Alta Trading UK Ltd (Formerly Arcadia Petroleum Ltd) & Ors v Bosworth & Ors

Fortification of an undertaking in damages is discretionary. The applicant for fortification must show a good arguable case that: loss has been or will be suffered; the injunction was a cause without which the loss would not have occurred; and there is a sufficient risk that the injunction-granting party will not satisfy an award.

The court should scrutinise the evidence carefully, while recognising the inherent imprecision of an interlocutory assessment. Fortification may cover past as well as future loss. Causation requires a sufficient but for link with the injunction, although the injunction need not be the sole cause. A failure to establish a real risk of non-satisfaction may justify refusing fortification despite satisfactory evidence of loss and causation.

The claimants, members of the Arcadia Group, brought fraud-related claims against former executives and associated companies. Freezing injunctions were granted in February 2015, supported by a US$2 million fortification of the claimants’ undertaking in damages.

Steven Kelbrick, the fifth defendant, applied to increase the fortification to up to US$10 million. He relied on alleged lost oil-trading income, loss of banking and finance facilities, and the expected continuation of the injunction until trial. The claimants disputed loss, causation and the risk that they would be unable to satisfy any damages award.

The central issues were whether Mr Kelbrick had a good arguable case on loss and causation, whether past losses could be covered, and whether there was a sufficient risk of non-satisfaction.

1. Application dismissed. Mr Kelbrick established a good arguable case that he had suffered losses caused by the freezing injunction, but failed to establish a good arguable case of a real or sufficient risk that the claimants would not satisfy an award under the undertaking.
2. The governing inquiry was whether the applicant showed a good arguable case that:
   1. loss had been or would be suffered, supported by an intelligent, informed and realistic estimate;
   2. the injunction was a cause without which the loss would not have occurred; and
   3. there was a sufficient risk of non-satisfaction requiring fortification.
   These factors guided the discretion, which required the court to step back and assess the circumstances overall.
3. The court had to scrutinise witness and documentary evidence rather than form an impressionistic view. It nevertheless had to recognise the interlocutory nature and possible incompleteness of the evidence. A mathematically precise assessment was unnecessary.
4. Fortification was not confined to future losses. There was no principled distinction between past and future losses, and fortification was analogous in this respect to security for costs. A change in circumstances could justify fortification in respect of losses already incurred.
5. For causation, the relevant question was whether the injunction was a cause without which the loss would not have been suffered. The injunction need not be the sole cause, and could operate concurrently with the proceedings. On the evidence, the loss of finance facilities and trading opportunities gave Mr Kelbrick a good arguable case on causation.
6. The claimants’ current assets, including cash held within the jurisdiction, were sufficient to cover the potential award. Evidence of future litigation costs and other defendants’ possible claims was insufficient to establish a real risk of non-satisfaction. In the absence of that risk, further fortification was unjustified.