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

In Phoenix Group Foundation v Cochrane [2018] EWHC 2179 (Comm) at [14] ("Phoenix Group")), Popplewell J (as he then was) said:

“14.

The relevant law was not substantially in dispute before me, and is summarised in Energy Venture Partners Ltd. v Malibu Oil and Gas Ltd. [2014] EWCA Civ 1295, [2015] 1 WLR 2309 , and the authorities there referred to. In particular, an applicant for fortification must satisfy three requirements. First, that the court can make an intelligent estimate which is informed and realistic, although not necessarily entirely scientific, of the likely amount of any loss which might be suffered by the applicant by reason of making the freezing order. Secondly, that the applicant has shown a sufficient level of risk of loss to require fortification, that is has shown a good arguable case to that effect. Thirdly, that the making of the interim order is or was a cause without which the relevant loss would not be, or would not have been, suffered. In relation to that third requirement, whilst it is open to the respondent to the application to demonstrate that there is no causal link between the granting of the injunction and the loss in question, if disproving that asserted causal link, as to which a good arguable case is shown, requires the deployment of extensive contentious evidence and argument, then that is not an exercise to be attempted at the interlocutory stage.

15.

The court in that case, and indeed the Court of Appeal in the later case of JSC v Mezhdunarodniy Bank and Anr. v Pugachev [2015] EWCA Civ 139, [2016] 1 WLR 160 , approved a passage in the judgment of Floyd J (as he then was) in Bloomsbury International Ltd. v Holyoake [2010] EWHC 1150 (Ch) at paras. 24 and 25. Floyd J said:

"In many cases the fact that there is a risk of loss will be obvious merely from the general situation, and while it may not be possible to put anything like a precise figure on the loss, the court will, if necessary, do what it can on the evidence before it to reach an appropriate figure. The courts are well accustomed to assessing the appropriate value to be given to things whose valuation is difficult. In some cases it will be possible to make a more precise or confident assessment than in others. The mere absence of particularised evidence does not [of itself necessarily] mean that there is no evidence of a risk of loss."

In PJSC National Bank Trust v Mints [2021] EWHC 1089 (Comm), Calver J considered in the context of fortification the question of whether the loss was caused by the grant of the injunction. He said the following at [27]:

“(c)

It is only loss which is caused or would have been caused by the preventative or, as the case may be, coercive effect of the injunction that is recoverable under the cross-undertaking: Harley Street Capital at [22]. It follows that if the loss would have been suffered in any event because of an injunction properly obtained in the proceedings against other defendants, that will not be recoverable: Tharros Shipping v Bias [1994] 1 Lloyd's Rep 577 at p. 583 ("Tharros Shipping").

(d)

If the loss would have been suffered regardless of the granting of the injunction, for example because of the bringing of the proceedings, then that is not covered by the undertaking. As was stated by Saville J in Financiera Avenida v Shiblaq (unreported, but cited in Tharros Shipping at 581-2 by Waller J):

"The object of the undertaking is to protect a party, normally the defendant, in respect of such damage as he may sustain by reason of the grant of the interim relief. It is no part of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise, as for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when no interim injunction is sought or granted. Consequently, it is for the party seeking to enforce the undertaking to show that the damage he has sustained would not have been sustained but for the injunction." See also Harley Street Capital at [35]; and Bloomsbury International v Holyoake [2010] EWHC 1150 (Ch) at [18] per Floyd J.

(e)

Similarly, a misconceived notion by potential investors in a listed company (or fund), that the grant of a freezing order against (private individual) defendants who are considered to be in control of that company (or fund) lent the Court's credence to the serious allegations made against those defendants is unlikely to be seen as part of a chain of causation between the freezing order and any loss in share value in the company (or fund). "It is a factor wholly unrelated to any restraint placed by the freezing order on the…defendants or anyone else. It therefore lies outside the quasi-contractual analysis of causation…": Harley Street Capital at [22] and [33].

(f)

So far as reputational consequences of being subject to a freezing order are concerned, in Harley Street Capital at [34] the deputy judge stated as follows:

"Neither I nor counsel were aware of any case in which the purely reputational consequences of being the subject of a freezing order have formed a part of an award of damages under the cross-undertaking, wholly divorced from the consequences of the restraint which the freezing order imposed on the applicant for damages or upon anyone else. In this case, the reputational loss is not even that of the defendants against whom the freezing order was made, but of the fourth defendant. That makes the supposed causative link even more tenuous." (emphasis added)

(g)

However, in Al Rawas v Pegasus Energy Limited [2008] EWHC 617 ("Al Rawas"), Jack J stated:

"35.

I consider that there is a close analogy between the stopping of a cheque by a bank and the obtaining of a freezing order. In each case there is an interference with the party's ability to use its money as it wishes. It goes to the heart of the party's ability to use the banking system, which is at the heart of trade. To be on the wrong end of a freezing order is undoubtedly a stigma – see the Booker McConnell case referred to above: it suggests that the defendant has failed to pay its debts and has been found likely to try to dissipate its assets….

39.

I conclude that it is in accordance with principle and the above authorities that general damages may be awarded where a search and seizure order has been wrongly obtained, and likewise with a freezing order. Such damages are to compensate the defendant for the consequences of the order which cannot be claimed as special damage. They are not, however, awarded for nothing. It may be obvious that the particular circumstances of the case justify an award, or it may well not be but rather the contrary. In most cases it will be necessary to have some evidence to support the award."

(h)

In Bloomsbury International Ltd v Holyoake [2010] EWHC 1150 (Ch), Floyd J, having considered Harley Street Capital and Al Rawas stated at [23]:

"Plainly, the strength of the causative link between the grant of a freezing order and damage to the commercial standing of the defendant will vary from case to case. Harley Street v Tchigirinski was a case where Mr Briggs QC felt able to discount it as an element in the defendants' loss at the interim stage, whereas Al-Rawas was a case where it was ultimately considered to justify an award of damages, once all the evidence was available."

(i)

Thus, whilst a claim for general damages might in theory be available for reputational damage caused by the granting of a freezing order, it is likely to be a rare case as it will frequently be difficult for the defendant to show that the damage has been suffered as a consequence of the restraint and not as a result of other factors, such as the bringing/existence of the underlying litigation.”