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Facing the risk of public body injunctions

The Supreme Court has confirmed that there is no rule demanding that where a public body such as the FSA seeks an interim injunction in exercise of its functions, it should be required to give a cross-undertaking in damages to third parties affected by that injunction.

The FSA had obtained an interim freezing order against defendants. The appellant bank was notified of this in December 2012. In the freezing order, the FSA had inadvertently undertaken to cover losses and costs incurred by third parties as a result of the injunction. The FSA subsequently applied to have the undertaking removed. The appellant bank intervened to oppose the application. The High Court refused the FSA’s application, however the Court of Appeal partly reversed that decision to maintain the undertaking in respect of third party costs but not in respect of third party losses. The bank appealed.

In dismissing the bank’s appeal, the Supreme Court recognised that a distinction between private claims and law enforcement actions should be maintained: In a private claim, a claimant should be prepared to “put its money where its mouth is” and back its claim against the possibility that a wrongly obtained injunction will cause unjustifiable harm to third parties; in law enforcement actions, it is not in the public interest for public authorities to back their legal actions with the public funds with which they are entrusted for the exercise of their functions.

However, the Supreme Court (supporting the Court of Appeal’s decision) recognised that this does not apply to the same extent in relation to a cross-undertaking in respect of third party costs.

Read the full judgment here.

Please contact PCB Litigation if you require any further advice on freezing injunctions and third party losses caused thereby.