Tuesday, 12 May 2015

What must an Applicant show to obtain a Freezing Injunction? Part 3

That it can provide an undertaking in Damages
Any Applicant applying for a Freezing Injunction must undertake to the Court to pay any damages that a Respondent or any other party may suffer as a result of the Freezing Order if it later transpires that it should not have been granted. This undertaking can in certain circumstances be limited to a specific sum by the Applicant, subject to the Court agreeing.
Depending on the financial standing of the Applicant, the Court may direct that monies be paid into Court and held in an account until determination of the matter at trial. Alternatively, the Court may simply rely upon an undertaking from an Applicant to pay damages if, for example, the Applicant is of significant financial standing, such as a bank or other financial institution.
If an Applicant ultimately loses the underlying substantive claim or a Defendant successfully argues that the Freezing Injunction should be discharged, the Applicant could face a very significant claim in damages against it, either in terms of the legal costs of the main proceedings, the legal costs of the injunction application and the undertaking in damages arising from the injunction, both to the Respondent and third parties (subject to any limitation as described above).
In any subsequent enquiry as to damages, the Defendant must prove that the losses he alleges would not have occurred but for the injunction, but not that the injunction was a sole cause of the loss.
It is open to a Respondent to ask the Court at the Return Date for the cross undertaking in damages to be increased and fortified (which refers to mechanisms to secure payment in the event the undertaking is called on). When considering the question, the Court will adopt the course which will involve the least risk of injustice. It is balancing act between having an undertaking which is of realistic value but ensuring that the fortification of it does not stifle the underlying litigation.
A cross undertaking in damages is not required where the Applicant is the Crown or a law enforcement body.