URGENT INJUNCTION APPLICATIONS, Study notes of Business

Download URGENT INJUNCTION APPLICATIONS and more Study notes Business in PDF only on Docsity! URGENT INJUNCTION APPLICATIONS: BEST PRACTICE AND PITFALLS TO AVOID Hugh Sims QC, Richard Ascroft 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; (7) understand the range of costs orders which may be made. 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 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 19811; 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) 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 order2 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 25A – Interim Injunctions, paras 1.1 to 1.43 & Civil Procedure (the White Book), 2016, vol 1, at para 25.0.7. 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. (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 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), 2016, vol 1, at p 760. The focus is on the conduct of the defendant as regards the defendant’s assets and the question is whether a particular course of conduct in relation to assets by the defendant, 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 Congentra AG v Sixteen Thirteen Marine SA [2008] EWHC 1615; [2008] 2 Lloyds Rep 602 Flaux J explained that the risk of dissipation had two relevant senses, viz: (1) a real risk that a judgment or award will go unsatisfied, in the sense of a real risk that, unless restrained by injunction, the defendant will dissipate or dispose of his assets other than in he ordinary course of business: The Niedersachsen [1983] 2 Lloyds Rep 600 per Mustill J as interpreted by Christopher Clarke J in TTMI v ASM Shipping [2006] 1 Lloyds Rep 401, at 406 [24]-[27]; (2) that unless the defendant is restrained by injunction, assets are likely to be dealt with in such a way as to make enforcement of any award or judgment more difficult, unless those dealings can be justified for normal and proper business purposes: Stronghold Insurance v Overseas Union [1996] LRLR 13 at 18-19 per Potter J and Motorola Credit Corporation v Uzan (No 2) [2004] 1 WLR 113 at 153 . 30. It is, therefore, not necessary to show that a judgment would be completely defeated. The extent of difficulty in enforcement will, however, be a factor in the exercise of the court’s overall discretion: Metropolitan Housing Trust Ltd v Taylor and ors [2015] EWHC 2897 (Ch) at [28]. 31. 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". 32. Pointing to some dishonesty on the part of the intended respondent to the injunction is insufficient: Thane at para 28; UCB Home Loans Corporation v Grace and anr [2011] EWHC 851 (Ch) (what is required is dishonesty sufficiently proximate to the applicant’s claim). 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 (Thane at para 28). 33. 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. 34. In VTB Capital plc v Nutritek International Corp [2012] EWCA Civ 808; [2012] 2 Lloyds Rep 313; [2012] 2 BCLC 437 the Court of Appeal agreed (at [177]) with what Peter Gibson LJ had said in Thane about the need for the court to be careful in its treatment of evidence of dishonesty but went on to observe that where the dishonesty alleged is at the heart of the claim against the relevant defendant, the court may well find itself able to draw the inference that the making out, to the necessary standard, of that case against the defendant also establishes sufficiently the risk of dissipation of assets. 35. 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). 36. 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. 37. 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. 38. 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. 39. The importance of cogent, relevant evidence on this aspect of any application cannot be overstated Unsupported statements and expressions of fear carry very little, if any, weight. There need to be evidence of objective facts from which the court can infer a risk of dissipation: Metropolitan Housing Trust Ltd v Taylor (supra) at [30]) citing O’Regan v Iambic Productions Ltd (1989) 139 NLJ 1378 at 1379. 40. The scope of assets caught by freezing injunctions expressed in standard form extends beyond what many might intuitively think. The goodwill of a respondent’s business (notwithstanding its tangible nature) is, for example, caught: (see Templeton Insurance Ltd v Thomas and anr [2013] EWCA Civ 35; Sloane House Ltd v Fleury and ors (unrep, 04.07.14, Turner J). 41. More recently, in JSC BTA Bank v Ablyazov [2015] UKSC 64; [2015] 1 WLR 4754 the Supreme Court held that the extended definition of assets in paragraph 6 of the current standard form Commercial Court freezing order includes proceeds of loan agreements to which a defendant was party. Those acting for and against applicants seeking freezing injunctions should consider carefully what (if any) contractual rights (or other choses in action) may constitute assets for the purposes of the order. Although paragraph 9 of the standard form order used in the Commercial Court obliges a defendant to provide information about his assets to the claimant, there is not an exact match between the wording in paragraph 9 and the definition of assets in paragraph 5. An applicant for such injunctive relief may, therefore, be well advised to seek express disclosure of assets over which the defendant has control but which are not owned legally or beneficially by him (see further in this context, Global Maritime Investments Cyprus Ltd v Gorgonia Di Navigazione SRL [2014] EWHC 706 (Comm)). It is also important to note that not all contractual rights or other choses in action or their proceeds will fall within the prohibition contained in the standard form freezing order; a defendant is not thereby restrained from dealing with or disposing of any of his assets in the ordinary and proper course of business. PROPRIETARY CLAIM 42. The standard form freezing injunction which permits expenditure by a respondent in the ordinary course of business will not necessarily apply where the underlying claim is proprietary in nature: see Halifax v Chandler [2001] EWCA Civ 1750 at [16]-[20] per Clarke LJ; BDW Trading Ltd v Fitzpatrick and ors [2015] EWHC 3490 (Ch) at [58]-[65]. 43. Where the claimant is asserting a proprietary claim against the defendant his position may be adequately protected by an order (proprietary injunction) preserving the relevant assets pending trial or further order (see CPR 25.1(1)(c) and Madoff Securities International Ltd and anr v Raven and ors [2011] EWHC 3102 (Comm); [2012] 2 All ER (Comm) 634 at [126] et seq). Unlike in the case of a freezing injunction, it is not necessary to show any risk of dissipation and even if there has been delay in applying (something which might lead to the refusal of a freezing order) a proprietary injunction may still be granted (see Cheareny v Neuman [2009] EWHC 1743 (Ch) at [101]-[102]). 44. A proprietary claim will often arise where the defendant has acted in breach of fiduciary duty whether by misapplication of his principal’s monies or other assets or through receipt of bribes or secret commissions (as to which see FHR Ventures v Cedar Capital [2015] AC 250). APPLICATION CONTENT AND PROCEDURE 45. 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. 46. 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 court5. 47. 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. 48. 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 49. Reference should also be made to paras 9.1 to 9.7 of PD23A – Applications. 50. 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 25A – 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). 5 See, for example, Memory Corpn plc v Sidhu (No 2) [2000] 1 WLR 1443, at 1460 per Mummery LJ. 4.1A Where there is to be a telephone hearing the application notice must be served as soon as practicable and in any event at least 5 days before the date of the hearing. 4.2 Where an application notice should be served but there is not sufficient time to do so, informal notification of the application should be given unless the circumstances of the application require secrecy. 62. CPR 25.3 is in these terms: (1) The court may grant an interim remedy on an application made without notice if it appears to the court that there are good reasons for not giving notice. (2) An application for an interim remedy must be supported by evidence, unless the court orders otherwise. (3) If the applicant makes an application without giving notice, the evidence in support must state the reasons why notice has not been given. 63. Paragraph 4 of PD25A – Interim Injunctions (which deals with urgent applications and without notice applications) is also relevant. Paragraph 4.3(3) provides: [E]xcept in cases where secrecy is essential, the applicant should take steps to notify the respondent informally of the application. 64. Reference should also be made to para 16.2 of the Chancery Guide12, paras 7.12.1 et seq of the Queen’s Bench Guide13, para F2 of The Admiralty and Commercial Courts Guide14 as applicable. 65. So, an applicant for an interim injunction who proceeds without having served an application notice on the respondent and without having given the respondent even informal notice of the hearing, must set out why in his evidence and (under the PDs accompanying CPR Parts 23 & 25) justify his position by reference to circumstances of secrecy and not just urgency. 66. The importance of the general principle that applications (including applications for injunctions) should only be made without notice, and in particular outside court hours, in cases of “exceptional urgency” was emphasised in Franses v Somar Al Assad and Ors (supra), at para 67. It is apparent from Henderson J.’s judgment that: (1) urgency brought about by inaction on the part of the applicant is unlikely to attract much judicial sympathy; (2) the reasons for proceeding without notice should not be confined to bare assertions; what is required is “a proper analysis of the issue and a reasoned explanation supported by references to the evidence.”15 67. A litigant making a without notice application is under a “compelling duty” to make full and frank disclosure (as to which see further below) and “especially on a without notice application for relief which freezes the defendant’s assets, invades his privacy and threatens his reputation: Memory Corpn plc v Sidhu (No 2) (supra) at p 1453 A per Robert Walker LJ; p 1459 H to 1460 A per Mummery LJ. 68. It is the particular duty of the advocate to see that the correct legal procedures and forms are used; that a written skeleton argument and a properly drafted order are prepared by him personally and lodged with the court before the oral hearing; and that at the hearing the court’s attention is drawn by him to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be used: ibid at p 1460 B per Mummery LJ. 12 Reproduced in the White Book, 2016, vol 2, at p 147. 13 Ibid at p 339. 14 Ibid at pp 406-7. 15 Franses v Somar Al Assad (supra) at para 72. 69. It is incumbent on an applicant for without notice relief to provide full notes of the hearing to those affected by any order as soon as reasonably practicable (see further below). THE DUTY OF FULL AND FRANK DISCLOSURE; A CLOSER LOOK Introduction 70. The duty of full and frank disclosure applies to all applications made without notice. The principle goes back to Castelli v. Cook (1849) 7 Hare 89, 94 and to the well known case of Rex v. Kensington Income Tax Commissioners, Ex parte de Polignac (Princess) [1917] 1 K.B. 486, 509, in which Warrington L.J. said: "It is perfectly well settled that a person who makes an ex parte application to the court - that is to say, in the absence of the person who will be affected by that which the court is asked to do - is under an obligation to the court to make the fullest possible disclosure of all material 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." 71. 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? 72. 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. 73. What about short notice applications however; does the principle apply then? 74. 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 61 above. 75. 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. 76. 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. 77. 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. 78. 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. (2) What is the nature and extent of the obligation? 79. 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. 80. 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. For a useful summary of applicable principles in the context of freezing injunctions, see Metropolitan Housing Trust Ltd v Taylor (supra) at [36]. 81. 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, 5th Edition @ para 9.001, footnote 6. (3) How long does the duty last? 82. 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. 83. 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: (7) Inquiries into damages (1) The typical form of the undertaking 96. The typical form of undertaking in favour of the defendant/respondent is in the following terms (taken from the example order for freezing orders): (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. (2) The nature of the undertaking 97. It is important to understand the nature of the undertaking. It is to the Court, and therefore a breach of the undertaking is a contempt of court. However, it is for the benefit of the respondent in the event that the claim fails or the order is later set aside and the respondent has suffered loss as a result of the order; see Hoffmann-La Roche & Co AF v Secretary of State for Trade and Industry [1975] AC 295 @ 361. It does not, however, have any existence independent of the proceedings in which it is given. In particular, it is not considered to give rise to an independent cause of action. If an order is discharged, the remedy for the respondent is to obtain a direction from the court that an inquiry into damages is taken and an order made accordingly. Until such time as an order is made that damages should be payable the respondent is reliant on obtaining relief through the proceedings in which the undertaking was given. (3) The impecunious applicant 98. Given that an undertaking is required, unless the court orders otherwise, lawyers and clients alike frequently wrongly assume that an injunction cannot be obtained if the applicant does not have funds to support the undertaking, or cross undertaking. However it is well established that in the right case the fact that the applicant is impecunious will not be a bar to an order being granted; see Allen v Jumbo Holdings Ltd [1980] 1 WLR 1252 (the legally aided applicant provided an undertaking of questionable value in that case). In those cases the court will typically expect that the merits of the underlying claim are very good. In addition, however, the applicant may be able to make a persuasive case for contending that they are only impecunious due to the actions of the respondent of which complaint is made, and that is also a relevant factor for the court to consider (cf. security for costs applications). 99. In addition, in the context of claw back claims brought by liquidators or other office holders of insolvent companies, the court will often accept a cross-undertaking in damages which is limited to the assets in the hands of the office holder (namely the net realizable and un- pledged assets of the company in liquidation); see DPR Futures Ltd [1989] 1 WLR 778, followed in RBG (Resources) Plc v Rastogi (31 May 2002) (Laddie J) . The logic appears to be that because the office holder is acting in a representative capacity they cannot be expected to offer a personal undertaking (cf. the public body cases referred to as exceptions below). 100. It should be noted, however that in many cases a claim brought by a liquidator will be supported by a commercial funder. That will be a material factor to disclose on any without notice hearing, and the court may in those circumstances consider that a limited undertaking in damages would not be appropriate; see the decision in Franses referred to above. 101. Ultimately, acceptance of a limited cross-undertaking by insolvency office holders is a matter for the court’s discretion: see JSC Mezhdunarodiny Promyshlenniy Bank and anr v Pugachev [2015] EWCA Civ 139; [2016] 1 WLR 160 at [66] to [86] per Lewison LJ. (4) Exceptions 102. There are certain entities who are not required to offer an undertaking. The best known is the crown. This rule, or practice, also extends to local authorities and any public officer when bringing proceedings to enforce the law. 103. For example, the secretary of state is not required to give a cross undertaking for the appointment of a provisional liquidation, which application is made on a without notice basis; see Re City Vintners Ltd, 10 December 2001, unrep. (5) Third parties 104. The current position is that the court is required to consider in all cases whether or not an undertaking should be made in relation to parties other than the respondent (see para 5.1A of PD25A). The standard forms, or examples, include such an undertaking in freezing order cases, but not for search orders. It is presumably anticipated that in those cases where the undertaking is in the example order, the onus will be on the applicant to explain why the order is not appropriate, where as in other cases, the court is required to consider the point, but it is anticipated there will be no presumption applied. 105. In freezing orders, the example order contains the following undertaking: (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. 106. 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 107. 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. 108. 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. 109. 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. 110. 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.] 111. Though, in suitable cases the applicant may prefer, and the court may accept, a payment into court, or a payment to solicitors, instead. 112. 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 113. 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. 114. 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. 115. 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. 116. There is a useful review of the relevant principles to apply when assessing special and general damages in 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) Ltd v Cooke (1994) 3 NZLR 216). The court also awarded aggravated damages, since the order had been obtained by intentional concealment of a material matter. In Astrazenca AB and anr v KRKA DD Novo Mesto and anr [2015] EWCA Civ 484; (2015) 145 BMLR 188 the Court of Appeal upheld an award of over £27m following an inquiry before Sales J of damages said to have been suffered as a result of an interim injunction which ought never to have been granted. 130. Thirdly, there is the even more difficult situation of non-parties who have a presence in the jurisdiction but also in the foreign jurisdiction. This is the situation frequently faced by banks and can give rise to the problem of double jeopardy; they may be required under the law of the foreign state to do something which the order in this country claims to prohibit There is a proviso in the standard wording which is intended to accommodate this problem: 20. Assets located outside England and Wales Nothing in this order shall, in respect of assets located outside England and Wales, prevent any third party from complying with – (1) what it reasonably believes to be its obligations, contractual or otherwise, under the laws and obligations of the country or state in which those assets are situated or under the proper law of any contract between itself and the Respondent; and (2) any orders of the courts of that country or state, provided that reasonable notice of any application for such an order is given to the Applicant’s solicitors 131. Again, however, it is sensible to give consideration in advance of the application whether this order is suited, or suitable to the specific facts which present themselves. The example order is not set in stone, and early advice from a foreign lawyer may assist to ensure that the order is effective in practice. COSTS Introduction 132. It is useful to consider the range of costs orders which may be made on an injunction application in the following two scenarios: (1) Where the applicant is granted an interim injunction or procures an undertaking; (2) Where the applicant fails to obtain an interim injunction or an offer of an undertaking. The “successful” applicant 133. Where the applicant succeeds in obtaining an interim injunction (at an on-notice hearing) or procuring an undertaking, the applicant will consider, with some justification, that he or she has succeeded and should therefore be awarded his or her costs. That, however, is not the general rule for interim injunction applications; usually (though not invariably) the court will order costs in the case or that costs should be reserved. The reason is that ordinarily the injunction application will not finally decide the merits of the arguments advanced, and accordingly it will usually be premature to consider the applicant as being the successfully party; see the decision of the Court of Appeal in Desquenne Et Giral UK Ltd v Richardson [2001] FSR 1. 134. The decision in Richardson was applied and followed by Neuberger J (as he then was) in Picnic At Ascot Inc v Derigs & Ors [2001] FSR 2, where he helpfully set out a number of guiding principles to apply when considering the appropriate cost order to make in interim injunction applications: (1) Absent any special factors, if an interim injunction application is obtained applying ordinary balance of convenience principles the court will normally reserve the costs. Whilst this guiding principle should not “tie the court’s hands” on questions of costs, it was desirable to have some consistency in the area; (2) It followed that a respondent who offered an undertaking or agreed to an interim injunction should not be the subject of a more disadvantageous order, since that would be to discourage the respondent from sensible conduct; (3) If, however, the Court was able to form the view that an injunction was clearly justified, and, for example, the respondent fought the application instead of, reasonably promptly, offering to accede to the application or provide equivalent relief, an immediate costs order against the respondent might be justified; (4) Overall, it would be appropriate for the Court to ask itself whether (a) it was fair for the applicant to have its costs even if it lost at trial and (b) whether the respondent’s opposition was justified. 135. See also Albon v Naza Motor Trading Sdn Bhd [2007] EWCA Civ 1124; [2008] 1 Lloyds Rep 1 at para 21 per Waller LJ; Hospital Metalcraft Ltd v Optimus British Hospital Metalcraft Ltd and ors [2015] EWHC 3093 (Ch). The “successful” respondent 136. There is some evidence of a more favourable approach to the respondent who successfully fights off an injunction application. The reasons for that were also the subject of discussion in the Picnic At Ascot case and may be summarized as follows: (1) It is the applicant’s choice whether or not to come to court; on the other hand the respondent is compelled to attend; (2) The Courts wish to encourage applicants not to launch unmeritorious applications. 137. Equally, however, it may be said that a respondent’s success cannot be properly measured until trial; it may be found at trial that the injunction application ought, with the benefit of final findings of fact, to have been granted. In those circumstances it might be said that it would be unfair for the respondent to have its costs of the application having regard to the risk of defeat at trial. Furthermore, independently from that question, the applicant may be able to point to some justification for the application, even if it is not successful. The marginal case 138. In marginal cases the parties might give consideration to whether the court should be persuaded to make a “costs in the case” type order. It is one thing to say that an immediate costs order in favour of an applicant who obtains his order would not be fair to a respondent who was ultimately successful at trial, but it is another to state that the respondent should necessarily have his costs of the application even if he succeeds at trial. Of course, the order that costs be reserved does not take away the opportunity to make such a submission after trial, but consideration should be given to whether there will be difficulty in persuading a trial judge to reconstruct how matters looked at the interim stage. Ordinarily it will pay for the successful applicant to ask for his or her costs of the application, especially in the absence of a strong judicial indication to the contrary, since even then some helpful judicial indications may emerge which can be deployed at trial, even if costs are reserved. 139. Given that many interim applications are determinative of the litigation as a whole, any order which reserves costs or provides for costs in the case ought sensibly to provide for the contingency that the claim may never come to trial in order to avoid distracting and potentially expensive squabbles just about costs. That said, the Court may be persuaded that it will hinder rather than assist the settlement of the case for the Court to keep its “powder dry” on the question of costs at the interim stage. Conclusion 140. The general rule in interim injunction application cases is to reserve costs where the applicant is successful. That general rule does not apply so strongly where the applicant is unsuccessful. Like all rules as to costs however, they are not to be construed as inflexible rules which “tie the hands” of the tribunal. There is always a place for persuading the court to take a different view. Richard Ascroft & Hugh Sims QC Guildhall Chambers April 2016