Summary
In an inquiry into damages under a cross-undertaking given for a freezing order, allegations that the order was obtained dishonestly should be permitted only where they have a properly pleaded and proportionate connection with an issue for determination. Alleged dishonesty was not relevant merely because it might bear on the original grant or continuation of the order, mitigation, aggravated damages, interest, costs, possible future applications, or public vindication. It was potentially relevant to causation where the claimant relied on the reputational or commercial effect of the underlying allegations while seeking to distinguish that effect from the freezing order. The court should give the parties an opportunity to plead that causation case precisely before finally determining a strike-out application.
Factual background
The claimants had obtained a worldwide freezing order in 2015 in proceedings alleging fraud in crude-oil transactions. Following a ten-week trial, the claims were dismissed in January 2025, certain counterclaims succeeded, and the freezing order was discharged. An inquiry into damages under the claimants’ undertaking was ordered.
The defendants sought substantial compensation for business, employment and investment losses, together with aggravated damages and other relief. They alleged that the freezing order had been obtained and maintained through knowingly false allegations. The claimants applied under CPR 3.4(2)(a) and (b), alternatively under the court’s case-management powers, to strike out those allegations. The central issue was whether the allegations were relevant and proportionate to the issues in the inquiry.
Held
- Disposition. The strike-out application was adjourned. The defendants were to have an opportunity to formulate, probably by draft amendments to their Replies, their causation case concerning the alleged dishonesty, after which the claimants could respond.
- The order enforcing the claimants’ undertaking and directing an inquiry into damages presupposed that the freezing order had been wrongly granted. The inquiry would cover losses caused by the order throughout its duration. It was therefore unnecessary separately to investigate whether the order had been wrongly granted, whether its continuation had been procured dishonestly, or whether it had been aggressively policed.
- The alleged dishonesty was not, standing alone, relevant to arguments that the defendants should have sought a variation by consent. Nor did it make mitigation relevant. A respondent to an injunction knows from service that a potential claim under the cross-undertaking exists and may reasonably be expected to mitigate, unlike a claimant in deceit who remains unaware of the deception.
- The allegations should not remain solely to support aggravated damages, interest, indemnity costs, possible future applications, or public vindication. Those matters could generate disproportionate satellite litigation unrelated to the losses caused by the freezing order.
- Causation presented a different question. The claimants disputed that losses were caused by the freezing order rather than by the underlying fraud allegations. The defendants contended that the freezing order gave credibility to those allegations and that the claimants should not rely on their effect while alleging that they were dishonestly made. That contention was at least arguable, particularly because it would be counterintuitive for a claim to fail on the basis that loss resulted from allegations which substantially overlapped with dishonest allegations used to obtain the order.
- The point had not been pleaded or developed with sufficient precision, and fairness required an opportunity to identify the alleged overlap and the proposed legal consequence before the strike-out application was finally decided.
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Key cases cited
13 authorities cited.
- Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd (Smith New Court Securities Ltd v Citibank NA) [1997] AC 254
- SCF Tankers Ltd & Ors v Privalov & Ors [2017] EWCA Civ 1877
- Hone & Ors v Abbey Forwarding Ltd & Anor [2014] EWCA Civ 711
- Hughes & Ors v Richards (t/a Colin Richards & Co) [2004] EWCA Civ 266
- Coudert Brothers v Normans Bay Limited [2003] EWCA Civ 215
- Downs v Chappell [1997] 1 WLR 426
- Pankim Kumar Patel v Minerva Services Delaware, Inc & Ors [2024] EWHC 172 (Ch)
- HRH The Duchess of Sussex v Associated Newspapers Ltd (Rev 1) [2020] EWHC 1058 (Ch)
- Ventra Investments Ltd v Bank of Scotland Plc [2017] EWHC 199 (Comm)
- Fiona Trust & Holding Corporation v Privalov & Ors [2016] EWHC 2163 (Comm)
- Charter UK Ltd v Nationwide Building Society [2009] EWHC 1002 (TCC)
- Al-Rawas v Pegasus Energy Ltd & Ors [2008] EWHC 617 (QB)
- Cheltenham & Gloucester Building Society (formerly Portsmouth Building Society) v Ricketts [1993] 1 WLR 1545
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Cases citing this case
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