Alta Trading UK Limited (Formerly Known as Arcadia Petroleum Limited) & Ors v Peter Miles Bosworth & Ors

On an application to amend, a pleaded legal argument should proceed where it has realistic prospects of success and is sufficiently particularised. Strike-out is inappropriate where the issue lies in a developing area of law and depends on facts to be found at trial.

In an inquiry under a cross-undertaking, the claimant must establish that the injunction was an effective cause of the loss. Loss caused by the injunction must be distinguished from loss caused by the underlying proceedings. It was realistically arguable that a party could not rely on its own dishonest conduct to displace causation, and that the counterfactual should remove that further wrong while still requiring proof of loss caused by the injunction.

The claimants sought to strike out allegations that they had dishonestly obtained and maintained a worldwide freezing order. The allegations were made by the first, second and fifth defendants in an inquiry into damages under the claimants’ cross-undertakings.

The claimants also opposed amendments advancing arguments based on the own-wrong principle, the treatment of dishonesty as the sole cause of loss, and counterfactuals involving an unsuccessful freezing-order application or successful discharge application. Applications for further information concerning the dishonesty allegations, knowledge, privilege and statements of truth were also before the court.

The central questions were whether the proposed amendments had realistic prospects of success, whether the dishonesty allegations disclosed reasonable grounds, and what information was necessary and proportionate for the parties to prepare their cases.

1. Amendment and strike-out. The defendants’ amendments were allowed in substantial part and the strike-out application was dismissed. The proposed own-wrong and lawful-counterfactual arguments had realistic prospects of success. The issue was suitable for determination on evidence because the law was developing. The court should not strike out a case unless it was certain to fail.
2. Causation under a cross-undertaking. The inquiry concerns loss caused by the injunction, rather than loss caused merely by the underlying proceedings. The defendants must establish that the freezing order was an effective cause, or a cause without which the loss would not have occurred. The injunction may be a concurrent cause, provided its causative contribution is proved.
3. Own-wrong principle. It was at least realistically arguable that a party should not rely on its own dishonest allegations to defeat or reduce liability for loss caused by an injunction obtained on those allegations. The principle might reflect public policy, fairness or an evaluative approach to causation. It was not confined at the pleading stage to conduct constituting a separately actionable tort, nor to a later or supervening wrong.
4. Counterfactual. Removing the alleged dishonest allegations from the counterfactual would not dispense with the requirement to prove loss caused by the freezing order. It would prevent the claimants from defeating that causation by relying on the effect of their alleged dishonesty. By contrast, amendments assuming that an unsuccessful application or discharge would have publicly exposed the weakness of the fraud claim were refused. The reasoning in Dr Reddy’s Laboratories and Sigma Pharmaceuticals supported excluding incidental effects of the application process rather than assuming those outcomes.
5. Sole-cause argument. Although the judge found the argument unconvincing, it had a narrowly realistic prospect of success and was permitted to proceed. The defendants could argue that, where dishonesty was a cause of loss, it should be treated as the only cause.
6. Stay and further information. A stay was inappropriate because the dishonesty issues were closely intertwined with the inquiry. Further information was ordered where necessary and proportionate, including information about which allegations a relevant individual knew were being advanced and which natural persons were said to hold a genuine belief. Requests seeking privileged communications, narrative matters or fishing enquiries were refused.