Commercial Injunctions: Araci v Fallon [2011] EWCA Civ 668 (2011)

Commercial Injunctions Araci v Fallon [2011] EWCA Civ 668 (2011)

A  recent case illustrates the courts reluctance to allow a breach of contract.

The dispute had arisen between racehorse owner Mr. Araci (A) and the jockey Kieran Fallon (F). The parties entered into an agreement on the 1st April 2011 called a “rider retainer agreement”. A, retained F, to ride the racehorse Native Khan as and when requested by A, over a period of 1 year. The agreement itself contained a prohibition on F riding any other horse as and when retained to ride Native Khan.

There was a liquidated damages provision in the agreement whereby the parties agreed by not riding A’s horse would be assessed at “minimum £30,000 per race not ridden”.

A had asked F to ride Native Khan on the 04th June 2011 in the Epsom Derby. On the 30th May 2011 A received a text message from F saying that he was not going to ride the horse and in fact was agreeing to ride a rival horse in that race.

In the High Court the judge Held it would be breach of contract for F to ride the alternative horse in the Derby, however granting an Injunction would be oppressive to the Defendant and that damages would be an adequate remedy. A, Appealed.

The decision of the Court of Appeal was given on the morning of the Derby.

The Court of Appeal accepted the four principles set out in the High Court’s judgment subject to one amendment that there would have to be special circumstances before the Court would refuse to grant an Injunction.

Special circumstances would be if it was unduly oppressive. To be unduly oppressive would be when the Injunction seeks to place a burden upon the Respondent which is more burdensome or restrictive than the prohibitory term of the contract; an example would be if it was a restraint of trade. In this case the Judge said that it was not a restraint of trade, the jockey was only prevented form riding in one race.

The rules as to the granting of Injunctions are contained in American Cyanamid Co v Ethicon L Ltd (1975). Those are as follows:

  • Is there a serious question to be tried?
  • Are damages an adequate remedy for the Claimant?
  • Does the Claimant’s undertaking of damages provide adequate protection for the Defendant?
  • Where does the balance of inconvenience lie?

In the Court of Appeal the judgment of Jackson LJ Held “Where the Defendant is proposing to act, to include breach of a  negative covenant there must be special circumstances (e.g. restraint of trade, contrary to public policy) before the Court will exercise its discretion to refuse an Injunction.”

The judge also stated that adequacy of damages are not “generally” a relevant consideration where the Injunction restrains a breach for negligent covenant.

The case therefore suggests that if a Claimant shows that the defendant intends to commit a clear breach of negative covenant, they will normally be able to obtain an interim Prohibitory Injunction.

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