The Claimants set out In Schedule 1 To the Claim Form v Spence & Ors

Fortification of a cross-undertaking requires the defendant to show a good arguable case that the interim order will cause loss. Proof on the balance of probabilities is unnecessary. The defendant must provide objective evidence of the risk and show a causal connection between the order and the possible loss. Where the amount cannot be assessed precisely at an interlocutory stage, the court should make an informed, realistic and intelligent estimate of likely loss. Additional fortification may be ordered separately from existing protection where that protection is needed for other potential losses.

The defendants applied to vary the fortification supporting a worldwide freezing injunction obtained by the claimants. The first defendant held a US dollar loan secured against sterling deposits. He argued that the freezing order created a substantial risk that the bank would demand repayment, forcing conversion of sterling at an unfavourable exchange rate.

The claimants argued that the loan documents did not establish a sufficient causal connection, that the bank had not terminated the facility, and that the alleged loss was speculative. The issues were whether there was a good arguable case of loss caused by the freezing order and, if so, the appropriate estimate of that loss.

1. Application granted in part. The first defendant established a good arguable case that the freezing order might cause loss by leading the bank to call in the on-demand facility. Additional fortification of £800,000 was ordered, in addition to the existing £500,000 insurance policy.
2. The applicable question was whether the defendant could show a good arguable case that he would suffer loss in consequence of the order. Proof on the balance of probabilities was unnecessary. The assertion of risk alone was insufficient; real evidence objectively establishing the risk was required. The principles in Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2015] 1 W.L.R. 2309 were applied.
3. The bank’s failure to terminate the facility after notification of the freezing order did not remove the risk. The contractual terms permitted repayment to be demanded, and there was an arguable case that an event of default had occurred. An on-demand facility might nevertheless be expected to continue absent some cause. The freezing order was capable of constituting litigation affecting the borrower’s or bank’s reputation and causing the facility to be called in.
4. The likely loss had to be assessed by an informed, realistic and intelligent estimate. That estimate was not an assessment of damages and could be imprecise. The claimed £2.08 million was rejected because it relied on an unusually low exchange rate and did not sufficiently account for uncertainty over the target rate, the time required to reach it, and saved interest payments. The estimate was fixed at £800,000.
5. The existing £500,000 fortification was required to cover other possible losses. The additional amount therefore had to be provided separately. The parties were directed to agree its form within two weeks, with unresolved matters to be referred to the court.