In a brief interim judgment, the High Court has decided that it is appropriate for an applicant who succeeded in obtaining a freezing injunction to itself give disclosure of certain of its worldwide assets in support of its cross-undertaking in damages.
The applicant had obtained a freezing injunction in support of an ongoing arbitration under s.44 Arbitration Act 1996. At the initial without notice hearing, the applicant had adduced evidence that it did not have assets in England and Wales. Further, it could not provide fortification of its cross-undertaking in damages because it was undergoing a restructuring.
The injunction was continued at the return date. The respondent later made an application to vary the injunction, asking that the applicant be required to provide fortification of its cross-undertaking. That application was initially refused due to lack of evidence of likely loss to the respondent. However, the door was left open for the respondent to renew its application at a later date, which it subsequently did.
The judge, who heard both the initial and renewed applications for fortification, noted that he had already been concerned by the asymmetry between applicant and respondent. He said it is a "common complaint" about freezing injunctions that they give an applicant information about the respondent's assets which cannot later be taken back, even if the injunction is set aside.
The judge decided that the applicant should provide asset disclosure to ameliorate the consequences of its lack of identifiable assets within the jurisdiction and its inability to give fortification. This would serve some useful purpose notwithstanding that the respondent had not yet established a sufficient risk of loss.
This brief but interesting judgment is a reminder to parties that freezing orders, an extremely powerful form of interim relief, come with attendant requirements on applicants. The cross-undertaking in damages is an important protection to the respondent and if it does not appear to be sufficiently robust, the Court may take steps to remedy the situation.
If an applicant does, in fact, have sufficient assets in the jurisdiction and/or can fortify the cross-undertaking then this sort of order can be avoided. However, those applying for freezing orders should stress test the cross-undertaking at an early stage to avoid undesirable conditions on continuation. Conversely, respondents to freezing orders should satisfy themselves that the cross-undertaking provides them with the protections envisaged and, if not, consider what relief may be reasonable in order to rectify the situation. The Court remains keen to balance fairly the interests of all parties to disputes and this decision shows that a creative approach may be taken to achieve that end.
Read the Court's anonymised judgment in LAX SA v JBC SA [2024] EWHC 2042 (Comm).
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