10 June 2011

Injunctions: Araci v Fallon

The reason I am writing about Araci v Fallon [2011] EWCA Civ 668 (4 June 2011) is that it is very rare indeed for the Court of Appeal to interfere with the exercise of a judge's discretion when considering an interim injunction application. As Lord Justice Jackson accepted at paragraph [64] the Court of Appeal only interferes with the judge's exercise of discretion in relation to an interim injunction in one of the exceptional situations described by Lord Diplock in Hadmor Productions v Hamilton[1983] I AC 191 at 196. However, his lordship took the view that this case fell into this category and Lord Justice Elias Agreed with him.

The Facts
The well known jockey Kieren Fallon ("Mr. Fallon") had agreed in April to ride Native Khan which belongs to one Vefa Araci ("Mr. Araci") in last week's Derby. Clause 6 of his agreement provided:
"Jockey's Obligations
6.1 The Jockey and his agent(s) agrees that he shall:
(a) Not ride for any other horse where the Jockey has been retained to ride Native Khan under this retainer
(b) Ride the Retainers' Horses in races whenever possible to do so or as requested by the Retainers; and
(c) Wherever a conflict of interest or of a choice of horses to ride occurs for that include a Retainers' Horse, the Jockey shall always ride the Retainers' Horse, unless the Retainers otherwise agree; and
(d) Ride the Retainers' Horses in as diligent a way as possible, making all reasonable efforts to win; and
(e) Conduct himself and appraise the Retainers in an open and honest fashion relating to his subjective views about the training regime, fitness and potential of all the Retainers' Horses and recommendations for training and alternative jockeys when it is not possible for the Jockey to ride a Retainers' Horse in a race. In addition, the Jockey shall use all reasonable endeavours to ride the retainers horse at the trainers establishment at least twice per month for the purpose of forming such subjective views."
Clause 8.3 of the agreement provides liquidated damages for breach of the agreement:
"In the case of a breach by Jockey by opting not to ride the Retainer's horse (unless injury) damages are to be liquidated and assessed at a sum of minimum £30,000 per race not ridden".
As Lord Justice Jackson noted, the contract contained positive obligation to ride Native Khan whenever requested to do so and a negative one of not riding on a competing horse when asked to ride Native Khan. In accordance with his agreement Mr. Fallon rode Native Khan at Newmarket on 11 April winning convincingly.

On Bank Holiday Monday Mr. Fallon texted Mr. Araci's daughter who was in charge of her father's stable to say that he could not ride in the Derby. That was because he had agreed to ride Recital for a competing syndicate. Mr. Araci managed to find another jockey to ride Native Khan at short notice but he faced the prospect of competition from his own jockey in the stakes.

The Interim Injunction Application
Mr. Araci applied to Mr. Justice MacDuff on Wednesday for an injunction to restrain Mr. Fallon from riding Recital. His lordship heard the application on Thursday and delivered his judgment on Friday. The learned judge rejected the application even though he regarded Mr. Fallon's defence as fanciful. Apparently, Mr. Fallon said that Mr. Araci had instructed him to race in the French Derby which was to take place on 5 June rather than the English one the previous day. The judge found for the defendant on the ground that the liquidated damages clause provided adequate relief for Mr. Araci. Dissatisfied with Mr. Justice MacDuff's decision, Mr. Araci appealed to the Court of Appeal which sat on Derby Day morning.

The Appeal
The Court of Appeal allowed the appeal on two grounds:
"First, the judge erred in law in holding that damages would be an adequate remedy. Secondly, although weight must be a matter for the trial judge not this court, in my view the various factors identified by the judge are not capable of justifying refusal of relief in a clear case such as this."
As for the first ground clause 8.3 was addressed to the breach of the positive obligation of failing to ride the claimant's horse when asked to do so under clause 6.1 (b) but not to the negative obligation of not riding for a competitor under clause 6.1 (a). Damages for breach of the latter obligation would be much less easy to quantify. As Lord Justice Jackson put it at paragraph [49]:
"49. There is a real possibility that if the defendant rides Recital this afternoon, he will finish ahead of Native Khan by reason of (a) his skills as a jockey and (b) his special knowledge concerning Native Khan and the strategy of the claimant's team.

50. Quite apart from the financial rewards which flow from winning the Derby, there is also the prestige which attaches to any horse and any horse owner following such a triumph."
As for the exercise of judicial discretion the Lord Justice Jackson observed perhaps somewhat icily at paragraph [65]:
"The defendant voluntarily entered into a contract for substantial reward containing both positive and negative obligations. There is nothing special about the world of racing which entitles the major players to act in flagrant breach of contract. The defendant has promised in the context of a commercial agreement that he will not compete against Native Khan in the Derby this afternoon. In my view, that promise should be enforced."

With those conclusions Lord Justice Elias essentially concurred.

Comment
Although not an IP case the is an authority that is likely to be cited in many IP cases particularly those on breach of confidence, restrictive covenants and licences. There was nothing unusual about the contract in this case. Most licence and distribution agreements,l contracts of service and services contracts contain positive as well as negative obligations and many have liquidated damages clauses which are usually controlling. It will be a hard case to distinguish in future.

This is not the first time today that I have blogged about injunctions. I have also given some tips on interim injunction applications in "The Right Way to Move a Motion" on our chambers website. If anyone wants to discuss this case or injunctions generally, he or she should call me on 0800 862 0055 or use my contact form.

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