Safe Transport (South West) Limited v The Pallet Network Limited [2025] EWHC 396 (Ch)

[2025] EWHC 396 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 26 February 2025
Before
STUART ISAACS KC
Between
Safe Transport (South West) LimitedClaimantThe Pallet Network LimitedDefendantSafe Transport (South West) Limited- and –The Pallet Network Limited Defendant for Claimant
Mr Alexander Cook KC and Mr Andrew Rose (instructed by Fieldfisher LLP) appeared for ClaimantMr Nicholas Goodfellow (instructed Horwich Farrelly Limited) appeared for DefendantHearing Hearing date: 7 February 2025This judgment was handed down by the judge remotely by circulation to the parties’ representatives by e-mail and release to The National Archives. The date and time for hand down are deemed to be 11.30am on 26 February 2025.Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.Stuart Isaacs KC:Introduction
[1]This is an application by the claimant made by a notice dated 6 January 2025 for an injunction to restrain the defendant:(1) until the conclusion of the trial of the claimant’s Part 7 claim or further order from seeking to terminate any contractual agreement which the defendant has with the claimant on account of prior events and, in particular, in reliance on the defendant’s solicitors’ letters dated 10 December 2024 and 6 January 2025 or otherwise in a manner contrary to the so-called 2024 Agreements (as defined in the Particulars of Claim); and(2) until the trial of the claim or further order from acting inconsistently with the 2024 Agreements, except as provided in paragraph 2.1 of the amended draft order which is before the court.[2]The application is supported by witness statements dated 6 January 2025 and 3 February 2025 of Ms Faye Riddiford, the claimant’s managing director, and a witness statement dated 5 February 2025 of Mr Paul Day, the claimant’s accountant. It is opposed by witness statements dated 29 January 2025 and 4 February 2025 of Mr Harry Wells of the defendant’s solicitors.[3]The claimant is a family-run freight distributor with substantial turnover. The defendant operates a system for the distribution of palletised freight. The defendant is part of the much larger and substantial Culina Group of companies, which in turn forms part of the even larger Theo Müller Group of companies. The claimant collects and delivers freight for the defendant within certain allocated postcode areas. The day-to-day operations of the claimant are detailed in Ms Riddiford’s first statement; and the system for the delivery of freight is described in detail in Mr Wells’ first statement.[4]In the Part 7 Claim, the claimant claims declarations that the 2024 Agreements are valid and enforceable and that a letter dated 18 October 2024 purporting to terminate an agreement between the parties dated 23 October 2018 (the “2018 Agreement”) with effect from 19 November 2024 (the “October 2024 Letter”) is invalid; an injunction to prohibit the defendant from relying on the October 2024 Letter; and orders to secure specific performance of the 2024 Agreements.[5]Under the 2018 Agreement, the defendant granted the claimant various rights in respect of territory in the Bristol and Gloucester area identified by reference to postcodes in return for certain payments.[6]Between 2021 and 2023, the parties – primarily through Ms Riddiford and Mark Kendall (the defendant’s managing director until his employment was terminated on 29 May 2024) but also involving other of the defendant’s employees, namely Kerry Raynor (its Network Development Manager), Sue Nicholson (its Commercial Director), Nick Shotton (its Head of Commercial) and Joanne Davis (its Finance Director) were in discussions about the expansion of the claimant’s territory to cover additional postcodes. Ms Riddiford’s first statement addresses in detail those discussions and the related emails as they appear to the claimant. Some were allocated to the claimant in 2021 (the “2021 Postcodes”); others (the “2022 Postcodes”) were not allocated and remain allocated to another logistics company, Hills Delivery (Bristol) Ltd (“Hills”) but the claimant is claiming that it is entitled to them under the 2024 Agreements. On 12 December 2023, Mr Kendall sent Ms Riddiford an email which stated in the Subject line “Re: Postcodes Transfer 22.01.2024”, in which he told Ms Riddiford that, as she was aware, it was he who was dealing with that matter not Ms Davis or Mr Shotton “so please address any correspondence to myself and not circumvent to others in the business”. The email was copied to Ms Davis and Mr Shotton.[7]The content of those discussions, according to the defendant, is summarised so far as material in Mr Wells’ first statement and in paragraph 18 of the defendant’s skeleton argument for the hearing.[8]The 2024 Agreements, as defined in the Particulars of Claim, comprise three separate alleged agreements:(1) An oral agreement alleged by the claimant to have been made at a meeting on 29 January 2024 between Ms Riddiford and Mr Kendall and recorded in a letter dated 31 January 2024 from the defendant to the claimant (the “January Agreement”) that the defendant would transfer certain further postcodes in the Bristol area from Hills, to the claimant on 29 April 2024; that the defendant would write off £667,000 of the outstanding debt due from the claimant to the defendant but that going forward any revenue that became due would have to be cleared “in current terms and timelines”; and that the terms of the “Partner agreement” between the parties were to be amended and the then current arrangement would change to a “2-year rolling notice period to both parties”.(2) A Pallet Network Limited Partner Agreement dated 5 February 2024 (the “Partner Agreement”).(3) An agreement dated 13 May 2024 (the “May Agreement”) which amended the January Agreement by extending the date for the transfer of the postcodes from 29 April 2024 to 29 January 2025, providing for the payment by the defendant to the claimant of £26,560 weekly credits and providing for a further credit note in the sum of £204,000.[9]The 2024 Agreements were preceded by a meeting on 10 January 2024 between Ms Riddiford and Mr Kendall – recorded by Ms Riddiford – at the conclusion of which they both signed a letter of that date in which Mr Kendall confirmed and guaranteed that the agreed postcodes currently with Hills would transfer to the claimant on 22 January 2024. According to paragraph 117 of Ms Riddiford’s first statement, the letter asked for confirmation that the payment plan which she had proposed on 8 February 2023 would be honoured and the difference from what was currently owed weekly in 2023 would be met on a weekly basis, i.e. that the claimant would clear invoices in full moving forward.[10]According to the claimant, the 2024 Agreements were intended to address difficulties which had arisen for the claimant as the result of the defendant’s failure to allocate the 2022 Postcodes to the claimant as promised by Mr Kendall in 2021. The combined effect of the 2024 Agreements is that certain substantial credits would be applied in its favour to the trading balance as between it and the defendant to compensate the claimant for not having received additional postcodes which it had been promised; the defendant would allocate those postcodes to the claimant by 29 January 2025; and, if the defendant did not do so, credits of £26,932.50 per week would be applied until they were allocated. The postcodes remain unallocated to the claimant.[11]On 15 November 2024, the defendant offered an undertaking until trial not to give effect to a termination notice in reliance on the claimant’s ongoing failure to pay the sum claimed by the defendant in the October 2024 Letter, subject to a cross-undertaking in damages by the claimant, which was given on 19 November 2024. The defendant was not, however, willing to agree an interim regime under which the weekly credits to the claimant under the 2024 Agreements would continue to be applied. The cross-undertaking was not made on the basis that the claimant would make payments to the defendant regardless of the terms of the 2024 Agreements. The claimant disputes its liability in respect of the sums to which the October 2024 Letter relates.[12]On 10 December 2024, the defendant’s solicitors wrote to the claimant’s then solicitors. The letter included a Notice that breach must be remedied which stated that if payment in full of the sum claimed by the defendant was not made by 9 January 2024, the defendant would give notice in writing thereafter to terminate the 2018 Agreement and/or the 2024 Agreements forthwith.[13]On 6 January 2025, the defendant’s solicitors wrote to the claimant’s present solicitors. The letter included a Notice that further breaches must be remedied which stated that if payment in full of the sums claimed by the defendant was not made by 5 February 2025, the defendant would give notice in writing thereafter to terminate the 2018 Agreement and/or the 2024 Agreements forthwith.[14]The claimant alleges that the defendant is in breach of the January Agreement and the May Agreement by failing to issue credit notes.[15]The claimant alleges that, by the October 2024 Letter, the defendant denied the validity of the 2024 Agreements, alleged that it is owed a sum of approximately £1.4 million under the 2018 Agreement and, on the basis of that liability, gave notice to terminate the 2018 Agreement or alternatively the Partner Agreement and to reallocate the postcodes to other transport providers. The defendant disputes that the October 2024 Letter gave notice of termination but, rather, explained that the 2018 Agreement would terminate if the sums claimed were not paid; and the defendant also disputes that its denial of the 2024 Agreements, if binding at all, amounted to a repudiation of the 2024 Agreements. There is, therefore, plainly a dispute about the nature and effect of the October 2024 letter.[16]On 27 January 2025, the defendant brought a Part 20 claim against Mr Kendall alleging breaches of his service agreement and of statutory and fiduciary duties owed to the defendant relating to his role in the conclusion of the 2024 Agreements.[17]The validity of the 2024 Agreements is hotly contested by the defendant on a variety of grounds set out in the defence and counterclaim but primarily on the grounds that Mr Kendall lacked actual or apparent authority to enter into them or, if they are valid, that they were entered into under a mistake or induced by misrepresentation. In consequence, the defendant seeks various declaratory and other relief. The defendant submits that there was no reasonable commercial rationale for the 2024 Agreements and invites the court to infer that when Mr Kendall agreed to them he was, in part, influenced by a desire to conceal wrongdoing on his own part.[18]It is, of course, not for this court on the present application to resolve the many disputed issues which will fall for determination at the trial of the Part 7 claim.[19]The defendant maintains that, pending trial, the financial basis of the parties’ dealings should be the 2018 Agreement, since it disputes the 2024 Agreements; and that if the claimant is not prepared to forego the weekly credits alleged by the claimant to arise under the 2024 Agreements and make payments in accordance with the 2018 Agreement, the defendant will terminate the contractual relationship.[20]The claimant claims that, leaving the weekly credits aside, the weekly amounts due from it to the defendant since 10 December 2024 are in the region of £40,000 - £50,000 and will continue until a trial some distance in the future, by which time the amounts due will have totalled some £2.3 million. If the weekly credits under the 2024 Agreements were applied, the weekly amounts due would be more than halved. Ms Riddiford’s evidence is that, without the weekly credits, the claimant will be unable to pay the amounts due and survive; and that, without the grant of an injunction, the claimant’s business will therefore ultimately be destroyed. The claimant has, on a without prejudice basis, offered to accept only one-half of the weekly credits and to pay the other half.[21]The claimant submits that the defendant is seeking to exploit the claimant’s vulnerable financial position to force the claimant to give way and avoid a trial.[22]Following the conclusion of the hearing, the parties entered into an order by consent which preserves their respective positions until after this judgment or further order. The order included an undertaking by the claimant to pay one-half of the amount of the weekly credits in dispute from the date of the hearing.[23]The outcome of the present application turns (as is common ground between the parties) on how the well-known American Cyanamid principles are to be applied, namely whether there is a serious issue to be tried, whether damages would be an adequate remedy and whether the balance of convenience (or, perhaps more correctly put, the balance of the risk of doing an injustice) lies in favour of or against the grant of an injunction. As stated by Lord Hoffmann, giving the opinion of the Board, in National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] 1 WLR 1405 at [17], the court “has to engage in trying to predict whether granting or withholding an injunction is more or less likely to cause irremediable prejudice (and to what extent) if it turns out that the injunction should not have been granted or withheld, as the case may be. The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other”. The principle applies whether the injunction is prohibitory or mandatory; and arguments over whether the injunction should be classified as prohibitive or mandatory are barren although, as a generalisation, the features which ordinarily justify describing an injunction as mandatory are often more likely to cause irremediable prejudice than in cases in which a defendant is merely prevented from taking or continuing with some course of action, see Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670, 680 cited in Olint at [19].

Serious issue to be tried

[24]On the question whether there is a serious issue to be tried, the claimant submits that not only is there a serious issue to be tried but that the defendant’s defences to the claim are inherently implausible. At the hearing, the defendant accepted that there is a serious issue to be tried but it argues that the claimant’s case is weak and that the court cannot have a high degree of assurance that the 2024 Agreements will be upheld at trial.[25]The defences raised by the defendant, as they appear from paragraphs 41 to 59 of its skeleton argument, include lack of apparent authority on Mr Kendall’s part; knowing receipt by the claimant of assets of the defendant by reason of Mr Kendall’s breach of fiduciary duties as a director; a liability on the claimant’s part to make restitution to the defendant by reason of the claimant’s unjust enrichment; misrepresentation; common mistake; and that clause 2.3 of the May Agreement is an unenforceable penalty clause. Ms Riddiford responds to the defendant’s allegations factually in her second statement. The defendant, with commendable realism, recognised that it “may not be feasible” to explore each of these defences in depth at the hearing of the application. The question of Mr Kendall’s alleged lack of actual authority to enter into any of the 2024 Agreements, for the reasons advanced in paragraph 60(1) of the defendant’s skeleton argument, does not arise since the claimant does not rely on Mr Kendall having had actual authority.[26]The defendant submits that the claimant’s argument that Mr Kendall had apparent authority is doomed to fail, having regard to what was said at the 10 January 2024 meeting and the highly unusual and oppressive commercial terms to which he purported to sign up. It submits that it is not open to the claimant to rely on Mr Kendall’s apparent authority since there is evidence that the claimant failed to make the inquiries that a reasonable person would have made in all the circumstances to verify that he had that authority. The claimant disputes that Ms Riddiford acted in such a way as to disentitle it to rely on Mr Kendall having had apparent authority. In particular, it contends that there is no basis in the documentation or otherwise for any suggestion that she had a suspicion that Mr Kendall was covering up his wrongdoing from his colleagues.[27]The claimant submits that it is unlikely that, in concluding the 2024 Agreements, Mr Kendall was acting disloyally towards the defendant. The claimant observes that the defendant has adduced no evidence from any of its officers or employees to that effect, although Mr Wells’ first statement says that evidence from various other members of the defendant’s employees will be sought for the hearing of the Part 7 claim. Mr Kendall has apparently declined to comment on Ms Riddiford’s evidence.[28]The claimant disputes that the terms of the 2024 Agreements are oppressive and exorbitant and, in particular, the matters relied on in paragraph 60(2)(b) of the defendant’s skeleton argument.[29]The claimant also disputes that the 2024 Agreements are void on the ground of an alleged common mistake, namely that the defendant was unilaterally entitled to serve notice on Hills. It submits that there is no evidence to that effect from Mr Kendall and that it is not credible that he would have been labouring under any mistake as to the defendant’s ability to terminate the contract with Hills.[30]In relation to the defendant’s misrepresentation claim, the claimant’s position is that there is no evidence that Mr Kendall understood the representations to be as alleged and no evidence of reliance on them.[31]The claimant also disputes that clause 2.3 of the May Agreement operates as an unenforceable penalty clause.

Adequacy of damages

[32]I now turn to the adequacy of damages. The claimant submits that damages would not be an adequate remedy and, relying on Gee on Commercial Injunctions (7th ed) at paragraph 2-025 and the cases there cited, that one situation in which damages may be inadequate is when the refusal of an injunction would lead to the destruction of the claimant’s business.[33]The claimant submits that this is what would occur here. According to the claimant, if no injunction is granted, the defendant will terminate the contractual relationship between the parties unless the claimant immediately pays some £162,500 on which the threat to terminate on 6 January 2025 is based, together with the weekly payments from that date until the hearing of the application, estimated to be about £129,000, and to make ongoing weekly payments without the weekly credits under the 2024 Agreements. According to Ms Riddiford, the claimant would be unable to make those payments without the weekly credits and would have to cease trading before the hearing of the Part 7 claim. She says that termination would likely result in the overnight closure of the claimant since about 89% of its business is accounted for by the defendant, moving to another network would take a considerable time to build up and operating outside a network and other suggested solutions are not feasible. Her evidence is supported by that of Mr Day who, in paragraph 6(d) of his statement, says that if weekly credits were to be removed in full, it would lead to the claimant’s liquidation.[34]The claimant submits that, in contrast to its position, the risk of financial loss to the defendant if an injunction were granted would be limited to the risk of not recovering from the claimant (or Mr Kendall via the Part 20 claim) the weekly credits (or half the weekly credits as proposed by the claimant) and the other sums on which the termination of the contractual relationship are based. There is no existential threat to the defendant.[35]The defendant submits that damages would, in theory, be an adequate remedy for both parties and that the issue here is that there would be no prospect of the claimant being able to pay the substantial and ever-increasing sum for which it is liable if the injunction were wrongly granted.[36]I accept that, for the defendant, damages would be an adequate remedy if it were able to recover the amount of such damages from the claimant if an injunction turned out at trial to have been wrongly granted.[37]In relation to the claimant, in paragraph 175 of her first statement, Ms Riddiford states that if the defendant were to terminate its contractual relationship with the claimant, the damage to the claimant’s business would be immediate and irreparable. The impact of termination on the claimant and its wider impact is further developed in paragraphs 179 to 183 of that statement. In paragraph 72 et seq of her second statement, she responds to Mr Wells’ evidence in paragraph 105 of his first statement that the refusal of an injunction “will not necessarily lead to termination” and that the claimant is able to meet the weekly payment requests after 15 November 2024 pending the trial of the Part 7 claim. She states that the claimant is not in a financial position to do so since it would render the claimant loss-making and the claimant lacks the cash flow to do so. As already mentioned, her evidence is supported by that of Mr Day.[38]The defendant submits that there is insufficient evidence to show that if an injunction is not granted the claimant will go out of business. In particular, it points to the absence of evidence that external funds are not available to sustain the business and what it says is a concerning development relating to the establishment on 15 February 2025 of a new company, Safe Group 25 Limited, which Ms Riddiford says is her daughters’ company. It submits that the court can and should take account of the late adoption by the claimant of the position that it cannot pay what is due and asks why, if the claimant is in a position to make payment of one half of the weekly payments due, it cannot make the payments in full.[39]Taking these matters into account, I consider that damages would not be an adequate remedy if an injunction turns out to have been wrongly refused. The claimant has adduced sufficient evidence to persuade me that, without an injunction being granted, there is a substantial risk of it going out of business by the time that its Part 7 claim would come to be tried. I do not consider that the incorporation of Safe Group 25 Limited alters that position. Mr Day’s evidence explains why the claimant is not in a position to make the payments in full. His evidence is not detracted from by the alleged late adoption of the claimant’s position.

Balance of convenience

[40]Aside from the question whether damages would be an adequate remedy, it remains to consider where the balance of convenience lies. I accept at the outset that the court’s preliminary view of the merits of the case is a matter which can properly be taken into account in assessing where the balance of convenience lies.[41]While I am satisfied that the claimant has a good arguable case, on the materials before the court and in the absence of cross-examination of Ms Riddiford and Mr Kendall and other potential witnesses, which will be important in the present case, in relation to the discussions in 2021-2023 and the January 2024 Agreements, it is not possible to form a view on the merits of the case which would affect one way or another the question of where the balance of convenience lies. I certainly do not consider that the claimant’s case only just crosses the relatively low threshold required to establish the existence of a good arguable case or is otherwise weak.[42]The defendant submits that the absence of any high degree of assurance that the claim will succeed at trial is a strong factor to be weighed in the balance in its favour when considering the balance of convenience. It submits that in a case such as the present, where the relief sought by the claimant on this application is essentially mandatory in nature (since the defendant is being required to give the weekly credits), if the court was not satisfied that the claimant’s case was a strong one which was likely to succeed at trial, that would in fact be decisive against the grant of an injunction.[43]As I have indicated, on the materials before the court I cannot be satisfied that the claimant’s case is a strong one which is likely to succeed at trial. However, I do not accept the defendant’s submission that this conclusion is fatal to the grant of an injunction in the present case. As Lord Diplock said in American Cyanamid itself, in a passage quoted by Lord Hoffmann in Olint at [17], it would be unwise to attempt to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them.[44]The claimant submits that the prejudice to it if no injunction is granted outweighs that to the defendant if an injunction is granted, due to the strong likelihood of the claimant going out of business if no injunction is granted. On the other hand, the prejudice to the defendant if an injunction is granted is purely financial in nature and, while the amounts which the defendant may fail to recover are substantial, they are well capable of being borne by the defendant and capable of being compensated by an award of damages. The prejudice to the defendant is reduced by the claimant’s offer to pay one-half of the weekly payments due. It would also be mitigated by an expedited trial being ordered.[45]The defendant submits that the likelihood of prejudice to it outweighs the likelihood of prejudice to the claimant. It relies on the matters referred to in paragraph 38 above and its likely inability to recover the losses which it will incur as a result of the grant of an injunction, against the backdrop of its 15 November 2024 undertaking, and the claimant’s inability to meet any liability on the cross-undertaking in damages which would be required from the claimant in return for the grant of an injunction.[46]As I have already stated, in relation to the matters referred to in paragraph 38 above, I consider that there is a substantial risk of prejudice to the claimant if an injunction is not granted.[47]Importantly, the defendant also submits that the claimant was in effect the author of its own misfortune since the cause of the claimant’s substantial indebtedness and financial instability which may lead to its business ceasing to be commercially viable was the decision which it took at its own commercial risk to acquire larger premises at Avonmouth in anticipation of receiving additional postcodes from the defendant, without there being any binding commitment on the defendant’s part to transfer the additional postcodes to the claimant. The claimant disputes this, arguing that its acquisition of the larger premises followed an agreement reached at the meeting on 25 October 2021 that the 2021 Postcodes and the 2022 Postcodes would be transferred to it. The existence of that agreement is disputed by the defendant. In my judgment, there is considerable force in the defendant’s submission. The claimant’s position does not emerge clearly from the email chain referred to in paragraph 37 of Ms Riddiford’s first statement, although again cross-examination will be important, and there is documentary evidence which indicates to the contrary, although not by any means conclusively. However, it does not follow that, for that reason alone, the balance of convenience lies against the grant of an injunction.[48]With regard to the inadequacy of a cross-undertaking, it is trite that one will usually be required as the price of the grant of an injunction but, as stated in Gee at paragraph 11-024, the court has a discretion in the matter: the court may “still decide to grant the relief sought, accepting the risk that the undertaking may not be honoured if called upon” albeit that this is “in rare cases where the merits are strongly in favour of the applicant”.[49]As Lord Hoffmann said in Olint at [19]:
“What is required in each case is to examine what on the particular facts of the case the consequences of granting or withholding of the injunction is [sic] likely to be. If it appears that the injunction is likely to cause irremediable prejudice to the defendant, a court may be reluctant to grant it unless satisfied that the chances that it will turn out to have been wrongly granted are low; that is to say, that the court will feel, as Megarry J said in Shepherd Homes Ltd v Sandham [1971] Ch 340, 351, ‘a high degree of assurance that at the trial it will appear that the injunction was rightly granted’.”
[50]The claimant relies on the Court of Appeal’s decision in Fleming Fabrications Ltd v Albion Cylinders [1989] RPC 47 where, even though the court considered it probable that the plaintiff would be unable to meet or meet in full any liability on its cross-undertaking in damages, an injunction was granted because of the risk of injustice if it were not.[51]In Fleming Fabrications, the plaintiffs were respectively the registered proprietor of and exclusive licensee under a patent relating to a self-priming device for hot-water systems. The inventor of the device, a director of the licensee, and its general manger subsequently went to work for the defendant. The plaintiffs learned that the defendant intended to market a similar device and succeeded in obtaining an interlocutory injunction pending trial of infringement proceedings even though the plaintiffs would in all probability be unable to meet any liability on a cross-undertaking in damages due to the risk of the plaintiffs otherwise being driven out of business by the defendant. An important consideration for the court was that the reason the plaintiffs might have been driven out of business was the activities of the second plaintiff’s former employees who acted against the interests of the plaintiffs around the time they left the licensee’s employment in decrying the plaintiffs’ position to the plaintiffs’ suppliers and customers and deliberately creating as much financial difficulty for the plaintiffs as they could; and who now were working for the defendant.[52]The defendant draws attention to a passage in the judgment of May LJ in that case where he said, at page 53:
“In my judgment, having read the learned judge’s judgment more than once, it seems to me that he took the view that not only did the respondents have an arguable case, but that it was a strong arguable case, and the defences raised against it were not in themselves very strong, although there was one point of law which was not decided. Having concluded that there was an arguable case on the respondents’ side, he then of course turned to the question of the balance of convenience.”
[53]Also, at page 57, May LJ said that:
“I fully appreciate that if one simply does the damages exercise, to which reference is so often made when American Cyanamid is quoted, the result might seem to be that no interlocutory injunction should go in the circumstances of the instant case. On the other hand, when one bears in mind that that is only part of the balance of the risk of doing an injustice and looks at all the other considerations – to which I have referred and which are also in my mind but which I have not gone into in detail which are clear on the papers – I think that the balance in the circumstances of the instant case does require the grant of an interlocutory injunction against the appellants.”
[54]Similarly, in Allen v Jambo Holdings Ltd [1980] 1 WLR 1252 (referred to in Dillon LJ’s concurring judgment in Fleming Fabrications at page 58) – a negligence and fatal accidents claim – the Court of Appeal held that the plaintiff should not be deprived of a freezing order to which she was otherwise entitled on the ground that her cross-undertaking in damages was of limited value. The plaintiff was the widow of a person who had been killed in an accident involving an aircraft owned by the defendant. At 1257H, Shaw LJ said that “If one applies the principle that the proper order is one which would result in a due balance of justice and convenience, it would follow that in the circumstances of this case the course to be taken is that which would involve the least risk of ultimate injustice having regard to the actual and potential rights and liabilities of the parties on both sides.”[55]Unsurprisingly, neither Fleming Fabrications nor Allen is on all fours with the present case. It is correct to say, as does the defendant, that in Fleming Fabrications the court was influenced by the fact that it was the conduct of the plaintiff’s former employees then working for the defendant being the cause of the risk of the plaintiff being driven out of business. The claimant, while accepting that the facts of that case are different, argues that the conduct of not only Mr Kendall but also of Mr Shotton concerning the acquisition of premises and staff recruitment was the cause of its financial situation.[56]The defendant draws attention to Goldtrail Travel Ltd (in liquidation) v Onur Air Taşimacilik AŞ [2017] UKSC 57, which is not a case concerning a party’s ability to meet any liability under a cross-undertaking in damages but concerned the imposition of a condition on the grant of permission to appeal. In that case, the Supreme Court held that a condition which would have the effect of stifling the appeal should not be imposed. In that context, where the appellant was a company which appeared to have no assets of its own and the respondent alleged that the company had access to the resources of others, the court had to determine whether the company had established on the balance of probabilities that no such funds would be made available to it. The court ought not to take at face value any refutation by the company that the funds necessary to meet the condition would be made available to it but had to judge the probable availability of funds by reference to the underlying realities of the company’s financial position: see in particular at [23] per Lord Wilson JSC.[57]In the present case, it is the defendant's own position that the claimant itself is not financially able to meet any liability on a cross-undertaking in damages. The defendant has not alleged that the claimant has access to other resources. While the defendant points to the absence of evidence that external funds are not available to sustain the business, unlike in Goldtrail Travel, the defendant does not affirmatively allege that the claimant does have access to the resources of others.[58]In the end, the question comes down to which course seems likely to cause the least irremediable prejudice or the least risk of injustice to one party or the other. Despite the forceful submissions of the defendant and the differences between the reported cases to which I have been referred and the present case, I consider, on the evidence, that the grant of an injunction seems likely to cause the least risk of irremediable prejudice in view of the respective financial positions of the parties and the other matters referred to above. To the extent that Gee is suggesting that there is a hard and fast rule that the merits need to be strongly in the claimant’s favour where a cross-undertaking in damages may be inadequate, I respectfully disagree. In all the circumstances of the present case, therefore, in my judgment the appropriate course, in the exercise of my discretion, is to grant the application. As discussed at the hearing, the precise wording of the order to be granted will require to be determined following this judgment if not agreed between the parties in the meantime.[59]For completeness, I do not consider it appropriate on the present application to direct that there should be an expedited hearing of the Part 7 claim. That matter was not the subject of full argument and is one not only as between the parties but which also involves wider considerations such as the availability of court time and the effect on other litigants. It can be addressed at a subsequent case management conference should the parties wish to raise it at a later stage.