Phoenix Group Foundation & Ors v Cochrane & Ors

An applicant seeking fortification of a cross-undertaking in damages must show three matters. The court must be able to make an informed and realistic estimate of the likely loss. There must be a good arguable case that a sufficient risk of that loss exists. The interim order must also be a cause without which the loss would not have occurred.

Exact quantification and particularised evidence are not invariably required. The court may estimate a difficult valuation from the available material. Nor does an ordinary-course-of-business exception necessarily prevent loss, because obtaining consent may cause damaging delay. Nevertheless, assertion and speculation cannot establish causation or provide a sensible measure of loss.

The sixth to twelfth defendants applied for further fortification of the claimants’ cross-undertaking in damages under freezing orders made against them as non-cause-of-action defendants. The orders restrained assets up to £145 million under the jurisdiction identified in TSB Private Bank International v Chabra [1992]1 WLR 231. Fortification of £1 million was already available.

The applicants alleged losses from abandoned property purchases, a failed sale of a development, increased financing costs, and disruption or delay to several property developments. The central questions were whether there was a good arguable case that the freezing orders caused the alleged losses and whether the court could make an informed and realistic estimate exceeding the existing fortification.

1. The application was dismissed. An applicant for fortification had to satisfy three requirements: an informed and realistic estimate of likely loss; a good arguable case that there was a sufficient risk of that loss; and a causal connection under which the interim order was a cause without which the loss would not have occurred. Extensive disputes about causation should not ordinarily be tried at the interlocutory stage once a good arguable case has been shown. In this case, however, the applicants had not first established that threshold case.
2. The absence of precise or fully particularised evidence did not invariably prevent fortification. Courts could estimate difficult valuations from the evidence available. Equally, an ordinary-course-of-business exception and the ability to seek consent or apply to the court did not eliminate the possibility of loss, because delay might itself cause damage. The sale protocol also left proceeds unavailable for further development while they remained frozen with the enforcement receivers.
3. The alleged losses from withdrawn purchasers were unsupported by evidence explaining why purchasers withdrew. In any event, the agreed sale prices were not a proper measure of capital loss. The companies retained properties with market values which might be equal to or greater than those prices. Any loss depended upon the eventual sale values, which the evidence did not establish.
4. The alleged collapse of the Llanharan sale was supported only by evidence of preliminary interest. There was no adequate evidence that the purchaser knew of the freezing order or that the order caused negotiations to end. The increased financing-cost claim also failed. There was no evidence that alternative investors would otherwise have provided additional funding, still less that they would have offered cheaper terms.
5. General claims for development delay and lost profits likewise depended upon an unproved assumption that the freezing orders caused funding to cease. Although some administrative expense or loss from delayed sales was possible, it remained speculative. The court could not sensibly estimate a causally connected loss exceeding the £1 million fortification already available.

not stated in the judgment.