Schettini v Silvestri & Ors

A cross-undertaking in damages is a voluntary promise offered as the price of interim injunctive relief. The court cannot compel such an undertaking or vary one already given. A party challenging its terms should refuse it and appeal the refusal or conditional order, or seek release and offer a new undertaking.

Absent exceptional circumstances, release ordinarily requires a significant change since the promise was given. An appellate court may also refuse points not raised below, particularly where they might have changed the hearing. The appeal was therefore unsustainable.

The appellant sought specific performance of an agreement concerning shares in a company owning a London flat. An interim injunction was granted without notice, then discharged for material non-disclosure and re-granted by HHJ Pelling QC subject to fortification of the cross-undertaking in damages by £100,000.

The appellant gave the undertaking but appealed against it, arguing that it amounted to security for costs, that the amount was excessive, and that compliance would stifle the claim. The Court of Appeal considered whether the appeal was competent, whether it should instead be treated as an application for release, and whether the new arguments could be raised for the first time on appeal.

1. Appeal dismissed. The undertaking recorded in the order fell within the statutory jurisdiction to hear appeals from High Court orders under section 16 of the Senior Courts Act 1981. However, jurisdiction in that strict sense differed from the circumstances in which the court would exercise its appellate power.
2. A cross-undertaking is a voluntary promise given as the consideration for interim relief. Following the principle explained in Tucker v New Brunswick Trading Co of London (1890) 44 Ch D 249, the court cannot compel a claimant to give an undertaking, although it may refuse the injunction without one. Birch v Birch [2017] UKSC 53 established that the proper route for a person wishing to cease being bound is an application for release or discharge, usually accompanied by a new undertaking. An appeal against the undertaking itself will ordinarily not lie.
3. A litigant wishing to challenge the proposed terms may refuse the undertaking and appeal the refusal of relief or an equivalent condition. Alternatively, the court may treat the appeal as an application for release. Absent extraordinary circumstances, release will generally require a significant change of circumstances since the undertaking was given. The limited appeal routes identified in Novartis AG v Hospira UK Ltd [2013] EWCA Civ 583 remained available where an injunction was refused.
4. The appellant’s principal arguments were new points. They had not been made before HHJ Pelling, who had not been asked to decide whether fortification was impermissible security for costs, whether the amount was excessive, or whether the claim would be stifled. An appellate court retains discretion to refuse new points, even pure points of law, particularly where they might have altered the hearing. Schmidt v Wong [2005] EWCA Civ 1506 supported the conclusion that there was no procedural error in failing to rule on an application that had not been made.
5. The original undertaking had also been discharged and replaced by a fresh undertaking following a later application for more time. There was no evidence of stifling or any change of circumstances. The appeal was consequently unsustainable.
6. The court made observations, not necessary to the result, that construction depends on the wording, background and purpose of the particular undertaking and that it may be wide enough to include costs. It agreed in broad terms with the policy that continuation of an injunction should not ordinarily be made conditional on security for costs where such security would not be available under Part 25 of the Civil Procedure Rules 1998, but did not finally determine those issues.

• Court of Appeal (Civil Division): dismissed the appeal against the fortification undertaking in [2019] EWCA Civ 349.
• Business and Property Courts, Chancery Division: HHJ Pelling QC discharged the without-notice injunction for material non-disclosure but was prepared to re-grant it subject to £100,000 fortification of the cross-undertaking in damages.
• Subsequent procedural order: Mr Nicholas Caddick QC released the appellant from the original fortification undertaking in return for a fresh undertaking with a later compliance date.