Cigna Insurance Company of Europe SA NV & Ors v Vural Ltd & Anor

Damages under an undertaking given in support of an interim injunction must reflect loss actually caused by the injunction. Where an alleged sale price substantially exceeds the market value of the restrained asset, the court must examine what the consideration represents. A premium may include payment for other assets, goodwill, continuity of trading and tax advantages. Such elements cannot be treated as loss attributable to the injunction’s effect on the asset sale. Where the evidence shows that the defendant suffered no recoverable loss, the claim for damages fails.

The claimants obtained a Mareva injunction and related relief against the defendants. They later discontinued their action, leaving an inquiry into damages under undertakings given when the orders were made. The second defendant claimed substantial loss from the alleged prevention of an agreed sale of a factory for £1 million, together with mortgage interest and lost investment income. The Master awarded only nominal damages. The appeal concerned whether damages should be assessed by reference to the alleged agreed price rather than the property’s market value, and whether mitigation also affected the claim.

1. Appeal dismissed. The court unanimously upheld the Master’s conclusion that the second defendant had suffered no recoverable loss.
2. The evidence showed that the true consideration was £1.35 million because the purchasing company also assumed liability for a £350,000 mortgage. The consideration was not solely attributable to the factory.
3. The agreed transaction also included elements relating to the first defendant’s net assets, its goodwill as a going concern, continuity of trading at the premises and tax advantages connected with the defendant’s intended move to Turkey. The alleged price therefore could not properly be used as the measure of loss caused by the injunction.
4. The market value of the factory in December 1997 was £600,000. The Master was entitled to assess the claim by reference to that value, and was clearly right to find that the defendant had suffered no loss.
5. It was unnecessary to determine the appellant’s arguments concerning mitigation or the proposed investment of the sale proceeds in Turkey at a high rate of interest.
6. Lord Justice Mance and Mr Justice Park agreed with Lord Justice Brooke.

• Court of Appeal (Civil Division): Cigna Insurance Company of Europe SA NV & Ors v Vural Ltd & Anor [2002] EWCA Civ 143 — appeal from the Master’s assessment of damages dismissed.
• High Court, Commercial Court: Master Miller awarded only nominal damages on the inquiry arising from the claimants’ undertakings given in support of the injunction.