In DSA Investments Inc v Optima Worldwide Group plc and Ors 2020 EWHC 2770 (Ch), the Court was asked to consider whether, as a matter of principle, an implied undertaking for damages would be automatically given by the applicant on the grant of an interim charging order (ICO).
The question arose in the course of an application by DSA (an international investment holding company with a global portfolio). The group was seeking to enforce the terms of a money judgment obtained against the first Defendant.
The Court found that an implied undertaking did not arise in this instance.
The Court was clear that an applicant who obtained an ICO is deemed to give an implied undertaking in damages to those who could be adversely affected by the ICO.
How did the Court reach the conclusion that implied undertaking did not arise?
In reaching this conclusion, the Court considered that where an order is in the nature of an interim injunction, an undertaking in damages can be implied as a matter of long-established practice.
The Court’s reasoning (see paragraph 60 of the Judgment) was that an order preventing the free dealing and/or access to property could potentially cause loss and damage to persons. This might not necessarily be limited to the owner of the asset.
What aspects were key to the decision?
The Court considered that it would be wrong to give the applicant a commercial advantage or interest at no risk to itself. It might transpire that the applicant was not entitled to the relief granted on an interim basis.
The corollary for that interference in the property rights of others is that the applicant should “stand ready” to compensate those who suffer loss and damage in the exercise of that interim remedy. To do otherwise would result in injustice.
The implied undertaking in damages will not apply after the making of the final order or injunction.
Can a third party enforce the implied undertaking?
The Court found, in light of CPR PD 25A 5(1), that a third party could not enforce the implied undertaking.
Such a step was open only to the respondent to the application. This is because the purpose of the undertaking is to compensate the respondent for damage. Meaning, the damage which it sustains as a result of the injunctive order.
The Court observed that it would be open to an applicant expressing their “reservations” about the provision of the implied undertaking.
It also suggested that an applicant who objected to being burdened with it could be expected to be refused the relief sought.
