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Public law and Regulation

Case reports and guidance on public law and professional regulation issues

03 MAY 2013

The Financial Services Authority v (1) Sinaloa Gold plc and (2) Barclays Bank plc [2013] UKSC 11; (2013) PLLR 046

Civil procedure - financial regulation - public authority - Financial Services Agency - asset freezing - injunction - section 380(3) Financial Services and Markets Act 2000 - section 37(1) Senior Courts Act 1981 - costs - cross-undertaking - whether public authority required to give cross-undertaking in respect of damages incurred by third party

There was no general rule that a public authority seeking an injunction should make a cross-undertaking in respect of damages which might be incurred by a third party.

27 February 2013

Supreme Court

Lords Neuberger (President), Mance, Clarke and Sumpton JSC, Lady Hale

(1)        The respondent (FSA) was a public authority charged with upholding regulation of financial markets in the UK. It sought an asset freezing injunction in respect of Sinaloa Gold (SG) on the grounds that it believed it to be carrying on a regulated activity without authorisation, namely promoting sales of shares contrary to sections 21 and 85 of the Financial Services and Markets Act 2000. It made a cross-undertaking in favour of Barclays Bank plc (B) with regards to costs.

(2)        B, with whom SG held six bank accounts, sought a cross-undertaking from the FSA to the effect that it would be indemnified for any damages incurred.

(3)        Lord Mance SC, delivering the judgment of the court, held (i) that the authorities showed a distinction between the approach in injunctions sought privately and those sought as part of enforcement action by a public authority. Whereas private entities could choose whether to take enforcement action and to risk resources on this, public authorities were under a duty to pursue claims in the public interest and had access to limited resources drawn from public funds in order to do so. Their claims required separate consideration if they were not to be deterred from fulfilling their duties. Thus a public authority would not be required to give a cross-undertaking as a matter of course Hoffman La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 followed) [31] - [33]. (ii) That there was no material distinction between cross-undertakings in favour of the party against whom the injunction is sought, and cross-undertakings in favour of third parties. In both cases any losses protected by the cross-undertaking will have been caused by the injunction [34]. (iii) That a distinction did exist between a cross-undertaking in respect of costs and a cross-undertaking in respect of damages. This was a matter of principle which could not be resolved by concession in a particular case. There was a distinction between a cross-undertaking to pay another party's costs, and a cross-undertaking in respect of potentially open-ended loss. In the latter situation arguments relating to the nature of the FSA's role as a public authority and the resources it relies on were particularly strong [35]. (iv) There was no general rule that a public authority seeking a freezing injunction in pursuit of its public duties should grant a cross-injunction in respect of any loss suffered by third parties. There were no circumstances in the instant case to compel a different decision [36] - [41].

Appeal dismissed

Key Paragraphs

[1] - [7] - Introduction

[8] - [13] - The Financial Services Authority and Financial Services and Markets Act 2000

[19] - [35] - Hoffman La Roche and the authorities

[36] - [41] - The present case.

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