Applying for an injunction can be an effective way to protect a business during a commercial dispute. However, injunction proceedings also carry significant financial and legal risks.
Because injunctions can restrict another party’s conduct before the dispute has been fully determined, the courts approach these applications carefully. Businesses considering such action must therefore understand the potential costs and liabilities that may arise if the application is unsuccessful or later proves to have been wrongly granted.
This article explains the main financial and legal risks associated with injunction applications in England & Wales.
Why can injunction applications be expensive?
Injunction applications often arise in urgent circumstances. Where a claimant seeks immediate court intervention, significant legal work may be required within a very short timeframe.
Preparing an injunction application typically involves
- gathering evidence,
- preparing witness statements,
- drafting the proposed court order and
- presenting legal arguments explaining why the injunction should be granted.
These steps can require substantial work from solicitors and barristers.
In many cases, the application will be heard in the High Court, particularly where the dispute involves substantial commercial interests. Court hearings, specialist legal representation and the preparation of detailed evidence can therefore contribute to the overall cost of the application.
Because injunction proceedings can develop quickly, the legal costs incurred at an early stage of the dispute may be significant.
What is an undertaking in damages?
One of the most important risks associated with injunction applications is the requirement to provide an undertaking in damages.
An undertaking in damages is a promise made to the court by the claimant that they will compensate the defendant if the injunction later proves to have been wrongly granted. The purpose of the undertaking is to protect the defendant from losses caused by an unjustified injunction.
For example, if an injunction prevents a business from carrying out commercial activity and the court later determines that the injunction should not have been granted, the defendant may seek compensation for the losses caused during the period the injunction was in force.
Before granting an injunction, the court may therefore consider whether the claimant has sufficient financial resources to honour the undertaking.
Can a Claimant be ordered to pay the other party’s legal costs?
Yes. As in most civil litigation, the courts in England & Wales generally follow the principle that the unsuccessful party pays the successful party’s costs, although the court retains discretion.
- If an injunction application fails, the claimant may be required to pay the defendant’s legal costs associated with responding to the application.
- These costs may include the preparation of evidence, legal submissions and representation at the hearing.
Where injunction proceedings are contested, these costs can be significant. Claimants should therefore consider carefully whether the application is likely to succeed before pursuing urgent relief.
What risks arise if the injunction is wrongly granted?
Even if the court grants an injunction initially, the order may later be discharged if the court concludes that it should not have been granted.
In such circumstances, the defendant may seek compensation under the undertaking in damages. This can expose the claimant to potentially substantial financial liability, particularly if the injunction has interfered with the defendant’s business activities.
For this reason, injunction applications should be supported by strong evidence demonstrating that the legal test for granting the order has been satisfied.
Can delay affect the success of an injunction application?
Yes. Delay is an important factor that courts consider when deciding whether to grant an injunction.
Injunctions are often sought where urgent intervention is required to prevent harm. If a claimant waits too long before making the application, the court may conclude that the situation is not sufficiently urgent to justify the order.
Delay may therefore weaken the claimant’s case and increase the risk that the application will be refused.
Why businesses should consider the risks carefully
Although injunctions can be powerful tools in commercial litigation, they should not be pursued lightly. The costs involved, together with the potential liability arising from undertakings in damages, mean that injunction applications can expose businesses to significant financial risk.
For this reason, careful legal analysis is required before seeking an injunction. Businesses must consider the strength of their claim, the urgency of the situation and the potential consequences if the application is unsuccessful.
Where the circumstances justify urgent intervention, however, injunctions can provide an important means of protecting commercial interests during litigation.
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