Financial Services Authority v Sinaloa Gold plc concerned the important issue of whether the FSA, as a public body exercising enforcement functions, should be required, as a condition of obtaining a freezing injunction, to give to the court a cross-undertaking in damages in favour of third parties affected by the injunction.

At first instance before HHJ Hodge QC, Barclays Bank plc, as intervener, successfully argued that the FSA should be required to provide such a cross-undertaking to third parties. The decision was successfully appealed by the FSA to the Court of Appeal (Mummery LJ, Patten LJ and Hedley J). The Supreme Court, in a unanimous judgment given by Lord Mance, upheld the Court of Appeal’s decision.

The Supreme Court found that there was no general rule that an authority like the FSA acting pursuant to a public duty should be required to give such an undertaking to third parties, and further held that there were no particular circumstances why it should be required to do so in the instant case.

The Supreme Court appeared to accept Barclays’ argument that F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 did not, contrary to how it has often since been regarded, establish a general rule that a public body exercising law enforcement functions will not be required to give a cross-undertaking in damages to a respondent when seeking an interim injunction.  However, the Supreme Court nevertheless considered that it was appropriate to draw a distinction between public and private claims. It held that in the former case, no cross-undertaking should be exacted from the public body as a matter of course. The Supreme Court further held that there was no relevant distinction to be made for these purposes between a cross-undertaking in favour of a respondent, and a cross-undertaking in favour of third parties.

The Supreme Court considered that to require a public body to provide a cross-undertaking as a matter of course where injunctive relief is sought, particularly on a without notice basis, could cause concerns to a regulator worried about risk and resource implications.  The Court stated that a defendant or third party who is or fears being adversely affected by an injunction obtained without notice should be expected to come forward, after being notified of the existence of the injunction, to seek an order that the continuation of the injunction be made conditional upon the provision of a cross-undertaking.

The full text of the judgement can be found here

Richard Handyside QC and Tamara Oppenheimer appeared for Barclays.