Mex Group Worldwide Limited v Stewart Owen Ford & Ors

An applicant who obtains an interlocutory injunction ordinarily gives a cross-undertaking in damages. Where the injunction is later discharged and loss may have resulted, the court will generally order an inquiry unless special circumstances justify refusal. At the first stage, the applicant need show only credible evidence of loss and an arguable case on causation. The court should avoid deciding complex questions of quantum, remoteness or recoverability prematurely. The cross-undertaking may in principle cover all loss caused by the injunction, including its market and reputational effects, and is not confined to the order’s direct restraints. General attacks on character do not justify refusing an inquiry; the relevant conduct must be inequitable conduct in the litigation.

The claimant obtained a worldwide freezing order against the defendants in support of proceedings in Scotland. The Scottish proceedings were later abandoned, and the freezing order was discharged. Other defendants had already obtained an inquiry into damages. The first, second and seventh defendants applied for the same relief under the claimant’s cross-undertaking in damages.

The claimant argued that the applicants had not shown credible loss, that some losses were irrecoverable, and that their conduct justified refusing an inquiry. The central issue was whether the applicants had established a sufficient evidential and discretionary basis for an inquiry at the first stage.

1. Inquiry ordered. The court ordered an inquiry into the losses suffered by the first, second and seventh defendants and whether they should be compensated under the cross-undaking in damages.

2. The usual approach is sequential. First, the court decides whether the undertaking should be enforced and whether an inquiry should be ordered. Second, if appropriate, the inquiry determines whether loss was suffered by reason of the injunction and the amount recoverable. The stages may be combined in a simple case, but separate determination is appropriate where factual, causation and quantum issues are complex or substantial sums are involved.

3. An inquiry should ordinarily be ordered where the injunction was wrongly granted or later discharged and loss may have been caused. The applicant need provide credible evidence supporting an arguable case on causation. The court should not conduct a protracted merits assessment at this stage. An inquiry may be refused where the proposed claim is plainly unsustainable, the loss would have occurred regardless of the injunction, the damage is too remote, or special circumstances such as inequitable conduct are established.

4. The applicants’ evidence, including contractual documents, invoices and investment data, was sufficiently specific and plausible. The court accepted that the freezing order could have caused loss through disruption of bond listing and trading. The timing of notifications to stock exchanges supported causation.

5. In principle, recoverable loss was not limited to the direct restraining effect of the order. It could include the wider market and commercial consequences of the order’s dissemination or weaponisation, if causation and recoverability were established at the inquiry. The applicants’ own lost revenues were not reflective loss. Loss of reputation and business opportunities could also be recoverable in an appropriate case.

6. General attacks on character, including regulatory findings against one applicant, were insufficient. Only inequitable conduct in the litigation was relevant to the discretion. The asset affidavits were not necessarily inconsistent with later claims for uncrystallised future profits, and alleged exaggeration was a matter for the inquiry.