Undertaking as to Damages in UK Law

The assessment is made upon the same basis as 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.

(1) Save in special cases an undertaking as to damages is the price which the person asking for an interlocutory injunction has to pay for its grant. The Court cannot compel an applicant to give an undertaking but it can refuse to grant an injunction unless he does.

The practice of requiring an undertaking in damages from the applicant for such an injunction as the price for its grant was originated by the Court of Chancery as an adjunct to the equitable remedy of an injunction. The order might subsequently prove to have been wrongly made but in the meantime the respondent by reason of compliance with the injunction may have suffered serious loss from which he will not be compensated by the relief sought in the proceedings.

The form of the undertaking indicates that the Court has a discretion whether to enforce it at all and that discretion is not limited in any way. The power to enforce the undertaking being incidental to the power to grant an injunction (see Re Hailstone (1910) 102 L.T. 877 at p.880), the discretion will be exercised in accordance with ordinary equitable principles (see, for example, Spry: Equitable Remedies (4th ed.)

On the contrary, I read them as dismantling an old Crown privilege and substituting for it a principle upon which, in certain limited circumstances, the court has a discretion whether or not to require an undertaking in damages from the Crown as law enforcer. The principle appears to be related not to the Crown as such but to the Crown when performing a particular function.

Mr Heslop's principal submission is that applications of this kind, being brought in the public interest, are outside the ordinary rule. I accept the premise of that submission, but reject the conclusion. The Crown or a local authority must take its chance on costs, just like any other litigant in these courts.

"If, on the other hand" damages would not be an adequate remedy, the court should then consider whether, If the injunction weregranted the defendant would be adequately compensated under the plaintiff's undertaking as to damages. "If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them there would be no reason upon this ground to refuse an interlocutory injunction" (page 323F-G).