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Recovery Of Damages Under Cross-undertakings: The Privy Council Provides Some Helpful Guidance – Arbitration & Dispute Resolution

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A recent decision of the Privy Council (Ennismore Fund Management Ltd v Fenris
Consulting Ltd (Cayman Islands)
[2022] UKPC 27 (27 January
2022) (
) has confirmed that damages payable under
cross-undertakings given in a freezing order application will
generally be assessed in the same way as damages for breach of
contract. While the decision is not specifically binding on the
courts in England and Wales, they will clearly be influenced by it.
The decision will be relevant to applicants and respondents of a
freezing order alike, particularly when a substantive action fails
and a claim for significant damages may follow.

In this article, our Dispute Resolution team provides more
details on this decision and its significance.


Ennismore Fund Management Ltd (EFML) brought proceedings against
Fenris Consulting Ltd (Fenris) in the Cayman Islands in February
2009. EFML sought to recover bonus payments that had been paid to
Fenris in the form of shares in an investment fund, worth
approximately two million euros. EFML had concerns that the sums in
dispute could be withdrawn from the fund and then be ‘lost’
for enforcement purposes. On 27 February 2009, EFML therefore
sought and obtained a without notice freezing order for the shares
and the proceeds of their redemption, providing a cross-undertaking
in damages in return. The proceeds were placed into an interest
bearing bank account held jointly by the parties’ attorneys,
subject to the freezing order.

EFML’s claim was successful at first instance and the
judgment sum was paid out from the funds held in the joint bank
account on 16 February 2012. Fenris successfully appealed the
decision to the Court of Appeal (CoA) and in response, EFML
appealed to the Privy Council (JCPC). The JCPC dismissed the EFML
appeal on 4 May 2016 and the judgment sum was finally repaid to
Fenris on 25 May 2016, some seven years after the shares were

Claim under the cross-undertaking

A further dispute then arose as to the damages that should be
paid to Fenris as a result of the freezing order and an inquiry
into damages took place. Fenris argued that it had been deprived of
the opportunity to invest the funds frozen by the injunction in the
period 27 February 2009 to 25 May 2016. Adopting the same
investment strategy that Fenris asserted it had used previously and
would have followed again, the Court at first instance assessed
Fenris’ losses at over 5.3 million euros.

EFML appealed to the CoA. EFML had argued that Fenris would have
taken a more conservative investment approach and – in any
event – Fenris’ losses were limited to the period between
27 February 2009 and 16 February 2012; the date the freezing order
was made and the date it was discharged. The CoA accepted the
arguments made by EFML and substituted the award with an amount
just in excess of 550,000 euros, which represented the loss
suffered by Fenris between 16 May 2009 (when the funds from the
redeemed shares were deposited in the joint bank account) and 16
February 2012 (the date of the original first instance decision on
liability). Fenris appealed to the JCPC.

JCPC decision

The JCPC did not accept that the CoA had erred in its assessment
of the loss, either as to the duration of the period of loss or in
its assessment of the losses suffered by Fenris, and the appeal was

Duration of period of loss

The JCPC held that the loss flowing from the freezing order did
not continue after the freezing order had been discharged. Any loss
after the freezing order had been discharged flowed from the
judgment and consequential orders, which led to frozen monies being
used to meet the first instance judgment in favour of EFML –
not from the freezing order.

The JCPC referred to the long established principle that the
courts do not compensate a litigant who succeeds on appeal for
losing at first instance. Where a litigant has been prevented from
accessing funds during the period between judgment and appeal,
interest on the judgment sum can be claimed. In this case, the
period of loss was the period between the date on which Fenris
would have invested the money from the shares had the funds not
been frozen and the date of the first instance judgment: between 16
May 2009 and 16 February 2012.

Assessment of loss

The JCPC held that the approach to be taken when assessing
damages payable under a cross-undertaking is analogous to that
taken where there has been a breach of contract. This is so
notwithstanding there is no contract between the parties and the
undertaking is given to the court rather than to the injuncted
party. In this case, Fenris was entitled to recover damages from
EFML as though the parties had entered into a contract, under which
EFML would not prevent Fenris from doing that which the injunction

The fact that the burden of proving the loss was on Fenris as
the party seeking compensation pursuant to the undertaking was not
disputed, and there was no dispute that Fenris could prove on the
balance of probabilities that it had lost the opportunity to invest
the frozen money profitably. The issue for the court was what loss
flowed from that lost opportunity. The parties disagreed about how
the money would have been invested and how the loss was to be

The JCPC upheld the findings of the CoA that Fenris would have
invested far more conservatively than it had argued. It was
incumbent on the injuncted party to establish that it would have
acted in a particular way on the balance of probabilities, with
more than a prima facie case. Fenris failed to establish
that it would have undertaken more risky investments with higher
returns. On the balance of probabilities, the CoA found that Fenris
would have taken a more conservative investment approach in the
circumstances it faced and would have earned a lower sum than it
asserted. The JCPC agreed with the CoA assessment.


This decision is helpful in illustrating how an inquiry as to
damages flowing from an injunction will be undertaken and
confirming that recoverable losses will be assessed in line with
the ordinary principles of causation that apply to a claim for
breach of contract. If a claim under a cross-undertaking is to be
pursued, the onus will be on the party making the claim to satisfy
the court – on the balance of probabilities – what they would
have done with the ‘frozen funds’ and what the result would
have been.

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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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