Privy Council In Bank Ruling Wraps Jamaican Judiciary On the Knuckles, Part III

First posted on Commercial Law International on May 19, 2009.

Injunction, injunction, what´s your function?

Sorry I just could not resist. Despite my lame attempts at a joke, it is a very valid question.

What is the function of an injunction?

It is a power whereby the court may order positive action be taken or an order to refrain from acts being currently done. It may be granted at the interlocutory (that is to say at any stage before the end of a trial) or it could form part of a judge´s final judgment. In either case it is a very powerful tool of the courts and one that is not exercised lightly. Special attention, however, should be paid to the interlocutory injunction as it is a pre-trial determination, it is also a subject on which the Privy Council had a few choice words for both the Jamaican judiciary and Jamaican Bar in National Commercial Bank Jamaica Limited vs. Olint Corporation Limited.

The interlocutory injunction is best thought of as a pause button. It is designed to freeze in place the item that is in dispute by ideally preserving the status quo. However, we do not live in a static world and there are going to be winners and there are going to be losers with such an order – you could go as far as saying such an order creates only losers and worse losers. This is why judges are or ought to be extremely cautious in the exercise of this discretion. It should not be that the making of such an order – one that is done without the full rigors of a trial – be determinative of the (main) issue or issues in dispute. This is why judges look to what is called balance of convenience (American Cyanamid Co v. Ethicon Ltd) or more accurately the balance of inconvenience. As Lord Hoffman explains in the NCB case, ¨the basic principle is that the court should take whichever course seems likely to cause the least prejudice to one party or the other.¨

Having decided that Mr. Justice Jones was correct in the first instance to dismiss the case, holding that there was no triable issue, their Lordships had no need to go any further. However (a favorite word of a lawyer), their Lordships went on to deliver a dicta that wrapped the knuckles of the Jamaican judiciary and Bar – as would a school master a disobedient pupil in days of old. As many a current and former law student come to learn, while the ratio of a case deals with the issues at hand, it is often the dicta though said by the way, that is the most significant aspect of a judgment.  And this I believe is the case here.

Their Lordships wanted to point out, provide some guidance and in a display of judicial politics, gave the Jamaican legal establishment scolding – that was at times not so well veiled.

There were two features of this case that troubled the Privy Council. The first was that, ¨there appears to have been no reason why the application for an injunction should have been made ex parte, or at any rate, without some notice to the bank.¨ An injunction applied for and given without presence or notice to the other party ought to be a very rare thing, ¨although the matter is in the end one for the discretion of the judge, audi alterem partem is a salutary and important principle.¨ Audi alterem partem – sorry for the Latin but it had to be done –  is a fundamental tenet and a cornerstone of justice and cannot be trotted on lightly. It is the right for the other side in a dispute to be heard – like I said a cornerstone of our justice system.

Given the facts of the case, especially the nature of what was in dispute, there should have been no reason why the application for the injunction should not have been inter partes but at a minimum with there should have been some notice to the bank. As their Lordships pointed out, ¨any notice is better than none.¨ The guidance provided to judges considering such applications was made by Lord Hoffmann in no uncertain terms.  He lays down the law (literally), ¨that a judge should not entertain an application of which no notice has been given unless either giving notice would enable the defendant to take steps to defeat the purpose of the injunction…or there has been literally no time to give notice before the injunction is required to prevent the threatened wrongful act.¨ The italics are Lord Hoffmann´s.  Lord Hoffmann further went on to point out these two conditions are enshrined in the Section 17.4 (4) of the Jamaican Civil Procedure Rules 2002.

What characterizes both these alternatives is a sense of urgency. Olint it would seem feared that the immediate closure of its accounts would prejudice it in its main action against the bank. However such fears are not substantiated by the facts of the case. Not only was Olint given ample notice, they were given an extension. Moreover, the closure of a bank account, with or without extensive notice, is not sufficient grounds on which to say that there was no time to give notice. Their Lordships wondered why, ¨no explanation has been given for why it was not possible for the bank to be given notice of the application.¨

However, it was later explained to their Lordships that such last minute ex parte applications had become common practice in Jamaica. The recent cases of World Wise Partners Ltd v RBTT (2008) and Smith v NCB (2008) were cited as examples.

The Privy Council, expectedly, took exception to such blatant disregard for the law and the Civil Procedure Rules by both the judiciary for granting such injunctions and the Bar for applying for them.   They went on to say, ¨these cases appear to show a disregard of rule 17.4 (4) for which no justification is offered. If the rule is not generally enforced, plaintiffs will be encouraged to make a tactical use of the legal process which should not be allowed.¨

Like I said a wrap on the knuckles – actually in legal terms a wrap is highly understating things.

The second feature that troubled the Privy Council was the way in which both Smith J and the Court of Appeal applied the balance of convenience test in the refusal, in the case of the former, and the granting, in the case of the latter of the interlocutory injunction. The basic principle that both had to be mindful of, ¨is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other.¨ Moreover, ¨what is required in each case is to examine what on the particular facts of the case the consequences of granting or withholding of the injunction is likely to be¨

It appears that what the Jamaican courts did was first to characterize the injunction as either mandatory (requiring positive action) or prohibitory while applying the balance of convenience test. Each requires different factors to be taken into account. A mandatory interlocutory injunction would require a ¨high degree of assurance¨ that the applicant would be prejudiced by its refusal, while a prohibitory interlocutory injunction required a ¨serious issue to be tried.¨ At first instance Mr. Justice Jones characterized it has mandatory and refused to grant it while the Court of Appeal characterized it as prohibitory and granted it.

As it turns out the judge at fist instance was correct in result but not in his reasoning. Because what matters is what the practical consequences of the injunction are, ¨arguments over whether the injunction should be classified as prohibitive or mandatory are barren (Films Rover International Ltd v Cannon Films Sales Ltd). Their Lordships made it clear that they ¨consider that this type of box-ticking approach does not do justice to the complexity of a decision as to whether or not to grant an interlocutory injunction.¨

Yet another wrap on the knuckles….Ouch.

It will be very interesting to see what that reaction of the judiciary and Bar will be in Jamaica. This may be a bitter pill to swallow; however, to my mind their Lordships are wholly correct in fact and in law.