SUPREME COURT OF IRELAND
26 JANUARY 2012
(delivered the judgment of the court)
An applicant for an interim injunction is, so far as I am aware, invariably required, as a condition of the grant of the relief, to give to the court an undertaking as to damages. In the present appeal, the appellant invites this Court to hold that the State should not be required to give an undertaking, when it asks the court to restrain dealing with assets claimed to be the fruits of crime. It is an example of international mutual assistance. The appellant relies on developments of the law in England, in particular, some decisions of the House of Lords. The High Court judge described the issue as “a small point of practice but a large point of principle.”
In the instant case, the appellant, whom I will describe as the Minister, is performing his part of an international system for mutual assistance in the enforcement of criminal sanctions. The respondent has been investigated in England for involvement in large-scale VAT fraud. She has been convicted and has served sentences of imprisonment in England. The English courts have made orders for the seizure of her properties, including properties in Ireland. The High Court has made consequential orders restraining dealing with the properties.
The question raised relates exclusively to the provisional or interim stage of the proceedings: should the High Court have required the Minister to give an undertaking as to damages at the ex parte stage, i.e., when granting an interim restraining order?
First, it is necessary to describe the legislative regime.
The legislation in force at the relevant time was Part VII of the Criminal Justice Act, 1994 and, in particular, the Criminal Justice Act 1994 (s.46)(6) Regulations, 1996 (S.I. No. 343/1996) (“the Regulations”), made thereunder. The Regulations were made pursuant to section 46(6) of the Act of 1994, which was contained in Part VII of the Act.
The Act of 1994 was repealed by section 10 of the Criminal Justice (Mutual Assistance) Act, 1994, which had the effect of revoking the Regulations. However, the Act of 1994 and the Regulations were in force when the High Court (Quirke J) granted the interim restraining order which is under consideration on this appeal.
The long title to the Act of 1994 describes it as “an act to make provision for the recovery of the proceeds of drug trafficking and other offences, to create an offence of money laundering, to make provision for international co-operation in respect of certain criminal law enforcement procedures and for forfeiture of property used in the commission of crime and to provide for related matters.” The first part of that title refers to domestic enforcement. This case is concerned with the latter part dealing with international co-operation in criminal law enforcement.
The Act of 1994 provides for the making of orders confiscating property, (called “confiscation orders”) firstly, where a person has benefited from domestic drug trafficking or other offences (Parts II and III) and, secondly, by way of international co-operation, where orders of confiscation have been made in countries designated under the legislation and an application is made to the High Court by or on behalf of the government of such a designated country by way of request for international mutual assistance. The application is for what the Act calls “a confiscation co-operation order.” (Part VII). Insofar as confiscation co-operation orders are concerned, the State, by this legislation, was giving effect to the European Convention on Mutual Assistance in Criminal Matters done at Strasbourg on 20 April 1959 and amending international conventions. The Act contains, for each type of order, provision for the making by the High Court of provisional restraint orders prohibiting any person from dealing with property shown to be liable to be made the subject of a confiscation order. Part VII and the Regulations use the model provided for domestic restraint orders and apply it with necessary modification to the case of external confiscation orders.
Section 46(1) of the Act of 1994 provides that the Government may by order designate countries as countries in whose case orders described as “confiscation co-operation orders” may be made for the confiscation, in accordance with the law of the State, of property which is liable to confiscation in accordance with “external confiscation orders,” made by a court in the designated country for the purpose of recovering from a person the benefits of drug trafficking or property or its value obtained as a result of other crime.
Section 46(2) provides:
If an application is made to the High Court by or on behalf of the government of a country designated under subsection (1) of this section (referred to in this section as a “designated country”) and with the consent of the Minister for the making of a confiscation co-operation order pursuant to an external confiscation order made by a court in that country, and the High Court is satisfied that the conditions specified in subsection (3) of this section are satisfied, the court may make a confiscation co-operation order.
The specified conditions are that the “external confiscation order” be in force in the designated country and not subject to appeal, that the person had received due notice of the proceedings and that the making of a “confiscation co-operation order corresponding to the external confiscation order would not be contrary to the interests of justice."
By virtue of section 46(5) a confiscation co-operation order is to have effect corresponding to a domestic confiscation order which is made pursuant to section 4 (drug trafficking offences) or section 9 (other offences). That then is the substantive and, in effect, the final order confiscating property from a person shown to have property in the State which is shown to be the proceeds directly or indirectly of criminal activity in a designated country. This proposition is qualified only insofar as section 46(7) provides that the “High Court shall revoke the confiscation co-operation order if it appears to the court that the external confiscation order has been satisfied in accordance with the law of the country in which it was made.” That does not affect the definitive character of the confiscation co-operation order, when made. That is the substantive “confiscation co-operation order.” The present case concerns the provisional stage.
The important provision for the purpose of the present case is section 46(6), which provides, inter alia, for the making of provisional restraint orders. Part VII, unlike Parts II and III, contains no provision for the grant of provisional measures. It achieves that result by the unusual mechanism of the making of regulations adapting those provisions of Part III of the Act relating to domestic enforcement (particularly sections 23 and 24) to the case of confiscation co-operation orders made under section 46(2). To that end, section 46(6) provides as follows:
The Government may by regulations make such modifications of this Act as appear to it to be necessary or expedient for the purpose of adapting to confiscation co-operation orders any of the provisions of this Act relating to confiscation orders, in particular in relation to enforcement and the taking of provisional measures to prevent any dealing in, or transfer or disposal of, property that may be liable to confiscation in accordance with any confiscation co-operation order that may be made.
Sections 23 and 24 of the Act of 1994 deal with domestic restraint orders. Under section 24(4)(b), a restraint order “may be made only on an application by the Director of Public Prosecutions, which may be made ex parte and otherwise than in public”. These sections then reappear but in a modified format in the Regulations with the object of rendering the system of restraint applicable to the case of international mutual assistance.
Regulation 3 of the Regulations provided:
In so far as it relates to confiscation co-operation orders, the Act of 1994 is hereby modified, for the purpose of adapting it to such orders, to the extent that sections 2 and 3 and Part III of that Act shall be read as set out in the Schedule to these Regulations.
Pursuant to the provisions of the adapted versions of sections 23 and 24, set out in the schedule, the High Court had power, exercisable at the time relevant to the present proceedings, to issue a restraint order in support of an external confiscation order. So adapted by the Regulations, section 24 read as follows:-
The conditions which were required to be established before the High Court could exercise the powers conferred by section 24 were set out in section 23(1), which provided:
O’Donnell J, in the judgment he is about to deliver, raises an important question regarding compensation provisions. He draws attention to section 16 of the Proceeds of Crime Act 1996, which provides a limited scheme of compensation in the event of the discharge or lapse of interim or interlocutory orders made under that legislation. More materially to the present appeal, he refers to section 65 of the Act of 1994. That section provided:
As O’Donnell J points out, this scheme of compensation “is significantly more limited than an undertaking to pay compensation for any and all loss suffered as a result of an order which is subsequently set aside or lapses.” It does not seem, on the face of it, that section 65 applies in the case of a restraint order made under Part VII. The essential pre-condition to the section’s application is that there shall have been a failure of a prosecution for drug trafficking or other offences mentioned in Part II of the Act. That can only refer to domestic prosecutions. Even if that obstacle can be overcome, sub-section 4 refers to persons affected by a “confiscation order or a restraint order ....” At first sight, at any rate, that can mean only orders made under Part II. Part VII refers, not to “confiscation orders” but to “confiscation co-operation orders.” It contains no reference to “restraint orders.” Perhaps, the meaning of the latter term could be extended to that term as it is used in the Regulations. However, all that seems far-fetched and difficult and we have had no sufficient argument on the point to enable us to reach a useful conclusion. I will return later to the possible significance of section 65.
By an order made on 26th November 1996, the United Kingdom of Great Britain and Northern Ireland was named as a designated country for the purposes of the Act of 1994. On 1st October 2004, an officer of the Home Office transmitted to the Minister as Central Authority for Mutual Assistance a request on behalf of the Commissioners of Customs and Excise of the United Kingdom (“the Commissioners”) for assistance in relation to restraining and confiscating the assets of the Respondent as a result of her conviction by the Crown Court sitting at Middlesex Guildhall on 5th and 6th July 2001 of offences of fraudulent evasion of value added tax.
Commencing in 1997 the Commissioners conducted an investigation into the business and trading activities of the Respondent and others, based on suspected involvement in a scheme to defraud them of large sums for value-added tax.
Pending her criminal trial the Respondent was the subject of a restraint order under United Kingdom legislation. The order, inter alia, prohibited her from in any way disposing of or dealing with or diminishing the value of any of her assets or assets of companies with which she was associated whether within or outside England. These included specified assets in this jurisdiction, which, with other assets discovered later, in due course formed the subject of the application made to the High Court in the present proceedings.
The Respondent was charged with five offences of fraudulent evasion of value added tax, contrary to provisions of the United Kingdom Value Added Tax Act. She was tried before the Middlesex Crown Court between May and July 2001. She was convicted by the jury on all five counts and sentenced to six years imprisonment. She was released from prison in April 2003.
In August 2001 confiscation proceedings were commenced in order to determine whether the respondent had benefited from her criminal conduct and, if so, the amount of any such benefit. On 5th August 2003 the Middlesex Crown Court made a determination that the Respondent had benefited from the fraudulent scheme to the value of STG£18,759,430.00. A Confiscation Order was made against the Respondent in the sum of STG£1,446,368.68, the amount which represented what, in the view of the court, might be realised even though less than the value of the respondent’s benefit. In default of payment of that amount by 31st August 2004, the court ordered that the respondent serve a five year term of imprisonment.
The Respondent lodged an appeal against her conviction and the Confiscation Order which was refused by the single judge on 9th July 2004. Thereafter she lodged an appeal against that refusal. She was refused leave to appeal her conviction on 27th January 2005. Her application for leave to appeal the Confiscation order was adjourned pending the outcome of an appeal then pending before the House of Lords. On 21st December 2005 leave to appeal the Confiscation order was refused by the Court of Appeal and the Respondent notified the U.K. authorities of her intention to abandon her appeal. Consequently, as of December 2005, the confiscation order had become final and beyond being the subject of any further appeal.
The United Kingdom authorities proceeded to execute the confiscation order insofar as it related to assets within that jurisdiction and on 26th July 2007 an Enforcement Receiver who had been appointed for that purpose paid the sum of STG£317,000 into Court. The Respondent failed to attend a number of subsequent enforcement hearings as a result of which, on the 2nd October 2007, the default sentence of the confiscation order was activated and the Respondent served some two and a half years of a five year sentence.
Proceedings in the High Court
In these circumstances, the United Kingdom sought the assistance of the authorities in this jurisdiction in accordance with the provisions Part VII of the Act of 1994. The Minister, acting on behalf of the government of the United Kingdom, applied for a restraint order, in support of the confiscation order made in the United Kingdom Order referred to above, in relation to the properties in Ireland which were covered by that order. In the affidavit grounding the application, it was stated that: (a) there were reasonable grounds for the court to be of the opinion that a confiscation co-operation would be made and that (b) it was anticipated that, subsequent to a restraint order being made, a request would be made by the Government of the United Kingdom for such an order in this State.
The application was made ex-parte on 7th March 2005 in accordance with the provisions of section 24(4) of the regulations before Quirke J. No undertaking as to damages was offered. Quirke J granted an interim restraint order restraining any person having notice of the order until after 18th April 2005 or until further order from disposing or dealing with or diminishing the value of the Respondent’s property as detailed in a list of specified properties paragraph (a) to (l). The listed properties included a number of bank accounts, land holdings and assets of companies. The Minister was given liberty to serve notice of motion for an interlocutory injunction returnable for 18th April 2005. No undertaking as to damages was sought from the Minister.
On 15th December 2005 the Respondent issued a notice of motion seeking an order setting aside what the notice of motion described as “the Interlocutory Restraint Order granted by Mr Justice Quirke on 7th Day of March 2005.” It was in fact an interim order. The affidavit grounding the application was brief, not to say laconic. It said merely that the order of Quirke J had been made without jurisdiction “in that it did so without first requiring or receiving from the [Minister] any undertaking as to damages ....”
That was the single and very narrow issue considered by O’Sullivan J. In his judgment, he took as his starting point the fact that the parties had accepted the propositions laid down in a passage from Bean on Injunctions (8th ed, 2004) as follows:
The court has a discretion to grant an interim injunction without requiring an undertaking in damages. There are a number of types of case in which an undertaking is generally dispensed with. They include:
O'Sullivan J emphasised that his conclusions concerned only the question of an undertaking at the ex parte stage. He said:
In the present context I think a court should lend particular weight to the obligations of this State under an international convention and equally should be particularly conscious of the pressing and increasing need for prompt, comprehensive and effective international cooperation in respect of criminal activities such as may underlie the respondent’s prosecution in the United Kingdom or prosecutions similar to it. Very great weight should, I think, be given to these considerations.
But does the need for urgent if not instantaneous comprehensive and definitive response on occasion mean that the balanced guarantees of a seventy year old Constitution must yield in toto to these perfectly legitimate and pressing concerns? I do not think so: the very need for swift and assertive response (in some cases it may even be in secret,) reinforces rather than the reverse the countervailing need that the courts have due regard to the unrepresented interests of the parties affected by such orders. The court, in my view, should be free where appropriate to make orders with such draconian effect without the burden of conducting even a preliminary enquiry into the current and possibly changing circumstances of the party or parties to be affected with a view to identifying the scope of potential damage to them. The tried and trusted method of achieving the appropriate balance has been an insistence that an undertaking as to damages should be given to the courts and not, be it noted, to the affected party. It is the court that insists on the undertaking to ensure as best it can that its own procedures be marked with the characteristics of fairness and balance.
The learned judge balanced his earlier reference to the weight that should be accorded to the performance by the State of its international obligations by saying that “great weight should also be given to the constitutional and conventional guarantee in relation to property rights and more so in my opinion, to the principle of equality before the court." He concluded that the court, when granting ex parte relief, “ought at the very least to have its attention drawn to the issue of an undertaking as to damages” and added that “it ought to require such an undertaking in the absence of an adequate explanation as to why it should not be given.” He decided that the court had had statutory jurisdiction to make the order and that the failure to furnish an undertaking as to damages did not invalidate it. Having heard counsel, he made an order extending the order which had been made ex parte by Quirke J. At his insistence, the Minister, having expressed an intention to serve a Notice of Appeal, gave what has been described as a “limited undertaking as to damages to the Respondent pending the determination of the Appeal....”
Arguments on the appeal
The Minister submitted that the practice of requiring an undertaking as to damages in general litigation had no relevance to an application such as was provided for under the statutory scheme concerning international cooperation involved in this case. Alternatively, the requirement could be dispensed with. The submission was founded on two bases:-
the nature of the proceedings and
the fact that the applicant is the State enforcing what is essentially the law of the land.
Counsel for the Minister referred to evolving case-law from the United Kingdom, to which I will refer. Counsel accepted that the State would normally be required to provide an undertaking if it was seeking an injunction aimed at enforcing or vindicating proprietary rights of the State (jus privatum). The central point of the submission was the repeated one that, in a case such as the present, the State is seeking to ensure compliance with the law of the land. That principle, it was contended, extended by analogy to the performance by the Minister of his functions under the Act of 1994. In that case, the Minister is ensuring that Ireland complies with the international and Convention obligations to which it has signed up, a public-law function.
The Minister also submitted that the rationale underpinning the restraint order granted by the courts of the United Kingdom was that the Respondent had benefited from participation in extensive organised criminal conduct, the proceeds of which are to be found in this jurisdiction. Thus, it was submitted that it was embraced by the terms of Irish legislation related to money laundering, in particular section 31(1) of the Act of 1994, as substituted by section 21 of the Criminal Justice (Theft and Fraud Offences) Act, 2001). As so amended, the provision reads:
With particular reference to paragraph (iii) of section 21(1), the Minister submitted that the prohibition on handling property in any way which would have the effect of removing it from the scope of a confiscation cooperation order meant that, in the absence of the restraint order, it would amount to a breach of the criminal law of this jurisdiction, for the Respondent to attempt to deal in her property.
Counsel for the respondent submitted that in virtually all cases where an interlocutory injunction is given, or an undertaking to the court is accepted in lieu, the person obtaining the benefit is required to give an undertaking as to damages. Such undertaking is, in effect, the price of obtaining the injunction.
Counsel submitted that the exception for the Crown was developed in the context of Crown immunity from suit, even in matters of contract and that, over the past century, there has been a continuous cutting back of the enormous litigation advantages and immunities enjoyed by States and public authorities. The State claim, in this case, is that it should enjoy virtual impunity to secure interim and interlocutory statutory injunctions that can cause individuals enormous loss and damage to their property, professional lives and businesses.
That would amount, it was said, to a disproportionate interference with an individual’s constitutional right to private property. Counsel claims that the Minister does not even address the question of balance or proportionality with regard to undertakings generally in the broad context of respect for human rights.
Counsel submitted, as had been submitted in the High Court, that to dispense with the provision by the State of an undertaking as to damages would amount to an unfair and unequal treatment. It would treat the State differently from an equivalent private litigant.
It is contended that the requirement of an undertaking as to damages would in no way seriously inhibit the State from performing such obligations as it may have undertaken in international law. It is suggested that the Minister could seek an indemnity against any liability imposed as a result of the giving of an undertaking.
There cannot, I think, be any room for doubt about the general rule. It is that a party who seeks the aid of the court by way of injunction restraining another person from acting in any particular specified way is required, as a condition of the grant of any injunction, to undertake to the court that he or she would be liable for any damage or loss sustained by the person so restrained, if it should transpire that the injunction should not have been granted. The undertaking is an integral part of the process of seeking to maintain the status quo, of maintaining a just balance. In this appeal, we are speaking of the interim or ex parte stage. The applicant is, of course, bound by an obligation to act with the utmost good faith and to inform the court of any material fact and in particular of any element which is or may be considered disadvantageous to his case. However, the context remains one of uncertainty. The court hears only one side of the story. The application is made on affidavit, often as a matter of great urgency.
It is pointed out in the English cases that, as a matter of history, the requirement of an undertaking emerged only during the nineteenth century. Lord Diplock, in his speech in the case of Hoffmann-La Roche, discussed later, said that it originated in the Vice Chancellorship of Sir James Knight Bruce between 1841 and 1851. That may be true, but it is merely of historic interest. Lord Diplock explained the function of the undertaking in this context of uncertainty in his speech in American Cyanamid v Ethicon Ltd  396 at 407:
It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that "it aided the court in doing that which was its great object, viz. abstaining from expressing any opinion upon the merits of the case until the hearing": Wakefield v Duke of Buccleugh (1865) 12 L.T. 628, 629.
The proposition that there is an established exception for certain types of State action is based on certain English cases, three in particular, referred to in the High Court. These are put forward by the Minister as establishing the distinction between State action in enforcement of the general law, or in the hallowed expression, “the law of the land,” on the one hand, and applications, even by the State to enforce its own property or contractual rights.
It is said that the principle that the Crown did not have to provide an undertaking in damages was pronounced, though not for the first time, in the case of Attorney General v Albany Hotel Co  2 Ch. 696. That action involved the Attorney General suing on behalf of the Crown for an order restraining the defendant company from using or permitting certain premises for the retail sale of intoxicating liquor contrary to the terms of the lease of premises which had been granted by the Crown. It was stated, in the course of the argument, that the practice of requiring an undertaking was a comparatively recent one and that, at first, it was required only on ex parte applications. Lindley L.J., in the Court of Appeal, addressed the issue as follows at page 703:
The question then raised before us is this; is it in accordance with the practice to compel the Attorney General, on obtaining an interlocutory injunction, to submit to the condition of giving an undertaking as to damages? The practice is, in my opinion, settled in the negative. Of course, if the case presented to the Court on the motion for injunction were doubtful, the Court might say, even to the Attorney General, “We shall not grant you an injunction”: and if the case were very near the line, the Court might say, “If you like to give an undertaking, or find somebody to do so, we will then grant an injunction”. That is possible. But if the case for an injunction is sufficiently plain as, in my opinion, this is, the practice is entirely against imposing any such condition. This condition was imposed in ex parte cases long before my time: but I never heard of such a condition being imposed upon the Attorney General in the case of an ex parte injunction .... if the Crown’s case is too doubtful, the Attorney General is not entitled to an injunction at all; that is the answer to the defendants’ contention.
Lopes L.J. at page 704 was of a similar view. If the plaintiff had been “an ordinary lessor,” the injunction would have been granted “with the usual undertaking in damages.” He thought that “it was the inveterate practice” not to require an undertaking when “the Queen sues by her Attorney General.”
I cannot regard this case is being of any assistance. The decision not to require an undertaking was based exclusively on what was described as the "inveterate practice." No other principle or reason is identified. Although the judges do not refer to Crown immunity, it is inescapable that it was the status of the monarch which decided the case. Lord Diplock, in the Hoffmann-La Roche case discussed below, at page 362, inferred that the court had accepted an argument of counsel that the practice was based on Crown immunity from damages, which seems to me to be more than plausible. Furthermore, if there be a principled distinction of the type for which the Minister contends, this case is not consistent with it. It was not a case of enforcing the "law of the land." It concerned the terms of a Crown lease. The analysis by Lindley L.J. shows that the question of whether an injunction would be given or not dependant essentially on the strength of the case, a proposition inconsistent with the more modern test propounded in American Cyanamid v Ethicon Ltd of a fair case to be tried.
In reality, the sheet anchor of the Minister’s case is Hoffman-La Roche v Secretary of State for Trade and Industry  AC 295, a case not previously considered in our courts. The appellants were a famous pharmaceutical group of companies. Following an enquiry and report by the Monopolies Commission relating to their profits on the tranquillising drugs, Valium and Librium, the respondent, in his capacity as government Minister laid a number of statutory orders before Parliament, one of which fixed maximum prices at which the drugs might be sold. Upon the approval by parliament of the order, the appellants announced that they would not obey it and brought proceedings claiming declarations of invalidity. It was in this context that the respondent, as Secretary of State for Trade and Industry, brought proceedings, pursuant to an express statutory provision enabling him to do so, for an injunction restraining the appellants from charging prices in excess of those fixed by the order. In the course of those proceedings the Secretary Of State applied to the court for an interlocutory injunction. He declined to give an undertaking as to damages.
The House Of Lords held that the former rule or practice, described in Attorney General v Albany Hotel Co, whereby the Crown was not required to give an undertaking as to damages as a condition of being granted an interim injunction was no longer justified following the Crown Proceedings Act 1947. The House proceeded to establish the distinction between an injunction to enforce what was prima facie the law of the land, on the one hand, and one aimed at enforcing proprietary rights, on the other.
Lord Reid justified dispensing the Secretary of State from giving an undertaking very much by reference to the principle of the “law of the land.” At page 341, he said:
Dealing with alleged breaches of the law is a function of the Crown (or of a department of the executive) entirely different in character from its function in protecting its proprietary right. It has more resemblance to the function of prosecuting those who are alleged to have committed an offence. A person who is prosecuted and found not guilty may have suffered serious loss by reason of the prosecution but in general he has no legal claim against the prosecutor. In the absence of special circumstances I see no reason why the Crown in seeking to enforce orders of this kind should have to incur legal liability to the person alleged to be in breach of the order.
Lord Reid could not countenance an ingenious arrangement offered by the plaintiffs for the deposit of monies representing the difference between the prices they would charge pending the hearing of the action and the maximum prices permitted, “because the serious objection would remain that the law laid down in the order is to be disregarded until the case is decided.”(page 342)
Lord Diplock, having said that the Crown should have to give an undertaking where it applied for an interim injunction “in an action brought against a subject to enforce or to protect its proprietary or contractual rights (jus privatum),” proceeded to consider the position of the Secretary of State in seeking to enforce the prices orders. He believed that the action could conveniently be called “a law enforcement action.”
Although it had been recognised historically that the Attorney General, acting on behalf of the Crown might apply as parens patriae to a court for an injunction to restrain the commission of illegal acts, this rarely happened. An order for costs could not be made against the Crown prior to 1933. The alternative was the relator action, where the relator could be made liable to costs.
Lord Diplock addressed the case of the Crown seeking to enforce a statute in the following terms:
When, however, a statute provides that compliance with its provisions shall be enforceable by civil proceedings by the Crown for an injunction, and particularly if this is the only method of enforcement for which it provides, the Crown does owe a duty to the public at large to initiate proceedings to secure that the law is not flouted, and not simply to leave it to the chance that some relator may be willing to incur the expense and trouble of doing so.
.... the practice of exacting an undertaking in damages from the Crown as a condition of the grant of an interlocutory injunction in this type of law enforcement action ought not to be applied as a matter of course, as it should be in actions between subject and subject, in relator actions, and in actions by the Crown to enforce its proprietary or contractual rights. On the contrary the propriety of requiring such an undertaking from the Crown should be considered in the light of the particular circumstances of the case.
Lord Cross, at page 371, said that “the court in considering whether or not to make the grant of an interim injunction conditional of the giving of an undertaking in damages has to bear in mind the interest which the public -- and in particular any section of it which will benefit thereby -- has in seeing that the law in question is enforced.” he expressed concern that the Crown might be “deterred from applying for an interim injunction by the necessity of giving an undertaking in damages ....”
In Kirklees Metropolitan Borough Council v Wickes Building Supplies Ltd.  1 A.C. 227, the House of Lords followed Hoffman-La Roche. In that case two local authorities had brought proceedings to restrain a number of retailers from opening their shop premises for trade on Sundays in breach of what were then the Sunday-trading laws. They applied for interlocutory injunctions. The only real significance of the decision is that the House of Lords extended to local authorities, when seeking to enforce the law, the same principles as applied to the Crown.
There has been no equivalent development of the law in this jurisdiction. The Hoffman-La Roche principles might conceivably have been applied in the case of Campus Oil v Minister for Industry (No. 2)  I.R. 88, where the defendant Minister applied to the High Court for a mandatory injunction requiring the plaintiffs, which were oil importing companies, from ceasing, in breach of their statutory obligation, to purchase oil from a State-owned oil refinery. The report of the case is entirely silent on the question of whether the Minister gave an undertaking as to damages. Having been counsel in the case, I should recall but I do not. The absence of discussion leads me to believe that the undertaking was granted, as a matter of routine, which seems to be the view of the authors of Civil Proceedings and the State (Second ed. Anthony M. Collins and James O’Reilly Thomson Round Hall 2004). Those authors state that “If an injunction is granted on the application of the Attorney General or a Minister of Government in such circumstances, an undertaking as to damages will be required by the court. This supposition gains some support from the fact that, at page 111 of the report, Griffin J quoted the passage from Lord Diplock's speech in American Cyanamid v Ethicon Ltd, referring to the function of the undertaking, which I have myself cited above.
On the other hand, it is clear that the question of the obligation of the State or a State organ to give an undertaking as to damages as a condition of obtaining an injunction as to damages has not been considered at the level of principle. It is true that, in Attorney General at the relation of Francis X. Martin v Dublin Corporation  I.L.R.M. 254, the Supreme Court held that the relator and not the Attorney General should provide an undertaking, when seeking an interlocutory injunction. However, the reason was that the Attorney General did not, by giving his consent, indicate any approval of the proceedings. I can certainly envisage circumstances in which the Attorney General seeks an injunction to enforce compliance with the general law, where he should not have to provide an undertaking. It is preferable not to try to delineate those circumstances more precisely until they arise.
The Hoffman-La Roche case proceeds upon an assumed distinction between two types of case: in one, the State seeks to enforce its proprietary rights; in the other, it is concerned to enforce observance of the general law. Insofar as the State might, in a particular case, presumably in the person of the Attorney General, apply for an order enforcing the general law, most notably, to prevent the commission of criminal offences, there may, as I have suggested, be no particular difficulty in accepting the principles laid down in Hoffman-La Roche. The present case does not fit into either the category of enforcing the law of the land or enforcing a proprietary right. I do not agree with the submissions made on behalf of the Minister to the effect that, in making the application to the High Court for the interim restraint order, the Minister was seeking to enforce the general "law of the land." Insofar as the law of the land was concerned, the respondent was prima facie entitled to deal with, handle, remove, sell or otherwise exercise rights of ownership over the specified property, assuming it to have been in her ownership. I do not intend, in the slightest, to question the strength of the case to the effect that the property in question represented directly or indirectly the proceeds of crime. I merely state that, as a matter of Irish law, and prior to the making of the order, it was not unlawful for her to deal with the property. For those reasons, the case is distinguishable from Hoffman-La Roche, where the pharmaceutical company openly declared that it would not obey the prices order. For the same reason, it is distinguishable from Campus Oil, where the oil importers refused to observe the mandatory obligation to purchase oil from the State refinery. Equally obviously, it is distinguishable from the Sunday-trading case. At that time, the opening of the shops on Sundays was unlawful.
Nor do I accept that the Minister can, by invoking section 21 of the Act of 1994, which criminalises money laundering as there broadly defined, bring this case under the rubric of enforcing the law of the land. The application was not made to the High Court on that basis. The grounding affidavit sworn on the behalf of the Minister made no reference to that section or to money laundering. I would reserve further consideration of this point for a case where it truly arose.
At this point, I would say that I do not accept the argument of the respondent that the State benefits from any discriminatory difference of treatment such as to constitute a breach of the principle of equal treatment, from a private litigant insofar as it is dispensed from offering an undertaking as to damages in an appropriate case. The State is clearly not to be equated with a private citizen or corporate litigant pursuing the protection of private interests.
The Minister argues for the extension of the principles derived from Hoffman- La Roche to his function under the Act of 1994, where, in pursuance of international obligations and of a statutory procedure, he applies to the court for a restraint order. As is clear from the legislation, that order is of a provisional kind. Section 46(6) authorised the making of “provisional measures.” These took the form provided for by the Regulations. It is intended to preserve the property so as to enable a confiscation co-operation order to be made. The ultimate object of the United Kingdom authorities is to have the property confiscated.
Meanwhile, section 24 of the Act of 1994, as adapted by the Regulations provides for the making of orders ex parte and that an order may provide for service on or provision of notice to persons affected. Sub-section (5) provides that an order “may be discharged or varied in relation to any property ....” The order of Quirke J was made for a limited period only, to 18th April 2005, and provided for notice of motion for an interlocutory injunction for that day. All of this is characteristic of an interim injunction. It is temporary in nature: the affected party is provided an opportunity to oppose the making of an interlocutory order. It is implicit in the scheme that the affected person may dispute the making of the order. It is true that the respondent has not, in this case, made any attempt to dispute the correctness of the material presented to the Court by the Minister. That would, of course, have been highly relevant at the stage of application for an interlocutory injunction.
This appeal is concerned exclusively with the interim injunction and with whether an undertaking as to damages should then have been sought at the stage when the application was made ex parte before Quirke J.
As I stated at the beginning of this judgment, it is the invariable practice of our courts to require that a party seeking an interim injunction, provide the court with an undertaking as to damages. I do not exclude the possibility of exceptional cases. In Boyle v An Post  2 I.R. 437, Lardner J granted an interlocutory injunction to employees of the postal service because they had an unanswerable case and dispensed with the undertaking. I have seen discussion of the possible injustice to a totally impecunious applicant, who might be deprived of a remedy if he could not provide an undertaking. O’Donnell J discusses this possibility in his judgment. These are special situations on I would not which to comment.
There are very powerful reasons for requiring an applicant for an interim (as distinct from an interlocutory) injunction, as a matter of more or less invariable practice, to provide an undertaking. It is an essential part of the system of balancing rights and of attempting to maintain the status quo or of compensating for disturbance of it, if that be the case. I can see force in the argument for dispensing with it in a true case of the State applying to enforce the law of the land. If a person is openly and flagrantly violating the criminal law, he should not be compensated for being restrained from continuing to do so, but that is not this case. In that context, I have little doubt that the Hoffman-La Roche approach is compatible with Irish law.
I do not, therefore, exclude the possibility of exceptional cases. But, in my view, it would require a clearly established ground of exception to dispense the State, as applicant, at the interim and ex parte stage from providing an undertaking as to damages. I wish to emphasise the distinction between the interim and interlocutory stages. The Regulations do not, as O’Donnell J points out, provide for distinct interim and interlocutory stages. In the case of the latter, a court can hear both sides and decide whether there are truly grounds for departure from the normal requirement of an undertaking. In the present case, for example, it would be open to a court to weigh in the balance the fact that the respondent has disputed none of the material put forward by the Minister in his application.
The application made under the adapted version of section 24 of the Act of 1994 depended on proof of the existence of the pre-conditions, some of them alternative, mentioned in section 23 (as adapted), which are set out in paragraph 16 above. They require, at least, that it be established that:
the other country has been duly and properly designated:
that, in the case where paragraph (a) is invoked, proceedings have been instituted against the defendant in that country, and;
that a confiscation order either has been made in those proceedings or it appears to the court that there are reasonable grounds for believing that one will be made;
that, in the case where paragraph (b) is being relied on that the court is satisfied that proceedings are to be instituted “against a person” in a designated country;
there are reasonable grounds for believing that an application will be made (i.e., made in this jurisdiction) for a confiscation co-operation order.
These are all matters of fact, which the applicant must prove. The respondent is, in principle, entitled to dispute any or all of them. The purpose of the rule of audi alteram partem is to permit an affected person to contest allegations made against him and the courts do not countenance a response that the case was so clear that a hearing would be pointless because no defence could possibly be made out. Similarly, the purpose of an interlocutory hearing is to enable the affected person to contest the making of the order and, where an interim injunction has been granted, to argue that it should not have been. The respondent, in cases such as the present, would be entitled to call into question any of the elements of the Minister’s case. It is not absurd to suggest even, for example, that an order validly designating the other country had not been made, or had been revoked or that there had been a mistake in identifying the country. (In Abimbola v Governor of Cloverhill  2 I.R. 302, the making of a statutory order revoking the application of the Part II of the Extradition Act 1965 to the Federal Republic of Germany had the effect, not anticipated by the authorities, of rendering ineffective an existing request for extradition.) Mistakes occur. There can be cases of mistaken identity or misdecsription of property.
I do not exclude the possibility that a judge, at an ex parte hearing, would have discretion to dispense the applicant from the giving of an undertaking. I have already stated that I accept that, in certain cases, the State may be in a special position, notably if it claims that it is seeking an order restraining the commission of illegal acts, i.e., performing the public function of ensuring observance of the law of the land. I do not disagree with O’Donnell J in his description of the flexibility of the discretion. On the other hand, I believe the O’Sullivan J, on the material before him, struck the balance correctly when he said that the court “ought to require such an undertaking in the absence of an adequate explanation as to why it should not be given.” The presumption should be that an undertaking is required. If the judge is to dispense with it, the applicant would have to point to an exceptional reason. He or she would then address his or her mind to the question. Ideally, the order would recite that there was no undertaking.
O’Donnell J makes a number of relevant suggestions in his judgment. It may be appropriate for the court to take account of statutory provisions which, though not applicable, are relevant in analogous circumstances, in particular section 16 of the Proceeds of Crime Act, 1996 and section 65 of the Act of 1994. An appropriate undertaking might be fashioned to meet the circumstances of the case. Account might be taken of compensation provisions potentially applicable in the country seeking the assistance of the court. However, the applicant, whether that be the Minister or other Central Authority or the other state will necessarily be privy to all that material. It is incumbent on the applicant to place any such information before the court and to make submissions as to whether an undertaking be dispensed with or a modified undertaking be given. None of that took place in the present case.
In the present case, I believe that O’Sullivan J correctly assessed and balanced the several elements of the case. He accorded particular weight to the international obligations of the State. He said that the court should be “particularly conscious of the pressing and increasing need for prompt and comprehensive and effective international co-operation in respect of criminal activities.” He also saw the “countervailing need that the courts have due regard to the unrepresented interests of the party affected by such orders.” He was concerned at the making of orders with “draconian effect without the burden of conducting even a preliminary inquiry into the current and possibly changing circumstances of the party or parties to be affected with a view to identifying the scope of the potential damage to them.” He added that the “tried and trusted method of achieving the appropriate balance [had] been an insistence that an undertaking as to damages should be given to the courts and not, be it noted, to the affected party.”
I approve of the approach adopted by the learned judge, based on the material before him. I am satisfied that he was right to require that there be an undertaking. I would dismiss the appeal.
On the 7th March, 2005, the High Court (Quirke J.) granted to the Minister herein (“the Minister”) a cooperation restraint order pursuant to the Criminal Justice Act 1994 (Section 46(6)) Regulations 1996) in respect of 12 identified properties and assets then located in Ireland. The respondent at that time had been the subject of a prosecution in the United Kingdom in respect of VAT fraud. In 1999, a restraint order had been made in that jurisdiction encompassing six of the classes of property located in Ireland which were the subject matter of the 7th March, 2005 order. That order operated against the respondent in personam.
In July 2001 the respondent had been convicted in England on five counts of fraudulent evasion of VAT. A post conviction confiscation process was commenced. On the 5th August, 2003, Middlesex Crown Court made a determination that the respondent had benefited from the fraudulent VAT scheme to the value of £18,759,430. A confiscation order was made against the respondent in the sum of £1,446,368.68. The respondent lodged an appeal against conviction and was refused leave to appeal. In July 2004 she sought to appeal the confiscation order. At the time of the application before Quirke J., her application for leave to appeal had been adjourned pending the outcome of another decision in the House of Lords. In 2005, the respondent withdrew her appeal and the English confiscation order became final.
In June 2006, and accordingly at a time when both the Respondent’s guilty and the confiscation of her assets had been conclusively determined as a matter of English law, the High Court (O’Sullivan J.) heard and determined the Respondent’s application to set aside the ex parte order granted in March 2005 by Quirke J. The sole ground asserted was that no undertaking as to damages had been provided (or required) in the High Court which, it was argued, rendered the order ultra vires. O’Sullivan J. held that the court ought to have required an undertaking as to damages but that the absence of such an undertaking did not invalidate the order. In a rather curious procedure, the High Court then required an undertaking as to damages although limited to the actions of the Minister and not extending to those of the requesting authority. It also appears that the same undertaking was required as a condition of continuing the ex parte order.
The Criminal Justice Act 1994
The Criminal Justice Act 1994 introduced into Irish law the offence of money laundering and made provision for post conviction confiscation and forfeiture orders in domestic proceedings. The Act gave effect to Ireland’s obligations under the Council of Europe Conventions on Mutual Assistance in Criminal Matters (COE 1957) Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (COE 1990). These were substantial additions to the field of criminal law in Ireland. But since drug trafficking and money laundering were international phenomena, and beyond the power of an individual state to control, the Act also made provision for confiscation and forfeiture orders that could be made in the Irish courts in aid of orders made in the courts of designated states, and also made provision for reciprocal requests on the part of Irish law enforcement agencies for such orders to be made in the courts of designated states in aid of Irish prosecutions.
While it is important, after final conviction and confiscation or forfeiture, that law enforcement agencies of any country can enforce confiscation and forfeiture orders in respect of property located abroad, the scheme would be a very ineffective measure in combating crime generally, and money laundering in particular, if the authorities were forced to await a final conviction before moving to secure property and funds in any relevant jurisdiction. Accordingly, under the Act there is provision for the making of restraint orders at the initiation of a domestic criminal prosecution so that property might be available in the event that confiscation or forfeiture orders were made. Section 46(6) of the Act addressed the situation where there was a prosecution pending in another designated state and, through the somewhat unusual mechanism of providing for the making of regulations which could adapt and modify the Act, made provision for the possibility of provisional measures such as restraint orders being available in Irish courts. Section 46(6) provides as follows:-
The Government may by regulations make such modifications of this Act as appear to it to be necessary or expedient for the purpose of adapting to confiscation co-operation orders any of the provisions of this Act relating to confiscation orders, in particular in relation to enforcement and the taking of provisional measures to prevent any dealing in, or transfer or disposal of, property that may be liable to confiscation in accordance with any confiscation co-operation order that may be made.
In pursuance of the power granted under s. 46(6), the Regulations of 1996 (S.I. No. 343/1996) were introduced. The Regulations provide, inter alia, for the making of a restraint order. Under the adapted s. 23, such an order may be made when proceedings have been instituted in the courts of another designated state, or if the court is satisfied that proceedings are about to be instituted in a designated state and there are reasonable grounds for thinking that an application be made for a confiscation cooperation order in connection with the said proceedings. In such circumstances, the adapted s. 24(1) provides:-
The High Court may by order (in this Act referred to as a ‘restraint order’) prohibit any person from dealing with any realisable property, subject to such conditions and exceptions as may be specified in that order.
By adapted s. 24(4) it is further provided that a restraint order:-
may be made on an application by or on behalf of the Government of a designated country, with the consent of the Minister, which may be made ex parte and otherwise than in public.
Section 24(6) as adapted, provides that “an application for the discharge or variation of a restraint order may be made by any person affected by it.”
This was the procedure which was followed, broadly, in this case. An ex parte order was made by Quirke J. and an application to discharge an order was heard by O’Sullivan J. By the time that the case reached this Court (and indeed at the time of the hearing before O’Sullivan J.), matters had developed to the point where the final confiscation order had been made in England. There was also pending in the High Court an application for the confiscation cooperation order. Furthermore, both the Act of 1994 and the Regulations of 1996 had been repealed by the provisions of s. 10 of the Criminal Justice (Mutual Assistance) Act 2008 (“the Act of 2008”).
The Act of 2008 was a comprehensive provision introduced to give effect to the provisions of a number of Conventions and the Council Framework Decision 2003/577/JHA of 22nd July, 2003, on the Execution in the European Union of Orders Freezing Property or Evidence. The central authority, in this case the Minister, is obliged on receipt of an external freezing order by s. 35 of the Act of 2008 to “forthwith cause an application to be made to the High Court for an order .... recognising the external freezing order and prohibiting any person from dealing with the property specified in the external freezing order”. It is provided in s. 35(2) and s. 35(3) that the application “may be made ex parte and otherwise than in public” and should “be dealt with as soon as possible and whenever practicable, within 24 hours of receipt of the order and a duly completed certificate.” Under s. 35(4) the court may make such an order “subject to any conditions that may be specified in the order”. Section 35(5) applies the general though limited grounds set out in the Act of 2008 for refusal to make a cooperation order, and s. 46 sets out specific grounds for refusal to make a freezing cooperation order.
On this appeal it was argued that the application in the High Court for confiscation was now governed by the Act of 2008 pursuant to the transitional provisions in that Act. There was also some discussion as to whether the Act of 2008 permitted the Minister to seek some sort of reciprocal undertaking from the requesting state as a condition of seeking to enforce a freezing order. However, since the application here was made under the Act of 1994 and the Regulations of 1996, I think it is preferable to address the arguments made by reference to that scheme. It may be possible to extrapolate from the conclusions of this case to the scheme under the Act of 2008, but it is in my view essential to focus on the precise facts and law which apply to this case.
It is worth observing that the provisions in relation to the making of a restraint order under s. 24, as adapted by the 1996 Regulations, are both detailed and complicated. On their face, they could give rise to some extensive legal argument. When regard is also had to the requirements of proof, which may involve proof of events which occurred in another unfamiliar jurisdiction, and the interaction of the Regulations and the Act of 2008, it is obvious that the scope for contention, and indeed for purely technical error, in the execution and enforcement of freezing orders is not insignificant. One issue which arises in this appeal is the extent to which an accused person the subject matter of a restraint order should be entitled to claim damages in the event that an order miscarries on some technical basis, albeit that it may be quite clear that the funds in question ought properly to have been available for a confiscation order.
The Minister’s Contentions
In this case, the Minister’s argument is that there was no absolute rule that required him to give an undertaking as to damages when seeking a restraint order under the Regulations of 1996. While the Minister conceded that the court had a discretion to require such an undertaking in certain circumstances, the normal rule should be that no such undertaking should be required, at least where the Minister was a state body performing a public duty. The Minister conceded that an undertaking should be required where the State was seeking to protect a private or proprietary interest. He relied heavily on the reasoning of the House of Lords in Hoffmann La Roche & Co. v Secretary of State for Industry  A.C. 295 and Kirklees Metropolitan Borough Council v Wickes Building Supplies Ltd.  A.C. 227.
In Hoffmann La Roche, the House of Lords had occasion to review the practice of the United Kingdom courts by which the Crown had never been required to give an undertaking as to damages on the grant of an injunction. This was a practice recognised in Attorney-General v Albany Hotel Co  2 Ch 696. The roots of the practice were undoubtedly to be found in the concept of deference to the sovereign in his or her own courts, something which could have no application in this jurisdiction. However, the significance of the decision in Hoffmann La Roche was that the court had to review the position in the light of the Crown Proceedings Act 1947, which substantially removed the Crown’s immunity from suit, and the Court was therefore required to consider whether there were grounds of policy, separate from any theory of the status of the sovereign, for not requiring the Crown authorities to provide an undertaking as to damages. The approach taken by the Court was entirely functional. Did the function which the Secretary of State was discharging, rather than his position in constitutional theory as a representative of the sovereign justify any departure from the practice of non-provision of an undertaking?
The facts of the case were that Hoffman La Roche were the patent holders and manufacturers of a popular and widely prescribed benzodiazepine. The cost to private patients and to the Health Service was significant. The Monopolies Commission reported on the level of profits being made by the companies producing and selling certain patented tranquilizing drugs. After debate and investigation, both Houses of the Parliament approved the order of the Secretary of State setting the maximum price at which the drugs could be sold. Hoffman La Roche informed the Secretary of State that they would not obey the order and brought proceedings claiming declarations that the procedures adopted by the Monopolies Commission were contrary to the rules of natural justice, and consequently, that the maximum price order was ultra vires and invalid. The Secretary of State sought an injunction to compel Hoffman La Roche to comply with the provision of the order. The company defended the motion and offered an undertaking that if they were permitted to continue to sell the drug at the higher price, they would set aside the difference between that price and the price imposed by the order and agree to pay it back in the event that their proceedings were unsuccessful. Hoffman La Roche maintained that the Secretary of State should be required to give an undertaking as to damages in the event of the granting of an interlocutory injunction.
The House of Lords (Lord Wilberforce dissenting) held that since the Crown Proceedings Act 1947, the former rule of practice whereby the Crown was never required to give an undertaking in damages was no longer justified. But in a case where the Crown sought by injunction to enforce what was prima facie the law of the land, as opposed to its proprietary rights, the person against whom the injunction was sought was obliged to show very good reason why the Crown should be required to give an undertaking. The court held that in determining whether there was such good reason, all the circumstances were to be taken into account including the Crown’s financial interest in the case; the consequences for the public of granting or refusing the injunction; the scheme offered by the company; the likelihood of the order being held to be ultra vires; the fact that the Minister’s contention was not that what they were doing was not prohibited by the order, but that rather the order was invalid; and the fact that the injunction was the only means available to the Crown of enforcing the order. In all the circumstances, it was held that the Secretary of State was entitled to the injunction without being required to give an undertaking of the damages.
In Kirklees Metropolitan Borough Council, the principle identified in Hoffman La Roche was applied in the context of the local authority seeking to enforce a regulation which was alleged to be invalid as a quantitative restriction prohibited by the provisions of what was then Article 30 of the Treaty Establishing the European Economic Community (EEC) 1957. The provision in question was s. 47 of the Shops Act 1950 which imposed restrictions on Sunday trading. A number of major retailers challenged the law and sought to contend that they were entitled to continue to trade on a Sunday. Kirklees Metropolitan Borough Council, in common with a number of other local authorities who were obliged to enforce the law within their functional areas, sought injunctions restraining Sunday trading. Once again, the issue of an undertaking as to damages arose. The local authorities frankly admitted that they could not afford to offer undertakings to major retailers who were trading in apparent breach of the section, since even if the risk of the retailer succeeding was small, the potential damages would be enormous, and no prudent authority could expose itself, and its rate payers, to such a risk.
The House of Lords held that there was no absolute rule that the Crown was exempt from giving a cross-undertaking in damages in law enforcement proceedings. However, the court had a discretion not to require the undertaking and the discretion also extended to other public authorities exercising the function of law enforcement in appropriate circumstances, and that subject to the impact of community law the courts should have exercised that discretion. In this case, it was argued that the Hoffman La Roche reasoning was in principle capable of application in this jurisdiction, since the Minister is performing the same law enforcement function as his or her counterpart in England, albeit under a quite different constitutional order, and it was the function, and not the constitutional status of the actor, which justified the court in not requiring an undertaking.
The Respondent’s Arguments
The respondent in this appeal contended that there was a general rule that an undertaking as to damages had to be offered as the sine qua non for the grant of an injunction and that there was no reason for treating the State differently in that regard. Counsel accepted that this was an argument based essentially on a principle of equality, but also relied on the protection of property rights. Although it appears from the judgment of the High Court that what was described as the common law position had been accepted by both parties, counsel for the respondent argued in this court that Hoffmann La Roche, which he sought to characterise as part of the outdated concept that the King could do no wrong, should not be followed in Ireland. In essence, his case could be reduced to two simple but powerful statements of principle. First, he contended that there was no reason why the State should receive different treatment in the courts than any other litigant seeking an order freezing property; indeed, there were powerful reasons which required the State to be treated in exactly the same way as its citizens in that regard. Second, there was no reason why an individual who had suffered loss and damage as a result of an injunction wrongly granted should not be able to recover that loss and damage. Again it was argued that there were indeed strong reasons of principle why the State, above all, should be liable to make good any such loss. Counsel pointed to the provisions of the Proceeds of Crime Act 1996 in this jurisdiction, and its United Kingdom counterpart in 2002, which made provision for compensation when an interim or interlocutory order lapses or is discharged. He also referred to, but did not open, the compensation provisions provided for under s.65 of the Act of 1994 which applied to domestic restraint orders. He suggested that these provisions were a statutory recognition of the necessity of providing something akin to an undertaking as to damages.
As the argument in this Court proceeded, counsel sought to emphasise the narrowness of his contention. He said that he was only arguing for an undertaking as to damages in the case of an interim order. At what he described as “the interlocutory stage”, the other side could be heard, and there was less of a requirement for the protection of an undertaking as to damages. (It should be noted that the Act of 1994, as adapted by the Regulations, does not contemplate an interlocutory stage. Rather the Regulations provide for an ex parte order enduring until the confiscation hearing, but with the possibility of an application to set it aside. However, there is little doubt, that as part of its general discretion on the grant of the ex parte order, a court could, as indeed the High Court here did, limit the duration of the ex parte order and interlocutory hearing).
Counsel also suggested that the undertaking was not necessarily required as a condition of the grant of an injunction. He said that the undertaking must be offered, but the court had discretion whether or not to accept it, and there were cases in which a court could refuse to do so, although he did not identify either the cases, or the principle which would permit the court to refuse to accept an undertaking proffered. On the other hand, while counsel speculated about a number of hypothetical cases in which loss might be suffered, he was unwilling to identify with any degree of precision the circumstances in which a claim on the undertaking as to damages might properly arise. The argument was put in an abstract way: if there was no possibility of substantial damage flowing from an order there could be no difficulty in providing an undertaking; if there was such a possibility it was all the more important that such damage should be compensated.
This type of argument by analogy with extreme hypothetical cases, and by invocation of principles of broad application, may have some merits, but it must be said that it is rare that cases are determined by sweeping and generalised arguments such as these. Most cases are not so simple. They almost always require clarity as to the basic facts and argument, precision both as to the formulation and analysis of the issue, and nuanced judgment. On any analysis, it is apparent that this case is much more complex than the argument of the respondent would admit.
It must be apparent that the qualifications to the argument introduced by the respondent were fatally at odds with the principle asserted by him. If the court is not obliged to require an undertaking as to damages from the State at the ‘interlocutory’ stage, then that suggests that the State may properly be treated quite differently to other litigants from whom such an undertaking is required at that stage just as much as at the interim stage. Similarly, if the court has discretion not to accept an undertaking as to damages from the State at the ex parte stage, then that suggests that different considerations apply to an application for an order restraining disposal of assets when it is made by the State rather than a private citizen. Yet no principle was articulated to explain these qualifications and no explanation is offered as to how a general principle of equality of treatment of litigants remains intact as a useful basis for decision once these qualifications are admitted.
There is, furthermore, every reason to doubt the major premises of the Minister’s argument. First it is apparent, that even in a field of interlocutory injunctions, there is no rule that an undertaking as to damages must be given in order to secure the grant of interlocutory injunction. The well known practitioner’s text Bean & Parry, Injunctions (9th ed., Sweet and Maxwell, 2009) states explicitly at p. 35 that “[t]he Court has a discretion to grant an interim injunction without requiring an undertaking in damages.”
The cases identified in that text in which an undertaking is dispensed with include not only those where the Crown applies for an injunction to enforce what was prima facie the law of the land (Hoffman La Roche etc.) but also extends to a situation where, for example, the United States Securities and Exchange Commission sought an injunction in the United Kingdom in support of proceedings against alleged fraudsters in the United States (United States Securities and Exchange Commission v Manterfield  1 W.L.R. 172). An undertaking was not normally required in matrimonial and domestic proceedings concerning personal conduct, however where an injunction was sought in a family case restraining the disposal of a property alleged vested in a third party, an undertaking in damages was required (W v H  1 All E.R. 300). Perhaps even more significantly, it is well established that a court can give an injunction notwithstanding the fact that the undertaking as to damages is of little or no worth because of the lack of means of the Minister (Allen v Jambo Holdings Ltd.  1 W.L.R. 1252). It would clearly be wrong that the deserving plaintiff with a good claim would be denied an injunction simply because they were without assets. In such a case the court must take into account the unlikelihood of such a party being able to satisfy an undertaking as to damages as one of the factors in considering the grant of an interlocutory injunction but may, and on occasion does, proceed to grant an injunction in such circumstances without such an undertaking. Finally, it is generally the case that an undertaking as to damages will not extend to protect the interests of third parties.
The picture which emerges, therefore, is not of a mechanical rule, but rather of the exercise of the discretionary jurisdiction in which the presence or absence of an undertaking as to damages may be significant, and in many cases decisive. Even in those cases in the United Kingdom which deal with the enforcement of law by public authorities, it is acknowledged that the court still retains the power to demand an undertaking as a condition of the grant of an injunction, and in a close case may refuse an injunction because of the absence of such an undertaking. In other cases, the court may take other steps to minimise or limit the potential harm to the party restrained, whether by limiting the period during which the ex parte injunction is operative or providing for a very early trial. For present purposes, however, it is apparent that there is no absolute rule requiring the provision of an undertaking as to damages. The authorities relied on by the Minister in this case therefore are not unique; rather, they are examples of circumstances in which the court in its discretion may not require the provision of an undertaking as to damages. This is entirely consistent with the exercise of an equitable jurisdiction, but it makes more difficult the argument that there is an absolute general rule from which the State is being exempted.
The Significance of Section 65 of the Criminal Justice Act 1994
This is not a case of the exercise of the equitable jurisdiction to grant an injunction in aid of the private law cause of action, or even in the enforcement of the general law. The jurisdiction here is entirely statutory and the true question is a matter of statutory construction. In the absence of any express provision in the 1996 Regulations in relation to undertakings as to damages, must the words of the adapted s. 24 – “the Court may .... subject to such conditions and exceptions” – be interpreted to require that an undertaking as to damages be provided as a condition of the issuance of a restraint order in every case? To pose this question is almost to answer it. In the absence of express language it is unlikely that the Act can possibly be construed to include a specific obligation on a court to demand a general undertaking as to damages. If that was what the Act intended, it would have been easy to so provide in explicit terms.
The statutory compensation provisions to which counsel for the respondent referred us, are also instructive in this regard, but I would draw an entirely different conclusion from them than that which counsel suggests. The provisions of s. 16 of the Proceeds of Crime Act 1996 are as follows:-
It will be noted that compensation is only available to the owner of the property and then only when the property does not constitute the proceeds of crime. Further, compensation is limited to that which the court considers just in relation to any loss. Significantly for present purposes, in applications under the Proceeds of Crime Act 1996, an undertaking as to damages is not required because of this explicit, albeit limited, provision for compensation in circumstances in which the order lapses.
Even more significant in this regard, are the provisions of s. 65 of the Criminal Justice Act 1994 itself, which applies in the case of orders made under the Act in domestic cases. This, it may be noted, is in virtually identical terms to the provisions in the United Kingdom of s. 89 of the Criminal Justice Act 1988, and s. 19 of the Drug Trafficking Act 1994. Section 65 of the Criminal Justice Act 1994 provides as follows:-
Again, this is significantly more limited than an undertaking to pay compensation for any and all loss suffered as a result of an order which is subsequently set aside or lapses. There must be “serious default” by a person concerned in the investigation. Even then, no compensation will be payable if the order would have been sought even if there had been no serious default. In other words, the serious default must be the cause of the order being wrongly sought. Finally, and in any event, compensation is limited to such amount as the court considers “just”.
These provisions apply to both the accused persons in respect of whom a confiscation order is made or may be made and to any persons with an interest in property affected by a restraint order. It seems plain therefore, that where these provisions apply, the Criminal Justice Act 1994 cannot be interpreted to require a broader undertaking as to damages, since that would be wholly inconsistent with the limited compensation scheme provided for by the Act for cases in which a restraint order (or indeed a forfeiture or confiscation order) ought not to have been made. While the word “may” in s. 24 grants a discretion, that discretion must be exercised in accordance with the structure and objects of the Act as a whole. It cannot therefore be used to make a separate and different provision for compensation than that provided for by the Act itself. In this regard, I note that this is the position under the identical provisions in the United Kingdom legislation. Rule 4 of the Civil Procedural Rules of 1998 of England and Wales provide bluntly that “a restraint order may be made the subject of conditions and exceptions .... but the prosecutor shall not be required to given an undertaking to abide by any order as to damages sustained by the defendant as a result of the restraint order”. The leading text book by Mitchell, Taylor & Talbot, Confiscation and the Proceeds of Crime (Sweet and Maxwell, 2002) notes at para.3.023 that although statutory restraint orders are similar to freezing orders and Mareva type injunctions at common law, there are a number of significant distinctions, not least that an undertaking as to damages is not required for a statutory restraint order (and the authors also note that even in the case of a freezing order where Hoffman La Roche applies, the public authorities will not be required to give any such undertaking). This reasoning was applied in Re R  2 W.L.R. 1232, where it was held that no undertaking as to damages in favour of third parties could be implied on the making of the restraint order.
It should be pointed out that these compensation provisions are unusual not by their limitation but rather by their extent. Persons affected by a criminal investigation whether by way of arrest, detention search or seizure, and whether or not they are the subject of the investigation, do not normally have compensation available to them on any terms, unless the conduct of the investigation is such as to amount to the tort of misfeasance of public office, or, and unusually, constitutes some other specific tort. The failure of the investigation, the acquittal of the accused, or the invalidity of the warrant, and even if attended by negligence, will not normally give rise to any cause of action or claim for compensation.
It is quite clear therefore, and appears to be at least implicitly conceded by counsel for the respondent, that in cases of domestic restraint orders in aid of domestic prosecutions, the existence of the compensation provisions of s. 65 mean that an undertaking as to damages is neither required nor appropriate.
The Position under the 1996 Regulations
It was implicit in the argument in this Court that there was no equivalent compensation provision applicable in the case of an application for a restraint order. I am not at all convinced that this is correct. The 1996 Regulations adapted the 1994 Act for the purposes of an application for a restraint order in aid of proceedings in a designated state. It is not apparent therefore why the provisions of s. 65 should not be applicable. Furthermore, and in any event, it is clear that in this case the original restraint and confiscation orders in England were made under statutory provisions which contained compensation provisions. Those compensation orders, on their face, appeared capable of providing compensation for all loss suffered by an acquitted defendant due to serious default on the part of prosecution authorities, and it would appear plausible and indeed logical, that such compensation should extend to loss caused by restraint orders made in other states pursuant to the original order. However, the matter was not addressed in argument in any detail, and I will assume therefore, without deciding, that there were no applicable compensation provisions here. However, it seems clear to me that on an application for a restraint order the court should certainly be informed as to the position in relation to statutory compensation both in Ireland and in the designated state. To the extent that it might appear that compensation for loss is available under the compensation scheme, then the court would be entitled not to require an undertaking. To the extent that it appears there are no applicable compensation provisions, then a court would be entitled to seek an undertaking in terms similar to those imposed by s. 65 or any comparable provision, namely that compensation such as the court would consider just, would be payable in the case of loss caused by serious default on the part of the Irish authorities where such an order would not have been made without such default.
The Broad Argument
The above considerations ought to determine this appeal. However, the argument in this Court did not address the provisions of s. 65 or their significance for the case. Instead the respondent argued that the Hoffman La Roche and Kirklees line of authority could not or should not be applied in Ireland because it was alleged to infringe the principle of equality. While I note that this argument did not find favour either in the High Court or with the majority of this court, it is nevertheless necessary to consider it, as it may be useful in identifying the principles which in my view are applicable to the issue which was determined in the respondent’s favour in this case, namely that notwithstanding the Hoffman La Roche and Kirklees line of authority, an undertaking was required in this case.
The equality argument advanced is put in simple, even crude, terms. The State, it is said, should not be treated differently from other litigants. But that is a proposition which cannot withstand any prolonged scrutiny. The principle of equality guaranteed by the Irish Constitution is that like persons should be treated alike, but also that unalike persons should not be treated alike. As Walsh J. noted in the de Burca v Attorney General  I.R. 38 at p. 68:-
.... Article 40 does not require identical treatment of all persons without recognition of differences in relevant circumstances but it forbids invidious or arbitrary discrimination. It imports the Aristotelian concept that justice demands that we treat equals equally and the unequals unequally.
In this case, as in many others, the critical question is whether the State is for present purposes the same as an individual litigant so that equality demands that it is treated in the same way.
It can scarcely be argued that the State is not manifestly different from individual citizens in many significant respects. The structure of the Constitution makes (indeed is founded upon) the most clear distinction between the State and the individual. It is hardly surprising, therefore, that different provisions should apply to the State than to others. Nor can it be said that the State in this case is in the same position as an individual litigant seeking a restraining order. It is self-evident that no individual litigant could enter into the international agreements to which effect is given in the legislation. Nor could any individual citizen have the power to pass the legislation in question. The legislation enacted does not give to any other person other than the central authority designated by law, the right, and arguably the duty, to seek restraint orders from the court in aid of the proceedings in another sovereign state.
It is true that there are similarities between the order sought here and a Mareva injunction in private litigation (albeit as Mitchell et al, even at the theoretical level there are important points of distinction between statutory restraint orders and freezing injunctions in private litigation). It might be said that the purpose of legislation such as this is to make available to the law enforcement agencies a weapon that has been found useful in private litigation; but the distinction between the two situations is also relevant. In the event that a private litigant seeks and obtains an injunction and succeeds at the trial of the action, he or she will obtain the full benefit of being able to execute against the money or property which has been preserved. That is a significant private benefit. The State is, however, in an entirely different position. It seeks an order such as this as a matter of public duty and in the public interest, and indeed in performance of an obligation undertaken pursuant to an international agreement. It obtains no private benefit from the making of the order. That is graphically illustrated in this case by the fact that the end purpose of restraining the disposal of assets is to permit an effective confiscation order to be made by another State. Furthermore, the State authorities cannot decide in their own interests whether or not to bring an application: that is a public duty imposed by law and arguably enforceable by mandamus. There are therefore significant distinctions between the position of the State in litigation such as this, and a private citizen seeking a Mareva injunction whom the respondent seeks to erect as a comparator. The real question in this case, which the submissions did not begin to address, was whether those differences justified a distinction whereby the State was not obliged as a matter of course to provide an undertaking as to damages to obtain the statutory order.
It might be said (and indeed was said by O’Sullivan J. in the judgment under appeal) that while due account had to be given to the important obligations upon the State, there was no reason why a party who had, ex hypothesi, been caused to suffer loss by reason of the wrongful grant of a restraint order, should not be entitled to obtain damages from the State in the same way in which a defendant wrongly restrained by a Mareva injunction is entitled to seek an inquiry as to damages. In this sense, it might be said that whatever the differences between the position of the State and a private party seeking a freezing order, the person restrained is in precisely the same position and should have the same remedies. This puts the argument in perhaps its most powerful form, but even then it cannot be acceded to without acknowledging, and perhaps explaining, a number of cases in which it appears that the law makes just this distinction, and tolerates the outcome.
In Dillane v Attorney General and Ireland  I.L.R.M. 167 the plaintiff challenged the position of Rule 67 of the District Court Rules 1997 which prevented a District judge from awarding costs against a member of the Garda Síochána in the discharge of his or her duties as a police officer. This position was contrasted with that of a common informer who might bring a prosecution in the District Court, and could be exposed to an award of costs. The Supreme Court rejected the challenge. Henchy J. concluded that a garda officer was exercising a different social function to that of a common informer, and accordingly the legislature was at least entitled to distinguish between them whether or not the court supported or approved of the distinction. He said:-
For a variety of reasons – among them the desirability that members of the Garda Síochána should be encouraged to discharge their police duties assiduously by being given immunity from liability for costs or witnesses’ expenses in the District Court – this discrimination could reasonably be thought a justifiable concomitant of the social function of the members of the Garda Síochána when carrying out their duties as police officers.
Significantly for the argument made by the respondent in the present case, the court also dismissed the challenge to the provision based on the protection of private property on the grounds that if this was a distinction permitted by Article 41 it could not be an unjust attack on property contrary to Article 40.3.
Dillane, which was not referred to in the parties’ written submissions but was discussed in argument, is a formidable obstacle to the respondent’s contention in this case. A defendant, against whom a claim is dismissed, is put to an expense which ex hypothesi he ought not to have incurred. An order for costs is a compensation for that loss. The law, however, while providing for the possibility of this compensation against all other litigants, permits a distinction to be made in the case of the State as a litigant.
The examples can be multiplied. A related and powerful example was that proffered by Lord Reid in Hoffman La Roche. An accused who has been refused bail pending trial is deprived of his or her liberty. In the event of his or her subsequent acquittal, there is no provision for the payment of compensation or damages to such an individual. Similarly, there is no automatic right for the payment of damages on the quashing of a conviction on appeal even when, as will often be the case, the successful appellant has been in prison pending appeal. A warrant authorising the gardaí to enter a premises, or to search and seize property, permits something which would otherwise be a trespass to property or goods or both. However, it is the normal rule that invalidity of such a warrant will not expose the gardaí to damages for trespass for which any other entrant would be liable. Section 50 of the Constabulary (Ireland) Act 1836 is one longstanding example of such a statutory protection. Similarly, it is the function, and indeed it is said to be the duty, of the gardaí to seek out and detain anything that may be evidence in a criminal matter. Such retention of property of perhaps wholly innocent private citizens may well cause inconvenience and even loss to them, but there are no provisions for compensation, and no requirement that the gardaí offer an undertaking as to damages. To this list of examples could be added the provisions of the Offences Against the State (Amendment) Act 1985 which permit for the freezing of funds by ministerial order alone, and make provision for only a limited compensation provision akin to that provided for by s. 65 of the Criminal Justice Act 1994.
All these examples are inconsistent with the assumed principle of equality, and go to show that the law distinguishes clearly between the position of State authorities carrying out public duties and other litigants, and does so in particular by protecting the State from exposure to claims for damages which private litigants pursing private interests may face. The rationale appears to be that, if law enforcement bodies must also take into account the risk of damages claims of unquantifiable amounts, then they may be deterred from performing the duty which they owe to the public of pursuing and if possible prosecuting wrongdoers. The Hoffman La Roche and Kirklees authorities cannot therefore be said to be anomalies. On the contrary, they are consistent with other features of the law.
These considerations lead to a different line of authority. In one of the most important decisions in recent years in the law of torts, this Court held in Glencar Exploration Plc v Mayo County Council (No.2)  1 I.R. 84 that an invalid administrative action which causes foreseeable loss to individuals will not, without more, give rise to any cause of action in damages. The general principle was outlined in the judgment of Fennelly J. at p. 159:-
Individuals enjoy protection from the consequences of unlawful public action in three respects: firstly, if that action consists of the commission of a recognised tort, including, in certain cases, negligence; secondly, unlawful decisions can be quashed on judicial review; thirdly, misfeasance in public office by knowing or malicious abuse of power, combined with the right of appropriate cases to award exemplary or punitive damages is the most appropriate remedy.
In rejecting a claim that public authorities had a general duty to take legal advice in a breach which would give rise to action for damages, Fennelly J. observed at p. 159 that “[a]n obligation to seek legal advice even as a counsel of perfection could have a paralysing effect on public administration.”
Another significant case in this regard is Kennedy v Law Society (No. 4)  3 I.R. 228 where the High Court held that the Law Society did not owe a duty of care to the solicitor a subject of an inquiry pursuant to a decision determined by this Court to be ultra vires. The High Court held at p. 229 that the Law Society:-
owed a duty of care to the public [and that] this duty of care was required to maintain public confidence in the regulation and administration of the solicitors’ profession. In such circumstances, the [Law Society] did not owe a duty of care to an individual solicitor [the subject of an inquiry]. To hold otherwise would amount to upholding two incompatible duties and undermine the capacity of the first respondent to exert proper supervisory and regulatory control of the solicitors’ profession.
This conclusion was itself consistent with wide ranging authority in the common law world. The High Court cited with approval the remarks of Brennan J. in the landmark Australian decision of Northern Territory v Mengel (1995) 185 C.L.R. 307 at p. 358:-
If liability were imposed on public officers who, though honestly assuming the availability of powers to perform their functions, were found to fall short of curial standards of reasonable care in ascertaining the existence of those powers, there will be a chilling effect on the performance of their functions .... The avoidance of damage to persons who might be affected by the exercise of the authority or powers of the office rather than the advancing interest would be the focus of concern.
This court upheld the decision of the High Court on appeal, while pointing out that there might be circumstances where a private duty might be owed in respect of some particular aspect of the carrying out of the public duty. The underlying reasoning appears to be that the duty placed on a public body is to act in the public interest and that duty will be inhibited if the body decides to refrain from action for fear of damages claims.
Indeed, in this regard it might be said that the whole existence and development of the tort of misfeasance in public office is illustrative of the very distinction which is sought to be denied by the respondent in this case. On the one hand, the tort significantly limits the circumstances in which a claim for damages will arise out of an illegal act. The similarity between these limitations and those imposed by the compensation provisions of s. 65 of the Criminal Justice Act 1994 is striking. On the other hand misfeasance is a tort which only a public authority can commit. It is not necessary or indeed desirable to consider the precise limits of this line of authority here: it is sufficient to observe that there is substantial authority for a distinction in law between the position of a public body exercising public powers and a private individual. Furthermore, that distinction is rooted in a policy consideration which seeks to avoid the “chilling” or “paralysing” effect of a broad exposure to potential claims for damages on the performance of the public duty imposed. This, it will be noted, is exactly the justification proffered by Lord Cross in Hoffman La Roche when he said that public bodies “might be deterred from applying for an interim injunction by the necessity to give an undertaking as to damages”.
The facts of Glencar provide a useful example to test the respondent’s proposition in this case. That case established that the invalidity of the mining ban, without more, gave no right to the mining companies affected to sue for damages. If, however, the companies had not abided by the mining ban but had proceeded to act in breach of it (possibly on the grounds that they had been advised that it was invalid) the County Council might have sought an injunction. If the County Council had been required to give an undertaking as to damages and Glencar then succeeded at the trial, could Glencar then have recovered the damages which they were not entitled to recover in their action? It would be a peculiar result if the party who complied with an arguably invalid order but challenged it in the Courts, was to be in a worse position than one who defied an order which until quashed, was and remained the law of the land. It is not necessary here to offer any concluded view on this matter. However, what these examples do show is that in a number of different circumstances the law distinguishes between the State and public authorities carrying out public duties, and the position of other litigants and does so on occasions by limiting claims for damages or compensation, and justified this distinction by reference to the risk of inhibiting public authorities from performing their duties in the public interest.
All of these examples suggest that the simple rhetoric of the respondent’s arguments falls short in a number of cases. In such circumstances, it is normally incumbent on a party asserting a broad principle of general application to either explain why these apparent exceptions to the principle remain valid, or to concede that they too must fall if he is to succeed. In this case the respondent did neither.
One factor which appeared to underpin the restriction on actions for damages against public authorities when carrying out public duties seems to also be present in the reasoning of Hoffman La Roche and Kirklees. These cases illustrate a phenomenon of modern society where private bodies may have resources which dwarf those of public authorities and in some circumstances even the State itself. In the Kirklees case, the local authority frankly admitted it would not have the resources to meet a claim from the large multiples which were seeking to trade on Sundays. This is not to say that bodies with substantial resources are not entitled to the same consideration and protection as any other litigant. But these cases and Glencar, cast into sharp relief the difficult position of a public body with limited resources seeking to enforce regulation made in the public interest, and the inefficiency and indeed paralysis which may be created by the prospect of unlimited claims for damages.
The problem is not addressed by simply observing that damages will only be awarded when the party is in the wrong and authorities can avoid damages by taking care to be correct. The critical time for evaluation is at the time when the decision has to be made and when what is faced is not a reality, but rather a risk of perhaps unlimited damages and when there is no way of knowing for certain what a court may do at some time in the future. As Professor Frederrick Schauer observed in his article “Is it Important to be Important? Evaluating the Supreme Court’s Case-Selection Process” (2009) 119 Yale L.J. Online 77 at p. 84:-
Whenever the Supreme Court – or any court – sets forth a rule, standard, principle, test, or whatever, it creates the possibility of three different forms of behaviour on the part of those governed by the rule. One is compliance, another is violation, and the third is ....”dropping out”; ceasing to engage in the behaviour that the rule seeks to regulate.
When courts announce a rule, their subsequent experience of it is normally limited to the second category of case, and they have little information about, or way of gauging the extent of the third category. Yet the prediction of the impact of any rule, not just upon those who come to court in future, but also and perhaps more importantly on those who comply reluctantly, or disengage from the process, is an important part of the assessment when a rule of general application is announced. One legitimate question concerns the likely impact of an obligation to provide an unlimited undertaking in cases of restraint orders in aid of foreign prosecutions.
It is somewhat unusual that a restraint order is sought, as in this case, when a trial in a designated state has concluded, a defendant has been convicted and a confiscation order made. In the normal course, it is to be anticipated that cooperation restraint orders will be sought at the outset of a criminal prosecution when the domestic restraint order is sought. Again, in most cases where cooperation restraint orders are sought, the property involved is normally highly fluid and readily transferable and can run to many millions of euro. Since the argument asserted on behalf of the respondent is alleged to be derived from a generally applicable principle, it is useful to consider the contention that there should always be an undertaking against the damages both against that general background, and the specific circumstances of this case.
There was some uncertainty as to the circumstances in which it was contended that an undertaking as to damages, if granted, could be called upon. However counsel did not seem to dispute the analogy with an injunction in civil proceedings. In such cases, an undertaking as to damages provided on the grant of an ex parte injunction may be activated in at least three situations: where the actions fails at the trial; where the ex parte order is not continued at the interlocutory stage; and where the injunction is discharged on grounds such as lack of disclosure. The first of these examples is perhaps the most important, and illustrates why in my view the analogy with civil proceedings is imperfect. A defendant may be acquitted in a court of trial either because of some unforeseen technical error or because a jury is not satisfied beyond reasonable doubt of his or her guilt, but it would not necessarily follow as a matter of logic that the restraint order should not have been sought, or granted. It does not seem just that an acquitted defendant could then seek to recover damages on an undertaking which had been required as a condition of the grant of the restraint order. The analogy with prosecution proceedings drawn by Lord Reid in Hoffman La Roche is instructive. An acquitted defendant does not normally receive compensation (or costs) even if denied bail pending trial. If it were otherwise, the State authorities could be exposed to potentially limitless claims and significantly inhibited in performing their duty.
The prospect of an undertaking becoming operative because of a mere technical error gives rise to other troubling considerations. An application for a s. 24 restraining order may involve obtaining proofs from an unfamiliar foreign jurisdiction, and then navigating at speed the rather complex legislative code which provides for the making of international cooperation orders. Even for those cases which are quite clear on the merits, the prospects of failing on some technical error, or indeed some unforeseen legal point, are by no means negligible. As Fennelly J. observes, mistakes can happen. If for example it appeared likely that a court may set aside the order on some such technical but curable grounds, the Minister may be well advised to bring a further application immediately to ensure that the property is still restrained and subject to confiscation in due course. In such circumstances, if the first application fails but the backup succeeds, the requesting state will still achieve its object, and be able to confiscate the property or money. But is it seriously to be suggested that the Irish authority seeking the confiscation cooperation order could be liable on the undertaking as to damages, given on the first application (when it would not be liable on a purely domestic application in the same circumstances) on the theory that the respondent was restrained by an invalid order from doing what they were otherwise entitled to do, at least as a matter of domestic law, i.e. to transfer the money concerned out of the country to some other financial haven? Would a requesting state which had been persuaded to grant an indemnity to the Minister who had been obliged to provide such an undertaking be then required to provide the funds which would allow the respondent to be reimbursed, even though by definition such a person would have been convicted of a serious criminal offence and been subject of a confiscation order in that jurisdiction?
If these are even foreseeable risks in the process, then the uncertainty that is thus created is likely to have a chilling effect on the performance of the public duty involved. It is hard to know which is the more unappealing prospect: considering from the Irish perspective the risks that a prosecution in being under an unfamiliar criminal code and over which the Irish Minister has no control may fail, or the calculation that foreign prosecution authorities might have to make as to the likelihood of the procedural steps in an Irish court miscarrying in some way and giving rise to a liability on the undertaking. In either case the capacity for debate, disagreement, confusion, hesitation, and failure to act, is obvious. Yet it is of the essence of orders seeking to restrain disposal of funds, especially those suspected of being the proceeds of crime, that they should be capable of being acted upon as speedily and decisively as possible. If this does not occur, the loser in such a scenario would be the public interest in deterring crime and in preventing Ireland becoming an attractive location for the proceeds of crime, or the assets of criminals. There is no circumstance in which that harm can be remedied by any order the court might make if it turns out that the order ought to have been obtained, but was not. This in my judgment, is why the compensation provisions of s. 65 are limited in the way they are. That section balances the necessity to have compensation available in limited circumstances with the need to avoid inhibiting the necessary action. Where therefore there are applicable statutory compensation provisions it is also a reason why no undertaking whatsoever should be necessary. If there are no statutory compensation provisions applicable, then it is the reason why any undertaking should extend no further than the scope of compensation provisions applicable to cases of domestic restraint.
It might be suggested that there are other examples of loss which ought to be compensated for, and which will not be captured by the compensation provisions or an undertaking patterned upon them. Such a possibility cannot be excluded, although it is significant that no real life example could be pointed to, and no detailed hypothetical case advanced. While however, it is easy to construct hypothetical claims running to many millions, it is more difficult to point to concrete examples of serious loss being caused by the wrongful grant of ex parte restraint orders in a case like this. The argument discussed already, that a defendant if not restrained by a technically invalid order would have been able to spirit funds out of Ireland to some financial haven and thus frustrate the foreign prosecution, is not one which is attractive. The possibility of some unforeseen circumstance cannot be ruled out. However, that is just the type of situation where it ought to be possible to identify the problem very quickly and to move to set aside the order, or at least persuade the court to take some measures to mitigate the risk of any significant loss.
This is the point at which the flexibility of the discretion recorded to the court becomes relevant. Due to the fact that the original application is made ex parte, the court is entitled to expect and obtain the utmost good faith in disclosure in the central authority which includes the identification of any potential difficulty created by the making of the order. In appropriate cases that may involve informing the court of the compensation provisions in the requesting state. The fact that the application may be made in camera means that the risk of erroneous reputational damage is lessened. If the court is still in doubt, or if the case is borderline, then the court retains the power to refuse the order if it considers that there is a real risk of injustice and no undertaking is offered. Alternatively, the court could require a form of undertaking patterned on the compensation provisions provided by s. 65 and limited to the default of the central authority. In any case, it is open to the court to make an interim order for a strictly limited period of time and direct that notice should be given to the respondent of any application to extend it.
Accordingly, I would conclude on this aspect of the case that the Hoffman La Roche line of authority is in principle consistent with Irish law, although in each case in which it is sought to be applied the justification must be carefully scrutinised. I would also conclude that the line of authority is capable of applying in the case of an application for a restraint order under s. 24 of the Criminal Justice Act 1994 as adapted by the 1996 Regulations, so that there should be no automatic requirement to the general undertakings to damages in such cases. In my judgment, the presumption should be against such an undertaking being required.
The High Court Judgment
It will be apparent, however, that the High Court started from the opposite presumption, namely that an undertaking is required. The court recognised that it should lend particular weight to the obligations of the State under an international convention and should be particularly conscious of the pressing and increasing need for prompt, comprehensive and effective international cooperation in respect of criminal activities. The court recognised that very great attention should be paid to those considerations. In the result, however, the High Court still required an undertaking as to damages albeit limited to the actions of the Minister’s authority and not extending to those of the requesting authority. That judgment has been upheld by the majority of this Court. I recognise and respect the sentiments which led the learned High Court judge to this conclusion and differ from him only with reluctance. However, I consider that the judgment does not set out a sound and principled basis for requiring such undertakings in this type of case.
First, the judgment seeks to draw a distinction between the Hoffman La Roche and Kirklees cases, and the present on the basis that both of the English cases involved a facial breach of the law which the relevant authority was seeking to enforce. That of course is a factual distinction, but it is not one which in my view should result in any difference of outcome. Neither case was decided upon that basis. In neither case could it be said that there was no issue to be tried, in which case different considerations would attend the grant of an injunction. On the contrary, in both cases, it was contended on behalf of the respondents that the relevant provision, whether the maximum prices order or the provisions of the Shops Act, was void and therefore of no effect. If the respondents had succeeded in that claim at the trial, then if they had been restrained by injunction pending trial, they would have suffered a loss which they ought not to have. Yet if there was no undertaking, they would not recover. This is precisely the circumstance contemplated by the House of Lords in both those cases, and, it appears, approved by the High Court. Accordingly, I cannot see how the distinction asserted is sufficient to lead to a different result in this case. It does not matter on what basis the respondent contends that they are not in breach of the law: what matters is that the Minister is obliged to enforce the general law in the public interest. If in the Kirklees case the business had also claimed (or perhaps only claimed) that what they were doing did not amount to a breach of the Sunday trading restrictions, either because of some asserted interpretation of the words of the Shops Act, or some scheme put in place within the shops on those days, this would not, as I read it, have made any difference to the outcome of the case. The underlying rationale of the judgment remained: that the local authorities should not be subject to the risk of crippling damages for having bona fide sought to enforce the law. Indeed, it is apparent that the Hoffman La Roche and Kirklees line of authority is regularly applied in the United Kingdom outside the context of a facial breach of the law contended to be invalid (e.g. SIB v Lloyd Wright  4 All E.R. 210, where the financial services authority sought an injunction pursuant to the Financial Services and Markets Act 2000; and SEC v Manterfield  1 W.L.R. 172 where an injunction was granted to the United States authorities in respect of an alleged fraud in each case without requiring an undertaking as to damages).
Second, on the logic of the High Court judgment, the restriction of the undertaking to loss attributable to the actions of the Minister alone makes little sense. The theory of an undertaking as to damages in private law is to provide for loss resulting from the existence of an order. It is not dependent on culpability, or indeed any activity other than that of seeking the order. If, for example, the English conviction or confiscation order had been belatedly overturned, then the Irish restraint order made pursuant to s.24 as adapted would necessarily fall. The respondent would have suffered the same loss by reason of the existence of the restraint order, whatever the source of its frailty. If the High Court is correct that there is a principle that a party should recover any loss flowing from the making of the order, then I can see no justification for exempting the Minister who sought the order alleged to cause the loss from the obligation to make good that loss. If, however, it is permissible to deny recovery of some of the loss flowing from the order then I do not see why it is necessary to go beyond the provisions of s. 65 of the 1994 Act if applicable, or some similarly patterned undertaking if not.
More fundamentally, the recognition in the High Court judgment of the importance of prompt and effective international cooperation in respect of criminal matters is itself recognition that this type of case cannot be treated as akin to one in which a private party applies for a freezing order. However, the High Court did not explain what weight should be given to this value in considering whether or not an undertaking should be required, nor did it identify circumstances in which it might tilt the balance against requiring such an undertaking. On close analysis, it is clear that the consideration of the public interest in prompt and effective action against crime will be largely illusory if no account is taken of the chilling effect of requiring such an undertaking on the prospect of prompt comprehensive and effective international cooperation. The State’s interest in pursuit of the particular crime is not necessarily inconsistent with requiring an undertaking as to damages. Indeed this is the very reasoning which led the High Court to the outcome of requiring an undertaking as to damages in the present case, and it is entirely predictable that the same process will lead to the same result and the same outcome in any other case.
The facts in this case are particularly revealing. It is difficult to conceive of a stronger case for not requiring an undertaking, if any significant weight is to be given to the State’s interest. By the time this application was decided in the High Court, not only had the respondent been subject to a trial and conviction which was itself final and conclusive, but she had also been the subject of a confiscation order made in the English proceedings, which itself was also both final and conclusive. Furthermore, although the order of Quirke J. had been in existence for 15 months, the only ground upon which the respondent sought to contend it should be said set aside was the legal argument, correctly rejected by the High Court, that the absence of an undertaking meant that the injunction was granted without jurisdiction. There was not the slightest suggestion that there was any error of fact or law on the part of either the Irish or English authorities, and no suggestion that any injustice would be created by the grant of the injunction. Furthermore, all this occurred in the context of an application to set aside the order, and accordingly an occasion which the respondent party had full opportunity to be heard. Nevertheless, the Court proceeded to require the limited undertaking to be given as a condition of continuing the ex parte order or as it was described, a condition of the interlocutory order in due course. This practical example illustrates something which is perhaps detectable by analysis from first principles: the approach taken by the High Court will inevitably lead to the requirement of an undertaking in almost every case. There is something wrong with a balancing process that always comes to the same outcome. For the reasons set out above, I consider that this test is inconsistent with the sensible approach reflected in the decision in Hoffman La Roche as much as in s. 65 of the Criminal Justice Act 1994. I would allow the appeal to the extent indicated by this judgment. If it is accepted on behalf of the Minister that s. 65 or compensate on provisions of the English Act, or both, apply to this case, I would not require any undertaking; if the position is unclear, I would only require an undertaking in accordance with the terms of s. 65 of the Act as a condition of the ex parte order. Given the facts that on the inter partes hearing nothing was pointed to which could conceivably have either amounted to a substantive ground for setting aside the order or a possible injustice against which the court should protect the Respondent, and that by that stage the Respondent was the subject of a final conviction and confiscation order, I would not have required an undertaking as a condition of the continuation of the ex parte order. Since in those circumstances any loss would not seem to be covered by s.65 that qualification may be academic.
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