CL-2015-000047 - [2025] EWHC 2724 (Comm)

ANALYSIS

The Claimants submit that the ‘own wrong’ principle has no possible application to the present case, for a number of reasons.

First, they submit that, as explained by the Court of Appeal in King Crude Carriers, it is not a free-standing principle of general application, but a concept which applies only in particular circumstances where an identifiable juridical basis for it can be found. Similarly, they submit that the statements quoted earlier in Hoffman-La Roche and Abbey Forwarding show that the assessment of damages under a cross-undertaking is not a free-ranging exercise of discretion, but governed by fixed and clear principles based on the terms of the undertaking, including the requirement for the injunction to have caused the loss.

In my view, however, it is at least well arguable (that being sufficient for present purposes) that the statements of Waller LJ in Coudert Bros., Rix LJ in Beart, Coulson J in D Morgan and Fancourt J in Duke of Sussex indicate that the ‘own wrong’ principle does reflect a principle of public policy of general application: thus capable in principle of applying inter alia in any context where the court is required to consider what loss should in law be regarded as having been caused by a particular event. I note in that context that Laws LJ in Coudert Bros. considered that Waller LJ’s approach “may” be correct and that it found support from statements in Bolitho. That in itself can fairly be regarded as making the point well arguable.

In any event, Laws LJ’s own approach in Coudert Bros., in which Carnwath LJ concurred, was to regard causation issues as not merely a fact-finding exercise but often an “evaluative judgment, concerned to establish the extent to which a defendant should justly be held responsible for what has befallen the claimant”. It is well arguable that an evaluative judgment of that kind would result in a party who has made dishonest allegations, in proceedings in which it obtained a freezing order, being held liable for damage caused by the freezing order even if some or all of that damage would also have resulted from the making of the dishonest allegations in the underlying proceedings.

Secondly, the Claimants submit that the first question remains whether factual causation can be established and, if not, one does not reach the question of whether the Claimants should be permitted to rely on their own further wrong in order to defeat or reduce their liability. Hence, in order for Coudert Bros. to have any application, the wrong being sued for must otherwise (i.e. without the further wrong) have caused the entirety of the relevant loss. In other words, the position must be that both wrongs would each have led to the same loss. For instance, the Claimants say, Coudert Bros. was concerned with two wrongs which would each, independently, have led to the same loss being suffered. It did not matter whether the loss was attributed to one wrong rather than the other, because they would each have led to the same loss (and, had there been no time bar, would both have been actionable by the claimant in order to recover that loss). Elsewhere in their skeleton argument, the Claimants put it this way:-

“In this case, neither the Cs nor the Ds are alleging that the proceedings and the Freezing Order would each have led to the same loss (or lost chance) being suffered. Rather, the Cs rely on the proceedings as a reason why the Ds cannot establish that the Freezing Order would everhave caused the relevant loss, as a matter of factual causation. These cases provide no authority for a claimant to be able to circumvent the requirement to prove factual causation; to the contrary they are very clear that the ‘rule’ in Coudert (if it can be described in this way) is only engaged once it has been established that the loss in question would otherwise (i.e. without the further wrong) have flowed in its entirety from the wrong being sued for.” (§ 46(1), emphasis in original)

However, I do not understand the Defendants’ case on the current Inquiry to seek to circumvent the requirement to prove factual causation. The Defendants each expressly plead a positive case that the freezing order caused (at least in the sense of being an effective cause of) their alleged losses. They then rely on the ‘own wrong’ principle in response to the Claimants’ defence that the losses would in any event have been caused by the allegations made in the underlying proceedings (in addition to disputing that defence on the facts). Thus the Defendants wish to plead that the Claimants are not entitled, in law, to rely on any alleged causative effects of their (allegedly) dishonest allegations in the underlying proceedings in order to displace the causative effect of the freezing order. On that basis, the Defendants’ position is at least arguably the same in principle as that of IML in Coudert Bros..

As part of their oral submissions, the Claimants also appeared to suggest that cases such as Bolitho, Lakatamia, Coudert Bros. and Beart were distinguishable because they all involved a supervening wrong, which occurred after the wrong sued upon had already begun to have a causative effect i.e. had already started a chain of causation. Similarly, they say, in Duke of Sussex the chain of causation began with the wrong sued upon (the gathering of the data), without which none of the later events could have occurred.

I doubt that that submission is correct. It seems to me that the operation of the ‘own wrong’ principle is conceptual rather than temporal. In Coudert, for example, the two breaches began to operate at the same time, when the tender was submitted, and caused loss at the same time, when the tender was found to be invalid. Moreover, even if one were to take a temporal approach, on the facts of the present case the freezing order preceded the filing of the Particulars of Claim. The distinction which the Claimants seek to draw appears to me artificial and arbitrary.

The Claimants make the further point that here, unlike in Coudert Bros., the wrong relied upon (the freezing order) could not independently have caused the loss, because it could not have existed without the underlying litigation. However, the freezing order was clearly a distinct event from the making of the claims in the underlying proceedings, and capable of having independent effects: indeed, that is part of the basis of the Claimants’ own causation defence.

Thirdly, the Claimants suggest that the ‘own wrong’ principle applies only where the ‘wrong’ is actionable. Here, they say, that is not the case, as the Defendants have not pleaded the elements of the tort of malicious prosecution (noting the observations of Stuart-Smith LJ in Berkeley Administration cited earlier). The Claimants make the point that the previous cases summarised above were all concerned with a defendant relying on conduct that had either been held to be, or was assumed to be, a wrong which would have been actionable by the claimant. Enron could be said to be an exception, because it refers to ‘unlawful’ or ‘illegal’ conduct by the defendant. However, there is nothing in the Competition Appeal Tribunal’s decision in that case which would suggest that they were deliberately expanding the ratio in Coudert, which was concerned with two actionable ‘wrongs’ (two acts of negligence against the claimant). The Claimants suggest that the underlying philosophy of the case law is not to penalise a claimant for pursuing one available cause of action rather than another.

Although that is one way of viewing the case law, it is not the only way. On the footing that the underlying principle, at least in the realm of causation, involves either (a) an evaluative judgment, concerned to establish the extent to which a defendant should justly be held responsible for what has befallen the claimant, or (b) a principle of public policy or fairness, it is well arguable that it extends to unlawful conduct whether or not actionable: particularly conduct as serious as making and pursuing in court dishonest allegations of fraud. I also note that (a) the further wrong in Coudert Bros. was not in fact actionable, because it was time barred, and (b) the passages quoted earlier from McGregor on Damages and JSC Commercial Bank use the broad terminology of lawful/unlawfulness rather than actionability.

Finally on the ‘own wrong’ point, it is fair to characterise this as a developing area of law, particularly in the light of (a) the slightly different approaches of the members of the Court of Appeal in Coudert Bros. and (b) the fact that permission to appeal to the Supreme Court has been granted in King v Crude Carriers.

For all those reasons, I consider that the Defendants should have permission to amend on the ‘own wrong’ point, the central expression of which is set out in D1/D2’s draft Amended Reply §§ 28C and D5’s draft Amended Reply §§ 49.1-49.4. I consider the Defendants’ proposed amendments to have realistic prospects of success, and, further, that it would be just in all the circumstances to grant permission for them, even recognising that they will increase the scope of the Inquiry to some extent and hence its cost.

The Defendants wish to advance a related argument to the effect that, in the counterfactual situation, the Claimants should be assumed to have acted lawfully and, thus, not to have made any dishonest allegations (D1/D2’s draft Amended Reply § 28E and D and D5’s draft Amended Reply § 49.5).

To my mind, that is really another way of framing the ‘own wrong’ point, since all it seeks to exclude from the counterfactual is the effect of the (allegedly) dishonest allegations made in the underlying proceedings. The Claimants object that, if used as the relevant counterfactual in assessing the effects of the freezing order, it would allow the Defendants to recover regardless of whether the freezing order had any causative impact. I do not agree. As the Claimants accept in § 46(1) of their skeleton (quoted in § 56 above), if the ‘own wrong’ principle applies then it is necessary to assess the causative effect of the wrong sued upon “without the further wrong”. That is the whole point of the principle. Otherwise in Coudert Bros., for example, the breach sued upon (relating to the licence period) would have been held to have had no causative effect because the tender would have failed anyway due to the anti-monopoly problem. Removing the allegedly dishonest allegations (only) from the counter-factual in my view would (at least arguably) correctly give effect to the requirement for the Defendants to establish loss caused by the freezing order but without the Claimants being able to displace such causation by reliance on the effect of dishonest allegations in the proceedings. These amendments too have realistic prospects of success and should be allowed.

The effect of my grant of permission to amend (and refusal of strike-out) in relation to these points will be that disclosure and evidence will be required in relation to the Defendants’ allegations that the Claimants made allegations dishonestly in the underlying proceedings and the injunction applications. It follows that, in practical terms, less turns on my decision in relation to the remaining bases on which the Defendants seek to amend. I shall therefore address those bases more briefly.

The Defendants wish to contend that, in circumstances where dishonesty is a cause of loss to them, it is to be treated as the only cause (D1/D2’s draft Amended Reply § 28F and D5’s draft Amended Reply § 49.6).

The Claimants submit that that argument has no realistic prospect of success because:-

As explained by the Defendants in submissions, their case on this topic does not depend on third parties having any knowledge of the Claimants’ alleged dishonesty, but merely on the freezing order having in fact been dishonestly obtained (as the Defendants’ existing statements of case allege) and having caused loss. The Defendants further submit that, although damages can be awarded on an inquiry even in the absence of wrongdoing by the applicant for the freezing order, where an injunction is obtained dishonestly then the resulting loss is referable to the applicant’s actions.

I do not find the Defendants’ proposed case under this heading entirely convincing. I am inclined to think that the position in deceit claims reflects a view based on fairness or public policy to the effect that a person deceived by a fraudster should not be denied recovery on the basis that he/she should have been more careful: rather than reflecting some principle of wider application. On the other hand, the Defendants’ point remains fairly arguable and, as explained above, is a pure point of law that should not require any additional disclosure or evidence. Overall, I am narrowly persuaded that it has a realistic prospect of success and should be allowed to proceed.

D1/D2’s draft Amended Reply § 28G would allege that:-

“…in circumstances where the Claimants had sought but not obtained the Freezing Order, or in circumstances where the Set-Aside Application had succeeded, it would have become apparent that (i) the Claimants’ allegations of fraud in the underlying proceedings were dishonest and/or unsustainable; (ii) there was no good arguable case of fraud; and/or (iii) the Claimants had failed to comply with their duty of full and frank disclosure. Paragraphs 3-34 of the D1/D2 Inquiry Particulars and paragraphs 6(a)(i) and 28C above are repeated. The Court’s judgment refusing to make the Freezing Order, or setting aside the Freezing Order, would have been publicly available. In the premises, third parties would not have been deterred from working with Mr Bosworth and Mr Hurley (to establish the Oil Trading Business or otherwise).”

D5’s draft Amended Reply § 49.7 is to similar effect.

The Claimants submit that the circumstances contemplated by these proposed amendments are not a relevant counterfactual according to any of the authorities.

D1/D2, supported by D5, submit as follows:-

Steps (ii) and (iii) in the above reasoning are in my view arguable, and may be regarded as supporting in a general sense the Defendants’ arguments considered in sections (D)(1) and (2) above. However, I do not consider the remainder of this line of argument to have a realistic prospect of success. In my view, it is contradicted rather than supported by the reasoning in Dr Reddy’s and in the Sigma case to which Zacaroli J referred. The gist of the reasoning in those cases is to exclude from the assessment incidental effects which the injunction application process itself might have (e.g. on parties’ or the market’s perception of the underlying dispute or its subject-matter, in those cases, the patents in question), as distinct from the effect of the order itself. I shall therefore not grant permission for these particular proposed amendments.

There are certain other amendments which the Defendants seek to make so as now to rely expressly on the dishonesty allegations in relation to the following issues in the Inquiry: (i) the policing of the freezing order; (ii) variations of the freezing order; and (iii) aggravated damages. In the 18 July judgment I found that those matters (as well as the issue of interest/costs) would not themselves justify the dishonesty allegations being investigated.

These points were not the subject of much, if any, attention in the submissions at the hearing on 7 October 2025. At present I am inclined to think that (i) and (ii) should not be permitted, for the reasons given in §§ 25 and 28 of the 18 July judgment respectively, but that (now that the dishonesty allegations are to be investigated in any event) there is a case for permitting (iii) and for allowing the Defendants to rely on the dishonesty allegations in relation to the issue of interest/costs. However, I shall consider any further submissions the parties may wish to make on these points in the light of the present judgment.