Cross-undertakings in damages: High Court considers test for inquiry as to losses caused by discharged WFO (England & Wales)

Key Takeaways

1. The Court applies a two-stage approach to applications for an inquiry as to damages under a cross-undertaking: At the first stage, the question is whether to order an inquiry at all – a discretionary exercise at a modest threshold (see point 2 below). At the second stage – the inquiry itself – loss and causation are assessed on the merits (see point 3 below). Both stages may be determined at a single hearing in simpler or lower-value cases, or separately as a matter of case management discretion where the case is complex or the evidence incomplete.

2. At the first stage: Where an injunction has been discharged and the underlying action has come to nothing, an inquiry will be ordered virtually as of right unless there are special circumstances. The applicant need only show an arguable case on causation and some credible evidence of loss. Inequitable conduct in the context of the litigation itself may justify withholding an inquiry, but general attacks on a respondent’s character – for example adverse regulatory findings – are not relevant to the Court’s discretion. Extraneous matters, however serious, will not defeat an otherwise proper claim.

3. At the second stage: Recoverable loss is not limited to the direct restraining effects of the injunction. It extends in principle to all of its effects, including reputational harm to business relationships and the commercial consequences of notifications to third parties including (as in this case) financial markets. The measure of damages applies contractual remoteness rules – i.e. as if the applicant had promised not to restrain the respondent from dealing with its assets, and breached that promise – with logical and sensible adjustments.

4. Bottom line: The decision strengthens the position of parties subject to freezing orders that are later discharged. It makes clear the low bar for ordering an enquiry, the broad scope of recoverable loss, and that courts will scrutinise tactical behaviour by applicants who obtained interim relief. Applicants should be alive to the potential consequences of their cross-undertaking in damages when seeking injunctive relief.

Facts of the Case

The claimant, Mex Group Worldwide Limited (“C”), obtained an ex parte WFO against twelve defendants in support of proceedings in Scotland alleging conspiracy in connection with the collapse of a gold-trading joint venture. Three of the defendants – Mr Stewart Ford (“D1”), Mr Brian Cormack (“D2”), and Regal Consultancy International Limited (“D7”, together the “Applicants”) – are the subjects of this judgment. D1 originated financial products that were packaged into bonds issued by CSM Securities SARL (“D8”) and marketed to investors by D7, of which D2 is the ultimate beneficial owner.

The Court of Appeal had already discharged the WFO against other defendants, finding that C had failed to make full and frank disclosure, including by “deliberate omission” (see our earlier ESCOU here). The day before that judgment – known to C from the draft circulated for corrections – C’s solicitors for the first time notified the WFO to the Frankfurt and Vienna stock exchanges, bond custodians, and listing agents, having not done so in the nine months since obtaining it. The Frankfurt exchange delisted bonds issued by D8, the Vienna exchange refused further listings, and the listing agents resigned.

C abandoned the Scottish proceedings in March 2025 and the WFO was set aside against the Applicants in September 2025. The Applicants applied for an inquiry as to damages under C’s cross-undertaking. Given that D7 earned fees as “Lead Introducer” for D8’s bonds and D1 held a contractual entitlement to residual surpluses from bond proceeds, both claimed substantial losses from the disruption to bond issuance and listing allegedly caused by C’s notification of the WFO.

The Decision

Applying the abovementioned two-stage framework, the Court found that the Applicants had comfortably met the first-stage threshold of an arguable case on causation and some credible evidence of loss. The evidence showed that D7’s income depended on marketing the bonds issued by D8 and that the notifications to exchanges and listing agents had directly disrupted those revenue streams. C’s attempt to impugn D1’s credibility by reference to adverse FCA findings was dismissed: general attacks on character are irrelevant; only inequitable conduct in the litigation itself could justify withholding an inquiry.

On causation, the Court drew a “reasonable and compelling” inference that C had notified the stock exchanges and custodians the day before the Court of Appeal judgment specifically to cause maximum damage while the WFO remained in force – a finding it characterised as “weaponisation”. Recoverable loss was held not to be confined to the direct restraining effects of the WFO but to extend to all its effects, including delisting, refusal to list further bonds, resignation of listing agents, and reputational harm.

Finally, the Court rejected C’s argument that the Applicants’ failure to seek immediate discharge of the WFO amounted to a “capitulation” disentitling them to an inquiry: C had failed to maintain the order or establish the cause of action, and bore responsibility for the consequences of keeping the injunction in place. Accordingly, an inquiry as to damages caused to the Applicants by the WFO was ordered.