Soutzos v Asombang & Ors

Compensation under a cross-undertaking in damages requires the claimant to prove loss and establish but-for causation. The injunction need not be the sole cause of loss, but subsequent events which would have occurred in any event must be taken into account. The court should not award compensation that leaves the claimant better off than if the injunction had not been granted.

A claimant must prove loss without a special allowance for difficulty in assessment where the case does not involve an ordinary interlocutory injunction and the defendant has not withheld relevant information. The ex turpi causa principle may bar recovery where the alleged loss depends substantially on fraudulent or unlawful conduct, including material misrepresentations made to induce the financing said to have been prevented by the injunction.

The claimant had obtained a freezing injunction against the defendants. Following trial, his claims against the second and third defendants were dismissed and the cross-undertaking in damages was enforced. An inquiry was then held to determine whether the injunction had caused compensable loss.

The second and third defendants claimed substantial losses on the basis that, without the injunction, Clydesdale Bank would have advanced £3.5 million to finance the refinancing of property and the purchase of machinery. They also claimed consequential business, property and borrowing losses. The claimant disputed both causation and the recoverability of losses said to depend on inaccurate or fraudulent information supplied to the bank.

1. Claims dismissed. The second and third defendants failed to prove that Clydesdale Bank would have advanced the proposed £3.5 million but for the freezing injunction. That failure was fatal to all their claims, including the alleged loss relating to a separate proposed acquisition dependent on the Clydesdale funding.
2. The burden of proving loss lay on the defendants. But-for causation applied, although the injunction need not have been the sole cause of loss. The court was required to take account of events which would have occurred in any event. The approach in Baker v Willoughby [1970] AC 467, developed in a tort context, should not be applied so as to over-compensate claimants under a cross-undertaking.
3. The court distinguished the circumstances considered in Les Laboratoires Servier v Apotex Inc [2008] EWHC 2347, [2009] FSR 3. The defendants were required to prove their loss without a particular allowance in their favour. The case did not concern an ordinary interlocutory injunction, and the claimant had not withheld the relevant financial evidence.
4. The ex turpi causa principle provided an additional bar. The information supplied to Clydesdale contained material inaccuracies and omissions, some of which were deliberate or made without belief in their accuracy. Any lending would therefore have been induced by fraudulent misrepresentations. Applying the approach in Hewison v Meridian Shipping Services PTE Ltd [2002] EWCA 1821, [2003] ICR 766, and the guidance discussed in Les Laboratoires Servier v Apotex Inc [2011] EWHC 730 (Pat), the defendants could not recover losses dependent substantially on that conduct.
5. The same conclusion applied to the second defendant. Although she was not shown to have made the misrepresentations, the financial affairs of the defendants were closely interconnected, she had given no consideration, and the court considered that the principle also barred her claim.
6. The court also found that the alleged losses were inadequately proved, including the asserted value of properties, the causal link with the injunction and the prospects of the business. No payment was ordered to either defendant.

The judgment records that, following the earlier trial, the claims against the second and third defendants were dismissed and the cross-undertaking in damages was enforced. The present judgment determined the resulting inquiry as to damages.