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The difficulties a defendant faces when confronted with a freezing injunction can be enormous and the impact of the order can have a massively detrimental impact not only on the defendant’s business but also their family life. The Court of Appeal in Hone at the end of last week acknowledged this (Hone and others v Abbey Forwarding and HMRC  EWCA Civ 711). In doing so, it had provided clarity on a number of issues which apply equally to practitioners either looking to obtain a freezing injunction or acting for a defendant who is subject to one.
When determining whether compensation should be paid to the defendant, under the cross undertakings, the court will apply, by analogy, the contractual test of foreseeability of damage and remoteness under the rule in Hadley v Baxendale.
This had been the position for a considerable period of time following the dictum of Lord Diplock in Hoffman-La Roche (Hoffmann-La Roche v Sos For Trade and Industry  2 All ER 1128).
However, recent first instance decisions had cast doubt on whether it was still good law. Given the Court of Appeal’s decision last week it clearly is.
However, the Court of Appeal added a caveat.
When applying this test by analogy it may be that logical and sensible adjustments will be required. This caveat was added to take into account that the court is not awarding damages for breach of contact rather it is awarding compensation for loss caused by the incorrect grant of an injunction.
The Court of Appeal set out a list the difficulties defendants face when confronted with a freezing order. It provides a helpful pointer as to the issues which need to be considered when acting for the defendant in such cases:
When determining any payment of compensation the court:
On a practical level the clarification provided by the Court of Appeal in this area, could mean that in future claimants may find it more difficult to avoid paying out a realistic sums for damages to the defendant(s).
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Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolution lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.
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