In January 2025, Mr Justice Henshaw handed down judgment dismissing a $325m fraud claim which had been commenced 10 years ago. In February 2025, the freezing injunctions that had been made against the Defendants in 2015 were discharged and the Court directed that the Claimants’ cross-undertakings in damages be enforced and there be an inquiry into the loss caused to the Defendants by the freezing injunctions.
The Claimants already held $50m for the First and Second Defendants and $24.5 for the Fifth Defendant by way of fortification of the cross-undertakings in damages and by way of security for costs.
In advance of the inquiry, the First and Second Defendants and the Fifth Defendant made applications for additional security for costs of the inquiry (and of the detailed assessment costs proceedings). The Fifth Defendant also applied for an order that the Claimants pay further money into Court as security/fortification for his claim on the cross-undertaking in damages.
In a judgment handed down on 8 May 2025, Henshaw J allowed the First and Second Defendants’ and the Fifth Defendant’s applications for security for costs but refused the Fifth Defendant’s application for security/fortification for his claim on the cross-undertaking.
Security for Costs
The judgment held (inter alia) that: (i) when there is an inquiry under a cross-undertaking, the person making the claim under the inquiry remains the defendant for the purposes of the proceedings ([73]); (ii) where there has been a previous security for costs order, to make a further order for security for costs it is necessary that there should have been a material change of circumstance ([74]); and (iii) it is unnecessary to establish a link between the particular change of circumstance relied upon and additional costs for which security is sought and if a material change of circumstance is established, the Court may recalculate afresh the totality of the sum to allow ([80]).
Henshaw J found there had been material changes of circumstances, including in relation to the Fifth Defendant’s application: (i) the findings in the trial judgment as to his capabilities, contacts and experience which potentially lend support to his case that he would, but for the injunction, have been able to find other lucrative work; and (ii) that the Fifth Defendant had succeeded at trial ([103]).
Payment into Court/Fortification
The judgment held (inter alia) that: (i) it would be contrary to principle to order a payment into Court pursuant to CPR r. 3.1(5) as additional fortification of the cross-undertaking after the freezing injunction had been discharged because this would in substance impose upon the Claimants an undertaking they did not give; and (ii) it is likely that breaches of rules or Practice Directions could be shown in many cases where an injunction is held to have been wrongly granted, and deployment of CPR 3.1(5) would significantly cut across the principle that the court cannot require a party to give an undertaking (or, hence, to provide or increase fortification) ([62]-[64]).
A copy of the judgment can be found here.
Freddie Popplewell acted for Fifth Defendant, led by Tom Sprange KC and instructed by Sarah Walker of King & Spalding International LLP.
