Triodos Bank NV v Ashley Charles Dobbs & Anor

A cross-undertaking in damages is assessed on contractual principles of causation, remoteness, quantum and mitigation. The claimant must establish that, on a but-for basis, the undertaking was prima facie the exclusive cause of the loss, although it need not exclude every conceivable or theoretical cause. Loss is recoverable where the restrained transaction was the only realistic opportunity for beneficial realisation and its loss was foreseeable. A party seeking damages must take reasonable steps to mitigate, but an unreasonable delay will not reduce recovery unless it caused or contributed to the loss.

The court determined two applications arising from earlier proceedings concerning the appointment of receivers over Acorn Televillages Limited. The first application concerned the receivers’ claim under a cross-undertaking given when Mr Dobbs obtained an undertaking restraining the sale of shares in Acorn USA. The undertaking was later released, but the intended purchaser no longer wished to proceed.

Mr Dobbs also sought to raise fresh claims concerning a tripartite agreement. Those claims had been excluded from the earlier trial and the court held that they could not be introduced after final judgment. The principal issue was whether the receivers had proved loss caused by the undertaking and had properly mitigated that loss.

1. Second application. Mr Dobbs’ application to raise further claims concerning the Tripartite Agreement was dismissed. The claims had been excluded from the earlier trial because they were raised too late and could not be introduced after final judgment.
2. Applicable principles. The court has a discretion whether to enforce a cross-undertaking and order an inquiry. Where an inquiry is ordered, causation, remoteness, quantum and mitigation are assessed on contractual principles: [1975] AC 295. The claimant must show not merely a but-for connection, but that the undertaking was, prima facie, the exclusive cause of the loss. It need not address every merely conceivable or theoretical cause: [1994] 1 Lloyds Rep 577.
3. Causation and foreseeability. The receivers proved that the undertaking prevented the only realistic beneficial sale of the shares. The prospective purchaser had agreed to buy them and had provided the purchase price before the undertaking was given. The shares were otherwise valueless. The undertaking was therefore the exclusive cause of the lost sale, and that loss was plainly foreseeable because preventing the sale was the purpose of obtaining the undertaking.
4. Mitigation. The receivers acted unreasonably by delaying until 15 January 2003 before preparing a draft order releasing the undertaking. However, that delay did not cause or contribute to the loss. Even an immediate draft would have encountered Mr Dobbs’ objections and required reference to the judge, so the sale would still have been lost.
5. Disposition. Damages were assessed at $52,500, equivalent at the material time to £33,501.79, with interest from 1 September 2002 to the date of the order.