For the first time, an appellate court has given clear guidance on the applicable principles for the assessment of damages under a cross-undertaking in damages.
In Hone v Abbey Forwarding Ltd, the Court of Appeal considered a claim for compensation in relation to a freezing injunction that had been wrongfully obtained. At first instance, HHJ Pelling QC ordered the respondents to pay general damages to the appellants pursuant to the cross-undertaking in damages in respect of some of the losses alleged to have been suffered, but rejected most of the appellants’ claims on the basis that the losses were not foreseeable.
At the appeal, the appellants argued that the judge had been wrong to hold that compensation pursuant to a cross-undertaking in damages needed to be assessed by analogy with principles of causation, remoteness and mitigation applicable to the assessment of damages for breach of contract. They instead argued that the respondents were liable for all losses, whether or not those losses were foreseeable.
The appeal was allowed in part. The court held that:
1. The judge had been right to apply by analogy the contractual rules of assessment, so that the remoteness rules applied and the respondents were generally liable for losses which were reasonably foreseeable at the time the injunction was granted;
2. Notwithstanding this general rule, when assessing damages caused by an injunction which was wrongly granted, “logical and sensible adjustments” may be required; and
3. In respect of some losses suffered by the appellants, the judge ought to have awarded a higher level of special and general damages. In particular, in addition to general damages for upset and stress, the appellants were also entitled to damages for:
- the wrongful restrictions to their way of life and the impact that the injunction had on their credit; and
- the “needlessly” aggressive” approach of the solicitors in charge of the administration of the freezing order.
The judgment is a warning to those who inappropriately seek freezing orders. As Lord Justice Vos stated in his judgment: “Those who inappropriately seek, obtain and enforce freezing orders should be aware of the kinds of damage they may cause, and of the fact that the courts will be astute to hold them to account by making such awards for their breaches of their notional contracts“.
Hone and others v Abbey Forwarding Ltd and another  EWCA Civ 711