In the landmark case Derma Med Ltd v Ally [2024] EWCA Civ 175, the Court of Appeal was called upon to consider the appropriateness of granting injunctions—specifically non-compete and confidentiality injunctions—without notice. The decision provided important clarification on the legal grounds under which such injunctions can be granted, especially in the context of a claimant seeking urgent relief without informing the defendant in advance.

Background

Dr Zack Ally was a leading aesthetics  practitioner who had a strong social media presence and treated patients with Botox and cosmetic fillers.  In 2022 Dr Ally and his wife sold their shares in the claimant company to a third party.  The company alleged that post sale, but whilst he remained employed by the company, Ally was diverting business and using confidential information to compete with Derma Med.

In response to these claims, Derma Med sought two key types of injunctions:

1. Non-compete injunction: A prohibition on Ally working for a competitor or starting a competing business in a particular geographic area and for a specific period.
2. Confidentiality injunction: An order to prevent Ally from using or disclosing confidential information learned during their employment.

Crucially, these injunctions were sought without notice—meaning they were requested without notifying Ally in advance, which is typically reserved for cases of extreme urgency where there is a risk of harm before the defendant can respond. 

Legal Framework and Court's Consideration

The Court of Appeal considered whether the High Court had erred in granting the injunctions without notice. This was a critical point, as injunctions of this nature are usually considered draconian remedies and are granted with caution. The general principles governing the granting of such injunctions were at the heart of the dispute.

1. Urgency and Risk of Dissipation of Assets: The Court examined whether there was sufficient evidence of urgency to justify the "without notice" application. This typically requires the claimant to show that the defendant may take actions that would render the relief sought ineffectual—such as destroying evidence, continuing to breach confidentiality, or otherwise acting in a way that undermines the purpose of the injunction.
2. Adequate Remedy at Law: The Court reaffirmed the principle that an injunction is an equitable remedy and should only be granted when there is no adequate remedy at law. If monetary damages or other forms of relief could provide an effective remedy, injunctions may not be granted. In this case, the court noted that damages would likely be insufficient to remedy the harm to Derma Med, which was concerned with the potential misuse of its confidential business information and client relationships.
3. Serious Issue to Be Tried: The Court reviewed whether Derma Med had established a serious issue to be tried, which is required for any injunction to be granted. In this case, Derma Med had provided evidence that Ally may have been breaching confidentiality agreements and using confidential information to unfairly compete with the company. The Court found that there was a serious issue for trial on these points, which justified the grant of the injunctions.
4. Balance of Convenience: The Court of Appeal also assessed the balance of convenience. This involves determining whether the harm to the claimant from not granting the injunction outweighs the harm to the defendant from granting it. In this case, the Court found that the potential harm to Derma Med from losing its competitive advantage and its confidential information outweighed any inconvenience Ally might suffer from being temporarily restrained from working in their chosen field.

Decision

Whilst initially granting the injunction, the High Court later discharged it due to what it determined to be significant failures in disclosure by Derma Med and the availability of damages as a remedy.  However the Court of Appeal ultimately upheld that those failures were not significant and that the injunction should not have been discharged.  The court recognised that Derma Med had sufficiently demonstrated the urgency of the situation, the risk of harm, and the serious issue to be tried. In particular, the Court emphasised that in cases involving confidential information, the risk of misuse could not be adequately remedied by damages, and there was a strong case for urgent protection through the injunctions.

Implications of the Decision

This decision has significant implications for employers seeking to protect their business interests, particularly in cases involving confidential information, non-compete clauses, and the competitive conduct of former employees. The Court of Appeal confirmed that it is possible for such injunctions to be granted without notice, but only in situations where there is clear evidence of urgency and a real risk of harm.

The case also highlighted the importance of having solid evidence when seeking such injunctions. Employers must demonstrate not only that they have a legitimate claim but also that there is an imminent risk to their business that justifies immediate intervention by the Court. The case reinforces that the courts will scrutinise applications for urgent relief carefully, balancing the interests of both parties before granting draconian remedies like non-compete and confidentiality injunctions.