No5 instructed against decision of HH Judge Pelling QC in Hone v Abbey Forwarding

Paul Marshall from No5 Chambers was instructed with Philip Coppel QC of Landmark Chambers by Banks Kelly on behalf of the appellants on appeal to the Court of Appeal against the decision of HH Judge Pelling QC in Hone and Ors v Abbey Forwarding (in liquidation) and HMRC [2012] EWHC 3525 (Ch); [2013] 1 CH 455; [2013] 2 WLR 1368; [2013] Ch 455.

Judge Pelling dismissed most of the claimants’ claims for damages claimed as a result of a series of freezing injunctions over an 18-month period pending a trial in 2010, at which Lewison J dismissed all HMRC’s claims — in the sum of some £7m — against the four directors. Lewison J directed that there be an inquiry as to losses caused by the injunctions.

The issue for decision on the appeal is the correct approach to the assessment of damages on an inquiry on damages on the cross undertaking given to the court on an injunction found to have been wrongly granted.

Since an obiter dictum of Brett LJ in Smith v Day (1882) 21 Ch.D 421, it has commonly been assumed that the approach is by analogy with damages for breach of contract. That view received support by an observation (also obiter dictum) of Lord Diplock in Hoffman-La Roche & Co AG v Secretary for Trade and Industry [1975] 1 AC 295. The inappropriateness of this model of assessment (injunctions being notably non-consensual in character) has recently been doubted (but not authoritatively determined) by a number of judges, both at first instance and in the Court of Appeal itself. The most closely reasoned analysis is by Arnold J in Lilly ICOS LLC v 8 pm Chemists Ltd [2009] EWHC 1905 (Ch) that Judge Pelling held to be per incuriam.

The appeal is the first occasion on which the matter has come before the court for authoritative decision. The appellants contended that it is wrong in principle that the damages payable by an injunctor on a wrongly granted injunction should be constrained by rules of foreseeability of loss derived the consensual character of contractual damages and that Arnold J’s analysis in Lilly ICOS is the correct approach. Curia advisari vult.