Fortification of an Undertaking for Damages Explained

Some of the orders that can be made by the Court are an interim injunction (requiring someone to do or not do something), freezing order (preventing the disposal of assets) or search order (allowing someone to enter your premises to remove documents or items). Where any of these orders are made, the Court will ask the applicant to make a sort of promise (called an undertaking) to the person subject to the order. This undertaking will be for compensation which is payable to the person subject to the order by the applicant, should it later be decided by the Court that the applicant was not actually entitled to the injunction.

The Court will calculate the compensation payable by looking at the losses the party subject to the order is likely to incur as a result of the injunction. The party subject to the order can apply to the Court to ask them to validate or increase the level of compensation promised, which is called fortification of the undertaking.

For an application for fortification to be successful, the evidence must be produced that:

1. Enables the Court to make an informed, realistic and intelligent estimate of the likely loss;

2. Provides details of a good arguable case as to the risk of loss. There must be an actual prospect of such loss occurring, not far-fetched or unrealistic; and

3. Demonstrates the order is and would be the cause of the loss. The loss must be likely to result from the injunction or freezing order and not a likely result of the underlying proceedings.

For the party to be successful in fortifying the undertaking, they must produce detailed evidence as fortification is not automatic. A recent 2022 case in the Court of Appeal confirmed that there must be strong evidence to support each of the above requirements and without evidence covering all requirements the Court is unlikely to consider fortification.

If you are subject to one of the orders described and want to ensure the undertaking provided covers the realistic harm anticipated, or you are the party providing the undertaking and seek to defend an application for fortification, contact our Commercial Litigation team who will be able to advise further.