Cross-Undertakings in Damages: The Price of Nuclear Power

1. The price of nuclear powerCross-undertakings in damages Anne Jeavons COMBAR, 31 May 2018

2. …this type of order is one of the law's “nuclear weapons”. If they are wrongly deployed, just as with a nuclear weapon, damage is inevitable. It would be an affront to justice to hold that damages for the unjustified restrictions imposed…are irrecoverable under the cross-undertaking.”

3. CPR 25.1(f) an order (referred to as a “freezing injunction”)— • restraining a party from removing from the jurisdiction assets located there; or • restraining a party from dealing with any assets whether located within the jurisdiction or not;

4. CPR 25APD • 5.1 Any order for an injunction, unless the court orders otherwise, must contain: • (1) …an undertaking by the applicant to the court to pay any damages which the respondent sustains which the court considers the applicant should pay. • 5.2 … when the court makes an order for an injunction, it should consider whether to require an undertaking by the applicant to pay any damages sustained by a person other than the respondent, including another party to the proceedings or any other person who may suffer loss as a consequence of the order.

5. Standard form freezing injunction • (1) If the Court later finds that this order has caused loss to the Respondent, and decides that the Respondent should be compensated for that loss, the Applicant will comply with any order the Court may make. … • (7) The Applicant will pay the reasonable costs of anyone other than the Respondent which have been incurred as a result of this order including the costs of finding out whether that person holds any of the Respondent’s assets and if the Court later finds that this order has caused such person loss, and decides that such person should be compensated for that loss, the Applicant will comply with any order the Court may make.

6. When will the question of damages arise? 1. On an application for fortification: Defendant will need to provide (inter alia) “an intelligent estimate, being informed and realistic although not necessarily entirely scientific, of the likely amount of any loss which might be suffered by the applicant for fortification by reason of making the interim order”; Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ1295(See also Commercial Court Guide, F15.4). 2. On discharge of an injunction found to have been wrongly granted: although nbCheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545

7. Assessment of damages “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.” F. Hoffmann-La Roche & Co AC v Secretary of State, [1975] AC 295 at 361,Lord Diplock

8. Abbey Forwarding Ltd v Hone (No 3) [2015] Ch309 “Logical and sensible adjustments may well be required, simply because the court is not awarding damages for breach of contract. It is compensating for loss for which the defendant “should be compensated” (to apply the words of the undertaking). Labels such as “common law damages” and “equitable compensation” are not, to my mind, useful. 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.” McCombeLJ at [63]

9. 1. Foreseeability “a claimant should not be saddled with losses that no reasonable person would have foreseen at the time when the order was made, …. 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.” Abbey Forwarding Ltd at [64]

10. “the court must be realistic as to the dilemma facing a defendant when served, out of the blue, with a freezing order”:- • applications for variation are not that simple; time-consuming and expensive. • Meanwhile, the defendant is operating under the restrictions of the order • Approaches to claimants to agree variations are often far from straightforward and claimants may not be reasonable. “If, in such circumstances, a defendant is shown to have suffered an unusual loss, then in my judgment the claimant should not be surprised if the court orders him to pay for it.”

11. 2. Standard of proof: Liberal assessment “there should as a matter of principle be a degree of symmetry between the process by which the claimant obtained its relief (an approximate answer involving a limited consideration of the detailed merits) and that by which it compensated the subject of the injunction for having done so without legal right” Les LaboratoiresServier v ApotexInc[2008] EWHC 2347, Norris J at [9]

12. “It does not mean that a defendant should be treated generously in the sense of being awarded damages which it has not suffered. It does mean, however, that the court must recognise that the assessment of damages suffered as a result of a freezing order will often be inherently imprecise, …[T]his problem has been created by the claimant's obtaining of an injunction to which it was not entitled; … it is not an answer for a claimant to say that damages cannot be awarded because the defendant's business venture was to some extent speculative and might have resulted in a loss. Thus the defendant is not absolved from proving its damages, but these factors must be borne in mind in determining whether it has succeeded in doing so.” Fiona Trust & Holding Corporation v Yuri Privalov[2016] EWHC 2163 (Comm), Males J, [51]

13. Specific types of damage • Loss of a chance: AstraZeneca v KRKA dd Novo Mesto[2015] EWCA Civ 484 • Loss of employment position: FinancieraAvenida v Shiblaq, The Times, 21 November 1998 • Loss of profits, withdrawn credit: Keller v Cowen [2001] EWCA Civ 1704 • Destruction of business: Johnson Control Systems Ltd v Techni-Track Europa [2003] EWCA Civ 1126

14. 3. Approach to general damages “I do not see why the notional contract by reference to which compensation is to be assessed is not a contract the very object of which ‘… is to provide freedom from molestation …’ It is very difficult to see how preventing an individual from dealing with his or her assets is anything other than molestation or why the contrary result is not the consequence of a (wrongly made) order that prevents such activity.” • Abbey Forwarding Ltd; Judge Pelling QC (affirmed by CA at [104])

15. “it is obvious that a freezing order of the type imposed in this case constitutes a severe invasion on the liberty of any person to deal with his or her assets as he or she sees fit. An intrusion on that liberty is bound to have profound effect on the day-to-day life of the person affected in a multitude of ways which do not require elucidation by evidence of special damage…” • Abbey Forwarding, McCombe LJ [109-110]

16. “general damages can in an appropriate case be awarded on a cross-undertaking in respect of an inappropriately obtained freezing order for any or all of these elements: upset, stress, loss of reputation, general loss of business opportunities, and general business and other disruption including adverse effects of the inappropriate policing of the injunction on the injunctees.” Abbey Forwarding, VosLJ at [150]

17. General damages: relevant factors: • embarrassment in doing simple day-to-day tasks such as going to the bank where the staff knew that D was subject to a freezing order. • Embarrassment and indignity of seeing people whom D had known for many years who would look at them as though they were criminals. • Damage to reputation as a businessman and investor. • Damage to credit rating and financial reputation. • Further damages for such losses suffered as a result of the unreasonable way the freezing injunction was policed by the liquidator.

18. Summary • Timing: When injunction discharged (nb can be before disposal of substantive action) • Starting point: contractual damages • Flexibility in remoteness: timing of foreseeability • Standard of proof: Liberal assessment • More open to general damages

19. The price of nuclear powerCross-undertakings in damages Anne Jeavons COMBAR, 31 May 2018