Joanne Ryan: Interlocutory injunctions and the fallout from Merck Sharpe & Dohme
Joanne Ryan, associate at William Fry, examines a recent decision that answers a question that arose for practitioners from the Supreme Court judgment in Merck Sharp & Dohme.
As my colleagues have discussed previously (here and here), the recent decision of the Supreme Court in Merck Sharp & Dohme v Clonmel Healthcare Limited  IESC 65 brought into question the settled Campus Oil test for determining injunctive relief.
In deciding that case, the Supreme Court set out eight factors that a court might follow in determining whether to grant an injunction. In doing so, the Court emphasised the need for flexibility. One key factor applied by the Supreme Court was that “robust scepticism” should be applied to arguments that damages are not adequate in commercial contract disputes.
A significant question that arose from the judgment was whether this nuanced understanding of the test would apply in intellectual property cases only, such as the patent dispute in Merck Sharp & Dohme, or if it would also apply to general commercial cases. In December 2019, the Court of Appeal welcomed the approach of the Supreme Court in a commercial contract dispute case.
Betty Martin Financial Services Limited v EBS DAC  IECA 327
In this case, the Court of Appeal noted that the Merck Sharp & Dohme decision was “significant” and “welcome”, particularly when it came to consider the adequacy of damages and the balance of convenience elements of the Campus Oil test.
What was the Dispute About?
This dispute centred on the termination by EBS of three agency agreements it had with the plaintiff. The agreements related to EBS branch agencies located in Athlone, Lucan and Longford which were run by the plaintiff company. The agreements were detailed, yet standard, documents adopted by EBS from time to time.
In 2018, EBS gave notice of its intention to terminate the agreements. However, it did not identify any reason for termination in the notice and simply concluded with an expression of EBS’s gratitude for the agent’s contribution over the years. The plaintiff alleged that its refusal to sell unsuitable investment products was the reason behind the termination notice and it issued proceedings against EBS.
The High Court granted the plaintiff an interlocutory injunction to restrain the termination by EBS of the agreements until the outcome of the proceedings. EBS appealed that decision.
Adequacy of Damages and Balance of Convenience
The High Court had considered two of the three elements of the Campus Oil test, namely the adequacy of damages and the balance of convenience, in the conventional manner, i.e. sequentially. However, the High Court case was heard before Merck Sharp & Dohme. This was noted by Mr Justice Collins in the Court of Appeal, where there was essentially a re-hearing of the injunction application.
In the context of the adequacy of damages and balance of convenience tests, the Court of Appeal brought the Merck Sharp & Dohme decision to the attention of the parties during the appeal hearing. Both sides were given the opportunity to consider the decision and to provide supplementary submissions on the decision, thus demonstrating its significance to the Court of Appeal.
Collins J. noted that Merck Sharp & Dohme represented a restatement of the appropriate approach to injunctions and the decision now mandated a less rigid approach. The Court of Appeal emphasised that the essential concern of the court in an interlocutory injunction application is to regulate matters pending trial pragmatically and, in a manner, calculated to minimise injustice.
Collins J. had regard to the flexible steps set out in Merck Sharp & Dohme, and, while noting some difference on the factual findings, ultimately the Court of Appeal upheld the High Court decision to grant the injunction. The consequence of this, unusually, is that the relationship between the parties will remain intact until the commercial court hears the case in full.
Interestingly, in relation to the robust scepticism that a court should apply when considering a claim that damages are not an adequate remedy in commercial contract disputes, the Court of Appeal did not delve into this in much detail in the judgment. In a case involving agency agreements, it would seem that the calculation of damages should be relatively easy to calculate. However, the Court of Appeal noted that the plaintiff’s interests, extend beyond the purely financial given the familial nature of the business. As a result, the calculation of damages would in this instance be too difficult and therefore not adequate.
The Merck Sharp & Dohme case demonstrates a noteworthy shift from the strict application of the three-step test established by Campus Oil.
The significance attached to the case by the Court of Appeal in Betty Martin, which was a commercial contract dispute, shows that the Merck Sharp & Dohme decision will likely have application to all injunction applications.