to undo the Elite/Hummel agreement as far as possible, while preserving the supply of kit for the 2019–2020 season. It prohibited Rangers from performing the agreement, required Rangers to repudiate it and prevented Rangers from causing or contributing to performance by Elite or Hummel. Permitting Rangers to enforce the very agreement which the court had required it to repudiate would contradict that purpose.

4. In context, “assist” included steps which furthered, promoted, facilitated or procured Elite’s performance. Assistance was not confined to conduct welcomed by Elite and could include coercive action. A demand or claim for payment would encourage or procure performance of Elite’s payment obligation, either by eliciting payment or converting the obligation into a judgment. Invoicing would likewise supply information and encourage payment. Such conduct would breach the prohibition against assistance.

5. Rangers would also breach the prohibition against “performing” the agreement by exercising or enforcing its contractual right to payment. The fact that Rangers could passively receive payments did not preserve or create an enforceable entitlement to demand them.

6. A defensive set-off was different. It would operate unilaterally to reduce or extinguish Elite’s claim and would not assist Elite to perform. Rangers could therefore assert a set-off, but could not counterclaim for the debt.

7. Underhill LJ would have dismissed the appeal. In his view, suing a debtor was not naturally described as assisting the debtor. The permitted continuation of kit sales meant that Rangers was intended to retain both the right to receive the associated royalties and its ordinary corollary, the right to enforce them.

1. Court of Appeal (Civil Division): By a majority, allowed SDIR’s appeal and rejected the Commercial Court’s construction of the injunction: [2021] EWCA Civ 790.

2. Commercial Court: Lionel Persey QC declared that Rangers could demand or sue for sums due under the Elite/Hummel agreement without breaching the injunction: [2020] EWHC 136 (Comm).