Brainbox Digital Ltd v Backboard Media GmbH & Anor

When deciding whether to fortify a cross-undertaking in damages, the court must assess whether there is a good arguable case that the injunction has caused, or may cause, loss which existing security may not cover. That requires an informed and realistic estimate of likely loss, a sufficient risk of loss, and a causal link with the injunction. Fortification may be limited or unlimited, but its extent remains discretionary and should ordinarily be proportionate to the estimated risk. A further unlimited undertaking should not normally be required merely because some loss is possible.

Applications for security for costs require a broad assessment of justice, including the merits, the likely effect on the claim, the claimant’s resources and the amount sought.

The claimant alleged that the defendants had participated in fraudulent online advertising activity and sought damages or restitution. A proprietary and freezing injunction had been granted without notice and continued against the defendants pending an inter partes hearing.

The court considered whether the injunction should continue, whether the claimant’s cross-undertaking required further fortification, whether the first defendant could pay its managing director, and whether the claimant should provide security for the defendants’ costs before the case management conference.

1. Continuation and fortification. The injunction ceased to apply to Mr Hansen and continued against Backbord, subject to an adjustment permitting ordinary business expenditure, including a monthly salary of €10,000 for its managing director.
2. The principles governing fortification were those identified in Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295, adopting the summary in Jirehouse Capital v Beller [2008] EWHC 725 (Ch). The applicant for fortification must show a good arguable case that there is a sufficient risk of loss, make an intelligent and realistic estimate of that loss, and establish that the injunction was a cause without which the loss would not have occurred.
3. The power to require fortification is discretionary. The court may require a limited or unlimited third-party undertaking or another form of security. Rigid rules should not fetter that discretion. The amount of fortification should ordinarily correspond to the estimated loss, since requiring an unnecessary unlimited guarantee may itself be disproportionate.
4. There must be an evidential foundation for fortification. Although the defendants’ witness evidence was deficient, it was not wholly disregarded in this interlocutory context. The court found a good arguable case that enforcement of the injunction had disrupted Backbord’s business and caused lost revenue, but there was no realistic evidential basis for recoverable loss exceeding the £125,000 already provided. Further fortification was therefore refused.
5. The court also applied the discretion governing security for costs under CPR 25.13. The claimant had a reasonable prospect of success, but the outcome was not highly probable. The absence of a defence did not make the application premature or oppressive, and the claimant had not shown that the proposed security would stifle the claim. Security of £125,000 was ordered, payable into the Court Funds Office within 14 days, with liberty to apply for further security at the case management conference.