Raising the bar for confidence injunctions


Cream Holdings Ltd and others v Banerjee and another



The recent decision of the House of Lords in Cream Holdings has been lauded as a victory for freedom of expression and the press. It raises the bar for applicants seeking to obtain an interim injunction to prevent the publication of confidential information until trial, so that they now have to show, where article 12 is engaged having regard to freedom of expression, that they have a greater than 50% chance of succeeding at trial.



The judgment of Lords Nicholls, Hoffman, Scott, Lord Chief Justice Woolf and Baroness Hale, sets out that, on its proper construction, the test in section 12(3) of the Human Rights Act 1998 - inserted into the Act 'to buttress the protection afforded to freedom of speech at the interlocutory stage', as Lord Nicholls explained in his leading judgment - is that, save for exceptional circumstances, an applicant must show that he will 'probably', or is 'more likely than not' to succeed at trial.



The historical context set out in Lord Nicholls' judgment shows just why this has been seen as a victory for press freedom. While in the 1960s an applicant had to show, on the balance of probability, a prima facie case that he would succeed at trial, in 1975, in the case of American Cyanamid Co v Ethicon Ltd [1975] AC 396, the House of Lords ruled that the applicant only had to show a 'real prospect of succeeding in his claim for a permanent injunction at the trial', and that the claim was not 'frivolous or vexatious'.



The court then had to consider where the 'balance of convenience lies', weighing factors including the urgency to publish now rather than later against the potential damage to the claimant if material were published before determination at trial. Importantly, the court should take, as a 'counsel of prudence... such measures as are calculated to preserve the status quo'.


Fears that maintaining the status quo would militate against publication and lead to the courts granting interim injunctions as a matter of course, led to the inclusion in the Human Rights Act 1998 of section 12. This provides that the court must have particular regard to the right to freedom of expression and section 12(3) sets a threshold test which provided as follows:


'No such relief [which might affect the exercise of the convention right to freedom of expression] is to be granted so as to restrain publication before trial unless the court is satisfied that the applicant is likely to establish that publication should not be allowed.'


Just what 'likely' means is a debate that the defendants took to the Court of Appeal and then on to the House of Lords, arguing that the lower and appeal court had incorrectly applied the test.



The facts of the case are that the first defendant, Ms Banerjee, took confidential material from her place of work. She was a chartered accountant for Cream Holdings, a large and important Liverpool business which diversified from its roots as a nightclub and event/festival staging company to branching into clothing and other manufacturing. After her dismissal in 2001, she gave the material to the publishers of the two daily newspapers in Merseyside, the Daily Post and the Liverpool Echo. Ms Banerjee argued that the information showed illegal and improper activities by the company. Some was later used by the Echo for articles about alleged corruption involving the applicants and a local councillor.



After publication, Cream applied for injunctive relief to prevent the publication of any additional confidential material given to the Echo by Ms Banerjee. While the defendants accepted that the documents were confidential, they argued that they were in the serious public interest. The judge, Mr Justice Lloyd, found it 'likely' that publication would not be allowed at trial, as required by his interpretation of section 12(3) of the Human Rights Act and, balancing the interests of the parties, he granted the injunction.



The defendants appealed, arguing that the judge had applied the wrong test and that 'likely' meant not only showing a 'real prospect of success' at trial, but that it was 'more likely than not' that the applicant would succeed. The Court of Appeal dismissed the appeal, ruling that Cream only had 'convincingly to establish a real prospect at trial'.


The House of Lords disagreed. It was accepted by Lord Nicholls in his leading judgment that his own interpretation of section 12 was not without an 'apparent circularity', but one which allowed for flexibility and justice to be done on the particular facts of the case. What was key was balancing freedom of expression against prospects of success.



In weighing up what must have been in the mind of Parliament when section 12 was included in the Human Rights Act, Lord Nicholls did not accept the Echo's contention that the word 'likely' meant - in all situations - 'probably' or 'more likely than not'. Such an interpretation would, for example, deprive the judge of the opportunity to preserve the position while he considered the evidence under a short-term interim injunction; the confidential genie, once out of the bottle, cannot get back in. Parliament must have intended for there to be some discretion: 'It would be extraordinary if in such a case the court were compelled to apply a "probability of success" test and therefore, regardless of the seriousness of the possible adverse consequences, refuse to restrain publication until the disputed issue of fact can be resolved at the trial.'



So in his judgment, 'likely' in section 12(3) did not mean 'more likely than not' in all situations, as such 'a test of universal application' could lead to 'the antithesis of a fair trial'. While the test should be higher than a real prospect of success, there should be some flexibility which 'permits the court to dispense with this higher standard where particular circumstances make this necessary.'


But in summary, and evidencing the circularity of the test accepted by Lord Nicholls, in the majority of cases this would in fact be the test. The proper construction of the effect of section 12(3) is that 'the court is not to make an interim restraint order unless satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case...'


Clarifying further, he said: 'As to what degree of likelihood makes the prospects of success "sufficiently favourable"... the courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably ("more likely than not") succeed at the trial.'


The flexibility of our common law approach enables the court to achieve justice; there should not be any 'single, rigid standard, governing all applications for interim restraint orders', ruled Lord Nicholls. Accordingly, we have to trade any real fixed set of rules for this flexibility.


But in conclusion, we can say that the bar has been raised so that the applicant will have to jump higher to get over it. To establish that he should be granted an interim injunction to prevent the publication of confidential information, until trial, he will have to show that he is 'more likely than not' to succeed at trial or that he 'probably' will.



See Law report



By Amber Melville-Brown, David Price Solicitors and Advocates, London