Case Alert ‐ [2017] EWHC 2465 ﴾QB﴿

Court accepts that it can order an unlimited cross-undertaking in damages in return for a freezing order

The judge in this case agreed that a freezing injunction against one of the defendants should continue. However, that defendant asked that maintaining the injunction should be made conditional on a further unlimited undertaking (to meet any loss or damages which the defendant might suffer if it turns out that the injunction was wrongly granted). A cross-undertaking of £125,000 had already been provided by the claimant.

The judge accepted that it is possible for the court to order an unlimited undertaking in damages: "In my judgment the court may require, as a condition for granting or continuing an injunction, that the cross-undertaking given by the applicant is fortified by the provision by someone other than the applicant of an unlimited, or a limited, undertaking, or by the making of some other form of limited provision, to meet any loss that the injunction may cause: see Stephen Gee QC Commercial Injunctions 6th ed p347. Any fortification required is not necessarily limited in amount. The court has a wide discretion as to the conditions on which it may grant or continue an injunction. Discretions of that kind should not be fettered by rigid judge-made rules".

However, it was still necessary to make "an informed and realistic estimate" of the likely amount of loss which the defendant might suffer. There was a difference between a difficulty in quantifying loss and the absence of evidence of the likelihood of a significant loss.

On the facts of this case, the defendant had failed to adduce sufficient evidence on which to make an intelligent estimate of its future recoverable loss. For example, the freezing injunction may have caused damage to the defendant's reputation in the market and caused it to lose business opportunities, but it was not possible on the evidence to estimate how much revenue might have been lost by the injunction (and not the claim itself). Similarly, it might take some time for the defendant to recover from any disruption, but there was insufficient evidence to estimate the potential loss from that. Accordingly, the defendant had not shown a good arguable case that the existing amount of fortification was inadequate.

However, the judge did order security for the defendant's costs of £125,000, even though no defence had been served yet: "Applications for security for costs should normally be made promptly as soon as the facts justifying the order are known. There is no requirement that a defendant must first serve a defence before making such an application. Were there to be such a requirement, a defendant may find that an impecunious claimant discontinues having received the defence without any provision having been made for payment of its costs".