Making Promises You Later Regret: Is it Possible to Appeal against Undertakings in Damages?
7 March 2019
The Court of Appeal considers the nature of undertakings in damages and the correct procedural factors to be considered when wishing to dispute their content before an appeal court.
The Appellant was an Italian lawyer practising in Rome. He claimed entitlement to an order for specific performance of an agreement to transfer the share capital in the Second Defendant, a company which owned a flat in London, and had obtained a without notice for an interim injunction preventing any disposal of or dealing with the flat, or the shares in the company. On the return day, the Appellant applied to continue the injunction, which was granted on the condition that the Appellant undertook to fortify his cross-undertaking in damages to the sum of £100,000. The Appellant gave the undertaking, but then sought to appeal against it on the ground that it should not have been required as the ‘price’ of continuing the injunction.
The Court of Appeal addressed whether there was any entitlement to appeal at all and considered that there were two aspects to the question.
On a general level, the Court clarified, by reference to the authorities, that an undertaking is a “solemn promise which a litigant volunteers to the court.” A court may make an undertaking a condition for the grant of an injunction, but if the litigant refuses, the court may only refuse the injunction; it cannot compel the litigant to give an undertaking. Undertakings remain voluntary promises, even if the undertaking is given under threat of an order in the same terms or of a more drastic remedy.
As such, undertakings raise questions regarding the jurisdiction of the Court of Appeal to hear and determine appeals from any judgment or order of the High Court under s 16 Senior Courts Act 1981 (emphasis added). The Court considered that most such ‘appeals against an undertaking’ are technically applications to discharge or vary the contents of an undertaking recorded in the form of an order. The Court held that, in a strict sense, the matter came within the Court’s jurisdiction under s 16, although when considering jurisdiction in a more substantial sense (i.e. where the court will not exercise its power except in a certain way and under certain circumstances) the Court held that, absent extraordinary circumstances, a claimant who gives an undertaking (even where it is given reluctantly in order to obtain the order sought) ought not to be entitled to pursue an appeal against that undertaking. The Court, therefore, treated the present appeal as an application to vary or discharge an undertaking and noted that such applications are rarely granted unless there had been a ‘significant’ change in circumstances.
On the specific level of the present case, the Court further found that the Appellant had the benefit of legal representation, had ample advance notice of and opportunity to address the issue of fortification, however, had not actively opposed the principle of fortification and had almost gone as far as to concede it altogether. None of the matters complained of in the grounds of appeal were submitted to the judge and, therefore, the Appellant had no entitlement to advance them on appeal. An appeal court may permit him to do so, but that remained a matter for the court’s discretion. On this, the Court stated:
Where the new point would (or might) have altered the course of the hearing below, that discretion will rarely be exercised in the appellant’s favour. But even where the point is a pure point of law, then (unless the point goes to illegality or the jurisdiction of the court) the court retains a discretion to refuse to permit it to be taken for the first time on appeal.
In the present case, the Court found that all the evidence clearly suggested that fortification of the cross-undertakings to £100,000 was a price the Appellant was willing to pay to continue the injunction.
Having, thus, considered both the general and specific aspects of the issue, the Court dismissed the appeal.
This case not only gives useful clarification on the legal nature of an undertaking, but also practical guidance on the procedural steps to be taken where a litigant wishes to dispute the contents of an undertaking before an appeal court. Two possible routes, which recognise the true nature of an undertaking as a voluntary promise by a litigant, were outlined by the Court:
- Decline to give the undertaking; accept that the judge will refuse the injunction in the absence of the undertaking; and appeal the refusal; or
- Again, decline to give the undertaking; but to invite the judge to make an order in equivalent terms or to make his grant of the injunction conditional on the provision of fortification; then appeal the order or the condition contained in the order.
In respect of appeals more generally, practitioners are also reminded that courts retain a discretion to refuse to hear new points on appeal, even points of pure law. Care should therefore be taken to raise all relevant matters before the lower court, especially on issues of which the litigant has had ample notice and opportunity to contest.
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