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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Societe Eram Shipping Co Ltd v Compagnie Internationale De Navigation & Ors [2001] EWCA Civ 568 (6 April 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/568.html Cite as: [2001] EWCA Civ 568, [2001] CP Rep 113

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
(HON MR JUSTICE TOMLINSON

		Royal Courts of Justice Strand London WC2 Friday, 6th April 2001

1. LORD JUSTICE RIX: There are a number of applications before me in respect of an appeal which is pending to the Court of Appeal from the judgment of Tomlinson J in this case. The judge discharged the garnishee order nisi which had been made in favour of the judgment creditor Societe Eram Shipping Company Limited against the Hong Kong and Shanghai Banking Corporation Limited ("the Bank"). The judge gave permission to appeal to the judgment creditor at the time of handing down his judgment. He also made an immediate cost order summarily assessed against the judgment creditor for payment of some £14,000 costs. That was to be paid in the normal way of such orders within 14 days, that is to say by 6 February of this year.
2. On 16 February there were requests directed to the judgment creditor's solicitors regarding the company's county of incorporation and address, and they went unanswered for a while but were ultimately answered. In the meantime, however, on 26 February the Bank issued two applications, one for security for costs on the appeal and the other for a stay of the appeal pending payment of the costs ordered by the judge. In response to those applications no explanation at all has come for the continuing non-payment by the judgment creditor of costs ordered against it, but instead it issued an application for disclosure of all the Bank's documents in correspondence with or concerning its customer, the judgment debtor, in case it should emerge from such documents that the Bank was entitled to an indemnity for its costs from its customer.
3. I deal first of all with the application for security for costs. Under CPR 25.15 the Court of Appeal may order security for costs of an appeal against an appellant on the same grounds as security for costs may be ordered against a claimant. The relevant provisions are contained in CPR 25.13. The conditions which have to be satisfied are (1) that the Court is satisfied having regard to all the circumstances of the case that it is just to make such an order, and (2) that one or more of the conditions set out in 25.13 (2) apply.
4. The primary such condition relied on by Mr Harrison on behalf of the Bank is that within subparagraph (c), namely that the claimant, here the appellant, is a company or other body whether incorporated inside or outside of Great Britain, and there is reason to believe that it would be unable to pay the respondent's costs if ordered to do so.
5. The appellant in this case is incorporated in Romania. Counsel submits that there is reason to believe that it will be unable to pay the costs on appeal if ordered to do so because it has failed, without any explanation, to pay the costs already ordered against it by the judge. He refers to cases arising out of the insolvency jurisdiction, where it has been said that even "Rich men and rich companies who did not pay their debts have only themselves to blame if it were thought that they could not pay them": see In Re a Company [1950] 94 SJ 369, an approach adopted and applied by Harman J in Cornhill Insurance Plc v Improvement Services Ltd [1986] 1 WLR 114.
6. In the present case, however, it would not be right to talk of rich men or rich companies. Nothing whatsoever is known about the appellant. It has not sought, despite the application made against it, to give any evidence or explanation about its means or about why it is that it is continuing to remain in breach of the Court's order in respect of the payment of costs.
7. At an earlier date it had made a proposal that, despite the order for costs, payment could appropriately, as I think it was put, be deferred until after the appeal had been determined. But that proposal was turned down and the appellant knew that that was the position. I am therefore in the position of having to infer with respect to a company about which I know nothing, certainly not one that could be described as a rich company such as Cornhill Insurance was in the case that I just cited, whether the reason why it has failed to discharge the order of costs made against it is because it cannot pay or will not pay. It seems to me that I have to make one or other inference.
8. In such circumstances I decline to infer that it simply refuses to pay, although able to pay, since it seems to me that it is a matter of commercial good sense, and preferable and kinder and more likely, that it will not pay because it cannot pay. If it cannot pay the £14,000 odd, which has been ordered against it, and that order has now been outstanding against it for some two months, then there is certainly reason to believe, which is the test under the code, that it would be unable to pay the appellant's costs if ordered to do so in the appeal later this year.
9. It also seems to me that in all the circumstances of the case it would be just to make an order for security for costs against the appellant. The appellant has come to this jurisdiction in order to obtain garnishment of the Bank's obligation to the judgment debtor. The appellant has no direct claim against the Bank. The Bank is impleaded merely by way of execution. The appellant has lost the first round of that attempt at garnishment.
10. I say nothing about the prospects for appeal, they have not been debated before me. Permission to appeal has been granted, which may be said to indicate that there is a reasonable prospect on appeal, but the fact remains that the appellant has lost the first ground. It seems to me that in such circumstances where a judgment creditor comes to this jurisdiction seeking execution, and impleads a party against which it has no course of action in itself, fails in that impleading and is ordered to pay costs to that party, then that is a very suitable background for an order in justice to the respondent to make an order for security for costs under the condition contained in subparagraph (c).
11. So far I have said nothing directly regarding the application for disclosure and the submission that the Bank is in any event indemnified for its costs by its customer. I can deal with that very briefly. The Bank has put before the Court sworn testimony that the Bank has no agreement with its customer, express or implied, for an indemnity for its costs, and that it is, and has been, defending the garnishee proceedings as a matter of principle. I have absolutely no reason to doubt that evidence from the Bank. It seems to me that in the light of that evidence, there is no case for disclosure, and, there being no case for disclosure, there is no case for adjourning this application until disclosure is given or for refusing the application to secure costs on the basis that disclosure will not be made. It seems to me therefore that there should be costs in a sum, which I cannot state at the moment but will deal with later. The claim is some £13,000. Nothing has been said to me so far on the subject of quantum.
12. I now turn to Mr Harrison's additional submission that there should be a stay of the appeal in any event until payment of the costs order made by the judge. Mr Harrison submits that the Court of Appeal has power to make such an order either under CPR 3.12(f), which is the general power to stay proceedings, or under its inherent jurisdiction. He has cited a number of cases in which, under the pre-CPR regime and the court's inherent power, the question of a stay of proceedings for non-payment of costs was being considered. In this connection, I have considered Re Wickham (1887) 35 Ch D 272, Graham v Sutton, Carden & Co [1897] 2 Ch 367, Thames Investment and Securities plc v Benjamin [1984] 1 WLR 1381 and Hines v Birkbeck College and Another (No 2) [1992] Ch 33.
13. The effect of such cases is that, whatever might have been the position in earlier days, since at any rate Re Wickham, the failure to pay costs has not been treated as a case of contempt under the guiding principles relating to the question of whether proceedings can be continued in the face of contempt, but rather has been treated on its own as a situation where a stay might be given, but not because of mere non-payment of costs and only where the conduct of the proceedings as a whole have been vexatious.
14. The examples where a stay have been ordered in exercise of that jurisdiction have been cases where either there has been apparent vexation because a case is plainly bad, and that does not apply to this case where a genuine appeal is underway, or cases where duplicate proceedings have been brought after initial proceedings have been stayed or discontinued. That latter class of case is now dealt with specifically in CPR 3.44 and CPR 38.8.
15. Interestingly enough, no example 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. Mr Harrison submits that that reflects the old regime, in which interim or summary assessments of costs were rare or not provided for and where the case of a taxed order for costs which had already come into existence by the time of appeal would be very rare. He contrasts that with the new CPR regime under which a much greater emphasis is placed upon the important sanction of costs and their timely payment, and in that respect he refers to the provisions made in the CPR for summary assessment and almost immediate payment of costs – a "pay as you go" regime, as he puts it.
16. I quite accept the greater emphasis placed on the timely payment of costs and the use of costs as a sanction under the CPR. It seems to me, however, that if, in the absence of vexationness in the proceedings themselves, especially on appeal, were to be impleaded for non-payment of costs, then there would be all the more reason for great contrast to be made between the new regime and the old. One might think, however, that the greater rarity of an outstanding order for payment of costs order the old regime might have been singled out for greater opposition. One might also think, against the background of the rule under the old regime and the absence of any example of an appeal being stayed for non-payment of costs, that if the greater importance and frequency of immediate orders for costs under the new regime were intended to lead to a new approach on the question of the staying of proceedings, then that might have been highlighted in some way. These are considerations which cause me much hesitancy.
17. Mr Hugo Page, on behalf of the appellant, submits that in any event there is no jurisdiction to make such an order by reason of CPR 52.9. That rule provides that the appeal court may impose conditions upon which an appeal may be brought, but it may only do so where there is "a compelling reason" to do so, and that it cannot do so where the respondent on appeal was present at the hearing at which permission was given.
18. I am inclined to think that Mr Harrison is right to submit that that rule applies only where the application for permission to appeal is being dealt with by the appeal court, because of course it is built into the procedure for such applications that they will in the first case be made without notice and may be heard either with or without notice to the respondent. CPR 52.9 as a whole is concerned with the procedure in the "appeal court". It is difficult to see how its provisions would apply to the court whose judgment is under appeal, when that court gives permission to appeal, as in this case, for it is highly likely both that the respondent will be present at such a hearing and that any costs order consequent upon the judgment under appeal will not yet have been the subject of default. I cannot see it likely that it is necessary in every such case for the winning party to ask there and then that permission be given only conditionally on payment of costs ordered, at a time when there is no reason to think that that order will not be properly discharged by payment.
19. Nevertheless, 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, in 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.
20. I am not saying that there is no jurisdiction to order a stay for mere non-payment of outstanding orders for 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, and in any event the reasons which I have already sought to explain I cannot find any encouragement either in specific provisions of the CPR or in previous authority for the rationale of making such an order for a stay one that should be too easily invoked.
21. I conclude this survey of some interesting arguments by putting the matter in this way. Ultimately in the face of an absence of explanation for the non-payment of costs by the appellant, I am left, as I stated before, 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" to that of "will not 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.
22. In any event, I can protect the respondent for the additional costs of the appeal by the order of security for costs of the appeal, which I have already made. For all these reasons the application for security for costs is allowed but the application to stay for non-payment of the judge's costs order is refused, and I also refuse the appellant's application for disclosure.
(Application for security of costs allowed; application to stay for non-payment of judge's costs orders refused; appellant's application for disclosure refused; costs summarily assessed at £4,000)