Wednesday, December 14, 2011

Sask CA Disagrees with FCA on Irreparable Harm in Interlocutory Injunctions

Mosaic Potash Esterhazy Limited Partnership v Potash Corporation of Saskatchewan Inc, 2011 SKCA 120

It is very difficult to obtain an interlocutory injunction in a patent case in the Federal Court, as the FCA jurisprudence uses irreparable harm as a strict threshold, in the sense that the balance of convenience stage will not be reached if the applicant cannot established that it will suffer irreparable harm, and the standard for establishing such harm is high: the applicant must show it “will actually” suffer irreparable harm on the basis of evidence that is “clear and not speculative.” For a critical review of the FCA jurisprudence, see my article Interlocutory Injunctions and Irreparable Harm in the Federal Courts, (2009) 88(3) Can Bar Rev 515. While not a patent case, or even an intellectual property case, Mosaic v PCS is an important appellate decision which fully considers the principles applicable to the grant of an interlocutory injunction, including a review of the leading authorities, and establishes an approach which is directly contrary to that used by the FCA. While the FCA is of course not bound by the SaskCA, this thorough and fully reasoned decision from an appellate court may give the FCA cause to reconsider its position when the occasion arises.

The Chambers judge in Mosaic v PCS had held that in order to be granted the injunction, PCS had an obligation to establish “something more than a mere possibility of irreparable harm.” [49] This clearly echos the standard used in the Federal Courts. The SaskCA identified “a wide spectrum” of views as to how irreparable harm is to be treated, and described the position of the Federal Court of Appeal that “evidence as to irreparable harm must be clear and not speculative,” as being “[a]t the far end of the range” [51]. The SaskCA ultimately held that the Chambers judge “identified the wrong standard of proof in relation to irreparable harm” [67]. The position of the FCA was also rejected by clear implication.

The SaskCA rejected any strict tests. Quoting Sharpe on Injunctions and Specific Performance, the Court stated that “The problem posed by interlocutory injunction applications may, it is submitted, best be understood in terms of balancing the relative risks of granting or withholding the remedy” [57]. Consequently, “[t]his exercise involves, and must involve, a weighing of risks rather than a weighing of certainties” [58]. The key passage of the decision warrant quoting in full. Note that the decision also has an extensive review of the leading authorities, which I have omitted:

[59] Given this underlying reality, it seems wrong to demand that a plaintiff seeking an injunction must prove to a high degree of certainty that he or she will suffer irreparable harm if the injunction is not granted. In many situations, this approach would self-evidently frustrate the balancing exercise which a court should be undertaking in deciding if interlocutory relief is warranted. For example, assume that failure to grant a plaintiff an injunction involves only a medium probability that the plaintiff will suffer irreparable harm. But, assume as well that, if such harm is incurred, it will be catastrophic. If the analysis ends at the point of the plaintiff being unable to establish the prospect of irreparable harm to a high level of certainty, a full balancing of the risks concerning the relevant non-compensable damages will not be possible. In other words, the true overall risk of irreparable harm will always be a function of both the likelihood of the harm occurring and its size or significance should it occur. A sound analytical approach should take this into account.

[60] In short, the same basic logic which recommends the serious issue to be tried standard in relation to the strength of the plaintiff’s case consideration also recommends against requiring the plaintiff to prove to a high level of certainty that irreparable harm will result if the injunction is denied. The purpose sought to be achieved by giving a judge the discretion to grant interlocutory relief will be “stultified,” to use Lord Diplock’s term, if he or she could consider in the balance of convenience only such irreparable harm as is certain or highly likely to occur.

[61] Therefore, in the end, it is sufficient that, as a general rule, a plaintiff seeking interlocutory injunctive relief be required to establish a meaningful risk of irreparable harm or, to put it another way, a meaningful doubt as to the adequacy of damages if the injunction is not granted. This is a relatively low standard which will serve to fairly easily move the analysis into the balance of convenience stage of the decision-making. It is there that all of the relevant considerations can be weighed and considered with as much subtlety as the circumstances require. This said, I should add once again that I do not mean to deny any possibility of there being exceptions to this rule. The approach being endorsed here is one of general, but not necessarily universal, practice.

[63] More generally, American Cyanamid does not contemplate that the irreparable harm consideration should operate as a significant free-standing bar to the grant of injunctive relief.

With that said [66].

none of this means the relative likelihood of the plaintiff suffering irreparable harm is unimportant. To the contrary, in the typical case it will be very important. An injunction is obviously more likely to be granted in a case where the prospect of a given degree of irreparable harm is high than in one where there is a much lower probability of such harm occurring. Somewhat similarly, an injunction is more likely to be granted in a case where the irreparable harm under consideration is major than in one where it is minor. All of these factors should be reflected and weighed in the balance of convenience analysis.

The SaskCA concluded with an overview of the proper approach:

[113] In the interest of clarity, it may be useful to recapitulate the basic points which have been developed in the course of these reasons and to summarize the approach a judge should typically take when deciding whether to grant interlocutory injunctive relief. This can be done as follows:

(a) The judge should normally begin with a preliminary consideration of the strength of the plaintiff’s case. The general rule in this regard is that the plaintiff must demonstrate a serious issue to be tried, i.e. the plaintiff must have a claim which is not frivolous or vexatious. If the plaintiff raises a serious issue to be tried, it is necessary for the judge to turn to the matters of irreparable harm and balance of convenience.

(b) Irreparable harm is best seen as an aspect of the balance of convenience. The general rule here is that the plaintiff must establish at least a meaningful doubt as to whether the loss he or she might suffer before trial if an injunction is not granted can be compensated for, or adequately compensated for, in damages. Put another way, the plaintiff must demonstrate a meaningful risk of irreparable harm. If this is done, the analysis turns to the balance of convenience proper.

(c) The assessment of the balance of convenience is usually the core of the analysis. In this regard, the relative strength of the plaintiff’s case, the relative likelihood of irreparable harm, and the likely amount and nature of such harm will typically all be relevant considerations. Depending on the particulars of the case, strength in relation to one of these matters might compensate for weakness in another. Centrally, the judge must weigh the risk of the irreparable harm the plaintiff is likely to suffer before trial if the injunction is not granted, and he or she succeeds at trial, against the risk of the irreparable harm the defendant is likely to suffer if the injunction is granted and he or she prevails at trial. That said, the balance of convenience analysis is compendious. It can accommodate a range of equitable and other considerations.

(d) The judge’s ultimate focus in considering whether to grant interlocutory injunctive relief must be on the overall equities and justice of the situation at hand.

[114] I note as well that, although undertakings as to damages have not been examined in this decision, it is well established that, as a condition of obtaining an interlocutory injunction, generally a plaintiff must give to the defendant an undertaking to pay the defendant any damages that the defendant sustains by reason of the injunction, should the plaintiff fail to prevail at trial.

Note that after applying this approach on that facts, the SaskCA dismissed the appeal, and affirmed the grant of the injunction.

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