British
and Irish Legal Information Institute
Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Sinclair v British Telecommunications Plc (By Original Action) [2000] EWCA Civ 6 (21 January 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/6.html
Cite as: [2001] WLR 38, [2000] EWCA Civ 6, [2001] 1 WLR 38, [2000] 2 All ER 461, [2001] 1 Costs LR 40
[New search] [Printable RTF version] [Buy ICLR report: [2001] 1 WLR 38] [Help]
Case No: QBENI/99/0811/A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
Buckley J.
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday, 21 January 2000
LORD JUSTICE PETER GIBSON
LORD JUSTICE JUDGE
and
MR. JUSTICE FERRIS
JAMES ANTHONY SINCLAIR |
Appellant/Claimant | |
- and - |
||
BRITISH
TELECOMMUNICATIONS PLC |
Respondent/Defendant |
BRITISH TELECOMMUNICATIONS PLC Claimant
- and -
(1) JAMES ANTHONY SINCLAIR |
Defendants |
(3) DIGITSUGE LIMITED
(By Counterclaim)
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Mr. Philip Engleman and Mr. Paul Spencer (instructed by Messrs. Bettesh Fox & Co. of Manchester for the Appellant)
Mr. Malcolm Chapple (instructed by BT Group Legal Services of London for the Respondent)
As Approved by the Court
Crown Copyright ©
Friday, 21 January 2000
MR. JUSTICE FERRIS:
This is an appeal by the plaintiff, James Anthony Sinclair, from an order of Buckley J made on 28th January 1999. By that order Buckley J stayed the plaintiff's action until after the defendant British Telecommunications plc ("BT") had been paid the sum of £3000 which represented the assessed costs ordered to be paid to BT in an earlier action in which the plaintiff was a company named Vox Telecom Limited ("VTL"). If BT had not been paid that sum by 28th April 1999 it was ordered that the action be struck out and that judgment be entered for BT, with consequential provisions in respect of costs.
In order to explain why that order was made and the basis of this appeal it is necessary to set out a considerable amount of background material.
Since about 1985 BT has had in place a facility known as its Callstream Network. This network can be used for what are colloquially known as "Chatlines", which enable a number of telephone callers to hold a conversation together. For some callers this represented a popular service which, with the calls being charged for at premium rates, was highly profitable to the provider of the service. Originally this service was provided only by BT itself, but after the first few years BT began to enter into arrangements with independent service providers under which those service providers organised the service, the revenue for the calls being divided between BT and the relevant service provider.
Between 1989 and February 1991 Mr. Sinclair or one or more entities connected with him (as will appear, the identity of the contracting party is a matter of significance in these proceedings) entered into arrangements with BT under which he or they became the providers of Chatline services. These arrangements were made by means of the submission to BT of a customer order, on a standard printed form, seeking provision of the relevant telephone lines and other facilities. This customer order, when accepted by BT, ripened into a contract. In these proceedings the contracts resulting from four such customer orders are relevant. The numbers and dates of these orders and the date on which the relevant service was to commence were as follows:
Order Number Order date Commencement date
NSS 02269 3rd June 1989 25th October 1989
NSS 02981 6th September 1989 27th April 1990
NSS 03056 15th November 1990 31st January 1991
SOL 00893 20th March 1991 28th March 1991
Unfortunately it is difficult to be certain about much of the contents of each order, largely because the material parts of the printed form have been completed in manuscript and, in the copies before the Court, these parts are largely illegible. There does, however, appear to be no dispute about the particulars given in relation to each contract in an affidavit of Gordon Alexander Peilow sworn on behalf of BT on 10th August 1998. From these particulars it appears that each customer order was signed on behalf of the customer by Mr. Sinclair. The customer and Mr. Sinclair's relationship to it was variously described. Thus in the case of order NSS 03056 the customer was named as "Mr. James Sinclair, Vox Ltd., The Temple, 24 Dale Street, Liverpool 2". Mr. Sinclair described his position in the company as "Secretary". Other orders may have been placed on behalf of entities named "Status Systems" and "Digitsuge Limited".
It seems that there is no company whose name was simply "Vox Ltd.", but VTL, whose full name is, as I mentioned, Vox Telecom Limited was in existence and was, at least at that time, closely connected with Mr. Sinclair. Figures produced by BT show that between June 1990 and February 1992 BT paid very substantial sums to entities connected with Mr. Sinclair whose names are recorded by BT as "Status Systems" "Vox" and "Vox Ltd". It is not known for certain which entity actually received these sums, but the actions of VTL referred to later clearly imply that it was a recipient.
During 1991 or at the beginning of 1992 BT became concerned at the way in which Mr. Sinclair or the entities connected with him were carrying on their Chatline services. On 10th January 1992 BT wrote a letter addressed to "Mr. James Sinclair, Vox/Vox Limited" at The Temple, 24 Dale Street, Liverpool 2 stating that, as a result of inquiries BT had reason to believe that "you have been conducting your business illegally and have not been providing bona fide services". The letter went on to say that
"We have decided to exercise our right under condition 11.5 of our contract with Vox and Vox Ltd, Order Numbers NSS 02981, NSS 03056 and SOL 00893 dated 27/4/90, 31/1/91 and 28/3/91, to suspend payments due."
This letter was replied to by solicitors who expressly identified their client as "Vox Telecom Limited". In subsequent correspondence it was said by the solicitors for VTL that "Vox" and Vox Ltd" were trading names of VTL.
It is said by Mr. Sinclair that at the time when BT suspended payment some £202,000 was due from BT to the entities in question and that BT stopped payment of a cheque for more than £66,000 which had been drawn in favour of "Vox Ltd". The suspension of payment has resulted in much litigation. So far as material to the present proceedings the relevant events can be summarised as follows:
(1) On 29th January 1992 VTL commenced a High Court action against BT ("the 1992 action") claiming an injunction to restrain BT from acting on its decision to suspend payment of sums due to VTL, an account of what was due to VTL and an order for payment.
(2) In its Statement of Claim in the 1992 action VTL did not specify the order number which had given rise to the contract on which it sued, but it referred to an agreement in writing between itself and BT made in or about January 1991. The only one of the four customer orders referred to in BT's letter which matches up with this reference is NSS 03056, which was in respect of a service which was to commence on 31st January 1991.
(3) In an affidavit sworn on 30th January 1992 in support of an application by VTL for an interlocutory injunction Mr. Sinclair said:
"In September 1988, together with my wife and some friends, I set up business operating on the "Callstream" service run by [BT]. The nature of the operation is to provide one to one chat conversations. Subsequently we formed a company, and since 6th January 1991 the business has been owned and run by the Plaintiff ("Vox"). I own a controlling shareholding in Vox, and was appointed a Director on 28th January 1992. I am authorised to make this affidavit on Vox's behalf."
Later in his affidavit Mr. Sinclair referred to the payments received from BT (then 22.5 pence per minute) as being "our only source of revenue" and said that until the suspension of payments by BT Vox's receipts from BT were of the order of between £60,000 and £65,000 per month, its overheads being £50,000 to £55,000 per month.
(4) The application by VTL for an interlocutory injunction was unsuccessful. Thereafter no steps were taken in the 1992 action until it was struck out as hereafter mentioned.
(5) On 5th December 1995 Mr. Sinclair commenced a new High Court action against BT ("the 1995 action"). In this action Mr. Sinclair claimed that he personally was the contracting party in the contracts which resulted from customer orders NSS 02269, NSS 02981, NSS 03056 and SOL 00893 and sued for breach of these contracts. In its defence, in addition to raising other objections, BT disputed this claim.
(6) Subsequently four deeds of assignment were entered into, each of them being dated 20th January 1997. Each deed was in the same form, except for the name of the assignor. In one deed the assignor was named as VTL, in the second as Digitsuge Limited, in the third as Status Properties (1989) Limited and in the fourth as Pullman (1991) Liverpool Limited. By each assignment the assignor was expressed to assign to Mr. Sinclair in consideration of £1 rights which were defined as follows:
"1.4.1 the causes of action disclosed in [the 1995 action]
1.4.2 any and all cause of action against BT arising out of [the contracts arising out of customer orders numbered NSS 02269, NSS 02981, NSS 03056 and SOL 00893]
1.4.3 any and all causes of action arising out of the issue by BT of the Cheque [i.e. the cheque for £66,000 payment of which had been stopped by BT in January 1992]."
(7) On 5th February 1997 Mr. Sinclair commenced a new action against BT ("the 1997 action"). In his Statement of Claim Mr. Sinclair asserted that he is the assignee of the agreements resulting from customer orders NSS 02269, NSS 02981, NSS 03056 and SOL 00893. Clearly the assignments relied upon are those dated 20th January 1997.
(8) On 26th November 1997 the 1995 action was struck out on the application of BT on the ground that Mr. Sinclair could not show that he was the party who had contracted with BT.
(9) In November 1998 BT applied for the 1992 action to be dismissed for want of prosecution, nothing having been done in it since the unsuccessful application for an interlocutory injunction early in 1992. Master Turner made the order sought and ordered VTL to pay BT's costs of the action, which he assessed at £3000. VTL has not satisfied this order for costs.
(10) On 8th January 1999 BT issued a summons in the 1997 action seeking an order staying proceedings in that action until after payment of the £3000 ordered to be paid by VTL in respect of the costs of the 1992 action and striking out the writ and statement of claim in the 1997 action if those costs were not paid within three months. This summons came before Buckley J on 28th January 1999. Buckley J made the order sought. He held that the 1997 action includes at the least the 1992 action, by which I understand him to have meant that even if the 1997 action was partly based on other causes of action it was also, at least in part, based on the same cause of action which VTL had asserted in the 1992 action. He found that the decision of the House of Lords in Norglen Ltd v Reeds Rains Prudential Ltd [1997] 3 WLR 1177 (now reported at [1999] 2AC 1) was not in point. He was not satisfied that the order sought would stifle the action and he found that it was just and proper that such an order should be made.
Mr. Sinclair now appeals against the order made by Buckley J, permission to appeal having been granted by Sedley LJ on 23rd July 1999. Four grounds of appeal are advanced. In the order in which I propose to deal with them (which is not the same as that in which they were argued by Mr. Engleman on behalf of Mr. Sinclair) they are as follows:
(1) BT has not established that the 1997 action is based either wholly or partly on the same cause of action as the 1992 action. Accordingly the unsatisfied costs order in the 1992 action constitutes no bar to the continuation of the 1997 action.
(2) The order made by Buckley J conflicts with the principle established in the Norglen case.
(3) The order should not have been made because neither VTL nor Mr. Sinclair has any assets and it will stifle the 1997 action.
(4) Even if it were right to order Mr. Sinclair to satisfy VTL's liability for the costs of the 1992 action this should have been achieved not by means of an order of the kind made by Buckley J but by an order under which the costs are to be satisfied after judgment in the 1997 action, when they can be met out of the damages which Mr. Sinclair expects to recover.
(1) 1997 action not based on the same cause of action as the 1992 action
Mr. Engleman criticised BT for failing to identify precisely who was the party which made each contract with BT. If criticism be appropriate it should, in my judgment, be directed not against BT but against Mr. Sinclair himself. It is he who is suing on the contracts and it is a normal and elementary requirement that the party suing on a contract must, if there is an issue about it, identify the parties to the contract on which the action is brought. Mr. Sinclair has not done this. His case appears to be based on the propositions that (i) the only relevant contracts are those which resulted from customer orders NSS 02269, NSS 02981, NSS 03056 and SOL 00893; (ii) the only entity which can have placed any of those orders is one of the four entities which has executed an assignment in favour of Mr. Sinclair; and (iii) although Mr. Sinclair cannot identify which entity assigned which contract he must be treated as the assignee of all the contracts by virtue of one or other of the assignments. This is hardly a convincing position, particularly when viewed in conjunction with Mr. Sinclair's conduct in relation to the 1992 and 1995 actions.
In reality, however, there is no doubt that VTL was, in the 1992 action, suing on one of the agreements which Mr. Sinclair seeks to enforce in the 1997 action. It is not suggested that there were any relevant customer orders except the four which I have mentioned. Mr. Sinclair, whose affidavit shows that he must have known precisely what orders VTL had placed, clearly caused VTL to sue on the contract arising from one of these orders. While neither Mr. Sinclair nor VTL specifically identified the order number, the other facts asserted in relation to the contract, notably the date when it is said to have been made, leave one in no doubt that it was the contract arising from order number NSS 03056. Accordingly Mr. Sinclair, in the capacity of assignee of VTL, is now suing on the very same contract which was the basis of the 1992 action.
(2) Buckley J's order is contrary to the principle established in Norglen
Norglen and an earlier Court of Appeal decision in Eurocross Sales Ltd. v Cornhill Insurance Plc [1995] 1 WLR 1517 concern the situation which arises when an individual takes an assignment of a cause of action vested in a company with a view to enforcing that cause of action with the benefit of legal aid, which is available to the individual but not to the company. In order to determine whether, as Mr. Engleman contended, the decisions in those cases preclude the making of the order which Buckley J made in this case it is necessary to consider from a more general point of view what jurisdiction exists to require the costs of a previous unsuccessful action to be paid before new proceedings based on the same cause of action are brought.
An express power to this effect was to be found in RSC Order 21, Rule 5(1), but it is clear from the terms of that rule that it applies only where a new action is commenced after a previous action has been discontinued. But the following statement appears in the note at paragraph 21/5/24 of the Supreme Court Practice 1999:
"Rule 5 ... applies to discontinued actions and counterclaims the principle on which the Court under its inherent jurisdiction stays actions in cases where a previous action brought for substantially the same cause of action has been discontinued or stayed and the plaintiff has not paid to the defendant costs of such previous action ordered to be paid by him."
This principle was applied by Goulding J in Thames Investment & Securities plc v Benjamin [1984] 1 WLR 1381. In that case the defendants had been ordered to pay the plaintiffs costs of two motions, which had been dismissed when the defendants failed to appear to move them. The defendants, who had not yet paid the costs of the dismissed motions (which remained to be taxed) subsequently sought to move two new motions seeking identical relief. The plaintiff objected that the new motions could not be moved until the costs had been paid. The particular problem which arose was how the position should be dealt with when the costs had not been ascertained by taxation, but in dealing with this problem Goulding J began by approaching the matter more generally. He said (at page 1383):
"Quite apart from authority, two propositions would seem to me plain as a general rule. The first is that where an application has been made for particular relief and has been dismissed with costs because of some fault or lack of success on the part of the applicant, then, generally speaking, the applicant ought not to be allowed to apply again for identical or equivalent relief if he is guilty of failure to pay the costs of the previous application."
The second proposition is not relevant here. Goulding J continued:
"The first principle is put by Cave J in a judgment in the Queen's Bench Division in Morton v Palmer (1882) 9 QBD 89, where, after speaking of previous authorities both in the Court of Chancery and the common law courts, Cave J said, at p. 92:
`The principle of the practice in each court was the same, viz. that , if a litigant had brought an action or made a motion against another and had failed, he should not bring a fresh action or renew his motion until he had paid the costs of the previous proceeding'"
These statements clearly demonstrate that the jurisdiction exists. If therefore the 1992 action had been dismissed for want of prosecution in, say, 1995 (as it might well have been if the requisite application had been made) and if VTL had, without assigning the benefit of its contract to Mr. Sinclair, brought the 1997 action in its own name, there would have been jurisdiction to stay the 1997 action until the costs of the 1992 action had been paid.
Eurocross was a case of a different kind. There a company brought an action in the county court to enforce a claim under an insurance policy. It subsequently assigned its cause of action to a director. The district judge refused the director's application to be substituted as plaintiff in the action and ordered the company to give security for costs under section 726 of the Companies Act 1985. On appeal to the county court judge it was ordered that the director be joined as co-plaintiff with the company, but the director was ordered to give the same security as the company had been required to give. The director appealed to this Court against the imposition of this condition. This Court held that
"the judge was entitled to impose appropriate conditions which might in principle have included any term which matched the justice of the case including (if appropriate on the facts) an order that [the director] give security for the Cornhill's costs." (see page 1524 at B)
The issue on the appeal was, therefore, whether in the circumstances of that case it was appropriate to impose a term as to giving security for costs. In deciding that it was not, this Court considered a number of matters, including an argument that the assignment was a device in the sense that it was intended to circumvent a procedural disadvantage to which the company, but not the director, was thought to be subject, namely exposure to a requirement to give security for costs. The Court referred to Advanced Technology Structures Ltd v Cray Valley Products Ltd [1993] BCLC 723, where it had been held that an assignment of the company's cause of action to an employee who was eligible for legal aid was a "sham" (a proposition which was doubted in Eurocross and rejected in Norglen) and said at page 1526 C-D:
"We do not think that [this authority] provides us with any ground for treating the sale in the present case, even if made with a view to avoiding an order for security to which [the company] would have been subject, as a colourable device which the court should or properly could strike down. The rules provide a safeguard against a defined risk: it cannot in our view be legally objectionable to remove the risk so as to remove the need to provide the safeguard."
On behalf of Mr. Sinclair Mr. Engleman attached some importance to the statement in the last sentence. In its context it appears to me to mean no more than that, when the rules provide a safeguard, in the form of a provision for security for costs, for defendants who may be exposed to an action brought by an impecunious company, it cannot be objectionable to bring about a situation in which the action is brought by an individual who does not have the protection of limited liability. In the present case, of course, the giving of security for costs, either by a company or an individual, is not in issue. The principle which enables the court to require the payment of the costs of a previous unsuccessful action is one which applies whether the plaintiff is a company or an individual.
In Norglen the House of Lords was concerned with two separate actions in each of which a company in liquidation had assigned a cause of action to an individual and the assignee sought to pursue the action with the benefit of legal aid. The primary issue for decision was whether an assignment made for these purposes was a sham, as had been held to be the case in Advanced Technology Structures Ltd v Cray Valley Products Ltd. Lord Hoffmann, with whom the rest of their Lordships agreed, held that it did not and that Advanced Technology Structures must be overruled. In particular he said that it was no objection to the validity of the assignment that it deprived the defendant of the right to apply for security for costs under section 726 of the Companies Act 1985.
In the action in which Norglen itself was the original plaintiff the additional question arose whether, the assignment being valid, the court had a discretion to impose, as a condition of giving leave for the assignees to be substituted as plaintiffs, a condition that the assignees give security for costs. On this matter Lord Hoffmann cited the material part of the decision in Eurocross and said that the reasoning in it suggested that it would be wrong to impose such a condition. But he did not make this the ground of his decision to uphold the Court of Appeal's refusal to do so. That part of his decision was made on the basis that the Court of Appeal had been entitled not to impose such a condition in the circumstances of the particular case, even assuming that it had power to do so.
It does not appear to me that any general principle relevant to the present case is to be derived from Norglen. In the present appeal the validity of the assignment from VTL to Mr. Sinclair is not challenged. While Norglen shows that any challenge to it on the basis that it renders section 726 of the Companies Act 1985 inapplicable would have failed, this is of no assistance to Mr. Sinclair. Nearer in point is the Eurocross decision, but that shows only that the mere fact that security could have been ordered against the company under section 726 does not give the court a discretion to order security to be given by an individual against whom there is no independent jurisdiction to order security.
The present case is concerned with a jurisdiction which is quite distinct from that conferred by section 726. It is an inherent jurisdiction which, in essence, enables the court to prevent a plaintiff subjecting a defendant to a second, substantially similar, action without satisfying his obligations in respect of the first action. In my judgment it is a jurisdiction which is fully wide enough to enable the court to make an order against the plaintiff in the second action who is the successor in title of the plaintiff in the first action. To my mind it is as if the cause of action had become impaired by the plaintiff in the first action in so conducting that action as to give rise to the probability that a stay will be granted if a new action is commenced without the costs of the first action being paid. The assignee ought not to be in any better position than the assignor in respect of this impairment.
(3) The order appealed from will stifle the 1997 action
Buckley J rejected this contention on the ground that he was not satisfied that his order would have this effect. In this he was undoubtedly justified, because there was no evidence at all before him as to the means of Mr. Sinclair or VTL. On this appeal Mr. Sinclair has sought to remedy this position by placing before us an affidavit in which he says that he is unemployed, has no income except his unemployment benefit of £123 per week and has no assets or expectations.
I am prepared to assume that in this case the Court ought to approach the matter on the same basis as it would approach an application for security for costs. I would add, however, that I have some reservations about this. In the ordinary case of an application for security the plaintiff is making his first attempt to enforce his cause of action. In the present case the action represents the second such attempt and Mr. Sinclair is unable to distance himself from the conduct of VTL which led to the first action being struck out and the order for costs being made. Moreover the court is concerned with a present liability to satisfy a judgment debt, not with a mere possibility that an adverse order for costs will be made at a future date. But the effect, if any, of these considerations was not argued before us.
I would, however, take the same view as the Judge, notwithstanding the additional material which is before us. Mr. Sinclair's affidavit consists of a series of bald assertions. He does not deal at all with a number of matters which it would be relevant to take into account in considering the argument advanced on his behalf. In particular he says nothing about the possibility of obtaining support from third parties. Nor does he give any explanation of what interest he had in the various entities which carried on the Chatline activities or what has happened to the very considerable sums which were paid to those entities by BT. This is, in my judgment, wholly inadequate to sustain a plea that the court should not make the order that it would otherwise be minded to make because to do so will stifle an otherwise well-founded action.
(4) Any order in favour of BT should do no more than require Mr. Sinclair to satisfy VTL's liability for costs after judgment in this action.
As the jurisdiction invoked by BT is discretionary it would, I think, be within the scope of the discretion to postpone liability in this way. But it seems to me that to do this would seldom, if ever, constitute a proper exercise of the discretion. It would remove altogether the disciplinary impact of the jurisdiction and would be likely to leave BT unsatisfied in respect of the costs awarded to it unless it loses the new action. It would certainly not be an appropriate order to make in this case.
I therefore reject all the grounds of appeal advanced in this case. I would dismiss this appeal.
LORD JUSTICE JUDGE:
When making the order now under appeal, Buckley J said:
"The present 1997 action at the very least includes the 1992 action .... The submission ..... is simply that Mr Sinclair and Vox Telecom are, in all the particular circumstances of this case, to be regarded as one and the same for the purposes of triggering the court's discretion to order the costs of that first action to be paid before the 1997 action is pursued any further."
The judge concluded that Mr Sinclair's action, as assignee, was in truth "the same cause of action" as that originally brought in 1992 by Vox, "a company over he himself has asserted he had control as controlling shareholder". Therefore it seemed "just and proper" to order that the costs of the 1992 action should be paid.
Mr Phillip Engleman's main submission before the judge, renewed on appeal, was that the order sought, and made, contravened the principle established in Norglen Limited (in liquidation) v Reeds Rains Prudential Limited & Ors [1997]3 WLR 1177. Buckley J swept aside the argument, saying simply that he did not think that "Norglen was in point".
To some extent the factual similarities between Norglen and those in the present case are obvious. In Norglen an order was made under s726 of the Companies Act 1985 ordering the plaintiff company to pay security for costs of an action for damages. The company was wound up. The liquidator assigned the cause of action, and the right to pursue it, to one of the directors, who owned 98% of the shares. He was granted legal aid to apply to be substituted as plaintiff instead of the company, and, if successful, to pursue the action. The Court of Appeal set aside the order for security made by the judge, a conclusion upheld in the House of Lords.
Norglen decided that the assignment was not rendered invalid by the fact that the company - not otherwise eligible for legal aid - would benefit directly from the legal aid granted to the company director personally, nor by the fact that the defendants were deprived of their right to apply for security for costs under s726 of the 1985 Act.
"For better or worse, the law entitles a defendant to be protected against incurring irrecoverable costs in litigation brought against him by an impecunious company but not by an impecunious individual. But that cannot prevent companies from assigning property to individuals."
(Per Lord Hoffmann, at p1189)
Although the House of Lords considered it was in the end unnecessary for a final view to be expressed on the correctness of the decision in Eurocross Sales Limited v Cornhill Insurance Plc [1995] 1 WLR 1517, but no reason was given to doubt it, and it remains binding on us. In Eurocross the facts were not dissimilar to the present case. After beginning an action the plaintiff company sold its assets to its major shareholder and director. An order for security for costs was made against the company. The director applied to be substituted for the company as plaintiff. In due course he was added as a co-plaintiff, conditional on paying £5,000 into court, that is "on terms similar to those of the order for the security of costs against the plaintiff company". The Court of Appeal set aside the order.
Sir Thomas Bingham MR explained that had the director
"in order to pay, and give security for, the costs occasioned by or thrown away as a result of his joinder, there could in our judgment be no sustainable objection to the order. But we can find no justification for the order in fact made."
In Norglen Lord Hoffmann affirmed the existence of a discretion to impose appropriate conditions to prevent the defendants from being put in a worse position as to costs than they would have been "if the new party had been in the action from the beginning". In such circumstances, he said, the plaintiffs
"may be ordered to pay or give security for additional costs caused by or thrown away as a result of the joinder."
This power did not however authorise an extended order for security for costs against an individual party merely because the defendants were put "at a greater risk as to costs than they would have been if no joinder had taken place".
I agree with Buckley J that neither of these authorities answers the question whether he was entitled, as a matter of discretion, to make the order that he did, not to provide BT with security against costs which they would or might incur when defending the current proceedings, but to enable effect to be given to an existing order for costs before yet further expense was incurred defending a third set of proceedings, which repeated issues which had already been raised, and failed, no less than twice before.
Accordingly the Norglen submission fails. The question which remains is whether the court was entitled to make the order at all. This jurisdiction issue was not directly addressed before Buckley J. It seems to have been assumed that if the judge was not persuaded that the Norglen principle precluded him from making the order, then, as a matter of discretion, he was entitled to impose the condition he did.
Mr Malcolm Chapple was unable to draw our attention to any express provision in the Rules of the Supreme Court, or indeed in the current Civil Procedure Rules, which unequivocally and directly demonstrated the existence of this power. In the end his argument was that the order could properly be made under the inherent jurisdiction of the court. When extensive and detailed provision is made for the conduct of civil litigation, and no express power can be found to sustain a particular course of action, an appeal to the court's inherent jurisdiction may sometimes, but not always, underline that, in truth, the jurisdiction does not exist at all.
Approaching the problem with an appropriate degree of caution, the starting point in this case is the well established principle that
"if a litigant had brought an action or made a motion against another and had failed, he should not bring a fresh action or renew his motion until he had paid the costs of the previous proceeding."
(Morton v Palmer [1882] 9 QBD 89)
Subject to ascertaining the figure for such costs, the same principle was more recently applied in Thames Investment & Securities Plc v Benjamin [1984] 1 WLR 1381, when Goulding J regarded as plain the proposition that
"where an application has been made for particular relief and has been dismissed with costs because of some fault or lack of success on the part of the applicant, then, generally speaking, the applicant ought not to be allowed to apply again for identical or equivalent relief if he is guilty of failure to pay the costs of the previous application."
Examples of the operation of these principles spring readily to mind. Where, exceptionally, before the expiry of the limitation period an action is struck out for want of prosecution, with costs, the costs should be paid before the fresh proceedings start, save perhaps when the limitation period is about to expire and a protective writ is urgently needed. A similar approach may be detected when the late joinder of a party involves the other party in consequential additional expense. As Lord Hoffmann observed in Norglen, an order for costs will normally be made for the additional or wasted costs to be paid, and although he did not expressly say so, there is no doubt that they may be and usually are ordered to be paid forthwith. The same principle applies in relation to amendments.
The question here is whether the power to make the order for costs was extinguished because Mr Sinclair chose to take a third, but separate set of proceedings, as assignee, so that he was not added, joined, or substituted as a party to either of the actions already in existence when the third set of proceedings was begun. In relation to the 1992 proceedings in particular, although the company was the plaintiff, he was, even at that time, the controlling shareholder and a director of the company and in effect the person responsible for the decision to begin and conduct the litigation.
Whether these events occurred by accident or design, the effect was to circumvent the ordinary principles in relation to costs which govern the conduct of second or further proceedings arising out of the same issues, or those which govern the joinder or addition of parties, and to impose an unfair and disproportionate burden on BT. The 1997 proceedings therefore involved a clear misuse of process. Part of the court's inherent jurisdiction is to ensure that its process is not so misused, and, if it is, that no corresponding benefit should be enjoyed by the party responsible and no disadvantage suffered by the innocent litigant. BT has successfully defeated two separate claims arising out of the contracts NSS02981, NSS03056 and SOL00893. The costs of one set of proceedings are irrecoverable because the plaintiff was legally aided. An order to recover the costs of the other set has been made, and the costs assessed. Buckley J was entitled to exercise the inherent jurisdiction of the court to prevent this particular misuse of process, without taking the additional and disproportionate step of striking out the 1997 proceedings in their entirety. In short, his order put both parties to the litigation in the position in which each would have been if the process had been properly used. If I may say so, it was an eminently sensible decision.
Mr Engleman sought to argue that the judge should not have exercised his discretion as he did. Mr Sinclair was legally aided with a nil contribution, and the judge failed to consider that the consequence of his order would be that the proceedings would be stifled. There was no evidence to this effect before the judge, and the fresh evidence put before us does not lead me to that conclusion. The affidavit in support is notable for its brevity. There is no suggestion that Mr Sinclair has sought to find or borrow £3,000, nor any explanation of how he has come to dispose of the £100,000, or so, in Vox's bank account at the beginning of the 1992 proceedings, nor indeed of the vast figures paid by BT in the years before 1992. In circumstances like the present the conclusion that the action will be stifled for the lack of or inability to raise £3,000 requires more compelling evidence than that provided by the affidavit put before us, or the metaphorical waving of a legal aid certificate with a nil contribution.
This order reflected the exercise of Buckley J's discretion, and no basis for interfering with it has been shown. For these reasons, as well as those set out by Ferris J after his detailed analysis of the material facts, I agree that this appeal should be dismissed.
LORD JUSTICE PETER GIBSON:
I agree with both judgments.
Order: Appeal dismissed. Section 18 order as to costs. Leave to appeal refused. Legal aid taxation.