Less commonly discussed are the repercussions that flow from having an interlocutory injunction granted. The significant effects of obtaining an interlocutory injunction include:
- the undertaking as to damages; and
- proceedings in the Court have now been commenced.
Undertaking as to damages
Before a Court will grant an interlocutory injunction, the plaintiff will almost always be required to give the usual “undertaking as to damages”.
The aim of an undertaking as to damages is to compensate any party that is harmed by the making of an unfair injunction. Such an undertaking is a commitment by the plaintiff, that it will pay damages to the respondent for any loss sustained by reason of the injunction, if it should be held at the trial that the injunction was incorrectly granted.
The main risks that one should consider prior to making an undertaking as to damages is that, should it be later held that the injunction was ordered incorrectly:
- the plaintiff may need to pay a significant amount of damages; and
- the plaintiff may need to compensate any affected third parties.
In some circumstances it may be near impossible to calculate the extent of any damages that could potentially result from an injunction and prior to seeking an injunction, a sound risk assessment as to the potential costs of such an exercise needs to be made.
Legal proceedings have been commenced
As discussed above, the Court must be satisfied that the plaintiff has a sufficiently arguable case that has a likelihood of success at a trial. Once an application for an injunction has been made, and legal proceedings between the parties has now commenced in the Court and the matter will proceed to a trial for final determination.
It is imperative that prior to making an application for an interlocutory injunction, that the usual considerations of risks of proceeding through litigation have been considered, these include (but are not limited to):
- the element of the unknown, every claim contains an element of the unknown and this is a fundamental element of litigation risk, the outcome of a trial is never guaranteed;
- the costs, traditionally in civil litigation costs follow the event; this means the successful party is usually entitled to recovering their costs of the litigation, by the time the matter has reached trial, this can be in the tens of thousands;
- time; litigation is a time-consuming exercise and matters can take months or years to reach trial; and
- relationships, litigation often results in the breakdown of relationships between the parties and if there is any future prospect of working together, the risk to the relationship should be seriously considered.