Ennismore Fund Management Ltd v Fenris Consulting Ltd (Cayman Islands)

A cross-undertaking in damages given for a freezing injunction is assessed on ordinary causation principles and by analogy with contractual damages. The party seeking compensation must prove on the balance of probabilities that, absent the injunction, it would have taken the particular profitable course alleged. A prima facie case may assist where loss is apparent and only its cause is disputed, but it does not establish a hypothetical investment decision. Once the relevant course of action is proved, the court makes its best assessment of the likely financial outcome, allowing for uncertainty. Liability does not extend beyond the point at which a properly obtained judgment, rather than the injunction, causes the inability to use the assets.

Fenris Consulting Ltd claimed damages under a cross-undertaking given by Ennismore Fund Management Ltd when obtaining a freezing injunction over retained bonus assets. The underlying clawback proceedings ultimately ended in Fenris’s favour following the Board’s earlier decision in [2016] UKPC 9, and the frozen money was returned.

On the subsequent inquiry into damages, the Grand Court awarded €5,354,601.07. The Court of Appeal set aside the causation findings and substituted €558,034.89. Fenris appealed, challenging the burden and method of proving and quantifying loss, and the duration of the recoverable loss. The central issues were whether the Court of Appeal had applied a loss-of-chance approach and whether loss continued after the first-instance judgment.

The Board, in the single judgment of Dame Kate Thirlwall, unanimously dismissed the appeal. The Court of Appeal was entitled to set aside the first-instance findings on causation and to substitute an award of €558,034.89, including interest.

1. Duration of loss. Liability under a cross-undertaking is determined by ordinary principles of causation. The judgment of Foster J, together with the consequential orders requiring the frozen money to satisfy that judgment, eclipsed the freezing injunction as the cause of Fenris’s inability to use the assets. The Board distinguished Algonquin Mercantile Corpn v Dart Industries Canada Ltd (1996) 12 CPR (3d) 289. A court does not compensate a party for losing an opportunity to avoid the consequences of a judgment properly obtained. The speculative counterfactual concerning enforcement outside the jurisdiction could not extend the period of loss. The recoverable period was therefore 16 May 2009 to 16 February 2012.
2. Measure of damages. The measure under an enforced undertaking is not discretionary. It is assessed on the same basis as damages for breach of contract, as explained in Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295.
3. Causation and quantification. Fenris had to prove on the balance of probabilities that, but for the injunction, it would have pursued the particular investment course alleged. The prima facie approach discussed in Financiera Avenida SA v Shiblaq [1990] CA Transcript No 973 was confined to cases where loss was apparent and its cause was disputed. It did not replace proof of a hypothetical investment decision. The Board applied the distinction discussed in Perry v Raleys Solicitors [2020] AC 352 and the approach upheld in SCF Tankers Ltd (formerly known as Fiona Trust & Holding Corp) v Privalov [2017] EWCA Civ 1877.
4. Assessment of hypothetical profits. Once Fenris established that it would probably have made a profitable investment, the court had to make the best assessment available of the likely return, taking account of uncertainty. This was not an award calculated on a loss-of-chance basis. The Court of Appeal had sufficient evidence to make its own assessment after setting aside the displaced causation finding. A liberal assessment did not justify an award greater than the sum to which Fenris was fairly entitled.

The appeal was dismissed and the substituted award stood.

• Privy Council: The Board dismissed Fenris’s appeal and advised that the substituted award of €558,034.89 stand.
• Court of Appeal of the Cayman Islands: Allowed EFML’s appeal against the Grand Court’s damages award, set aside the causation findings and substituted an award of €558,034.89.
• Grand Court of the Cayman Islands: McMillan J awarded Fenris €5,354,601.07, plus interest, under EFML’s cross-undertaking in damages.