Case Alert - [2017] EWCA Civ 1877 

Court of Appeal holds that judge did not err in assessing damages where a freezing injunction should not have been granted

The substantive claims brought by the claimant against the defendant failed (on the whole), despite the defendant having been found to have acted dishonestly. The claimant had obtained freezing orders against the defendant and he sought enforcement of the usual undertaking in damages which had been provided by the claimant. The main issue in the proceedings was whether the defendant was entitled to damages on the basis that he would have used the frozen funds to build new ships which would have resulted in a profit. Males J held that, adopting a liberal approach to the assessment of the defendant's damages, the defendant was entitled to damages of USD 60 million plus USD 11 million interest (the freezing order having been in place for just 19 days). The Court of Appeal has now dismissed the appeal from that decision.

It has held that the judge had not erred in finding that the defendant had been unable to enter into new contracts to build ships which had resulted in loss which was not too remote. The judge had also been entitled to find that the failure of the defendant to apply to the court for the release of all or part of the frozen funds had not broken the chain of causation, and nor had it been an unreasonable failure to mitigate its loss.

The Court of Appeal acknowledged that if a court decides to enforce a cross-undertaking, a "but for" test of causation is applied. The judge had also been entitled to deal with the question of causation in a common-sense way. The Court of Appeal rejected an argument that the onus had been on the defendant to show that an application to release funds would have failed. It had been prohibited from using the funds and the position taken by the claimant was that it would have resisted any application to remove that prohibition. Furthermore, "The force of his observation that an improperly obtained freezing order is likely to cause significant loss to a businessman has more force where the freezing order departs from the usual form of words for such an order and precludes the person subject to the order from using monies in what is in the ordinary course of his or her business".

The judge had also been entitled to find that the defendant would have faced a "practical dilemma" in attempting to get a quote from the Korean shipyards on the basis that they would like to conclude some shipbuilding contracts, but would need to make an application to the court in order to find out whether they were allowed to do so, whilst at the same time needing some concrete proposal in hand for the court to assess before applying to the court for permission.