Understanding Injunctive Relief & Interim Orders: Without Notice & Asset Freezing Focus, Lecture notes of Civil procedure

Download Understanding Injunctive Relief & Interim Orders: Without Notice & Asset Freezing Focus and more Lecture notes Civil procedure in PDF only on Docsity! 1 URGENT INJUNCTION APPLICATIONS: BEST PRACTICE AND PITFALLS TO AVOID INTRODUCTION 1. Pre-emptive relief may often be determinative of the course of litigation; the effect of an early tactical advantage is frequently difficult to reverse. What follows is intended to help applicants and respondents: (1) focus on the circumstances in which injunctive relief (particularly in the context of without notice applications) is genuinely appropriate; (2) highlight important aspects of the practice and procedure governing applications for interim injunctions; (3) understand the content of the duties on a without notice applicant and the consequences of breach; (4) consider in more detail the duty of full and frank disclosure; (5) examine the role of undertakings, or cross-undertakings, in damages; (6) understand some of the issues which arise on implementation and enforcement of the order. 2. Just as early success may strengthen a claimant’s hand, the bloody nose of an unsuccessful application can have lasting consequences. 3. A convenient starting point (and salutary lesson) for those advising a prospective applicant for urgent injunctive relief is the decision of Henderson J in Franses v Somar Al Assad and Ors [2007] EWHC 2442(Ch) where the court held a without notice freezing injunction obtained by a liquidator against a judgment creditor was: (1) improperly made without notice; (2) suffered from “severe” procedural flaws; and (3) obtained against a backdrop of a breach of the duty of full and frank disclosure in 2 respects. 4. The cumulative effect of the deficiencies justified an award of costs against the liquidator applicant on the indemnity basis. The public criticism of the legal team involved was not probably particularly welcome either. JURISDICTION 5. The jurisdiction of the High Court to grant injunctions (and, more particularly, freezing injunctions) was the subject of recent review by the House of Lords in Fourie v Le Roux [2007] UKHL 1; [2007] 1 WLR 320. 6. The main speech was delivered by Lord Scott of Foscote, from which it is possible to extract the following propositions: (1) the word “jurisdiction” is potentially ambiguous. In the strict sense, jurisdiction is a reference to the court’s power to grant the relevant relief. Sometimes, however, jurisdiction is used to describe the settled practice governing the exercise of the power; the High Court’s power to grant injunctions is derived from the pre- Supreme Court of Judicature Act 1873 powers of the Chancery courts, a power now confirmed in s 37 of the Supreme Court Act 1981 1 ; 1 Which provides (so far as is relevant): (1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just to do so. (2) Any such order may be made either unconditionally or on such terms and conditions as the court thinks just. (3) The power of the High Court under subsection (1) to grant an interlocutory injunction restraining a party to any proceedings from removing from the jurisdiction of the High Court, or otherwise dealing 2 (2) whether the jurisdiction has been properly exercised by a judge does not involve a review of discretion but an examination of the restrictions and limitations placed on the power by a combination of judicial precedent and rules of court; (3) provided the court has in personam jurisdiction over the person against whom an injunction, whether interlocutory or final, is sought, the court has jurisdiction, in the strict sense, to grant it; (4) as to the granting of interim relief in relation to proceedings that have been or about to be commenced in a foreign state, jurisdiction (in the strict sense) exists by virtue of the Civil Jurisdiction and Judgments Act 1982, as extended by the Civil Jurisdiction and Judgments Act 1982 (Interim relief) Order 1997 (SI 1997/302); (5) in suitable circumstances a freezing order 2 may be, and often is, granted and served on the respondent before substantive proceedings have been instituted. Such an order is valid and of immediate effect but if proceedings for substantive relief are not instituted, the freezing order may lapse in accordance with its own terms or, on an application by the respondent, may be discharged; (6) no “activation” of the court’s jurisdiction to grant an injunction by issue of substantive proceedings is, therefore, needed; (7) whenever an interlocutory injunction is applied for, the judge, if otherwise minded to make the order, should pay careful attention to the substantive relief that is, or will be, sought; (8) in deciding whether, in the words of s 37 of the SCA 1981, it is “just and convenient” to grant an injunction, the court must have regard to the interests of the defendant as well as the claimant; (9) it is very difficult to visualise a case where the grant of a freezing order, made without notice, could be said to be properly made in the absence of any formulation of the case for substantive relief that the applicant for the order intended to institute; (10) at the least a draft claim form might be expected; (11) the respondent to a without notice freezing injunction made without substantive proceedings having been started is entitled to the protection of directions about the institution of such proceedings. 7. As to the power of a Master or District Judge sitting in the High Court to grant an interim injunction, see Practice Direction – Interim Injunctions, paras 1.1 to 1.4 3 & Civil Procedure (the White Book), 2008, vol 1, at para 25.0.8. In cases of urgency in the mercantile court and a mercantile judge is unavailable, the application may be dealt with by another judge (including a district judge): see PD – Mercantile Courts and Business Lists, para 1.3 4 . 8. So far as county courts are concerned, s 38 of the County Courts Act 1984 confers a general power, subject to regulations, for a county court to make any order which could be made by the High Court of the proceedings were in the High Court. with, assets located within that jurisdiction shall be exercisable in cases where that party is, as well as in cases where he is not, domiciled, resident or present within that jurisdiction. (4) … (5) … 2 And, by extrapolation, any other interim order. 3 Reproduced in Civil Procedure (the White Book), 2008, vol 1, at p 637. 4 Reproduced in Civil Procedure, vol 2, p 396. But see also, para F15 of the Mercantile Court Guide for the Bristol Mercantile Court. 5 actual or feared, is conduct which should or may lead the court to conclude that the grant of a freezing order is just and convenient. 26. Freezing orders are emphatically not granted as security for claims and by procuring such an order a claimant is not in any better position that any other actual or claimed creditor. It follows that the mere fact that a defendant’s creditworthiness is in doubt does not justify the making of a freezing order: ibid at para 36. 27. The risk of dissipation must involve a risk of impairing the claimant’s ability to enforce a judgment or award. In the application of this principle it is not necessary for the claimant to prove that enforcement in England and Wales, rather than elsewhere will be impaired. Nor is it necessary for the claimant to prove that the purpose of the defendant’s actual or feared conduct is to frustrate the enforcement of any judgment which is obtained, provided that, objectively, that would be its effect: ibid at para 40. 28. The risk of impairment does not, however, in every case mean a freezing injunction should be granted; the conduct relied upon must be unjustifiable by normal and proper commercial considerations: ibid at para 41. 29. In Thane Investments Ltd v Tomlinson & ors [2003] EWCA Civ 1272 Peter Gibson LJ emphasised (at paragraph 21) the need for any application for a freezing injunction to be supported by "solid evidence...of the likelihood of dissipation". 30. Pointing to some dishonesty on the part of the intended respondent to the injunction is insufficient: Thane at para 28. The court will scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that that person has assets which he is likely to dissipate unless restricted (ibid). 31. The court will be particularly interested in evidence of such things as a poor credit history, a record of defaulting on other debts or any threat to remove or otherwise deal with the relevant assets: ibid at para 26. The defendant’s proven links with another country to which he may decamp will also be highly relevant, as will any lack of openness on the part of the defendant in response to enquiries about his intentions in relation to assets being realised. 32. Plainly, the more easily realised or moved the assets identified in the evidence may be, the easier it is to justify a risk of dissipation. Where there is evidence as to the form which the assets take which in itself indicates there has been no attempt to dissipate in the past and, by the nature of those assets, any such dissipation in the future is unlikely, then the court may take a different view. Moreover, the mere fact of asset realisation by a defendant is insufficient (at least where the application is not for a “proprietary” freezing order in which the claimant asserts that an asset held by the defendant is really his); there must, as noted above, be some basis for believing that the disposal of assets is unjustifiable: see, for example, Renewable Power & Light plc v Renewable Power & Light Services Inc & ors [2008] EWHC 1058 (Ch). 33. Ultimately the test is not one of probability of dissipation, but of real risk: Caring Together Ltd v Bauso and ors [2006] EWHC 2345 (Ch) at para 64. 34. Thane is not a judgment to the effect that allegations of dishonesty are insufficient to found the necessary inference of a real risk of dissipation, but a reminder that in order to draw the inference it is necessary to have regard to the particular allegations of dishonesty and to consider them with some care: Jarvis Field Press Ltd v Chelton [2003] EWHC 2674 (Ch) at para 10. 35. There is or may be an appreciable risk in the case of somebody who appears to be guilty not merely of dishonesty, but dishonesty in financial dealings in relation to the use or misuse of assets, that he will take steps to put such assets outside the reach of the people claiming an entitlement thereto: Jarvis Field at para 17. 6 36. The importance of cogent, relevant evidence on this aspect of any application cannot be overstated. APPLICATION CONTENT AND PROCEDURE 37. There is frequently a tension between the client’s understandable wish to act decisively and promptly to restrain some actual or threatened invasion of his rights and the need to collate the necessary evidence and prepare the proceedings upon which injunctive relief is parasitic. 38. Proper adherence to the practice and procedure governing the grant of interim injunctions is vital. Failure to comply with the rules and practices of the court: (1) will or may render any injunction granted in consequence of the flawed application improper and susceptible to immediate discharge; (2) potentially expose the applicant to adverse costs orders; and (3) be a breach of the advocate’s duty to the court 6 . 39. The rules governing the making of injunction applications are contained in CPR 23 General Rules About Applications for Court Orders) and CPR 25 (Interim Remedies): familiarisation with the applicable rules and the accompanying practice directions is a must. Aspects of these are discussed in more detail below. 40. So far as evidence in support of an application is concerned, CPR 23.7(3)(a) provides: When a copy of an application notice is served it must be accompanied by- (a) a copy of any witness statement in support 41. Reference should also be made to paras 9.1 to 9.7 of PD – Applications. 42. CPR 25.3(2) provides that an application for an interim remedy must be supported by evidence unless the court orders otherwise. The form which that evidence must take is amplified in paragraphs 3.1 and 3.2 of PD – Interim Injunctions. Importantly, applications for search orders and freezing injunctions must be supported by affidavit evidence, a requirement emphasised by Peter Gibson LJ in Thane (at para 21). 43. The local Specialist Circuit Judge exercising chancery jurisdiction (His Honour Judge McCahill QC) has issued a checklist for use in connection with urgent injunction applications in his court 7 . TIMING 44. In many instances the outcome of applications for interim relief is determinative of the outcome of the litigation as a whole and this particularly true in the context of interim injunctions. The early tactical advantage of a successful application (which necessarily requires the court to have found the existence of a serious issue to be tried) cannot be overstated; the respondent and his or her legal team are immediately on the back foot. 45. Apart from an early possible judicial indication of the strength of the claim 8 , there is an additional incentive for an applicant for injunctive relief to act expeditiously; such relief is discretionary in nature and delay may be fatal if unexplained 9 . This will especially be the case where the respondent has changed his position on the basis of the applicant’s apparent lack 6 See, for example, Memory Corpn plc v Sidhu (No 2) [2000] 1 WLR 1443, at 1460 per Mummery LJ. 7 A copy of this is annexed to these notes. 8 Though many judges are astute to avoid saying anything other than that the case alleged by the claimant is one with a real prospect of success. Anything more than this can be dangerous because the judge is usually without a full understanding of the factual position. 9 See also para 2.7 of PD – Applications which provides that every application should be made as soon as it becomes apparent that it is necessary or desirable to make it. 7 of concern (or apparent approval of the conduct subsequently challenged) or the respondent has otherwise been lulled into a false sense of security. 46. Ultimately each case turns on its own facts and little is to be gained by seeking to divine from the authorities a maximum time within which any application must be made. In Raks Holdings AS v Ttpcom Ltd [2004] EWHC 2137 (Ch), however, Lloyd J, in refusing an interim injunction to restrain exploitation of allegedly confidential information disclosed to the defendant in the course of a commercial collaboration which had come to an end, considered a delay of 4 months 10 to be fatal; the lack or urgency showed that the claimant did not really fear irrevocable damage in the meantime such as would justify an injunction. See also AAH Pharmaceuticals Ltd & ors v Pfizer Ltd & anr [2007] EWHC 565 (Ch) where delay was a “powerful factor” in the refusal of the claimants’ application for an interim injunction restraining Pfizer Ltd from terminating its supply agreements with the claimants in accordance with proposals published some months before. The fact that the claimants were pursuing their complaints with the OFT did not provide a good ground for not bringing the matter before the court at a much earlier stage. 47. The making of an early application for interim relief is, however, not without its disadvantages for the claimant: (1) it necessarily gives rise to some front-loading of costs as the evidence gathering and drafting phases of the claim are condensed to a short period of time; (2) in an effort to establish a “serious issue to be tried” and otherwise to bolster the chances of success there is naturally a tendency to disclose all of the evidence obtained by the claimant; the defendant accordingly has advance warning of what can usually be assumed to be the high-water mark of the claimant’s claim. THE ORDER 48. Para 2.4 of PD – Interim Injunctions provides: Whenever possible a draft of the order sought should be filed with the application notice and a disk containing the draft should also be available to the court in a format compatible with the word processing software used by the court. This will enable the court officer to arrange for any amendments to be incorporated and for the speedy preparation and sealing of the order. 49. The early provision of a draft order for consideration by the court prior to the hearing to was emphasised in Memory Corporation plc v Sidhu (No 2) (supra) at p 1460 C per Mummery LJ. See also para 5.19 of the Chancery Guide 11 . 50. Para 5 of PD – Interim Injunctions identifies those matters which must, unless the court orders otherwise, be contained in any order for an injunction. They are: • Applicant’s cross undertaking in damages • Applicant’s undertaking, where the application is made without notice, to serve on respondent as soon as practicable the application notice, evidence in support and any order • a return date (where application made without notice) • Applicant’s undertaking (where application made before filing of application notice) to file and pay appropriate fee on same or next working day • Applicant’s undertaking (where application made before issue of claim form) to issue and pay appropriate fee on same or next working day; or • directions for commencement of claim • clear statement of what respondent must do or not do 10 Since discovery of a vital piece of evidence. 11 Reproduced in the White Book, 2008, vol 2, at p 18. 10 facts within his knowledge, and if he does not make that fullest possible disclosure, then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may have already obtained by means of the order which has thus wrongly been obtained by him. That is perfectly plain and requires no authority to justify it." 64. Here we consider the following questions which arise in relation to the duty when making urgent injunction applications: (1) When does the duty apply? (2) What is the nature and extent of the obligation? (3) How long does the duty last? (4) How is the respondent to know the obligation has been discharged? (5) What are the consequences of a failure to discharge this duty? (6) When to spot the tactical discharge application and how to address it? (1) When does the duty apply? 65. At first blush the answer to this question is obvious; it applies when the application is made without notice. That is correct as far as it goes. There can be no argument that the duty of full and frank disclosure always applies when an application is made without notice. It is an essential part of the quid pro quo for the court entertaining a departure from the fundamental principle of fairness that an order should not be made without giving the person who is the subject of the order a chance to be heard. 66. What about short notice applications however; does the principle apply then? 67. The Court may abridge the 3 day time for service (CPR 23.7(4)). Further, if there is insufficient time to serve in accordance with the rules, but an application needs to be heard urgently, informal notification of the application should be given unless the circumstances of the application require secrecy; see paragraph 4.2 of the PD set out in paragraph 54 above. 68. So there may be a category of cases where the court will bless short notice, in which case, on conventional principles the duty of full and frank disclosure will not apply. There can be some advantages to an applicant in taking this approach if they do not wish to have to give full and frank disclosure, but nevertheless there is a good reason for urgency. 69. In addition, circumstances may arise where the applicant cannot serve within the rules, but provides informal notification. It is frequently the case in those circumstances that the respondent may appear before the Court and personal service be effective. On one view the application is no longer without notice in those circumstances. Any fair minded observer can see however that whilst the respondent can be heard, and indeed may even be ably represented, there is not a level playing field. 70. If a respondent is at all concerned in these circumstances that they cannot properly present a full case, they should invite the Court to treat the application on the basis that the duty of full and frank disclosure should apply. They can cite their old friend, the overriding objective, which specifically refers to ensuring the parties are on an “equal footing” as being a relevant consideration. They might invite the Court in those circumstances to direct that the Court should not give permission to serve short, but instead should treat the application as being effectively without notice, albeit with the benefit of limited submissions from the respondent. 71. The applicant may have to accept, in those circumstances, that the duty should apply. But in their turn, even if not at the first hearing, if faced with a discharge application on the grounds of a breach of this duty, the applicant may profitably rely on the fact that the application was on short notice. They may seek to contend that the duty should be treated as tempered by that fact to a certain extent, or at least that the consequences of non-compliance should be less severe (see further below), especially if they can make out the case that any failure on their part could have been remedied by the respondent. 11 (2) What is the nature and extent of the obligation? 72. There is a wealth of case on the nature and extent of the duty of full and frank disclosure. For present purposes it is useful to summarise the nature of the duty as follows (drawn from the decision of Bingham J in Siporex Trade SA v Comdel Commodities [1986] 2 LR 428 @ 437, subsequently cited with approval in the more recent case of the Court of Appeal in Marc Rich & Co Holding GmbH v Krasner [1999] CLY 487): (1) The applicant is required to show the utmost duty of good faith and must present his case fully and fairly; as such “fair presentation” cannot be separated from the duty; (2) The affidavit or witness statement in support of the application must summarise the case and the evidence on which it is based; (3) The applicant must identity the key points for and against the application and not rely on general statements and the mere exhibiting of unhelpful documents; (4) He or she must investigate the nature of the claim alleged and facts relied on before applying and must identify any likely defences; (5) He must disclose all facts, or matters, which reasonably could be taken to be material by the judge deciding whether to grant the application; the question of materiality is not to be determined by the applicant. 73. The Courts have observed that it is especially important that the duty is strictly observed on a without notice application for relief which freezes the defendant's assets, invades his privacy and threatens his reputation; see Memory Corporation v Sidhu [2000] 1 WLR 1443. 74. It is questionable whether there is any difference in the nature of the obligation as between different without notice injunctions. However the greater the risk of substantial prejudice the greater the consequences are likely to be for a breach of the duty; see the cases collected by Steven Gee QC in Commercial Injunctions, 5 th Edition @ para 9.001, footnote 6. (3) How long does the duty last? 75. Many litigants make the mistake of thinking that as long as they have discharged their duty before obtaining their order they no longer need be concerned with the duty. In fact, the duty remains in place until the order has been implemented. It is a continuing duty in that sense. 76. The following matters have been considered to be relevant matters which have occurred after the application has been granted, but before full execution has occurred, which should have been drawn to the attention of the court before any further action had been taken: (1) in relation to a freezing order, obtaining cautions to register against foreign properties owned by the defendants; see Commercial Bank of the Near East plc v A [1989] 2 LR 319; (2) in relation to a search order, receiving a letter which offered voluntary access for the purpose of searching for certain items; see O’Regan v Iambic Productions (1989) 139 NLJ 1378; (3) on an application to serve out of the jurisdiction, the existence of prior foreign proceedings; see Network Telecom (Europe) Ltd v Telephone Systems International Inc [2003] EWHC 2890 (QB) (Burton J). 77. In the last case the nature of the continuing obligation is subjected to analysis and all the relevant cases are helpfully reviewed, notwithstanding the fact that the case id not concern an injunction application. 12 (4) How is the respondent to know the obligation has been discharged? 78. The duty to keep a full and proper note of the without notice hearing, and to provide a copy to the respondent, is sometimes viewed as being part of the duty of full and frank disclosure. It is better understood however as being a duty which enables the respondent to ascertain whether or not the duty of full and frank disclosure has been complied with. It is intended to remedy, as best it can, the absence of the respondent at the first hearing, and provide the respondent with the chance to attend any subsequent on notice hearing, or the return date, with the best possible knowledge of the earlier hearing. 79. The following cases have put the flesh on the bones of this additional duty as follows: (1) Full notes of the hearing should be supplied with all due expedition to any party affected by the relief sought, whether or not the respondent asks for it; Interoute Telecommunications (UK) Ltd v Fashion Gossip Ltd, The Times, November 10, 1999 (Lightman J); (2) The applicant cannot rely on a transcript being available or that it will suffice even if it is available; Cinpres Gas Injection Ltd v Melea Ltd [2005] EWHC 3180 (Pat). 80. Non-compliance with these additional, or ancillary duties, is likely to have the same or similar consequences to non-compliance with the duty of full and frank disclosure to the court. The applicant must be careful therefore not to allow the efficacy of the order to be attacked on the grounds of tardy transmission of the note of the hearing, or for that failure to be part of a long list in a tactical discharge application. (5) What are the consequences of a failure to discharge this duty? 81. It is often said that the starting point for a failure to discharge the duty of full and frank disclosure is that the order so obtained should be discharged. This used to be known as the “golden rule”. These days, the rule is recognized as not being a “golden one”. In reality, most judges have always recognized they have a discretion in what they do. 82. A number of cases have reviewed the relevant principles (see Brink’s-MAT Ltd v Elcombe [1988] 1 WLR 1350; Memory Corporation v Sidhu [2000] 1 WLR 1443; Arena Corp Ltd (In Provisional Liquidation) v Schroeder (2003) EWHC 1089 (Ch); Dadourian Group International Inc [2007] EWHC 1673 (Ch) (Warren J)), which can be distilled here as follows: (1) If the non-disclosure would have resulted in the order not being made initially then the proper remedy will be for the order to be discharged; (2) If an order could properly have been made even if the material fact or matter had been disclosed, the court may nevertheless continue the order, or make an order on new terms, particularly where the failure was innocent and not grave; (3) A material non-disclosure which was intentional, or grave even if not intentional, will tend to tip the balance in favour of discharge; (4) Other factors may still be relevant however, including the speed with which the failure is cured, whether the consequence of the breach was remediable and has been remedied. 83. Overall, the Court must have in mind the question of the overriding objective and proportionality (cf the approach taken by HHJ Havelock-Allan QC in Re Industrial Services Group Ltd [2003] BPIR 392, where an innocent material non-disclosure lead to a percentage deduction in costs being applied). 84. It is important to remember that if a material non-disclosure is remedied by a respondent at the return date, and the judge concludes it is appropriate to continue the order, such respondent is unlikely to be able to rely on that factor in support of a subsequent discharge application; see Dadourian Group International Inc above. 15 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. 98. This wording was considered by Michael Briggs QC (then a deputy) in Harley Street Capital Limited v Tchigirinsky [2005] EWHC 2471 (Ch), when he rejected the submission that the undertaking was limited to persons who hold any assets of the respondent, and reaffirmed the orthodox view that any sufferer of loss may be compensated. (6) Fortification applications 99. The question of fortification for the undertaking in damages may arise at an initial without notice hearing. More often, however, it arises on a return date of a without notice application, or subsequent inter partes hearing. 100. In Harley Street Capital Limited v Tchigirinsky, above, three principles were identified as being applicable: (1) the court is required to make an intelligent estimate of the likely amount of the loss which could be suffered; (2) the person who seeks fortification must show a sufficient level of risk of loss; (3) the loss will not qualify for compensation unless it has been caused by the grant of the injunction. 101. This latter principle is based on the fact that on an inquiry into damages, the court will approach the matter as if it were a claim for damages for breach of a contractual undertaking, and the same requirements as to causation and foreseeability apply. 102. The form of fortification may take the shape of the example wording in freezing orders: [(2) The Applicant will – (a) on or before [date] cause a written guarantee in the sum of £ to be issued from a bank with a place of business within England or Wales, in respect of any order the court may make pursuant to paragraph (1) above; and (b) immediately upon issue of the guarantee, cause a copy of it to be served on the Respondent.] 103. Though, in suitable cases the applicant may prefer, and the court may accept, a payment into court, or a payment to solicitors, instead. 104. If the court considers that an undertaking should be fortified the applicant should be given a reasonable opportunity to put security in place and the order should not be immediately discharged pending the fortification. If the security is not provided then this will justify the injunction order being discharged. (7) Inquiry into damages 105. Before the court should direct an inquiry, it must first conclude that the injunction was wrongly granted. In most cases, though not all, if a claimant fails at trial then it will follow that the injunction was wrongly granted. The question might also arise before trial, where, for example, in the context of a freezing order it is shown that there is no real risk of dissipation. In those circumstance the Court should still be wary of ordering an inquiry before trial, since if the claim is made out at trial that could be material to the decision as to whether an inquiry should be ordered; see Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 and per Lord Scott of Foscote in Fourie above. 16 106. After the Court has concluded the injunction was wrongly granted it may still conclude, as an exercise of discretion, that no inquiry should be directed. For example, the claimant may persuade the court that there are special circumstances which justify the conclusion that the undertaking should not be enforced. The claimant must be careful, therefore, when the issue of an inquiry arises, to ensure that its position is properly protected, or reserved, in relation to such matters when an inquiry is ordered, alternatively that those issues are determined before the inquiry is ordered. Otherwise, following the direction of an inquiry, the Court may only entertain argument on quantum. 107. As stated above, the question of quantum is to be determined on the basis of conventional principles applicable as if there had been a breach of contract between claimant and defendant (see also, more recently, the decision in Eliades v Lewis [2005] EWHC 2966 (QB). It is important to distinguish between loss caused by the order and loss which might be caused by the proceedings generally. In some cases that may prove, difficult, or impossible to achieve; cf the decision above in Harley Street Capital Limited v Tchigirinsky. It should also be noted that where the Court is satisfied that an order has been obtained by fraud, the rules of remoteness should be relaxed and all loss flowing directly from the breach should be recoverable. 108. There is a useful review of the relevant principles to apply when assessing special and general damages in the recent case of Al-Rawas v Pegasus Energy Ltd & Ors [2008] EWHC 617 (QB). In that case special damages was sought and obtained for wasted management time lost when dealing with a search and seizure order. In addition, the court was satisfied that general damages should be awarded for the inconvenience caused by the order, notwithstanding the absence of any direct evidence, because such inconvenience was an obvious inference from the relevant agreed facts. The claim for a general damages award for emotional distress was dismissed in that case, though it is well established that it can apply (and search orders carried out in the home of a defendant may give rise to such a claim; cf. the decision in Bonz Group (Pty) Ltdd v Cooke (1994) 3 NZLR 216 HC (Aus)). The court also awarded aggravated damages, since the order had been obtained by intentional concealment of a material matter. IMPLEMENTATION AND ENFORCEMENT ISSUES Introduction 109. To make the most of the order, at the enforcement and implementation stage requires consideration of the relevant issues before the order is obtained. In many cases, consideration may need to be given as to whether the wording in the example, or standard, form of order should apply, or whether a variation should be considered. In addition the procedure for service needs to be given some thought in advance. The need for personal service 110. Whilst an order takes effect as soon as it has been made, it cannot be enforced by contempt proceedings if the respondent has not had notice of the order with a penal notice indorsed on it (RSC Ord 45 r7(4)). In cases where the injunction is solely prohibitive in nature (e.g. the standard form of freezing order) contempt proceedings cannot be brought, unless the court orders otherwise, unless the respondent is in court when the order is made or has been notified of its terms by telephone or otherwise (RSC Ord. 45 r7). By contrast, where the order is a mandatory order (such as, for example a search order), personal service must be effected, unless the court considers it just to dispense with this requirement (RSC Ord 45 r7(7)). Such a discretion can be exercised before or after the alleged breach of the order; see LTE Scientific Limited v Thomas [2005] EWHC 7 (QB). 111. In short, in most cases it is best to ensure that personal service is effected if the respondent is not present in court when the order is made. That way, armed with an affidavit of service, there is unlikely to be any risk of further argument on the issue. 17 Committal proceedings 112. Committal proceedings for contempt of court may be considered where, for example, a party has dissipated assets following the service of a freezing order, or has failed to disclose documents ancillary to such an order. Often the issue of such applications can cause the recalcitrant defendant to take notice of the allegation of default and remedy the position before the hearing occurs. It must be remembered however that such proceedings should not be issued lightly; proceedings for contempt are tightly regulated, as set out in RSC Ord 52. For present purposes it is useful briefly to touch on some of the major principles which apply: 113. First, it must be borne in mind that as long as the defendant has capacity to understand, there is no need to establish any mens rea. All that must be demonstrated, beyond reasonable doubt, is that a breach occurred. By contrast, if a non-party who is the subject of an application establishes that he honestly believed at the time he could do the acts complained of that may provide him with a defence. 114. Secondly, a claimant must consider with care whether to initiate a committal application; if the court ultimately concludes that the breach was a technical one it may conclude that the claimant should pay the defendant’s costs of the application; see Adam Phones Ltd v Goldschmift [1999] 4 All ER 486. Proportionality and the availability of other remedies must be borne in mind. 115. Thirdly, on the question of sentence, the Court has the power to imprison for a period of two years. Very serious and sustained breaches may result in a sentence in the period 18 months to 2 years; see Lexi Holdings Plc v Luqman [2007] EWHC 1508 (Ch) (Henderson J). 116. Fourthly, representatives for the defendant or non-party who is accused of contempt should always have in mind the ability to apply to court to purge his contempt, which effectively amounts to a plea for forgiveness. In some cases such an application can effectively avert a sentence of imprisonment, especially when coupled with other evidence of co-operative behaviour. Unless orders 117. Where there has been a breach of an injunction order, the claimant may also wish to consider, instead of a committal application, whether an unless order might provide more satisfactory relief. Given the drastic nature and effect of unless orders which debar a defendant from defending, the courts tend to be reluctant to make such orders and they are treated as orders of last resort; see Marcan Shipping v Kefalas & Anor [2007] EWCA Civ 463. 118. On one side of the fence, in Raja v van Hoogstraten [2004] 4 All ER 793, the court concluded that non compliance with a disclosure order (ancillary to a freezing order) did not prevent a fair trial and did not justify an order striking out the defence. On the other side, in the more recent decision of Lexi Holdings plc v Luqman [2007] EWCA Civ 1501, the Court of Appeal concluded that the respondent’s evidence that he had no, or negligible, assets was incredible and in those circumstances an unless order requiring a full statement of his asset position in default of which the defendant was debarred from defending should be made. Territorial effect 119. There is nothing to prevent an injunction being granted against a person over whom the Court has jurisdiction in relation to assets out of the jurisdiction. The most common example of this is the world wide freezing order (another example is where a receiver is appointed over assets abroad). This can lead to difficulties in enforcement, however.