I have before me two applications. The first is an application for the determination of the liability in damages of the first claimant Mr Ashley Dobbs (“Mr Dobbs”) under a cross-undertaking given by him on the 30^th July 2002 (“the Cross Undertaking”). On that day on an interlocutory application Mr Dobbs gave the Cross Undertaking to pay damages for any loss suffered as a result of the first and second defendants (“the Receivers”) being restrained by an undertaking to the court (“the Undertaking”) from disposing of shares in Acorn USA (“the Shares”), if it turned out that Mr Dobbs was not entitled to the Undertaking. Acorn USA was the subsidiary incorporated in Missouri USA of the second claimant Acorn Televillages Limited (“Acorn”). An order releasing the Receivers from the Undertaking was made on the 19^th December 2002 but was only drawn up on the 23^rd May 2003. In his judgment at the trial of these actions Lewison J after a lengthy trial held that Mr Dobbs was not entitled to the Undertaking and on the 19^th May 2004 he gave the Receivers permission to proceed with this inquiry

The second is an application by Mr Dobbs to try in these actions (and in particular on the hearing of the first application) certain claims made by Mr Dobbs against the Receivers and the third defendant (“the Bank”) relating to a tripartite agreement dated the 22^nd December 2000 (“the Tripartite Agreement”). Lewison J refused a very late application by Mr Dobbs to permit these claims to be raised at the trial of these actions because the application to raise them was too late: to allow them to be raised at that stage would have been unfair to the Receivers and the Bank. It is not open now to Mr Dobbs to raise these claims after final judgment in these actions. He may be entitled to raise them in a fresh action. He may be debarred from doing so for reasons of abuse of process or for other reasons. It is unnecessary and inappropriate to express any view in that regard on this application. Mr Dobbs accepts that this second application must be dismissed, and I need say no more about it.

The detailed background to all aspects of the case is contained in the judgment of Lewison J in these actions. Mr Dobbs was at all material times and is the managing director and majority shareholder of Acorn. In the late 1990s, Acorn embarked upon a project to build a “televillage” in Crickhowell, Wales. The project was financed by the Bank, which ultimately lent Acorn some £2.5m secured by a debenture (“the Debenture”). The main contractor was a company called Countryside. The project did not proceed smoothly. Acorn, the Bank and Countryside all blamed each other for the various problems and delays that occurred.

In 1996, Mr Dobbs gave the Bank a personal guarantee for £50,000. Towards the end of the project, in September 1999, the parties entered into a series of complicated tripartite agreements including the Tripartite Agreement. By those agreements, inter alia, the Bank guaranteed Acorn’s debt to Countryside and Countryside was granted a debenture over Acorn’s assets in priority to the Debenture.

After having lent Acorn further money, in early 2000 the Bank called in its loan and eventually on the 20^th October 2000 appointed the Receivers as receivers of Acorn’s undertaking. The Receivers ultimately disposed of the main development at Crickhowell for £2.1m in March 2001. They also tried to sell the Shares but were unable to do so. It is the Receivers’ case that they had an opportunity to sell the Shares to a Mr Don Russell (“Mr Russell”) in July 2002 for $52,500 (£33,501.79) but were prevented from so doing by the Undertaking. The issue before me is whether the Receivers can properly establish loss as result of giving the Undertaking.

As a result of the appointment of the Receivers, two actions were brought. In the first action (BS. 150417), the Bank sought judgment against Mr Dobbs on his guarantee for £50,000 plus interest. Mr Dobbs made a counterclaim in those proceedings in which he made numerous allegations against the Bank, including misrepresentation, breach of the facility agreement and the various tripartite agreements, conspiracy with Countryside to put Acorn into receivership, acting as a shadow director of Acorn, and failure to pay over £0.5m liquidated damages awarded to Acorn in an adjudication.

On the 26^th March 2002, HHJ Havelock-Allen gave summary judgment for the Bank and made declarations as to the construction and effect of the guarantee. No money judgment was ordered at this stage. The judge gave Mr Dobbs permission to appeal on two issues:

Mr Dobbs made amendments to the counterclaim in which he made further allegations of breach of contract and misfeasance by the Bank, including an allegation that the Bank had acted wrongfully in appointing the Receivers on the 20^th October 2000. The counterclaim was tried by Lewison J. in March 2004, together with the trial of the second action, namely Mr Dobbs’ action against the Receivers to which I must now refer.

On the 17^th July 2002, Mr Dobbs commenced a second action (Claim 4721 of 2002). By an Originating Application in the Companies Court he sought the removal of the Receivers on the ground that they had been invalidly appointed by the Bank pursuant to an unlawful conspiracy with Countryside. Mr Dobbs also made other claims against the Receivers, and in particular claims that they had attempted to sell the Crickhowell development to Countryside and/or had otherwise disposed of it at an undervalue, had neglected and devalued Acorn USA and/or had sold the Shares at an undervalue, had lied to the press, failed to ensure they were properly appointed and acted in bad faith in other ways.

The matter came before Neuberger J on the 30^th July 2002 and, at the request of the Receivers, since a number of Mr Dobbs’ claims were matters only the Bank could answer, gave directions for the Bank to be joined as third defendant and for the matter to be listed for a Case Management Conference (“CMC”). At the hearing before Neuberger J Mr Dobbs sought protection against the Receivers disposing of the Shares at an undervalue and, in order to provide that protection, the Undertaking and Cross-Undertaking were given.

On the 3^rd October 2002 outside court awaiting the hearing of the CMC Mr Stuart Hornett, counsel for the Receivers, asked Mr Dobbs if he would agree that the Undertaking be discharged. Mr Dobbs did not agree. The CMC thereafter proceeded with no reference to the Undertaking. The Receivers successfully applied to strike out a large number of the allegations made against them. The Bank also applied to strike out parts of the claim against the Bank, an application which was partially successful.

On the 6^th December 2002, the Receivers applied to be released from the Undertaking on the ground that Mr Dobbs had provided no evidence that the sale was at an undervalue and, more importantly, that as a large firm of accountants, they would be able to pay any damages that might be ordered against them. This application came on for hearing with the strike out applications on the 18^th and 19^th December 2002. At that hearing Mr Dobbs initially opposed the application, but Neuberger J suggested to him that he should agree to the release of the Undertaking and Mr Dobbs agreed to do so. Neuberger J directed that the Receivers be released from the Undertaking and he then went on to strike out large parts of Mr Dobbs’ case against the Receivers, including his application to set aside the receivership.

There was a period of delay in the preparation and finalisation of the form of order giving effect to the various orders made by Neuberger J on the 19^th December 2002. On the 9^th January 2003 Mr Dobbs sent an email to the Receivers inquiring as to the form of order. Prompted by this email on the 15^th January 2003 the Receivers sent a draft order to Mr Dobbs and on the 20^th January 2003 the court. On the 20^th January 2002 Mr Dobbs sent an email stating that he had concerns about the draft, but not saying what they were: indeed he did not tell the Receivers what they were until the 15^th April 2002. In response the Receivers on the same day sent their draft to Neuberger J, told him that Mr Dobbs was not happy with it and at the same time invited Mr Dobbs to communicate his objections to the court and send a copy of such objections to the Receivers. Mr Dobbs tells me that on the 24^th January 2003 he sent a letter to the court setting out his objections, but certainly he sent no copy to the Receivers, and no copy of that letter is now in existence.

A further hearing took place on the 18^th February 2003 to consider Mr Dobbs’ proposed amendments to his claims against the Receivers. Neuberger J ordered that the only claims that Mr Dobbs was to be permitted to advance against the Receivers were claims concerning the alleged disposal at an undervalue of the main development at Crickhowell and the allegation that the Receivers negligently managed the affairs of Acorn US. The Receivers raised the question of finalising the draft order of the 19^th December 2002 and (as Mr Dobbs made quite clear to me) Mr Dobbs confirmed that he agreed the Receivers’ draft of the order. On the 27^th February 2003 the Receivers sent a draft order for the hearing of the 18^th February 2003 to Neuberger J’s clerk and at the same time stated that they looked forward to receiving the sealed order for the hearing of the 19^th December 2002 hearing. Nothing happened and on the 12^th March 2003 the Receivers sent a fax to the clerk asking when they would receive a sealed copy and stating that Mr Dobbs had agreed the draft on the 18^th February 2003. Again nothing happened and on the 14^th April 2003 the Receivers sent an email to the clerk stating that Mr Dobbs was not pursuing objections to the draft and therefore it was agreed and that their proposed purchaser was anxious to receive the draft.

On the 15^th April 2003 Mr Dobbs wrote to Neuberger J’s clerk stating that he did not agree the draft and referring to his letter of the 24^th January 2003 to the court, but he did say that he agreed to the discharge of the Undertaking. On the 16^th April 2003 Neuberger J held that the order should be made in the form of the Receivers’ draft. On the 17^th April 2003 nonetheless Mr Dobbs persisted with his objections but to no effect. Thereafter the Receivers chased the judge’s clerk for a sealed order which was only forthcoming on the 29^th May 2003.

It is not possible on this application to determine the cause of the protracted delay on the part of the court. It may be that it was because Neuberger J was sitting outside London. The delay may in part be due to the fact that Mr Dobbs sent a letter (which he produced for the first time on the second day of the hearing) dated the 3^rd March 2003 objecting to the form of order. But it is questionable whether this letter was ever sent. The letter states that a copy was being sent to the solicitors for the Receivers and the Bank, and certainly no copy was ever received by the solicitors for the Receivers.

At the subsequent CMC on the 7^th July 2003, Mr Dobbs again sought to amend his case and re-introduce a number of the allegations which had previously been struck out. Neuberger J refused Mr Dobbs permission to amend his claims against the Receivers, thereby affirming his previous order as to the scope of the issues to be tried. He also imposed a Grepe v Loam order to protect the other parties from Mr Dobbs making further unmeritorious applications without permission. Permission to appeal the Order of the 7^th July 2003 was refused by Mummery LJ on the 21^st December 2003.

At the start of the trial of the action against the Receivers and Mr Dobbs’ counterclaim against the Bank (which was heard between the 16^th March and the 1^st April 2004). Mr Dobbs made an application to amend his statement of case and allege, in particular, that the Bank and the Receivers were negligent in entering into the Tripartite Agreement by which, inter alia, Countryside, was paid £500,000 and released from any further liability against Acorn. Save for unopposed amendments, Lewison J in a fully reasoned judgment refused Mr Dobbs permission to amend and in particular to amend to add the claim regarding the Tripartite Agreement. Mr Dobbs applied for permission to appeal the decision of Lewison J. After a full oral hearing, Chadwick LJ refused him permission on the 17^th December 2004.

By his judgment at the trial Lewison J finally determined all the issues and (save in one respect), dismissed all Mr Dobbs’ claims in both actions. The one exception was that he found that the Bank had breached the terms of one of the tripartite agreements in failing to exercise step in rights prior to appointing the Receivers. The issue of damages in respect of this breach was not strictly before the Court, but Lewison J expressed the view that damages were nominal. He ordered an assessment of damages but required as a condition of allowing Mr Dobbs to proceed with the assessment that Mr Dobbs provide security for costs within a fixed period. Mr Dobbs did not comply with the condition and Mr Dobbs concedes that he is no longer entitled to proceed with the assessment and that his damages are limited to £2.

Amongst the issues which Lewison J had to determine in the actions was the value of the Shares. He held that: (1) in November 2002 Acorn USA owned some 140 acres of land which was charged to secure debts of about $425,000 and was liable to make interest payment of $5,425 per month; (2) Acorn USA had no way of servicing this debt and Mr Russell, who was a 10% shareholder in Acorn USA and a creditor, had to pay himself to safeguard the company’s assets; (3) the Shares at that date were worthless; (4) attempts by Acorn USA’s lawyers to sell the Shares failed; (5) the only possibility of sale was the sale to Mr Russell for $52,000; (6) the Receivers were prevented from selling to Mr Russell by the Undertaking; and (7) by the time the Undertaking was released and the Receivers were free to sell Mr Russell was no longer interested and the Shares were valueless (see pages 176-193 and 288-293). It was for this reason that he gave the Receivers permission to proceed to an inquiry for damages under the Cross-Undertaking though he expressed the hope that they would not take up the permission. Notwithstanding that expression of hope the Receivers have decided, as they are entitled, to proceed with the inquiry and that is the matter now before me.

Mr Dobbs did not serve any evidence in the inquiry until the very eve of the hearing notwithstanding directions given on the 28^th July 2004 which required statements to be served by 30^th September 2004 and statements in reply by 14^th October 2004. The Receivers however sensibly agreed to admit his late evidence.

The present inquiry centres around the Shares. The shareholders in Acorn USA (70%) were Mr Russell (10%), Alan Kenyon (10%) and Dreyton Advisory Services Ltd (10%). The shareholders had pre-emption rights under a shareholders agreement dated the 16^th September 1997 (“the Shareholders Agreement”) and this precluded any sale by the Receivers without first offering the Shares to the other shareholders.

Acorn USA had acquired a 50 acre site in Missouri with the intention of developing a Televillage near the city of Nevada. The site had been gifted by the council, subject to various conditions as to its development. Mr Dobbs had resigned as a director of Acorn USA in July 1999. When the Receivers were appointed in October 2000, Acorn USA’s board was made up of US directors and there was no direct UK management. The value of the shareholding was stated as £20,000 in Acorn’s balance sheet to the year end 31^st March 1998. Acorn had also entered into a number of agreements with various individuals to sell its US shareholding for $87,570 ($4.17 per share). None of these agreements were completed.

Throughout its entire existence, Acorn USA had been in serious financial difficulties and owed significant sums to various banks including Metz Bank. It never traded. By early 2001, it had amassed debts of around $600,000. Acorn USA had an option (“the Option”) to acquire a further 530 acres from the local Council for approximately $580,000. Following litigation with the Council over the validity of the Option, the Option was eventually exercised in January 2002 with the benefit of $650,000 advanced by a Mr James Corral, a local businessman. This advance was secured over the Option land.

Given his heavy investment, Mr Corral became interested in acquiring Acorn’s majority interest in Acorn USA. On the 4^th March 2002, Mr Corral made an offer to the Receivers to purchase the Shares for $52,500 ($2.50) per share.

Pursuant to their obligation under the Shareholders Agreement, the Receivers were obliged to offer the Shares to the existing shareholders at the same price. The Bank made such offer by letters dated 18^th March 2002. This included an offer to Mr Russell, who had from time to time been in contact with the Receivers over various issues.

At around the same time the Option was exercised, in January 2002, Acorn USA was subject to court action by a Mr Hoeper and Mr Irvin, who claimed to have provided money and building services to Acorn and to have acquired in consequence a proprietary interest in the development site. They had also personally guaranteed Acorn USA’s debt to Metz Bank and, when the litigation commenced, on 30^th April 2002, Metz Bank called in its loan of $500,000.

In May 2002, an agreement was reached between Mr Corral, Messrs. Hoeper & Irvin, Metz Bank and Acorn USA which effectively gave Mr Corral and Hoeper & Irvin the vast majority (450 acres) of the development land. As a result, Mr Corral withdrew his offer to purchase the Shares. Mr Russell however was still interested in purchasing what remained (some 140 acres) and, by letter dated 31^st May 2002, he indicated his acceptance of the Receivers’ offer.

On the 12^th July 2002, Mr Russell wrote to the Receivers proposing that the share certificates be endorsed over to him and that, pending completion, the purchase monies be sent to the UK and held in escrow. On 17^th July 2002, the Receivers accepted the offer. The Receivers received from Mr Russell £33,501.79 on the 30^th July 2002 to be held in escrow. This was the same day that the Receivers gave the Undertaking.

The effect of the Undertaking was that the sale to Mr Russell could not be completed. Mr Russell was informed of this and in September and October 2002, urged the Receivers to apply to the court to have the Undertaking released so that the purchase could proceed. Acorn USA was clearly in serious financial difficulties at this stage and Mr Russell was the only person supporting it and servicing its debts.

By November 2002, there were signs that Mr Russell was becoming frustrated. By letter to Mr Dobbs dated the 13^th November 2002 he wrote that the financial position of Acorn USA was precarious and that without an immediate injection of funds foreclosure was imminent. On 15^th November 2002, he asked for the funds held in escrow to be returned and they were returned.

Immediately following the hearing on the 19^th December 2002 when the order was made that the Undertaking be released, the Receivers informed Mr Russell. Mr Russell required a copy of the order to this effect and stated that he would let the Receivers know his position when he had seen it. Mr Russell telephoned the Receivers on the 7^th January 2003 to inquire as to the position. In the course of that conversation he stated: (1) that he thought that the Shares were actually worth a lot less than his offer price; and (2) that he intended to set up an escrow account, but he never did so. Thereafter communications from him disclosed that he had still a limited, but a diminishing, interest in a purchase.

The order was sealed on the 29^th May 2003 and TLT informed Mr Russell of this by fax dated the 3^rd June 2003. No written response was received, but on the 5^th June 2003 Mr Russell telephoned the Receivers and said that he was no longer prepared to proceed because of the dire financial position of Acorn USA. On the 28^th July 2003, the Receivers again chased Mr Russell but the only response was on the 20^th October 2003 when Mr Russell resigned as director of Acorn USA.

The court has a discretion whether to enforce a cross-undertaking in damages and order an inquiry and can refuse to do so if the party seeking enforcement has behaved inequitably (see F Hoffman-La Roche & Co AG and ors v. Secretary of State for Trade and Industry (“Hoffman”) [1975] AC 295 at 361). In this case, Lewison J has already considered the question of whether the undertaking should be enforced and has given the Receivers permission to proceed with the inquiry.

The issue before me is whether the Receivers can show that they have suffered loss as a result of giving the Undertaking and, if so, what that loss is.

The authorities establish that the legal principles to be applied as to causation, remoteness and quantum are essentially contractual. In Hoffmann, Lord Diplock said that, if an inquiry is ordered:

“the principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction”

The Receivers must not only establish causation on a “but for” basis; they must show that, prima facie, the giving of the undertaking was the exclusive cause of the loss. This does not mean, however, that they must deal with every conceivable or theoretical cause of the damage (Tharros Shipping v. Bias [1994] 1 Lloyds Rep 577).

If contractual principles apply (as they do) to causation, remoteness and quantum, contractual principles regarding mitigation of damage must also likewise apply.

On the evidence before me I am satisfied that Mr Russell certainly would have purchased the Shares at the agreed price prior to November 2002. He had on the 30^th July 2002 provided the purchase price “up front”. With the subsequent delay in finalising the order the prospects thereafter progressively diminished. There was a real chance that he would have proceeded on or shortly after the 19^th December 2002, but by January 2003 the situation was very uncertain. Mr Russell thought that the price was too high and failed to set up (as previously intimated) an escrow account.

In my judgment (as in the judgment of Lewison J) it is quite clear that the Undertaking did cause the loss of the only prospect of the sale of the Shares to Mr Russell and that this was the only prospect of a beneficial realisation of the Shares which were otherwise valueless. Mr Russell was prepared to pay well above the odds because he was already tied into Acorn USA and had the special interest of an opportunity to salvage his interest. The sale to Mr Russell would have proceeded to completion but for the Undertaking. The existence of the Undertaking was the exclusive cause of the loss. The loss of the sale was clearly foreseeable: indeed Mr Dobbs obtained the Undertaking in order to prevent the sale proceeding.

Mr Dobbs has raised a number of defences none of which (save one) has any substance. In particular he has charged the Receivers with negligence in failing to prevent the directors of Acorn USA dealing with its assets and conducting its affairs in the way they did. In my judgment there is no substance in the allegation. The management of the affairs was in the hands of the directors of Acorn USA. The Receivers were not directors. They could only have intervened by exercising their voting rights as shareholders to remove the existing director and appoint new directors in their place. There was no cause for such drastic action and such action could scarcely be contemplated having regard to the very limited value of the Shares.

The one question however that has occasioned me serious anxiety is whether the Receivers lost the chance of a sale to Mr Russell after the hearing of the 19^th December 2002, and accordingly failed properly to mitigate their loss, by taking insufficient steps to secure the most expeditious drawing up of the order for the release of the Undertaking.

There are two elements to this question. The first is the critical delay in their drafting of the form of order until the 15^th January 2003. Preparation of the final order and the provisions of it to Mr Russell was plainly a matter of the gravest urgency if a bargain was to be struck with Mr Russell. It was obvious that the prospects of a sale were diminishing with every day that passed. The obvious and reasonable course for the Receivers to take to mitigate loss was to protect and preserve the prospects of a sale by ensuring that the order was drawn up as a matter of urgency. But the Receivers did nothing until prompted by Mr Dobbs and only produced a draft for consideration by him on the 15^th January 2003. There is no or no satisfactory explanation for this delay. I do not think that the Receivers can be criticised for the delay thereafter. The delay thereafter was the responsibility of Mr Dobbs and the court. In hindsight it appears most unfortunate that the Receivers did not restore the proceedings before Neuberger J in open court as soon as Mr Dobbs raised any objections, but I do not think that the Receivers can be criticised for taking the course which they did and avoiding incurring further legal costs. In any event it is highly dubious if a deal was available with Mr Russell after the 15^th January 2003.

The question is accordingly whether the delay until the 15^th January 2003 in preparing a form of order releasing the Undertaking caused or contributed to the Receivers’ loss. After anxious consideration I have concluded that the delay by the Receivers did not do so. Even if the Receivers had prepared a draft immediately after the hearing on the 19^th December 2002, the lack of cooperation of Mr Dobbs in agreeing the draft order would have led to a delay and required the reference made to the judge; and the timetable would have remained much as it was and the sale of the Shares would have been lost. No final order would have been obtained before Mr Russell had decided not to purchase.

In my judgment therefore, though the delay until the 15^th January 2003 was unreasonable and in hindsight the course subsequently taken by the Receivers to finalise the order proved unfortunate, the Receivers are entitled to recover from Mr Dobbs the full loss which they suffered.

I accordingly hold that the damages should be assessed at the price Mr Russell was prepared to pay for the Shares namely, $52,500 which, at the material time, had a sterling equivalent of £33,501.79, and I direct that Mr Dobbs shall pay this sum and interest from the 1^st September 2002 to the date of the order.