PROVING THINGS 88: MATTERS YOU HAVE TO PROVE IF YOU WANT AN INJUNCTION: THE IMPACT OF A SIX MONTH DELAY IN APPLYING

In Blade Motor Group Ltd v Reynolds & Reynolds Ltd [2018] EWHC 497 (Ch) an applicant for an injunction failed because it failed to prove the basic requirements.  The fact that there was a six-month delay in applying for the injunction was also a highly relevant factor.

“ it does not appear to me to be acceptable for Blade to wait until February 2018, some six months later, before approaching the court on an urgent basis for interlocutory mandatory relief”

THE CASE

The claimant is a car dealership.  For many years the defendant provided its computer software.  The claimant decided to change software supplier.  The new supplier started, however the defendant’s input was still necessary in order for the system to work. The defendant withdrew its input rendering the claimant’s computer system unworkable.  The claimant applied for an injunction to compel the defendant to provide specific performance.

THE ISSUE

Mr David Stone (sitting as a High Court Judge) considered the American Cyanamid criteria in detail. The first – a serious issue to be tried – was conceded.

HAD THE CLAIMANT ESTABLISHED THAT DAMAGES WOULD NOT BE AN ADEQUATE REMEDY

One part of the test is whether damages would be an adequate remedy.

1. 1. “Second, would damages be an adequate remedy for the party injured by the court’s grant of or refusal to grant an injunction? Blade submitted that damages clearly would not be an adequate remedy for it if no injunction is granted, contrasting that with an assertion that damages plainly would be an adequate remedy for R&R if an injunction is granted. As I mentioned earlier, the damage which Blade says it is suffering and will continue to suffer is set out in Mr Flanagan’s witness statements and was put as follows:

1) Blade’s auditors cannot perform their functions without access to the data stored on Blade’s system through R&R’s software. This, Mr Flanagan said, prevents the auditors from preparing properly audited accounts, which is considered a very serious matter for Blade and companies within the group. I am conscious that whilst the position in which Blade finds itself is not to be preferred, there was no evidence before me beyond Mr Flanagan’s assertion that the results of failing to provide an audit would, at this stage, be unquantifiable for Blade;

2) Mr Flanagan gave evidence that Companies House had contacted Blade about a group company, Blade Motorcycles Limited, in relation to the late filing of accounts and threatening strike off proceedings against that company. The letter from Companies House was exhibited to Mr Flanagan’s second witness statement and was dated 9 December 2017. Mr Tabari pointed out that no information has been given as to what happened next. That letter was dated 9 December 2017 and requested an answer within 28 days. It is therefore likely, he said, that Companies House has taken further action but we cannot know what it is because that is not before the court. There was no evidence before me that any fines levied by Companies House cannot be quantified;

3) Mr Flanagan gave evidence that Blade is unable to comply with requests for information that have been made by Her Majesty’s Revenue & Customs but again, there was no evidence that that difficulty is insuperable or that any losses suffered are unquantifiable;

4) In the course of its business, Blade makes claims under car manufacturer warranties. Mr Flanagan gave evidence that Volkswagen has requested audit support from Blade. There was evidence that Blade has been unable to claim a warranty to the value of £1,782 as a result of lack of access to its data. I accept Mr Flanagan’s evidence that there may well be more such refusals but, again, it does not seem to me that they are unquantifiable so long as records are kept;

5) Mr Flanagan gave evidence that Blade faces financial penalties from manufacturers in relation to data collection and potentially faces fines. Again, it seems to me that those difficulties are not insuperable and that the fines themselves can be quantified. There was no evidence that they would drive Blade out of business. Indeed, the evidence went the other way suggesting that Blade is in robust financial health; and

6) Mr Flanagan gave evidence that the lack of access to the data prevents Blade from meeting customer requests for information which will cause reputational loss to Blade. It does not seem to me that this particular head of damage can be put too highly: Mr Flanagan’s evidence on this point was assertive only. It also became clear from my questioning of Mr Arumugam that Blade has access to current data: since mid-2016 Blade has been using Pinnacle. Therefore, any unfilled customer requests can only relate to dates from before that time.

1. Mr Tabari submitted that the unquantifiable loss occasioned to Blade by a qualified audit (the first of the 6 heads of unquantifiable loss put forward in Mr Flanagan’s witness statements) was “vague and uncertain, and should be treated with deep scepticism”. He said that there was no explanation as to how a qualified audit would affect Blade’s business, which credit lines would be affected, how that would stymie future business or for how long it would have effect.

2. As to the other heads of loss, Mr Tabari submitted similarly that there is insufficient evidence, but that, in any event, they could all be compensated in damages. To the contrary, he submitted, and with some force, that the mandatory injunction would obviate the need for a trial – because if would give Blade the same result as if it won at trial, and a better result, he said, than any other customer of R&R terminating a contract on amicable terms, and in circumstances where Blade’s substantive claim for rectification is weak.

3. I agree with Mr Tabari – I do not consider that Blade has provided sufficient evidence to substantiate its assertions that damages would be an inadequate remedy. In relation to the qualified audit, I agree with Mr Tabari that insufficient evidence has been provided. I have before me an assertion by Mr Flanagan that an unqualified audit would be damaging, but he has not provided evidence of how, nor the extent of that damage. I also keep in mind that the relevant data are now historic – and have been since mid-2016. Blade has access to its data since that date kept in the Pinnacle system. I also agree with Mr Tabari that the remaining heads of loss are quantifiable in damages, or, at least, that there was no evidence given by Mr Flanagan that demonstrates otherwise. There is nothing in Mr Flanagan’s evidence that suggests that records cannot be kept of the financial penalties or other fines levied by Companies House, HMRC and/or Volkswagen. If there are customer complaints, they can be logged.

4. I therefore find on the basis of the facts before me that Blade has not proved that damages would not be an adequate remedy.”

THE BALANCE OF CONVENIENCE

The judge then went on to consider the balance of convenience.

1. 1. “If I am wrong in that, I turn now to consider the balance of convenience and I do so on the basis of an assumption that, in this case, damages would not be an adequate remedy for Blade.

   2. As I stated earlier, the parties are in agreement that a mandatory injunction is sought and therefore I should apply the dicta of Chadwick J as approved by the Court of Appeal in Zockoll. Working through the four propositions set out in those cases:

(1) The overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be ‘wrong’;

(2) Because of the mandatory nature of the injunction, it may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo. There was disagreement as to what the status quo currently is, with Mr Arumugam suggesting that the status quo is best maintained by unlocking the software. I disagree. It is abundantly clear to me that the status quo is the position as it currently is and indeed was on 12 February 2018 when this application was filed. The evidence is clear: Blade had no access to the relevant software on those dates. I do not accept the suggestion that the status quo is best maintained by mandatorily forcing R&R to provide access to the software. That is not the status quo. The status quo is the position as it is now, and the position as it is now is that Blade has no access to the software;

(3) I am entitled to take into account whether or not there is a high degree of assurance that Blade will be able to establish at trial the right it asserts. It is not clear to me that a term will be implied into the negotiated written contract in the terms alleged by Blade. The various agreements have been negotiated over time. They deal with a number of eventualities. The email correspondence I have quoted above appears clear to me: it is at least highly arguable that Blade asked for and was given a 5 year agreement. I therefore cannot say that I have a high degree of assurance that Blade will be able to establish at trial that there was a unilateral mistake requiring the agreement to be amended. Whilst I certainly make no determination at this point, I am entitled to take into account whether I have a high degree of assurance and, in doing so, I find that I do not; and

(4) Even if I am unable to feel a high degree of assurance that Blade will establish its rights, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. These circumstances will exist where there is the risk of injustice if the injunction is refused which sufficiently outweighs the risk of injustice if the injunction is granted. In this context, I consider the alleged delay in Blade’s bringing of its claim. Blade says it has brought this application promptly. However, it is clear to me that this dispute began in mid-2016, escalated thereafter, and in August 2017 reached something of a climax in the denial by R&R of access by Blade to its data through R&R’s software. Since then, Blade says it has repeatedly been requesting access to its data and I note that there have been without prejudice and other meetings to try and resolve the dispute. However, given that there was disagreement between the parties in mid-2016 and access was blocked in August 2017, it does not appear to me to be acceptable for Blade to wait until February 2018, some six months later, before approaching the court on an urgent basis for interlocutory mandatory relief. I was taken to and I am mindful of the decision of Laddie J in Handi-Craft Co and Anor v B Free World Ltd and Ors [2005] EWHC 1307 (Pat). In that case, Laddie J looked at delay and found on the facts of that case as follows:

“Yes, the claimants have proceeded to court perhaps less speedily than one would have expected, but on the other hand, I do not accept that the defendants have changed their position at all as a result of that delay. It seems to me that the delay is not such as to justify the refusal of an injunction which would otherwise be appropriate.”

I am mindful of what Laddie J said in that case, but Laddie J was dealing with a six-week delay in Handi-Craft. That is a different order of delay from the six-month delay in this case. I consider that Blade’s delay is something that weighs against it in the balance of convenience. If the data access were as vital to Blade as it has submitted, it would have approached the court well before now.

1. Further, I am asked by R&R to consider its open offer which was made yesterday to supply access to the system in return for payment of monies owing to it. Blade says that that offer was not really an offer but rather a complete win on behalf of R&R should it be accepted, but Mr Arumugam did accept that I could take the offer into account. Whilst I accept the submission that the offer, whilst genuine, was not one that Blade was bound to accept, it is part of the matrix of the case and something which I consider weighs in the balance of convenience, although not heavily. It remains open to Blade to pay the money R&R says it is owed, and obtain access to its data. Any overpayment can be reclaimed in due course.

2. I am also mindful of R&R’s position. It says, in short, that Blade has reneged on the written contract as agreed in 2014. R&R has accepted that repudiatory breach, and the agreement, as amended, is now at an end. Granting the injunction now, R&R says, would be to ignore the termination of the contract, and instead reinstate a one-sided version of it for what is likely to be the remainder of its term, without imposing on Blade an obligation to pay for access. R&R says if the factors are evenly balanced, the court should preserve the status quo.

3. Taking all that into account, and exercising my discretion, it does seem to me that Blade has not proved that the risk of injustice if an injunction is refused sufficiently outweighs the risk of injustice if the injunction is granted. Therefore, I refuse Blade’s application for mandatory interim injunctive relief.”