Public Law Duty and Cross-Undertaking for Losses to Third Parties

1 03 2013

The Financial Services Authority (a company limited by guarantee) (Respondent) v Sinaloa Gold plc and others (Respondents) and Barclays Bank plc (Appellant) [2013] UKSC 11

Affirming the Court of Appeal’s decision reported at [2011] EWCA Civ 1158, see Patten LJ at [55], the Supreme Court has unanimously dismissed the appeal in this case. The court held that there is no general rule that an authority such as the Financial Services Authority (FSA), acting pursuant to a public law duty, should be required to give a cross-undertaking in respect of losses incurred by third parties. Equally, on the facts of this case, no particular circumstances existed whereby the FSA should be required to give such a cross-undertaking. For the full details of this case in the Court of Appeal and High Court (which held that the FSA was required to give a cross-undertaking in respect of losses incurred by third parties), the preview to this case is available here.

Just to recap briefly, cross-undertakings are a critical feature of a freezing (formerly Mareva) injunctions. Usually, applicants must give a cross-undertaking in damages to the court. This is to compensate respondents and any affected third parties in the event  the court decides that the applicant was not entitled to injunctive relief (a discretionary remedy). Where no cross-undertaking is given, the courts will refuse to grant an injunction. However, in situations where freezing injunctions are procured by public bodies (such as the FSA) pursuing law enforcement functions, the courts usually do not require such bodies to provide a cross-undertaking in damages to safeguard the respondent’s position. Lord Mance of Frognal gave the leading judgment and Lord Neuberger PSC, Lady Hale, Lord Clarke and Lord Sumption JJSC concurred with his Lordship. Read the rest of this entry »





UK Supreme Court: Does the FSA Need to Give a Cross-Undertaking as to Damages in Favour of Third Parties?

8 12 2012

FSA On 12 and 13 December 2012, the UK Supreme Court will be hearing an extremely interesting appeal. The case of The Financial Services Authority (a company limited by guarantee) (Respondent) v Sinaloa Gold plc and others (Respondents) and Barclays Bank plc (Appellant) UKSC 2011/0244 concerns cross-undertakings, damages, freezing injunctions and third parties. The issue thrown up by the appeal is whether the Financial Services Authority (FSA) should generally be required to give a cross-undertaking in damages to third parties affected by a freezing injunction obtained pursuant to its statutory regulatory functions over and above the costs incurred in complying with the order. See Supreme Court’s judgment here

I. Background

The FSA regulates financial services and markets under the powers and duties conferred upon it by the Financial Services and Markets Act 2000 (FSMA). In December 2010, the FSA commenced proceedings in the Chancery Division against the three named defendants, Sinaloa Gold (S), PH Capital Invest (PH) and Mr Glen Hoover (GH), whom it alleged were involved in what is commonly referred to as a “boiler-room fraud” involving the sale of S’s shares. Read the rest of this entry »