Court extends injunction forbidding husband from competing with the family business

Divorce|Family Law|News|January 15th 2014

An injunction preventing a husband from competing against the family business should remain in force, a High Court judge has ruled.

R v R concerned a couple who ran a successful business. But in November last year, the wife was granted a freezing order against the husband. This included an injunction “restraining the husband from directly or indirectly engaging in any business that competes with [the family company] or soliciting customers from, or attempting to sell, licence or provide the same or similar services to any customer or client of that company”.

The wife claimed the husband had begun to compete against the family business to lower its value but the husband denied this.

At the High Court, Sir James Munby, President of the Family Division, explained:

“The complaint is that the husband is, so it is said by the wife, deliberately – an allegation vigorously denied by the husband – competing in order to depreciate the value of one of the matrimonial assets, namely, the company. The husband denies that root and branch but it seems to me, for immediate purposes, I should proceed upon the basis that there is a sufficient factual foundation for the wife’s concerns as to justify in principle the continuation of the injunction if, but only if, there is some appropriate legal basis for doing so.”

The President noted that, in order to have legal validity, an extension of the injunction would have to be granted under section 37 of the Senior Courts Act 1981. This allows the High Court to “…grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.”

The wife’s legal team argued that the husband’s admission that he served as shadow director of the family firm meant he held fiduciary duties to the organisation which would satisfy the requirements of section 37.

Sir James Munby accepted this argument, saying the situation was “very simple”. The husband’s business “either does or does not compete with the family company. If it does not compete then there is nothing in the injunction which in any way fetters the operation of that company. If it does compete, then it is right that there should be an injunction because by operating a competing business he is…in breach of his fiduciary duties.”

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