| |
Lord Justice Clarke:
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This is the judgment
of the court, to which each of its members has contributed.
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Introduction
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| 1. |
The applications
before the court in this case are at first sight straightforward. Pending
the hearing of the substantive appeal, the appellant seeks a stay of orders
made by the judge for the payment of the judgment debt and costs. The respondents
make a cross-application for security for their costs of the appeal.
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| 2. |
Two factors,
however, make the case unusual. The first is that the appellant is a limited
liability company registered in the British Virgin Islands, with a PO box
address in Jersey, and with no assets within the United Kingdom (or, as it
would have us believe, anywhere else). The second is that the respondents
seek not only to oppose the appellant's application for a stay, but also ask
for an order that the appeal be struck out unless, by a given date, the appellant
pays or secures the full amount of both the judgment debt and the specific
orders for costs made by the judge, as well as providing security for costs
in whatever sum the court determines.
|
| 3. |
The application
to strike out gives rise to two points point of principle. The first is whether
it is a permissible exercise of the court's powers, either when granting permission
to appeal or subsequently, to make the prosecution of the appeal conditional
upon the payment of the judgment debt and costs. The second is, if so, whether
it is appropriate to do so in a case where, as here, the appellant might have
to obtain the funds to meet the various orders from a third party. There appears
to be little authority on these questions, which seem to us as potentially
of some considerable practical importance. It was for this reason that, having
heard full argument, we reserved judgment.
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The Facts
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| 4. |
The appellant,
Agrichem International Holdings Limited, seeks a stay of orders made against
it by Silber J on 12 July 2001 at the conclusion of an action in the Queen's
Bench Division, in which the appellant was the defendant and the claimants
were Hammond Suddards Solicitors (the respondents). In very simple terms,
the respondents' claim in the court below was for unpaid fees. The appellant
was a former client of the respondents, who acted for it in unsuccessful proceedings
which the appellant brought in England against a Spanish company called Compania
Envasadora Loreto ("CENLO"). The appellant is (or was) a commodity trading
company which had entered into a contract with CENLO for the purchase and
resale of a quantity of olives located in Spain. The appellant's case was
that the respondents had negligently advised the appellant that the appellant
had acquired title to the olives and would retain it until the appellant was
paid. Consequent upon this advice, said the appellant, it brought proceedings
in England to recover the olives, which it lost, and in respect of which it
was ordered to pay indemnity costs. The appellant accordingly denied liability
for payment of the respondents' fees, alleged a total failure of consideration
and counterclaimed for damages said to be caused by the respondents' alleged
negligence.
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| 5. |
The trial of
the action took place before Silber J. On 20 June 2001 the judge handed down
a reserved judgment running to some 326 paragraphs. He rejected most of the
allegations of negligence made against the respondents and found that the
appellant had in any event suffered no loss. He accordingly entered judgment
for the appellant on its counterclaim with damages assessed at £5. He adjourned
the claim for further argument, ordered the appellant to pay 90% of the respondents'
costs of the counterclaim, to be assessed if not agreed, and ordered the appellant
to make an interim payment on account of costs in the sum of £100,000 by 4.00
pm on 12 July 2001. He directed payment out of court to the respondents in
the further sum of £50,000, which had been paid into court by way of security
for costs pursuant to an order of Master Leslie made on 30 May 2000. He also
gave the respondents liberty to apply for a further interim payment on account
of costs, but refused the appellant's application for a stay of the order
for the interim payment of £100,000. Master Leslie had made a second order
for security for costs in the further sum of £100,000 which had been provided
by bank guarantee. The respondents were subsequently paid that sum under the
guarantee.
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| 6. |
On 12 July 2001
the judge gave judgment by consent on the claim in the sum of 465,809 Belgian
Francs and £72,945 plus interest, those sums to be paid by the appellant to
the respondent by no later than 4.00 pm on 31 August 2001. The figures were
agreed on the basis that the appellant retained the right to argue on appeal
(1) that the respondents were liable to it on its counterclaim and (2) that
it was entitled to the return of the whole or part of the payment on the grounds
of a total failure of consideration, together with its costs. On the same
day the judge made an order that the appellant make a further interim payment
of £200,000 on account of costs of the counterclaim, also to be paid by 31
August 2001. None of those sums, including the judgment debt, has been paid.
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| 7. |
The judge refused
permission to appeal, giving detailed reasons. However, on 10 August 2001
Mance LJ gave permission to appeal on paper. He refused an application to
adduce fresh evidence and also refused a stay in relation to the order for
costs, saying:
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"The
application for a stay in respect of the costs order is unsupported by any
compelling reason why the successful respondents should be deprived of the
normal fruits of the judgment in their favour, pending appeal. It is not suggested
that it would be a hardship for the appellant to pay, or that there would
be any risk of the sums not being recoverable if the appeal were to succeed."
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|
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Renewed Application for a Stay.
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| 8. |
The first application
before us, therefore, is a renewed application by the appellant for a stay
of Silber J's orders of 20 June 2001 and 12 July 2001 pending the determination
of the appeal. The basis upon which the stay is sought is that the appellant
is in an extremely poor financial position and that, if a stay is not granted,
enforcement proceedings by the respondents could result in the appellant being
unable to pursue its appeal.
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| 9. |
In support of
this application, the appellant produces a witness statement of Rosemary Elizabeth
Marr, who is a director of the appellant. She explains the absence of evidence
of the appellant's financial position before Mance LJ as being due to lack
of time. She adds:
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"The
precise figures were not available, and (the appellant) did not want to put
in evidence until satisfied that it was accurate, and that no further funding
was available."
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Ms
Marr's statement deals in some detail with the history of the litigation between
the appellant and CENLO, but its main burden is that because of the collapse
and bankruptcy of its principal customer, a company called American Rice Inc,
owing it is said $4,055,448 to the appellant, the appellant now finds itself
in dire financial straits. The action against CENLO, Ms Marr asserts, was
an attempt to mitigate its losses, which, because of the respondents' alleged
negligence, had the reverse effect.
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| 10. |
Ms Marr says
that the appellant is a privately owned BVI company. She exhibits to the statement
what she describes as "a balance sheet" which she says represents the appellant's
financial position as at 11 September 2001. At the same time, she says:
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"[The
appellant], as a privately owned BVI company, is not required to produce accounts
and this document has been prepared solely for the purpose of this application.
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We
think the document worth reproducing in full:
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| |
"AIHL
11 September 2001
Agrichem
International Holdings Limited
| | |
Balance
Sheet
As
at September 11 2001
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US
$'000 US$'000
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Cash
at Bank 3
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________
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3
Loans
2,975
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Creditors
373
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________
-3,348
___________
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Net
Liabilities -3,345
___________
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Represented
by
Share
Capital 0
| | |
Revenue
Reserves – Deficit -3,345
____________
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Shareholder
Funds 3,345
____________"
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[Editor's Note: This table takes the same form as the version on the Court Service site. The layout is plainly inaccurate, but nothing appears to turn on this.]
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| 11. |
Ms. Marr's narrative
explanation for the appellant's apparently dire financial position is in these
terms:
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"[The
appellant's] extremely difficult financial position became clear once it was
established that American Rice's unsecured creditors were paid only 5% of
the debt proven in the Chapter 11 Bankruptcy. This coupled with the failure
by (the appellant) to recover the olives at CENLO meant that the company went
from having a book net worth in 1998 of approximately US$5 million to having
net liabilities as currently stated in the balance sheet once the amounts
owned by American Rice had been written off and the debts crystallised. The
costs of defending the claim by [the respondents] and of pursuing the counterclaim
have been very significant, and (as described below) [the appellant] has exhausted
all funds available to it.
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It
has simply not been possible to date, given the financial condition of [the
appellant] to raise any further funds for [the appellant]. [The appellant]
has approached all of its usual sources including existing lenders, but has
found that they either are unwilling to advance funds (which is not surprising
given the financial condition of the company) and/or do not have funds available
to advance."
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The
statement concludes:
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"(The
appellant) is not in a position to both pursue its appeal and to satisfy the
judgment and the interim costs order of 12 July 2001. Its current position
is due to a great extent to the poor advice of the (respondents) If a stay
is not granted then enforcement proceedings by (the respondents) could result
in (the appellant) being unable to pursue its appeal, although that appeal
has a real prospect of success on points which would reverse the result of
the trial."
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|
| 12. |
Mr. Justin Fenwick
QC, for the appellant, submitted that we were bound to take Ms Marr's statement
at face value, that it represented credible evidence of the appellant's financial
position and that in the light of Ms Marr's assertion that the refusal to
grant a stay could "stifle" the appeal, a stay should be granted. We are quite
unable to accept any of those submissions.
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| 13. |
We regard the
"balance sheet" produced by Ms Marr as a wholly inadequate document to support
an application for discretionary relief by an entity such as the appellant,
which is not registered in the United Kingdom, has no assets here and a PO
box address in Jersey and is not subject to either the Brussels or the Lugano
Conventions. In our judgment, the evidence in support of an application for
a stay needs to be full, frank and clear. The "balance sheet", in our view,
is none of these.
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| 14. |
While it may
well be the case that the law of the British Virgin Islands does not require
the appellant to produce accounts, this does not mean that they do not exist.
Given the scale of the appellant's business transactions (to which further
reference is made below) it is inconceivable that accounts do not exist. It
is therefore wholly unacceptable for this court to be told, on such an application
as the present, that the only document the court is to see is a single sheet
of paper produced for the purposes of the application and that the court must
accept this as sufficient evidence of the appellant's financial position.
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| 15. |
We note in this
regard that, when it was perceived to be in the appellant's interests to show
that it was of financial substance, Ms Marr was willing to give a much more
expansive description of the appellant's status. On 23 November 1998, in the
proceedings between the appellant and CENLO, Ms Marr swore an affidavit "to
clarify the financial position and substance of (the appellant)". As Mr Edmund
Cullen, for the respondents, pointed out, that affidavit was sworn three months
after American Rice Inc, said to be the appellant's principal customer, went
into Chapter 11 bankruptcy, a fact which is not mentioned in the affidavit.
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| 16. |
A number of
statements in Ms Marr's earlier affidavit are relevant to the current application.
She describes the appellant as:
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"wholly
owned by a discretionary trust the beneficiaries of which are members of one
family. The trust has substantial assets and no borrowings. Because all the
holdings of the trust are private there is never any need to disclose financial
information publicly and as a matter of policy such information is never disclosed."
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We
notice that the references to the substantial wealth and freedom from borrowings
of the Trust which owns the appellant are omitted from Ms Marr's statement
in the current appeal. The 1998 affidavit continues:
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"Over
the past two and a half years, (the appellant) has had substantial dealings
with American Rice Inc and (CENLO). (The appellant) continues to trade with
its other principals in the commodities business.
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[The
appellant's] turnover during the year to 30 November 1997 was $30.463 million.
The company is highly profitable and continues to trade profitably..."
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|
| 17. |
Ms Marr then
exhibits to the affidavit a number of documents including a revolving letter
of credit and testimonials from banks. These show, she says, that:
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"[the
appellant] continues to trade and is able to finance substantial trading activity.
Banks will not open letters of credit on behalf of their clients unless they
are satisfied that the client (ie the applicant for the letter of credit)
has the ability to settle the future liability that such letter of credit
will create.
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[The
appellant's] turnover with American Rice and CENLO alone during the six month
period to 28 February 1998 exceeded US$21.3 million. This is more than twice
the total turnover of CENLO during the same period.
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[The
appellant] has substantial assets and has a net worth in excess of $US5 million.
The company has always been in a position to meet its commitments."
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|
| 18. |
The only other
information we have about the appellant derives from a company search carried
out on behalf of the respondents in January 2000. This showed that it was
incorporated in July 1992 and was then "in good standing". It had paid its
licence fee up to November 2000; it had authorised capital of US$50,000, divided
into $1 shares; the directors were empowered to issue bearer shares and its
objects clause is extremely wide. In the search the appellant's registered
agent was reported to have declined to name the company's principal banker
and it was made clear that the appellant was not required under the laws of
the British Virgin Islands to disclose details of directors and shareholders.
In addition, as we have already seen, the appellant was not required to publish
or disclose balance sheets.
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| 19. |
The material
we have set out above explains why we take the view that Ms Marr's statement
produced for this application is wholly insufficient evidence to show that
there is any risk of the appeal being stifled unless a stay is granted. In
our judgment, a foreign corporate entity without assets within the United
Kingdom and without readily identifiable assets elsewhere, which is not subject
to any international conventions to facilitate enforcement, and which seeks
to stay orders obtained after a lengthy and fair hearing must produce cogent
evidence that there is a real risk of injustice if enforcement is allowed
to take place pending appeal.
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| 20. |
Before it could
properly grant a stay, the court needs to have a full understanding of the
true state of the company's affairs. Simple assertion, particularly if it
is scarcely consistent with previous assertions, is not enough. Thus, in the
instant case, we would have expected the appellant to produce accounts showing
precisely what its trading and financial position is and how it has changed
since 1998 in order to evaluate the risks of allowing enforcement to proceed
in the ordinary way.
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| 21. |
The thrust of
Ms Marr's 1998 affidavit is that the owners of the appellant were wealthy
and willing to stand behind it. In the absence of evidence to the contrary,
there is no reason to think that they are not still wealthy or that, if they
wished to, and if they thought it in their or the appellant's interests to
do so, they could satisfy or secure the judgment debt and the orders for costs.
They plainly have an interest in the appeal succeeding. We note in this regard
that the appellant is able to fund its own costs of the appeal. It appeared
before us by leading and junior counsel, who, we understand, will be briefed
at the hearing of the appeal, which is due to last three to four days. The
evidence does not make it clear how those costs are being funded.
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| 22. |
By CPR rule
52.7, unless the appeal court or the lower court orders otherwise, an appeal
does not operate as a stay of execution of the orders of the lower court.
It follows that the court has a discretion whether or not to grant a stay.
Whether the court should exercise its discretion to grant a stay will depend
upon all the circumstances of the case, but the essential question is whether
there is a risk of injustice to one or other or both parties if it grants
or refuses a stay. In particular, if a stay is refused what are the risks
of the appeal being stifled? If a stay is granted and the appeal fails, what
are the risks that the respondent will be unable to enforce the judgment?
On the other hand, if a stay is refused and the appeal succeeds, and the judgment
is enforced in the meantime, what are the risks of the appellant being able
to recover any monies paid from the respondent?
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| 23. |
For the reasons
which we have given we are not persuaded that there is any significant risk
of the appeal being stifled if a stay is refused. On the contrary, it seems
to us that the appellant will continue to finance the appeal in whatever way
it is doing at present. Moreover, if a stay is refused and the respondents
are able to enforce the judgment, it is not (as we understand it) suggested
that there is any risk that the respondents will not repay any sums recovered
in the meantime if the appeal succeeds. On the other hand, if a stay is granted
and the appeal fails, it will certainly be no easier to enforce the judgment
thereafter. Indeed the approach of the appellant on these applications leads
to the conclusion that it will be more difficult.
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| 24. |
In all these
circumstances, on the inadequate evidence of means put before the court, we
can see no proper basis for exercising our discretion to grant a stay. We
return to the appropriate order to make in the context of the appeal as a
whole below.
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Security for Costs
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| 25. |
Under CPR rule
25.15, the court is given jurisdiction to order security for the costs of
an appeal against an appellant on the same grounds as it may order security
for costs against a claimant under Part 25. It follows that the criteria in
rule 25.13 must be satisfied. Thus the court must be satisfied, having regard
to all the circumstances of the case, that it is just to make such an order
(rule 25.13(1)) and if one or more of a number of conditions apply. The relevant
conditions in this case are contained in rules 25.13(2)(b) and (c), namely:
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| "(b) |
The
[appellant] is a company or other incorporated body
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| (i) |
which
is ordinarily resident out of the jurisdiction; and
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is
not a body against whom a claim can be enforced under the Brussels Conventions
or the Lugano Convention.
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| | (c) |
The [appellant] is a company or other body (whether incorporated inside or
outside Great Britain and there is reason to believe that it will be unable
to pay the [respondents'] costs if ordered to do so."
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| 26. |
It is not in
dispute that the court has jurisdiction to make such an order under rules
25.13(2)(b) and 25.15(1). It is also conceded that it is appropriate for the
court to make an order on the facts of this case. It follows that it is not
necessary to consider the principles applicable to security for costs which
are discussed in detail in the unreported decision of this court in Amy Nasser v United Bank of Kuwait[ [2001] EWCA Civ 556]. In the instant case
the only issues between the parties under this head are in what amount security
should be ordered and when.
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| 27. |
In the context
of the above discussion as to whether a stay should be granted, it is of interest
to note that it was not argued on behalf of the appellant that security for
costs should not be ordered on the ground that to do so would stifle the appeal.
That can only have been because it was recognised (in our view correctly)
that the appellant could not satisfy the principles set out in the judgment
of Peter Gibson LJ in Keary Developments Ltd v Tarmac Construction Ltd
[ [1995] 3 All ER 534, 539h to 542g]. We simply note in passing that, in
our judgment, although that case was decided before the advent of the CPR,
the principles in it are relevant to the determination of any case in which
the appellant asserts that an order for security for costs (or an order for
security for costs above a certain amount) will stifle an appeal, or indeed
where it is said that a refusal of a stay of execution will have that effect.
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| 28. |
In this regard
Peter Gibson LJ said at p 540j:
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"However,
the court should consider not only whether the plaintiff company can provide
security out of its own resources to continue the litigation, but also whether
it can raise the amount needed from its directors, shareholders or other backers
or interested persons. As all this is likely to be peculiarly within the knowledge
of the plaintiff company, it is for the plaintiff company to satisfy the court
that it would be prevented by an order for security from continuing the litigation
..."
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As
already indicated, the appellant does not seek to satisfy that burden in order
to resist the respondents' application for security for costs.
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| 29. |
There are, accordingly,
two issues for us to decide, namely: (1) how much? and (2) when? There was
a third question, namely: how? But, as we understand it, the parties are content
that security for costs should be provided by bank guarantee, as was done
in the proceedings below.
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| 30. |
We turn to quantum.
The respondents have estimated their costs at £111,855. This is based on a
schedule prepared by the respondents' solicitors' costs department. This in
turn is based on a five day hearing, with charging rates for partners at £330
per hour, solicitors at £270 and £180 per hour based on seniority and experience,
£195 per hour for the costs manager and £75 per hour for a paralegal. The
brief for leading counsel is put in at £25,000 with four refreshers of £3,000
making £12,000. Junior counsel's fees are half those of leading counsel. The
fees for the preparation of the skeleton argument and respondent's notice
come to £7,000.
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| 31. |
The appellant
argues that this is excessive, and says that a reasonable estimate on the
indemnity basis would be in the order of £60,000 to £65,000. It is, however,
argued that any figure for security should be substantially less than that.
Mr. Fenwick makes a number of points in relation to the respondents' figures.
He says that Mance LJ's estimate when giving permission to appeal was three
to four days and that the costs should be based on a four day hearing, not
five. He argues that any security should take account of the fact that part
of the hearing will be taken up by the respondent's notice, for which security
is not appropriate. He also argues that the charging rates are higher than
can be justified, and points out that the respondents appear to have given
themselves an unwarranted pay rise since the hearing before the judge. Mr.
Cullen counters by arguing that the appellant has calculated its figures on
outdated rates which have been subsequently superseded.
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| 32. |
It does not
seem to us that there is any particular science in the exercise of the court's
discretion in this respect. There are only two certainties. The first is that
neither the respondents' nor the appellant's figures will prove correct and
the second is that the respondents' figure is likely to be too high and the
appellant's figure is likely to be too low. We are, however, of the view that
the case should be assessed on a four day basis and that the rates advanced
are somewhat too high. On the other hand, this is not a case in which the
respondents are cross-appealing and it seems to us that the costs of and incidental
to the respondents' notice should fairly regarded as part of the costs of
the appeal. This is not an exact science and, doing the best we can, we require
the appellant to give security for the respondents' costs of the appeal in
the sum of £85,000.
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| 33. |
There was some
debate as to when the security should be provided. We have reached the conclusion
that the appellants should be permitted a reasonable time in which to do so
and that the security must be provided in the form of a payment into court
or of an irrevocable bank guarantee in a form which is to the reasonable satisfaction
of the respondents' solicitors on or before 1 March 2002, failing which the
appeal to stand struck out without further order of the court. There will
be liberty to apply as to the form of the guarantee if agreement cannot be
reached, but any such application must be heard and determined before 1 March
2002.
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Payment of or Security for the Judgment Debt
|
| 34. |
The respondent
seeks an order that unless the appellant either pays or gives security for
the whole of the judgment debt, including the amounts which the judge ordered
should be paid on account of costs, it should not be permitted to proceed
with the appeal. The appellant argues that such an order is contrary to principle
and misconceived. There is no justification, it says, for linking the appellant's
right to appeal to satisfying the order being appealed against. Mr. Fenwick
submits that it is a fundamental requirement of a fair legal system that a
party should be able to challenge an adverse order, provided the other party
is not unfairly prejudiced. That balance, he says, is achieved by giving a
party a right to appeal if he has a real prospect of success or other compelling
reason to appeal, and the appeal is not otherwise an abuse of the legal process,
while at the same time providing protection for a respondent to any such appeal
by way of the requirement to obtain permission to appeal, an order for security
for costs (where appropriate) and, absent a stay, by the normal processes
of enforcement. If the appellant's application for a stay is unsuccessful,
Mr. Fenwick argues, the appellant is vulnerable to enforcement by the respondents,
but it does not lose its right of appeal. The order sought by the respondents,
he argues, will deprive the appellant of its right to appeal, as it does not
have the funds to satisfy the 12 July 2001 order. Mr. Fenwick submits that
striking the balance between an appellant and a respondent does not require
that the respondent should be given the further protection of making an appellant
first satisfy the order which he wishes to challenge. Still less does it mean,
he argues, that an appellant should be required to seek funds from a third
party to meet the Judgment as the price of appealing.
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| 35. |
In the instant
case, the respondents accept that the order they seek would not be just if
to impose the condition would stifle the appeal. Thus, if the appellant does
not have, and is unable to obtain, sufficient assets to pay the judgment debt
and proceed with the appeal, no such condition should be imposed. However,
if the appellant has and or can obtain sufficient assets to discharge the
judgment debt and proceed with the appeal, Mr Cullen submits that justice
requires that it should be required to pay or secure the judgment debt before
being permitted to proceed.
|
| 36. |
The first logical
question is whether the court has jurisdiction to make the order sought. CPR
rule 52.9 provides:
|
| |
| "(1) |
The appeal court may -
| | |
| (a) |
strike out the whole or any part of an appeal notice;
| | (b) |
set aside permission to appeal in whole or in part;
| | (c) |
impose or vary conditions upon which an appeal may be brought.
|
| | (2) |
The court will only exercise its powers under paragraph (1) where there
is a compelling reason for doing so.
| | (3) |
Where the party was present at the hearing at which permission was given
he may not subsequently apply for an order that the court exercise its powers
under sub-paragraphs (1) (b) or (1) (c)."
|
|
| 37. |
Rule 52.9 must
be considered in the context of rule 52.3, which provides by rule 52.3(1) that permission to appeal is required in a case like this and which expressly
provides by rule 52.3(7) that an order giving permission may be made subject
to conditions. Immediately after paragraph (7) the CPR notes in brackets that
rule 3.1(3) also provides that the court may make an order subject to conditions
and rule 3.1(3) provides:
|
| |
| "(3) |
When the court makes an order, it may –
| | |
| (a) |
make it subject to conditions, including a condition to pay a sum of money
into court; and
| | (b) |
specify the consequence of failure to comply with the order or a condition."
|
|
|
| 38. |
It is important
to note that, contrary to the underlying basis of some of the submissions
advanced by Mr Fenwick, a party who has lost at first instance in a case of
this kind does not now have a right of appeal but must obtain permission.
Moreover, the court has power to grant permission to appeal subject to conditions
and it is plain from rules 52.3(7) and 3.1(3) that the CPR contemplate that
one of those conditions may be that a sum of money is paid into court. It
is thus clear that either the judge or a single lord justice considering whether
to grant permission to appeal has power to give permission subject to the
applicant paying the judgment debt (or part of it) into court.
|
| 39. |
Where, as here,
the judge has refused permission to appeal and permission has been granted
by the single lord justice, as will ordinarily be the case without imposing
conditions, the court has express power under rule 52.9(1)(c) to impose or
vary conditions upon which the appeal may be brought, although by rule 52.9(2) it will only exercise such powers where there is a compelling reason to do
so. We note in passing that the requirement that there must be a "compelling
reason" is curious if it is intended to create a higher threshold than would
have been applicable to the exercise of the discretion of a judge considering
the matter on an application on notice or of a lord justice considering the
matter on an application without notice whether or not to impose a condition.
|
| 40. |
However that
may be, the provisions of CPR 52.9 seem to us to be clear. Rule 52.9(3) does
not apply in this case. Logically there are two questions posed by rule 52.9(1)(c)
and (2). The first is whether there is in the instant case a compelling reason
for making the continued prosecution of the appellant's appeal conditional
upon the payment into court of the judgment debt and costs (or those debts
being secured in some satisfactory way within the United Kingdom) and the
second is whether the court should exercise its discretion to make the order.
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| 41. |
We turn to the
question whether there is a compelling reason for making the appellant either
pay the judgment debt or secure it as a condition of permitting it to proceed
with the appeal. We have reached the conclusion that the answer to that question
is yes. In our judgment, the facts which combine to constitute a compelling
reason are the following:
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| |
| (1) |
The appellant is an entity against whom it will be difficult to exercise
the normal mechanisms of enforcement. It is registered in the British Virgin
Islands and has no assets in the United Kingdom. There is, accordingly, a
very real risk that if the appeal fails, the respondents will be unable to
recover the judgment debts and costs as ordered by Silber J. Given the attitude
of the appellant to date, including that demonstrated on these applications,
it is fanciful to think that the appellant will co-operate in the enforcement
process.
| | |
The appellant plainly either has the resources or has access to resources
which enable it both to instruct solicitors and leading and junior counsel
to prosecute its appeal and make an application to the court for a stay of
execution and to provide a substantial sum by way of security for costs.
| | (3) |
There is no convincing evidence that the appellant does not either have
the resources or have access to resources which would enable it to pay the
judgment debt and costs as ordered. It has failed to do so. It is, accordingly,
in breach of the orders made by Silber J on 12 July 2001.
| | (4) |
The discovery which the appellant has provided of its financial affairs
is inadequate and gives the court no confidence that it has been shown anything
near the truth. Moreover, as stated earlier, it has produced evidence (when
it wanted to) that it was a thriving and profitable institution. It has wealthy
owners and there is no evidence that, if they were minded to do so, they could
not pay the judgment debt including the outstanding orders for costs.
| | (5) |
For
the reasons we have already given we are not persuaded that this appeal will
be stifled if we make the order sought.
| | (6) |
In these circumstances, we find it unacceptable that absent any other
orders of the court the appellant is intending to prosecute the appeal (and
is willing to put up security for costs in order to do so) whilst at the same
time continuing to disobey the orders of the court to pay the judgment debt
and costs, as well as seeking to persuade us that it cannot do so.
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|
| 42. |
In our judgment,
these six factors add up to a compelling reason to make the orders sought
by the respondents. We think there is a real risk that, unless the orders
sought are made, the respondents, if the appeal is dismissed, will be deprived
of the fruits of the judgment, and will only be able to recover whatever sum
is secured by way of costs. In our judgment, on the facts of this case, it
is not just to allow the appellant to proceed with an appeal which is designed
not only to reverse the judge's decision that it is liable to the respondent
but also to obtain judgment on its counterclaim for a very substantial amount,
especially in circumstances in which it appears that it is willing and able
to use resources from others, including perhaps its owners, while being unwilling
to seek and obtain resources to discharge the judgment debt.
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| 43. |
Once it is concluded
that there is a compelling reason to make the order sought, there can really
be no doubt as to how the second question identified above, namely whether
the court should exercise its discretion to make the order, should be answered.
In short, it would be just, and in accordance with the overriding objective
to make the order. We do not think that such a solution is in any way disproportionate.
The appellant has been ordered to pay the judgment debt and costs after a
trial, and should do so as a condition of the court giving it permission to
challenge the order, provided only that it can raise the money. We see nothing
unjust or inconsistent with the overriding objective in requiring such a company
to obey the court's orders as a condition of being permitted to continue to
prosecute its appeal. Thus we see nothing unjust in providing the trust which
owns the appellant with a choice. If it is in the interests of the appellant
for the appeal to continue, the trust must procure the payment of the current
orders. If it does, the appeal will proceed. If it does not, the appeal will
be struck out.
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| 44. |
In these circumstances
we have reached the firm view that the appellant should pay or secure both
the judgment debt including existing orders for costs and the appellant's
costs of the appeal before being allowed to proceed with the appeal. In this
way, if the appeal fails the appellant will have to pay the judgment debt
and the respondents' costs of the appeal, while, if the appeal succeeds it
will recover its costs of the appeal and the amount of any judgment given
on the counterclaim. We would add that, in order that the appellant should
be fully protected in case its appeal succeeds, the reasonable costs of putting
up the security should be treated as the costs of the appeal. We shall therefore
require the respondents to agree that such costs should be so treated as a
condition of making the order sought.
|
| 45. |
We would also
add that the position would be very different if the appellant were able to
produce convincing evidence that the appeal would be stifled if it were required
to take these steps. If it were able to produce evidence of the kind identified
by Peter Gibson LJ in the passage from Keary quoted above, the position
might well be different because it may well be that in that event justice
would require that the appeal be allowed to continue. We should add in this
regard that we are very conscious of the danger that orders such as those
which we propose to make in this case could have the effect of deterring genuine
appellants from prosecuting an appeal. Nothing we have said in this judgment
is intended to have that effect. The key point here is that the evidence put
before the court does not show that these orders will stifle the appeal.
|
| 46. |
We have reached
the above conclusions by applying the CPR to the evidence before us. We are
not aware of any case which requires us to reach any other conclusion. The
only case to which we were referred is an unreported decision of Rix LJ given
on 6 April 2001 in Societe Eram Shipping Co Ltd v Compagnie Internationale de Navigation[ [2001] EWCA Civ 568]. In that case, a judgment
creditor had obtained a garnishee order against a bank, which the judge had
discharged. He gave the judgment creditor permission to appeal, but also made
an immediate costs order summarily assessed against the judgment creditor
for the payment of some £14,000 costs, to be paid in 14 days. When the money
was not paid, the bank applied to the court for security for costs of the
appeal and for a stay of the appeal pending payment of the costs ordered by
the judge. The judgment creditor did not make the payment or offer an explanation
as to why it had not paid. However, it cross-applied for discovery of the
bank's documents in case it might emerge that the bank was entitled to an
indemnity for its costs from its customer, the judgment debtor.
|
| 47. |
Rix LJ made
an order for security for costs, but declined to order a stay of the appeal
pending payment of the costs ordered by the judge. He commented that:
|
| |
| |
"interestingly
enough, no example of a case in which a stay of an appeal has been ordered
for non-payment of costs has been brought to my attention. There is not even
a case in which the matter has been considered, let alone ordered.
|
|
| |
In
the course of an analysis of CPR 52.9, Rix LJ said:
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| |
| |
"the
fact that conditions may only be imposed by an appeal court on appeal when
there is "compelling reason to do so" does again suggest a very cautious approach
to the question of a stay for non-payment. If I had found any encouragement
either in specific provisions of the current rule or in authority for ordering
a stay for non-payment of costs, I can well see that this case might well
be considered to be a suitable case for the exercise of such a discretion.
Not because of any doubt about the legitimacy of the appeal, but because of
the complete absence of any explanation for non-payment and also because there
is still some considerable time until the appeal takes place. It can be said
that if the sanction of stay did not exist, then subject to all the difficulties
of seeking to enforce the order in foreign jurisdictions and I bear in mind
that the jurisdiction with which I am here concerned, Romania, is not one
within the Brussels or European Conventions, then it is not clear to me what
sanction there is to support the very desirable new provisions for summary
assessment and the need for payment of costs.
| | |
I
am not saying there is no jurisdiction to order a stay for mere non-payment
of costs. Nevertheless, I am not sure that I would be able to say that there
was here a compelling reason for making such an order ......
| | |
Ultimately,
in the face of an absence of explanation for the non-payment of costs by the
appellant, I am left with the choice of an inference between "cannot pay"
or "will not pay". I have already given my reasons for preferring the inference
of "cannot pay". If that is the correct inference to make in all the circumstances,
then the inability to pay is not, it seems to me, a proper ground on which
to deprive an appellant who has permission to appeal from pursuing his appeal.
|
|
| 48. |
We note that
Rix LJ expressly recognised the court's jurisdiction to make the order. We
do not disagree with Rix LJ's "cautious" approach to CPR rule 52.9. Nor do
we disagree with the final extract from his judgment set out above, since
each case of course depends upon its own facts. We do, however, take the view
that the new regime of the CPR, with its emphasis on the timely payment of
costs, and the use of costs as a sanction, warrants a robust approach to appellants
who fail to obey orders for the payment of a judgment debt and costs when
they can afford to pay them either themselves or through others.
|
| 49. |
We note that
Rix LJ was not considering a case like this, where the evidence of the appellant's
financial position is far from clear and where it is able to pursue its appeal
with solicitors and counsel and there is no evidence that the appellant could
not raise the money to pay or security the judgment debt, its own costs and
the respondents costs.
|
| |
Conclusion
|
| 50. |
For the reasons
we have given we refuse the appellant's application of a stay of execution,
save on terms that it pays into court or provides security for the judgment
debt, including the orders for costs. We grant the application for security
for costs of the appeal in the sum of £85,000. We further grant the respondents'
application that a term be imposed upon the permission to appeal granted to
the appellant, namely that it only be permitted to appeal if it pays into
court or provides security for the judgment debt (including the orders for
costs) and the above sum in respect of security for the respondents' costs
of the appeal. The security is to be in a form to the reasonable satisfaction
of the respondents' solicitors, failing which there be liberty to apply to
the court, any such application to be heard and determined before 1 March
2002. The reasonable costs of putting up such security are to be costs in
the appeal and the respondents must agree to their being so treated as a condition
of the order. If the appellant fails to pay or provide security for the above
sums on or before 1 March 2002, the appeal is to stand struck out without
further order.
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