Court of Appeal assesses damages for the breach of a cross-undertaking where freezing injunction should not have been made and whether general damages can be awarded
As is customary, the respondents had provided a crossundertaking in damages in return for the grant of a freezing order against the appellants. At first instance, the judge ordered the respondents to pay the appellants almost GBP 30,000 for losses suffered as a result of the freezing order (which, it was subsequently shown, had been made without justification). On appeal, having reviewed prior caselaw, the Court of Appeal agreed with the judge that the starting point for an assessment of those damages was that set out by Lord Diplock in Hoffmann-La Roche v Secretary of State : “The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction”.
However, there was a caveat to that basic position: “Logical and sensible adjustments may well be required, simply because the court is not awarding damages for breach of contract. …The court is compensating for loss caused by the injunction which was wrongly granted. It will usually do so applying the useful rules as to remoteness derived from the law of contract, but because there is in truth no contract there has to be room for exceptions. In my judgment, the law also meets the justice of the matter. A defendant wrongly injuncted should be compensated for losses that he should not have suffered, but a claimant should not be saddled with losses that no reasonable person would have foreseen at the time when the order was made, unless the claimant knew or ought to have known of other circumstances that was likely to give rise to the particular type of loss that occurred in the case at hand. A claimant may, however, find himself liable for losses which would not usually be foreseen in particular cases. One such case may be if a loss, not usually foreseeable, arises before a defendant has had any real opportunity to notify the claimant of the likely loss or sensibly to apply to the court for a variation”.
Applying these principles to this case, an additional GBP 10,000 was awarded. However, the Court of Appeal also said that the appellants could not claim for loss of individual investment or earning possibilities if those possibilities had never been mentioned to the respondents. They could not simply argue that, given the respondents’ attitude to the administration of the freezing order, there had been no point in discussing potential investments with them.
The Court of Appeal further held that general damages for distress and anxiety were recoverable in respect of a cross-undertaking (even though such damages are not usually recoverable for a breach of contract). In this case, there had been the aggravating feature of the “needlessly aggressive approach” of the respondents’ solicitors to the administration of the order. The Court of Appeal ordered GBP 15,000 to be paid to each of the three appellants under this head (instead of the GBP 8,000 ordered by the judge).