This judgment determines the damages to be recovered by the defendants under the claimant’s cross-undertakings given in respect of damages in an order for search and seizure, and in a freezing order.

The claimant in the action is Iman Said Abdul Aziz Al-Rawas. Mrs Al-Rawas is a resident of Oman. The first defendant in the action, Pegasus Energy Limited, is a company incorporated in Mauritius. It was founded by three entrepreneurs, His Highness Sheikh Khalifa bin Hamed Al-Thani, the former Emir of Qatar and second defendant, his principal man of business, Dr Issa Al-Kawari, the third defendant, and Mr Thamer Al-Shanfari, who is the husband of the claimant. The issued shares were divided equally between the three. The capital of the company was provided in the form of loans by the Sheikh. In early 2003 the relationship between them began to break down. Mr Al-Shanfari agreed to resign as a director. He transferred his shares to his wife. A scheme was devised by the Sheikh and Dr Al-Kawari to divest Mrs Al-Rawas of any significant shareholding. This was done by the Sheikh calling in his loans and by Pegasus issuing new shares as capital to replace them. Mrs Al-Rawas did not take up the shares which were available to her, and the consequence was that her shareholding dropped from one third to below 1 per cent. This is very much a brief summary of what occurred, saying only as much as is necessary for what follows.

On 18 July 2006 two actions were commenced by Mrs Al-Rawas in the Supreme Court of Mauritius. One was in the civil court by plaint with summons. The other was in the Bankruptcy Division by petition. The first was brought against Sheikh Khalifa, Dr Al-Kawari, Pegasus and its other directors, nine defendants in all. It was alleged that powers had been exercised in breach of the Companies Act of Mauritius for the improper purpose of diluting Mrs Al-Rawas’ shareholding in Pegasus. She claimed US$50 million damages. The second action was brought against the same defendants with the omission of Sheikh Khalifa, and sought declarations that the share issue was invalid by reason of various failures to comply with the Companies Act, together with damages. The petition was supported by affidavits from Mrs Al-Rawas and Mr Al-Shanfari. In his Mr Al-Shanfari referred to the loans made by Sheikh Khalifa to Pegasus in terms which strongly implied that they were not genuine.

On 20 July 2006 Mrs Al-Rawas applied to the court in Mauritius without notice for a search and seizure order in respect of documents in the possession of the defendants in Mauritius, London and South Africa. On 25 July the order was granted in relation to the offices of Pegasus in Mauritius only.

On 27 July 2006 Mrs Al-Rawas made an application without notice under section 25 of the Civil Jurisdiction and Judgments Act 1982 to the High Court in London for a search and seizure order in relation to documents at 44 and 46 Catherine Place, London SW1, relating to Sheikh Khalifa’s loans to Pegasus, the decision to allocate further shares in Pegasus, and the invitation to subscribe for further shares in Pegasus. The defendants were Pegasus, Hawkstone Managements Services Limited, Sheikh Khalifa, Dr Al-Kawari, and his son – Mr Talal Al-Kawari. Hawkstone is an English company, which has a role in the management of the business affairs of the Sheikh. The application was supported by affidavits made by Mr Al-Shanfari in the Mauritius proceedings and by affidavits made by Mr Hassan Khan of Hassan Khan & Co, Mrs Al-Rawas’ English solicitors, among others. There was no claim for substantive relief: the relief sought was interim relief in connection with the Mauritius proceedings. The application was granted by Dobbs J. The order was supported by a cross-undertaking in damages and by £5,000 to be held in an account controlled by Hassan Khan & Co, Mrs Al-Rawas’ solicitors.

The order obtained on 27 July 2006 was executed on 4 August simultaneously with the order obtained in Mauritius and a similar order obtained in South Africa. An order was obtained in South Africa because Pegasus is administered from offices in Capetown. The examination of documents and computer material at the two Catherine Place addresses was a very drawn out process. It lasted until 29 August.

On 14 August, in reliance on a document which summarised the plans and intentions of the Sheikh and Mr Al-Kawari in relation to the Pegasus share offer, the claimants applied to Langstaff J for, and obtained, a world-wide freezing injunction in the sum of US$33 million. That was one third of Mr Al-Shanfari’s valuation of Pegasus at £100 million. Fourteen further defendants were added, who were subject to the order. The first five of these were further directors of Pegasus, and the other nine were companies connected with Pegasus. The order provided that the defendants should each within 24 hours of the service of the order inform Hassan Khan & Co of their assets worldwide. It was provided that the order should cease to have effect if US$33 million were paid into court. The order was supported by a cross-undertaking in damages supported by a sum of £150,000 to be held in an account controlled by Hassan Khan & Co. No freezing order was sought in Mauritius or in South Africa.

On 17 August at 1.15 pm US$33 million was paid into court and it was agreed between solicitors very soon afterwards that the order should be treated with regard to the defendants’ assets as discharged. The search and seizure order of 27 July continued in force and the search at the two addresses went on.

On 23 August the defendants served applications to have both the search and seizure order and the freezing order set aside. On 6 September Ramsay J delivered his judgment on those applications, acceding to them. He held that the claimants’ case against the defendants in respect of the Pegasus shareholdings was not an extremely strong prima facie case, but merely an arguable case (paragraphs 50 and 67 of the judgment). He held that a sufficient risk of destruction of documents had not been established (paragraph 76). He held there was no sufficient risk of dissipation of assets to justify the freezing order (paragraph 90). In relation to non-disclosure he held that:

Therefore, if I had not come to the conclusion that the orders were to be discharged on their merits, I would have come to the conclusion that they should have been discharged because of the serious and material non-disclosure made in Mr Al-Shanfari’s witness statements.”

On 6 September 2006 Ramsay J made orders that, inter alia, (1) the claimant’s English actions should be dismissed, (2) the defendants’ costs should be paid on an indemnity basis, and £200,000 should be paid on account, (3) Mr Al-Shanfari should be joined for the purpose of obtaining an order for costs against him, (4) permission to appeal be refused, but pending an application to the Court of Appeal for permission the order be stayed subject to the cross-undertaking in relation to the freezing order being fortified by the payment into court of US$1 million (which was done). He also ordered that there should be inquiries as to the damages which the defendants had sustained by reason of the search and seizure order and the freezing order. The sums of £5,000 and £150,000 were to remain where they were, with Hassan Khan & Co, and be applied towards the damages.

On 30 March 2007 the Court of Appeal dismissed Mrs Al-Rawas’ renewed application for permission to appeal with indemnity costs. In the course of his judgment Moore-Bick LJ stated;

On 2 and 3 October 2007 Eady J heard the defendants’ application for directions, and an application by the 17^th defendant, Watchhorn Business Corporation (BVI), for summary judgment on the cross-undertaking in respect of the interest difference relating to the US$33 million paid into court. Eady J delivered judgment in favour of Watchhorn in the sum of $409,337. Mrs Al-Rawas’ renewed application for permission to appeal to the Court of Appeal was refused by Thomas LJ on 22 January 2008.

On 23 October 2007 Eady J made an order which included directions as to the further conduct of the damages inquiries. He provided for the service of statements of case and exchange of witness statements. Witnesses were not to attend the trial unless otherwise ordered. No further order has been made, and so I have heard the inquiries on the basis of the statements without cross-examination.

In addition to the interest difference dealt with by Eady J the following claims for damages have been advanced by the defendants (as I will call the defendants in the action, although they are the claimants in the inquiry):

$74,166.29 as expenses incurred by Watchhorn in connection with the $33 million. This was agreed by letter of Hassan Khan & Co dated 26 February 2008.

£3,156.29 IT costs incurred by Hawkstone in connection with the search and seizure order, together with £63.71 and £636.90 for photocopying and refreshments. These were likewise agreed.

Lost management time in the sum of £32,000.

General, aggravated and exemplary damages. The letter of 26 February offered £5,000 in respect of general damages.

Costs by way of damages. This was advanced for the practical reason that the security provided by Mrs Al-Rawas in respect of damages exceeds that in respect of costs by a very substantial margin. The alternative approach of the defendants was to apply for a freezing order which would have a similar effect. Faced with this an undertaking was offered by Mrs Al-Rawas, Mr Al-Shanfari and The Khan Partnership LLP, which has resolved the matter.

I go next to the general approach to be taken by the court in the assessment of damages in relation to a cross-undertaking. The starting point is found in the speech of Lord Diplock in Hoffmann-La Roche v Secretary of State for Trade & Industry[1975] AC 295 at 361:

The evidence on which the defendants rely to support their claims is mainly to be found in the witness statement made by Mr Lloyd, the eighth defendant, on 20 December 2007. Mr Lloyd is a director of Pegasus and secretary of Hawkstone. The relevant parts can be summarised as follows. 44 Catherine Place is the private office of Sheikh Khalifa and is the office of Hawkstone. 46 Catherine Place is the private office of Dr Al-Kawari. They are small town houses, converted to offices. The search took almost 4 weeks – 4 to 29 August. A large number of people were involved, including probably 3 persons from Hassan Khan & Co at any one time, IT specialists, three or more supervising solicitors, and two or three persons from Field Fisher Waterhouse, the defendants’ solicitors. So there were likely to be an additional dozen or so people in the two houses at any time. There would normally have been only three persons at number 44. A van was parked outside with two security men inside who monitored and filmed the offices. The offices could only be open when the claimant’s representatives were present. No documents could be moved within the offices without consent. Access to computers was restricted. The days of management time which were lost were stated. The defendants had suffered ‘damage to their personal and business reputations as a result of the orders … together with emotional distress and inconvenience’ – paragraph 53. Pegasus was an oil trading company, and its ability to obtain trade finance and credit facilities was crucial. Sheikh Khalifa and Dr Al-Kawari were high profile individuals, dependent on their reputations in the conduct of their business and personal lives – paragraph 54. The search and seizure order was damaging to Pegasus, Hawkstone, Sheikh Khalifa and Dr Al-Kawari because the execution of the order was apparent to any visitor, and may have suggested wrongdoing; the order obtained on the basis of allegations of dishonesty had a detrimental effect on the reputations of Pegasus, Hawkstone and their staff – paragraph 55. Neighbours were aware of what was happening, causing embarrassment and loss of reputation – paragraph 56. The reputational damage and distress was aggravated by the time the search took – paragraph 57. The statement went on to complain of the conduct of Hassan Khan & Co in conducting the search. Mr Simon Browne-Wilkinson QC accepted on behalf of the defendants that I was unable to form a view as to these last allegations – which were denied by Hassan Khan & Co, and that I should not take account of them. As to the freezing order, the individual defendants had business reputations. The tenth defendant, Mrs Cook, was a former US Ambassador to Oman. The eleventh to nineteenth defendants were companies associated with Pegasus. Mr Lloyd believed that the freezing order involving serious allegations of dishonesty had damaged the reputations of the defendants. Having got the order, Mr Al-Shanfari enthusiastically spread word of it: he did not spread the news of its discharge – paragraph 61. The freezing order was served on 44 banks (in fact 88), which was designed to cause maximum damage to the defendants; there was no reason for including at least two; Hassan Khan & Co were slow in informing the banks of the discharge of the order – paragraphs 62 to 66. Mr Lloyd believed that as a result of the freezing order the defendants had each suffered damage to their professional and business reputations; it could not be quantified; the order would have had an impact which could not be wholly undone – paragraph 67. Mr Lloyd was very concerned about the effect of the freezing order on his own finances; his wife was embarrassed when her credit card was refused; it was distressing and worrying for his family – paragraph 68. The reputational damage and distress was exacerbated by the allegations of dishonesty on the basis of which the order was obtained – paragraph 69.

Mr Martin Bowen, the sixth defendant, also made a statement. He works for Dr Al-Kawari at 46 Catherine Place. He is a director of Pegasus. His statement dealt mainly with the evidence of Miss de Saux, a former employee of Dr Al-Kawari, who had made a statement for Mrs Al-Rawas. He worked mostly from home during the period of the search. He was served with the freezing order at 46 Catherine Place. It is remarkable that his statement says nothing as to whether the order caused him any problems.

The freezing order was served on Pegasus, Hawkstone and Mr Lloyd at 44 Catherine Place. All the other defendants were notified of the order by Mr Lloyd or Mr Palmer, the ninth defendant. This was following an arrangement between Hassan Khan & Co and Field Fisher Waterhouse. I can presume that the intention to obtain the discharge of the order as soon as possible by the deposit of the $33 million would also have been passed to them. Mrs Cook was also served with the order at her home in the United States.

Lastly I should refer to the witness statement of Mr Peter Still, the compliance officer for Investec Bank in Guernsey. The bank is trustee of the Goshawk Trust, which is connected with Dr Al-Kawari. It was involved in procuring the $33 million to be paid into court. Mr Still’s statement describes how his bank reacts to a freezing order. He stated ‘I have no doubt that the service of a Freezing Injunction inevitably causes reputational issues for any client’, also that ‘Reputations take a very long time to build and a very short time to ruin.’ He concluded ‘In this case the client relationship is still very good but the reputational damage is likely still to persist.’

I have set out this evidence at some length so that its limits are clearly seen. Apart from Mr Lloyd’s evidence as to the effect of the freezing order on him, there is no evidence that any defendant was in fact caused any sort of problem by the existence of the freezing order, nor as to any actual inconvenience or distress.

Mr Browne-Wilkinson did not pursue part of this claim, namely that relating to £9,286.23 as set out in Schedule 1 to the particulars of claim.

The claim is that management time was lost to the relevant businesses because it was spent in dealing with the search and freezing orders. The principle of claiming the cost of management time spent in repairing a wrong seems first to have been established in Tate & Lyle Food & Distribution Limited v Greater London Council [1982] 1 WLR 149. The authorities as a whole were considered in the recent judgment of Wilson LJ in Aerospace Publishing Limited v Thames Water Utilities Limited[2007] EWCA Civ 3:

Mr Charles Graham QC submitted on behalf of the defendants that there is no evidence that any business was disrupted by the search. That is literally true. However the application of common sense may fill the gap. I am satisfied by the sheer scale and time of the search that the ordinary business carried on at the two offices must have been seriously disrupted, and that the cost of the time spent in dealing with the search can be taken as a measure of the loss thereby caused.

Mr Lloyd is an accountant and is the financial controller of Hawkstone, which acted as the private office of Sheikh Khalifa. He states that for 18 days between 4 and 29 August he was involved with the search and could not attend to anything else. However he was in Capetown for two of those days which leaves 16. Further, it is not credible that during this period of over 3 weeks he did no work for Hawkstone at all, leaving the company’s affairs in abeyance. Also during this period he spent substantial time preparing the applications to discharge the orders. Mr Graham submitted that management time spent on the litigation itself could not be recovered as damages. He referred to paragraph 75 of the judgment of Wilson LJ in Aerospace. I accept that management time spent on preparing a claim for damages for breach of contract is not recoverable as damages. I also accept that it is not recoverable as costs, and so is irrecoverable. That is the law. Mr Graham went on to submit that, as it could not be said how much of Mr Lloyd’s time fell on the right side of the line, the claim must fail altogether. There I disagree. I consider that the correct approach is for me to take the minimum time which I can be sure was wasted by reason of the freezing order. To do otherwise would be unjust. I consider that to take approximately one third, 5 days, would be fair. Mr Lloyd has assessed his daily costs to Hawkstone at £420. I award Hawkstone damages of £2,100 in respect of Mr Lloyd’s time.

Mrs Linda Fisher is employed by Hawkstone as office manager, receptionist and telephonist. She also deals with personal and family matters for Sheikh Khalifa. I do not think that this latter work should be accepted as generating revenue for any particular party. It is said that her work was confidential and could not be carried out while the search was in progress, and in consequence she did not attend for 9 days. Mrs Fisher was on holiday after 18 August. The period for which she was available to attend was therefore 11 days. I cannot be satisfied what proportion of her time might actually have been spent on revenue-earning activity. I think that this claim falls the other side of the line to that relating to Mr Lloyd, and that I should decline to make any sort of estimate based on wholly inadequate information. The claim fails.

Mrs Ann Coppen is employed by Hawkstone as an accountant and book-keeper. She was on holiday when the search began. It is said that because of the confidentiality of her work she could not attend to her normal duties for 4 days. She in fact attended between 21 and 25 August (a working week) and on 29 August. So I deduce that the claim is for 4 days during those 6. I accept this claim. Her cost to Hawkstone was £150 per day, which gives £600.

Mrs Claire de Saux was employed by Dr Al-Kawari. She managed his office and attended to personal matters for him. Mr Lloyd stated that her position was similar to that of Mrs Fisher. Mrs De Saux made a witness statement on behalf of Mrs Al-Rawas. In paragraphs 64 to 69 she dealt with claims for lost a management time, but said nothing about her own time. I allow nothing for the claim in respect of her time.

Mrs Pratt is employed by Dr Al-Kawari as a book-keeper. Her position is similar to that of Mrs Coppen. The claim is allowed for 4 days, £600.

Mr Harold Palmer is the ninth defendant and a director of Pegasus. Mr Lloyd says that Mr Palmer spent a total of 5 days working in connection with the applications to set aside the orders. This claim fails for reasons set out in respect of Mr Lloyd. Likewise a claim in respect of Mr van Rensburg.

The claim for lost management time is allowed to the extent of £2,700 to Hawkstone, and £600 to Dr Al-Kawari.

It was submitted that the relevant defendants were entitled to general damages by reason of the search and seizure order, and that all the defendants were entitled to general damages by reason of the freezing order. It was submitted that the damages should be awarded in respect of loss of personal and business reputation, and for inconvenience and distress. It was submitted on behalf of Mrs Al-Rawas that, while damage to business rather than personal reputation might be recoverable, no damage of either kind should be presumed or inferred, and that none had been shown. It was submitted in the alternative that as no damage had been shown any general award should be modest. It was accepted that following Doyle v Olby (Ironmongers) [1969] 2 QB 158, where an order that been obtained by fraud, as found by Ramsay J here, the rules of remoteness were relaxed and all loss flowing directly from the breach should be recoverable. The authorities which were cited do not provide any clear guidance on this claim.

In Columbia Picture Industries Inc v Robinson & Others [1987] 1 Ch 38 the defendants had run a business in the sale of video tapes of films. Part of the business was legitimate and part involved pirated tapes. Search and seizure and freezing orders were obtained. The affidavit on which they were obtained had various omissions including any reference to the legitimate side of the business. The business was destroyed as a result of the orders. Scott J held that the affidavit was misleading in important respects, that the claimants’ solicitors had acted oppressively and in abuse of their powers in seizing items not covered by the order, and had broken their undertaking to the court. The defendants were awarded £10,000 to include compensatory damages for the loss of their legitimate business and aggravated damages. At page 78 Scott J quoted from the judgment of Dillon LJ in Booker McConnell Plc v Plascow, 3 April 1985, unreported:

When he came to the question of damages Scott J stated at pages 87 and 88:

Mr Browne-Wilkinson relied on Kpohraror v Woolwich Building Society [1996] 4 All ER 119. The defendants had wrongfully refused payment of the claimant’s cheque for £4,550. The error was realised the same day, and corrected. The master awarded damages of £5,550 as general damages to the claimant’s credit by reason of the dishonour. It was argued that as the claimant was not in business he could not recover general damages relating to loss of credit. I note that on any broad reading of the facts it appears that the claimant was engaged in business to a degree, the cheque being drawn in a business transaction. Giving the leading judgment in the Court of Appeal Evans LJ stated:

I consider that there is a close analogy between the stopping of a cheque by a bank and the obtaining of a freezing order. In each case there is an interference with the party’s ability to use its money as it wishes. It goes to the heart of the party’s ability to use the banking system, which is at the heart of trade. To be on the wrong end of a freezing order is undoubtedly a stigma – see the Booker McConnell case referred to above: it suggests that the defendant has failed to pay its debts and has been found likely to try to dissipate its assets.

In the New Zealand case, Bonz Group (Pty) Limited v Cooke [2000] NZCA 44 the claimant obtained a search and seizure order against the defendant on the basis that she had infringed rights by making and selling hand knitted woollen garments. The order was executed at her home. The order was set aside on terms that the defendant make clear that her goods were not the claimant’s. In consequence in part of the order the defendant had discontinued her business. At trial the claimant failed entirely. The Court of Appeal upheld the judge’s award on the cross-undertaking of $72,990 for financial loss relating to her business and $5,000 for emotional distress. The latter sum was not contested on the appeal. Mrs Cooke had claimed $75,000 under that head.

In Thorres Shipping Co. Ltd v. Bias Shipping Ltd [1994] 1 Lloyds Rep 577 the court was concerned with whether the conduct of the defendant’s bank when served with a freezing order which caused the defendants an exchange loss was too remote. It was held that it was. In the course of his judgment Waller J. quoted with approval a passage from the unreported judgment of Saville J. in Financiera Avenida v. Shiplaq (1988). There Saville J. quoted with approval from the judgment in the Australia decision Air Express Ltd v. Ansett Transport Industries (Operations) Ltd(1979) 146 CLR 249. The following was relied on by Mr Graham :

Mr Graham pointed to the fact that no case had been found in which general damages had been awarded on a cross-undertaking where there was no evidence of the adverse effects of the order.

I conclude that it is in accordance with principle and the above authorities that general damages may be awarded where a search and seizure order has been wrongly obtained, and likewise with a freezing order. Such damages are to compensate the defendant for the consequences of the order which cannot be claimed as special damage. They are not, however, awarded for nothing. It may be obvious that the particular circumstances of the case justify an award, or it may well not be but rather the contrary. In most cases it will be necessary to have some evidence to support the award.

I think the award of damages for emotional distress in the Bonz case are to be considered in the context of its particular facts. In my judgment, unless the particular facts make it appropriate as an exception, damages for emotional distress are not recoverable under a cross-undertaking in damages. I refer to Chitty on Contracts, 29^th Edition, paragraph 26-073 and following where the principles and authorities are considered. I do not think that the circumstances here are such as to take the case out of the general rule.

The search and seizure order was obtained against the first five defendants. There is nothing to suggest that the fifth defendant, Dr Al-Kawari’s son, was in fact affected by it. The outcome of the order was the unjustified invasion of 44 and 46 Catherine Place over a long period, with all the inconvenience that it caused. Number 44 was primarily the office of Hawkstone, and number 46 was the office of Dr Al-Kawari. Pegasus is administered in Capetown. Some compensation in respect of the search and seizure order has been given by the award of damages in respect of the loss of management time. I consider that the facts are sufficient to support an award of general damages in addition to the special damages which have been awarded or agreed.

I consider that the fact that the order was obtained by intentionally concealing a material matter from the court is something which justifies an award of aggravated damages. That is consistent with the approach of Scott J in the Columbia Pictures case. The approach that I intend is to assess a sum to cover both general and aggravated damages on a per day basis. The search was carried out on 18 days. I think that a sum of £2,500 per day per property is appropriate to the circumstances. There will therefore be an award of £45,000 to Hawkstone, and £45,000 to Dr Al-Kawari. The total of £90,000 seems to me a sufficient reflection of the conduct on the claimant’s side. It is small in comparison with $33 million, but is nonetheless a substantial sum. The making of what may be an extravagant claim (the valuation of Pegasus at $100 million being unsupported) does not justify an extravagant award of damages.

In assessing those sums I should make it plain that I take no account of the defendant’s allegations as to how the search was carried out. As I have said, it is accepted on behalf of the defendants that I am not in a position to form a view as to those. Nor do I take account of the conduct on the side of Mrs Al-Rawas in serving witness summonses on Sheikh Khalifa and Dr Al-Kawari to attend the damages assessment. That should never have been done. The summonses have been set aside by consent, with indemnity costs. But the summonses are irrelevant to this assessment of damages.

I turn to the freezing orders. They were obtained on 15 August and became of no effect on the afternoon of 17 August. 88 banks or branches of banks were notified of them. (That is the total of the list at the start of the exhibit to Mr Khan’s seventh witness statement made on 7 March 2008). This was done by fax and by post. It would seem likely that some of the banks notified by post would have received notification after the orders had become of no effect. The defendants made two complaints, one as to the number of banks notified and one as to the delay in notifying those notified by post of the order ceasing to have effect. That second complaint was largely founded on the statement in paragraph 160 of Mr Khan’s witness statement of 21 December 2007 that the letters had not been posted until 23 August. That has now been explained by Mr Khan as an error in his witness statement of 7 March 2008 provided after the conclusion of the hearing: all letters save one were sent on 17 or 18 August. Mr Khan has not explained how the mistake in his witness statement of 21 December 2007 occurred.

The defendants have only pointed to one bank with whom no connection could be seen. A connection was given in the witness statement of Mrs de Saux – a surprising deponent in the circumstances. Mrs Al-Rawas’ advisers have not provided any detailed justification for the large number of banks. I am not in a position to hold either that too many banks were served, or that banks were notified late of the order ceasing to have effect. The witness summonses are irrelevant here as they were with the search and seizing order.

Mr Khan’s new witness statement of 7 March 2008 has given rise to a further problem. When Hassan Khan & Co were asked by faxed letter of 17 August 2006 to give details of all third parties to whom the freezing order had been notified, they replied the same day with a schedule which included 43 banks. The correct figure is now shown to be 88 as I have stated. It is submitted on behalf of the defendants that their solicitors were deliberately misled by Hassan Khan & Co and that I should therefore award aggravated damages. I should mention that in their particulars of claim in the enquiry the defendants referred to “over 70 banks and financial institutions”. This said to have been a mistake but there is no explanation as to how the mistake was made save that it may have been a typographical error. There is no explanation from Hassan Khan & Co as to how 43 has become 88. It is however clear that the 43 were those which were said to have been faxed and that the others were notified by post. The Schedule listing the 43 is headed ‘List of Recipients of the freezing order by fax’. It includes in error one which was notified by post only and 6 where fax failed. All the others included in the latest list were served by post. So what has happened is that, for one reason or another, Hassan Khan & Co did not inform Field Fisher Waterhouse of the banks served by post. This has not been remarked on by the defendants’ side.

In the defendants’ written submissions provided following the service of Mr Khan’s further witness statement I am asked to award the defendants aggravated damages on the basis that Hassan Khan & Co deliberately misled Field Fisher Waterhouse as to the number of banks served. Hassan Khan & Co have not asked for an opportunity to respond to this. I have not been asked on behalf of the defendants to order that there should be a further hearing and that Mr Khan should attend to be cross-examined. It is clear to me that I am not in a position to decide whether Hassan Khan & Co deliberately misled the defendants. I think that it would be wrong to make such a finding, if one be appropriate, without hearing oral evidence. In the circumstances that this has all arisen after the hearing, that there is at least a partial explanation in that it was the posted notifications of which Hassan Khan & Co failed to inform Field Fisher Waterhouse, and that I am not asked to order that Mr Khan attend for cross-examination, I should decline to consider the matter further. I reach that decision in the further context that Mr Browne-Wilkinson had rightly accepted on behalf of the defendants that I could not decide whether the search of 44 and 46 Catherine Place was carried out in an aggressive manner – paragraphs 16 and 43 above. So this coda to the inquiry will proceed no further.

The only evidence as to the effect of the freezing order is that of Mr Lloyd as to the effect on him. It was only in force for 48 hours. It is very possible that it had no effect at all in relation to a number of the defendants. Apart from Mr Lloyd the defendants have not chosen to say what effect, if any, it had. Sheikh Khalifa and Dr Al-Kawari are men of such wealth that once the order was set aside it is unlikely to have had any on-going effect. The same may well be true as to the companies which they control. I have come to the conclusion that with the exception of Mr Lloyd it is inappropriate to award any general damages in respect of the freezing order. In Mr Lloyd’s case there will be an award of £1,000, which includes aggravated damages.

Mr Graham relied on the terms of the undertakings as excluding any right to exemplary damages. The undertaking in respect of the search and seizure order was in these terms:

Mr Graham submitted the two sentences of the first undertaking have a different function. The first provides for damages by way of compensation, which, he submitted, necessarily excludes exemplary damages. The second refers to damages, and could include exemplary damages if exemplary damages were recoverable in principle. He submitted, however, that they were not.

The contrast between the references to compensation and to damages in the first and second sentences of the standard undertaking given to support a search and seizure order is marked. The second sentence applies where the order has been carried out in breach of its terms or the applicant’s solicitors have acted in breach of their duty to the court. These are matters which may be considered to give rise to a possible claim for exemplary damages, and that seems the only explanation for the change in wording. The undertaking thus appears to have been framed with the distinction between compensatory and punitive damages in mind. I accept that the undertaking is to be construed in that manner. Thus the applicant for an order accepts liability for compensatory damages only, save where the second sentence applies. Further, exemplary damages are not available by reason of misrepresentation in the obtaining of the order: for the second sentence is not framed to cover that. It follows that the standard undertaking in the freezing order is to be construed in the same way: it covers only compensatory and not punitive damages.

This construction accords with the first paragraph in the second citation I have made from the judgment of Scott J in the Columbia Pictures case, namely that in paragraph 33 above. Although that was a case where the solicitors had also misrepresented to the court the position as to the defendants’ business in the affidavit on the strength of which the search and seizure order had been obtained, Scott J. did not there refer to that, but only to their misconduct in carrying out the order.

I have not held that the search and seizure order has been carried out in breach of the order or in a manner inconsistent with the solicitors’ duties as officers of the court. So the possibility of an award of exemplary damages does not arise.

I would accept that it can be submitted with some force that, if a litigant misleads the court into granting him an order with the intention of enabling himself to steal a march in the litigation, he should be treated as falling within Lord Devlin’s second category as he described it in Rookes v Barnard [1964] AC 1129 at 1226 and 1227. I do not, however, think that in that debate very much weight should be place on obiter dicta in the ex tempore judgments of the Court of Appeal in Smith v Day (1882) 21 Ch D 421. I must, however, deal with the case on the basis of the undertakings which were given, and if they are to be construed as I have held the question of exemplary damages does not arise. It is only the undertaking which enables a claim to be made for damages for its breach.

Mr Graham also submitted that when Ramsay J made his order of 6 September 2006 he was making an order for an enquiry as to compensatory damages, and that if it was wished to claim exemplary damages it was necessary to raise that at this point, which was not done. He thus submitted that any issue of exemplary damages arose, if at all, at the point when the court had to consider the exercise of its discretion whether to order an enquiry. I do not consider that Mr Graham is right here. Ramsay J made orders for enquiries ‘as to the amount of damages sustained’. If exemplary damages are recoverable, the order is wide enough to cover them.

I have considered whether I should indicate what awards I would have made, if any, by way of exemplary damages in addition to the awards I have already made, if I had considered it open to me as a matter of law to make them. If that question arises on any appeal, the Court of Appeal will be able to form its own assessment in accordance with the principles which it has found established, and I should not do so.