Freezing order — Undertaking as to damages — Enforcement — Whether injunction wrongly made — Whether other special circumstances justifying non-enforcement — Claim dismissed
The first claimant and his associated companies, the second and third claimants, brought proceedings against the defendant in the USA following the termination of their contracts as the managers and promoters of his career as a professional boxer. The defendant brought a counterclaim alleging fraud and racketeering. Prior to the commencement of the proceedings, the defendant obtained a worldwide freezing order in the UK against the claimants’ assets, pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982, and gave an undertaking for damages in respect of any hardship that this might cause to the claimants. An application to continue the order, heard before the commencement of the main proceedings, was discontinued on the basis of a consent order, under which the freezing order was discharged and an inquiry ordered as to the damages payable by the defendant pursuant to his undertaking.
The USA proceedings were decided in favour of the defendant, who subsequently obtained an order in the UK permitting him to enforce the judgment. There followed a hearing with regard to the claimants’ claim for damages pursuant to the defendant’s undertaking. Issues arose as to: (i) whether the court should, in its discretion, enforce the undertaking and (ii) what damages had been established if it were to be enforced. The defendant argued that the court should not enforce the undertaking unless it found that the freezing order had been wrongly granted. The claimants maintained that the proceedings to discharge the order had already determined the matter in their favour.
Held: The claim was dismissed.
1. A freezing injunction would have to have been wrongly granted, or wider in scope than it should have been, before the party against whom it was granted could recover damages. That party would have to have been restrained by the terms of the injunction from doing something that it should have been entitled to do: F Hoffmann-LaRoche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 and Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840 applied. Accordingly, it was necessary for the court, when considering enforcement of the undertaking, to determine whether it had been wrongly granted. Where, as in the instant case, the question of the court’s discretion to enforce the undertaking remained to be determined, that discretion had to be exercised upon the basis of facts known at the time of exercise, even though the inquiry into damages had been ordered at an earlier date: Universal Thermosensors applied.
2. If it were established that the order had been wrongly granted, even without fault on the applicant’s part, the court would ordinarily order an inquiry as to damages. Although there was a discretion as to whether to enforce the undertaking, exercisable by reference to all the circumstances, prima facie the party that had wrongly obtained the injunction ought to bear the loss. In order to justify a decision to the contrary, it would be necessary to establish a link between the conduct of the party against whom the injunction had been made and the obtaining or continuing of it or the enforcement of the undertaking. Outrageous or dishonest conduct that was not so linked would not suffice to justify a refusal to enforce the undertaking. If it were determined that an undertaking as to damages was to be enforced, the measure of damages payable would not be discretionary, but would be governed by the ordinary principles of the law of contract as to causation and quantum.
3. In the instant case, the question of whether the freezing order had been wrongfully granted had not been finally determined by the discharge of the injunction by consent, since there had been no final judgment on the merits, and the defendant had not conceded the matter. In all the circumstances, taking into account, inter alia, the outcome of the US proceedings and the claimants’ conduct, the injunction had been justified on the merits, and, accordingly, damages were not payable. Even if that were incorrect, special circumstances existed that would in any event make it inequitable to enforce the undertaking for damages.
Mark Warwick (instructed by Jeffrey Green Russell) appeared for the claimants; Ian Mill QC and Andrew Green (instructed by Forbes Anderson) appeared for the defendant.
Sally Dobson, barrister
