Standing v Power

On an application to fortify a cross-undertaking in damages supporting an injunction, the applicant must establish three linked matters:

1. an intelligent estimate of the likely loss;
2. a sufficient risk of that loss to require fortification; and
3. a causal connection between the injunction and the loss.

The assessment is made at the hearing date. Fortification is not available for losses already incurred before the application. The applicant must provide realistic, current evidence of the relevant transaction, loss and causation. Where the injunction permits the alleged loss-producing transaction with the claimant’s consent, the applicant must show why consent could not realistically be obtained. Mere assertions of a prospective sale or insolvency are insufficient.

The claimant obtained an interim injunction restraining the defendant from dealing with shares and assets connected with Swindon Town Football Club. The injunction continued until trial and was supported by the claimant’s cross-undertaking in damages.

The defendant applied to fortify the undertaking, alleging that the injunction jeopardised a proposed sale of the Club for £7.5 million and might cause substantial loss or insolvency. The claimant argued that the injunction did not prevent a sale with his written consent, which he would consider on receipt of full information. The central issue was whether the evidence established a sufficient risk of injunction-caused loss requiring fortification.

1. The application was dismissed. The defendant was ordered to pay the claimant’s costs of defending the application.
2. The governing principles were those explained in Harley Street Capital Ltd v Tchigirinski and ors [2005] EWHC 2471 (Ch) and endorsed in Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2015] 1 WLR 2309. The applicant had to provide an intelligent estimate of likely loss, establish a sufficient risk of loss requiring fortification, and establish that the loss was caused by the injunction.
3. The relevant assessment had to be made as at the hearing. Fortification could not properly be ordered for loss which had already occurred while the applicant delayed making the application.
4. The evidence did not establish a real likelihood that the proposed sale to Able would proceed at £7.5 million. The Letter of Intent was old, unsigned and overtaken by uncertainty. Later correspondence did not confirm either an agreed transaction or the price. The effect of the Covid-19 pandemic had also not been properly addressed.
5. The defendant had not proved that the Club was likely to enter administration if the sale failed. The asserted funding requirement was unsupported by current accounts or other financial evidence. Alternative funding or another sale remained possible.
6. Causation was also unproven. The injunction permitted a sale if the claimant gave written consent, and the claimant had indicated that he would consider a properly disclosed transaction. The defendant’s lack of transparency prevented that consent from being considered. The necessary involvement and consent of Axis, together with the defendant’s failure to provide information to Axis, could also break the causal chain.
7. Because the application failed on risk, estimation and causation, it was unnecessary to decide whether the claimant’s assets adequately supported the undertaking. The judge nevertheless considered the remaining quantum arguments and concluded that they would not have shown any material shortfall.