UK: The Enforcement Of Negative Covenants: An Easy Ride?

Last Updated: 9 March 2012
Article by Jonathan Angell, Sean Geraghty and James Stonehill

Published in Dechert's Commercial Matters March 2012

Clauses which purport to allow parties to seek injunctions or similar equitable remedies when damages would prove inadequate are regularly included in agreements. But should those seeking an injunction, particularly to enforce a negative covenant, expect an easy ride?

Despite a recent Court of Appeal case (the first of its kind) which granted an interim injunction to enforce a negative covenant, there are a number of hurdles which must be cleared before an injunction to enforce a negative covenant will be granted.

Vefa Ibrahim Araci v Kieren Fallon

Jockey Kieren Fallon entered into an agreement with a racehorse owner, Araci, which placed him under both a positive obligation to ride that owner's horse when requested, and a negative obligation not to ride a rival horse at such time. A week before the 2011 Epsom Derby, Fallon informed Araci he would not ride the designated horse, but would instead be riding a rival's.

The Court of Appeal over-turned the first instance decision and granted Araci an interim injunction restraining Fallon from riding in the Derby. The Court held that it was settled law that breaches of negative stipulations could be restrained by injunction. They also held that the injunction would not be oppressive or unjust to Fallon and that there were no special circumstances warranting its refusal.

Although an injunction was granted in this case, it is important to bear in mind the following points, which the court will take into account when deciding whether to exercise its discretion.

  • Equitable doctrines

Injunctions are equitable remedies and, as such, in deciding whether to exercise its discretion the court will apply certain equitable doctrines. These include:

    • those who come to equity must come with "clean hands" — the court will consider whether the applicant has upheld, and is willing to uphold, their side of the contract; and
    • delay — claims must be brought in a timely manner, and any delay must not result in an unfair outcome.
  • Adequacy of Damages

As with all equitable remedies, the enforcement of negative covenants will not be available where damages are an adequate remedy. This was discussed in Araci, where it was held that damages would not be adequate, due in part to the unique circumstances of the case and the difficulty therefore in quantifying damages. The court acknowledged that, although not impossible, it would be difficult to speculate how different horses would have performed with different jockeys. However, one of the Court of Appeal judges stated that in the context of a prohibitory injunction, adequacy of damages is not a relevant factor. If such reasoning is applied going forward, this could ride roughshod over the accepted adequacy of damages principle.

  • Hardship or Oppression

If the granting of an injunction would cause hardship or oppression, the court will not grant it, even where this will result in an agreement being breached. In Araci the court found that, although being restrained from riding in the Derby would be a serious blow to Fallon, it would be neither oppressive nor unjust. The court will also take into account the impact of any injunction on third parties and restrict its use if it would cause undue suffering or hardship to a third party.

  • Interim Injunctions

In addition to the points listed above, those seeking interim injunctions must usually satisfy the conditions laid down in the American Cyanamid case. These are:

  • whether there is a serious question to be tried;
  • whether the balance of convenience is in favour of granting the order;
  • whether it would maintain the status quo;
  • the relative strengths of the case; and
  • any special factors.

The judges in Araci held that the test in American Cyanamid was inapplicable in Araci as there was a clear breach of covenant. Instead there was a rebuttable presumption that the injunction should be granted and the burden therefore fell on Kieren Fallon to prove 'special circumstances' as to why the injunction should not be granted.


Although Araci was successful in obtaining an injunction to prevent a breach of a negative covenant there are several conditions for an applicant to satisfy before the courts will grant an injunction. Nonetheless the case of Araci shows that if there will be a clear breach of a negative covenant, the courts can be willing to grant injunctions to restrain breaches.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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