When facing issues such as trade mark infringement or misuse of confidential information, your business may need an urgent document-imaging order to preserve evidence and perhaps also a freezing injunction to prevent the defendant from disposing of or concealing its assets, so that you cannot recover any of your losses if ultimately you win at trial. These legal tools can be effective, but a recent case highlights the critical need to comply fully with your duty of fair presentation when making applications without sending notice to the defendant, so that it does not attend the court hearing.
In this newsletter, we examine (1) J&J Snack Foods Corp (2) ICEE Corporation v (1) Ralph Peters & Sons Ltd, (2) Mark Jeffrey Peters, where the court set aside two orders obtained without notice of the initial application hearing to the Defendants.
What happened in (1) J&J Snack Foods Corp (2) ICEE Corporation v (1) Ralph Peters & Sons Ltd, (2) Mark Jeffrey Peters?
The Claimants contended that the Defendants were infringing their “Slush Puppy” and “Slush Puppie” UK and EU trade marks and passing off their products. Without notice to the Defendants the Claimants sought from the court and secured urgent orders to freeze the Defendants’ worldwide assets and to gain access to electronic documents to image and preserve them. However, these orders were later set aside at the second (return) hearing when the Defendants were present.
This was because the court found significant shortcomings in how the Claimants had presented their application for these remedies, including that the circumstances of the application had not justified a without notice hearing in the first place. Mr Justice Fancourt ruled that the Claimants had failed to comply with the duty of full and frank disclosure (or fair presentation) in their without notice applications.
Without Notice Applications
The Judge explained that any hearing which takes place without the party from which the Claimant is seeking relief being present, is an exceptional hearing. The Claimant must demonstrate a genuine concern that if the Defendant had been notified of the hearing in advance then it would have taken steps to put the Claimant at a disadvantage. This could be by concealing assets or by destroying evidence.
The test for a without notice application is stringent:
“The case for excluding the respondent has to be justified by evidence, be persuasive, and be explained to the judge at the hearing, and then there has to be a conscientious attempt to compensate for the (otherwise) one-sided nature of the hearing”.
The Duty of Fair Presentation
Given that the absence of a party to a hearing offends the principles of natural justice, there is a heavy responsibility on the Claimant to bring all relevant matters to the attention of the judge hearing its application for injunctive orders. This includes making all the points which the Defendant would have made to the court if it had been present at the application hearing.
Specific Failures Identified by the Judge
Mr Justice Fancourt identified several specific breaches of the Claimants’ duty of fair presentation:
- Misrepresentation of claim value to secure the amount of the sums frozen: The Claimants were seeking from the Defendants an account of profits for the alleged trade mark infringements and for the passing off. For this purpose they had used an estimate of the profits which FBL, a subsidiary company of Ralph Peters & Sons Ltd, had allegedly made from the trade mark infringements in order to calculate the amount of the Defendants’ funds which they asked the Court to freeze.
However, FBL was not a Defendant to the Claimant’s claim.
Instead it was a Defendant to the same infringement claims brought by the second Claimant, ICEE in earlier and continuing proceedings in Ohio in the United States. For the proceedings in England, the Claimants had pleaded only that the Defendants had procured the FBL infringements, or were parties to a common design with it to that effect. This is a claim of accessory liability against the Defendants in tort (civil wrong), and not a case of primary liability against them. As a result the Claimants were only entitled to apply to freeze funds calculated on the assumed profits which each Defendant would have received from FBI’s alleged infringements; and not to freeze funds calculated on the Claimants’ estimate of the entire profits which FBL itself had made from the alleged infringements. - Ignoring potential defences: At the initial hearing the Claimants had not fairly presented the obvious potential defences that the Defendants would have raised in response to the allegations.
- Lack of clarity on claim phases: The Claimants had pleaded that there were 2 distinct phases to the alleged infringements. For the second phase, FBJ had used a new trade mark: “Slushy Jack’s”. But the Claimants had not attempted to establish at the without notice hearing that they had a good arguable case of infringement against the Defendants based on the new trade mark. Establishing a good arguable case is the minimum standard required to apply for injunctive relief. As a result of this oversight, the scope of the imaging order which the Court had initially ordered had been far too wide.
- Exaggeration of asset dissipation risk: The Claimants had failed to bring to the Judge’s attention some key facts, including the Defendants’ continued trading and financial stability; it had assets of £26,000,000 and had made some royalty payments made to the Claimants. All this indicated that there had never been any realistic risk of asset dissipation.
Consequences of failing to meet disclosure obligations
If your business fails to present a balanced picture, without notice injunctions could be overturned later, leaving you exposed to costs, damages, and reputational harm even in cases such as this where the Judge rules that the failures have not been deliberate.
Ensuring compliance and avoiding pitfalls
To have the best chance of succeeding in without notice injunctions, applicants must:
- Clearly justify the urgency of the application and need for the absence of the defendant from the first court hearing.
- Fully disclose any weaknesses or potential defences.
- Accurately represent claims and evidence without exaggeration.
How 3CS can help
At 3CS, we specialise in helping businesses navigate complex injunction applications. Our experienced team of dispute resolution lawyers ensure your applications comply fully with court requirements, protecting your interests and reputation. Contact us today to discuss how we can support you.
