KB-2023-004010 - [2025] EWHC 2689 (KB)

The starting point is relevant principles in respect of an application for enforcement of a cross-undertaking as to damages. A principle is as follows:

“In a case where it is determined that the injunction should not have been granted the undertaking is likely to be enforced, though the court retains a discretion not to do so.” See Cheltenham & Gloucester BS v Ricketts [1993] 1 WLR 1545 per Neill LJ, his fourth numbered point.

As regards the timing of when a determination should be made as to whether there should be an inquiry as to damages, there are a number of possibilities, namely:

“ (a) The court can determine forthwith that the undertaking as to damages should be enforced and can proceed at once to make an assessment of the damages…. (b) The court may determine that the undertaking should be enforced but then direct an inquiry as to damages in which issues of causation and quantum will have to be considered…. the court should not order an inquiry as to damages and at the same time leave open for the tribunal at the inquiry to determine whether or not the undertaking should be enforced. A decision that the undertaking should be enforced is a precondition for the making of an order of an inquiry as to damages. (c) The court can adjourn the application for the enforcement of the undertaking to the trial or further order. (d) The court can determine forthwith that the undertaking is not to be enforced. …”: see Cheltenham & Gloucester BS v Ricketts above, being the seventh numbered point of Neill LJ (emphasis added).

In Harley Street Capital Limited v Tchigirinski [2005] EWHC 2471 (Ch.), Mr Michael Briggs QC (as he then was) stated at [19]:

“The third principle is that loss will not qualify for compensation under the cross-undertaking unless it has been caused by the grant of the injunction. Though normally that is an issue decided on an enquiry as to damages at the end of the day, the causation issue must also be examined in forming an intelligent estimate of likely loss at the fortification stage.” (emphasis added)

In Gee on Commercial Injunctions 6^th Ed. at para. 11-041, it was stated:

“On an application for an inquiry the applicant should adduce some evidence (Yukong Line Ltd v Rendsburg Investments Corp [2001] 2 Lloyd’s Rep. 113 at [35]—“some credible evidence that he has suffered loss as the result of the making of the order”) to show an arguable case that he has sustained loss falling within the undertaking. The court will not order an inquiry if it would be pointless to do so because the intended claim is obviously bad or because any recoverable loss is trivial. On the other hand, at the discretion stage the court should not hear protracted argument on whether the suggested loss will be recoverable: see Malhotra v Malhotra [2015] 1 B.C.L.C. 428; see generally Williams and Humbert Ltd v WDH Trademarks [1986] A.C. 368 at 441.”

This is derived directly or indirectly from the case of Yukong Line Ltd v Rendsburg Investments Corp [2001] 2 Lloyd’s Rep. 113 (“Yukong Line”) in which Potter LJ said:

“33.

Upon discharge of a Mareva injunction, the court has a discretion whether or not to enforce the undertaking in damages….if it is established that the injunction was wrongly granted, albeit without fault on the plaintiff's part, the court will ordinarily order an inquiry as to damages in any case where it appears that loss may have been caused as a result.

34.

… The order for an inquiry as to damages is discretionary, such discretion being exercised in accordance with equitable principles, taking into account all the circumstances of the case, but bearing in mind that, since the injunction should not have been obtained, prima facie the plaintiff ought to bear the loss: see Financiera Avenida -v- Shiblaq [1991] The Times 14th January (CA Civil Division) . As observed by James LJ in Graham -v- Campbell (1877) 7 Ch. D. 490 at 494, the undertaking ought to be given effect except under ‘special circumstances’. Those special circumstances include the conduct of the injunctee at the time the injunction was obtained or later, see per Lord Diplock in F. Hoffmann -v- La Roche & Co AG -v- Secretary of State [1975] AC 295 at 361. However, whilst the principles referred to above have been enunciated as generally applicable to the exercise of the court's discretion whether or not to order an inquiry as to damages, if the reason for the discharge of the injunction is that the court lacked jurisdiction to make it in the first place, it is difficult to envisage any circumstances in which the court would refuse to order an inquiry as to damages upon some evidence of loss…”

35.

So far as evidence of loss is concerned, upon an application for an inquiry, the applicant must adduce some credible evidence that he has suffered loss as the result of the making of the order. The court will not order an inquiry if it appears to be pointless to do so because the intended claim for damage is plainly unsustainable. That may be because it is clear that the order is no more than the factual context for loss which would have been suffered regardless of the granting of the order, or it may equally be clear that the damage is too remote. However, at the stage of exercising its discretion whether to order an inquiry, the court does not ordinarily hear protracted argument on whether the suggested loss will be recoverable. If the defendant shows that he has suffered loss which was prima facie or arguably caused by the order, then the evidential burden of any contention that the relevant loss would have been suffered regardless of the making of the order in practice passes to the defendant and an inquiry will be ordered: see for instance Financiera Avenida SA -v- Shiblaq (above); Tharros Shipping Co Limited -v- Bias Shipping [1994] 1 Lloyd's Rep 577 .” (emphasis added)