England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR SECURITY FOR COSTS

		Royal Courts of Justice Strand London WC2 Wednesday, 7th March 2001

1. LORD JUSTICE BROOKE: There is an appeal pending in this court by the claimants, White Sea & Onega Shipping Co, against an order of Mr Justice Tomlinson in the Commercial Court on 19th December 2000 when he dismissed their application for an interim injunction against the International Transport Workers Federation in relation to the Federation's alleged unlawful activities in Denmark.
2. The judge considered that the crucial matter was that this was not an appropriate case for an English court to grant leave in relation to a dispute with exclusively Danish features. The Federation had undertaken to submit to the judgment of the Danish court. He went on to say that if there had not been special features in the case the balance of convenience was overwhelmingly in favour of granting an injunction. He granted permission to appeal and made an order for an interim payment of costs to the Federation of £15,000 which was duly paid on 15th June 2001. The case is still in being and there is application pending (with which I am not concerned) for security for costs in the main action. What I am concerned with is the application for security for costs for the appeal.
3. The notice of appeal was lodged on 2nd January 2001. I understand that the appeal is destined for hearing towards the end of this month. On 7th February 2001 the respondent wrote a letter asking for security for costs. On 23rd February they received a reply not responding favourably to the request; hence this application. The first two issues I have to determine on this application relate to jurisdiction and discretion respectively. I have not at the moment heard any submissions as to quantum, supposing that the applicant surmounts the first two hurdles.
4. The claimant company is a limited company incorporated in the Russian Federation. It is based in Russia, it is operated from Russia and it has its head office in Russia. On the evidence before me, it has 63 ocean going vessels that call regularly to ports in the United Kingdom and the European Union. They are described as coastal traders. They are prevented by their rules of classification (produced by their classification society) from trading further afield than the Baltic, Europe, the Mediterranean and Black Sea ports. I am told that none of these 63 vessels are mortgaged and that they fall into 9 different types. In paragraph 5 of the second witness statement of Mr Sleightholme the claimant's solicitor, the approximate market values of these vessels are set out, the lowest of which is $US300,000 and the top of the bracket is $US3,200,000. There is a 20-year old vessel called The Baltiyskiy which has a value of between $US550,000 and $US600,000. Mr Sleightholme describes how in the year 1999-2000 there were 900 visits by White Sea vessels to countries that were signatories to the Brussels and/or Lugano Conventions. He said that this reflects the typical trading pattern of the fleet over many yeras and the vessels spend 2 or 3 weather working days in a port. He has exhibited to his written statement a schedule which sets out the ports in the United Kingdom which his client's vessels have entered, 66 of them in the year 2000. He tells me that:

" ..... at any one time, taking the number of visits over the last 3 years, it is likely that between about 6 and 9 of White Sea's vessels are physically present in a port of a country which is a signatory to the Brussels or Lugano Conventions. Moreover, the whereabouts of vessels can easily be established if necessary by means of a tracking service, such as SeaData, provided by Lloyd's Maritime Information Services."

5. That witness statement was served - if that is the right word to describe what happens at 6.30 on a Friday night - on the defendant's solicitors at that time. Mr Chambers accepts that they received it first thing on Monday morning. They had 48 hours to respond to this assertion and they did not do so.
6. For the purposes of this application I am bound to accept the truth of what Mr Sleightholme says about the ease of identifying the whereabouts of White Sea's vessels.
7. The first point that Mr Lord takes is that I have no jurisdiction to order security on the proper construction of the Civil Procedure Rules Part 25-13. This provides:

"(1) The court may make an order for security for costs under rule 25.12 if -

(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and

(b) (i) one or more of the conditions in paragraph (2) applies, or

(ii) an enactment permits the court to require security for costs."

8. As far as is relevant sub-rule (2) provides:

"(2) The conditions are -

.....

(b) the claimant is a company or other incorporated body -

(i) which is ordinarily resident out of the jurisdiction; and

(ii) is not a body against whom a claim can be enforced under the Brussels Conventions or the Lugano Convention."

9. In my judgment in Thurrock Borough Council v Secretary of State for the Environment, I explained that one of the great merits of the Civil Procedure Rules is that they set out in clear transparent form certain rules, whether rules as to amendment as in that case or as to security for costs as in this case, which are common throughout the courts in which the Civil Procedure Rules come to apply even though there may be special provisions in relation to an application by an individual for security for costs in the Court of Appeal.
10. Mr Lord submits that his clients are persons against whom a claim can be enforced against the Brussels Convention or the Lugano Convention. He submits that at any given time the odds are that there will be a vessel owned by his clients within the jurisdiction of one or other of the Brussels Convention or Lugano Convention countries. He has adduced evidence from lawyers in 3 of those countries which refer to the ease with which an order of an English court can be enforced in those countries under the Convention. I have been reminded of the judgment of Lord Donaldson MR in De Bry v Fitzgerald and Another [1991] WLR 552, 558 E where he castigated a circuit judge for falling into the error of "failing to appreciate that the enforcement of an English judgment within the EEC is prima facie relatively cheap and effective".
11. When I asked Mr Lord at what time I should determine whether his client was a person against whom a claim can be enforced under the two conventions, he said, in effect, "now, when the application for security for costs is made." I asked him how I could be satisfied that now, today, there were any of his clients' vessels in Convention ports. He said he could not say whether there were any vessels of his clients in Convention ports although he suggested, on the balance of probabilities, that it was likely that there would be one. Even if there was one there now, it might have left that port by the time an order - even if it were to be made now - could be realistically enforced. Mr Chambers showed me the practical problems which might be encountered if a court, on an application like this, entered into a game of hunt the assets, with the burden of proof lying on the applicant for security to satisfy the court that the claimant was not a person against whom a claim could be enforced in relation to the Conventions.
12. Although it would be wrong to interpret the new rules simply as altering some of the inconveniences of the old rules - the Civil Procedure Rules are a brand new code - in my judgment, there is a good deal of force in Mr Chambers' submission that the wording of the new rule was introduced in order to abolish the objection or discriminatory effect of the language of the old rule as set out in judgments of Lord Bingham CJ in Chequepoint SARL v McClelland [1997] QB 51 at 59 to 60 following, as they did, his earlier judgment in Fitzgerald v Williams [1996] QB 657 at 674-675.
13. In my judgment, as a matter of the interpretation of the rule, Mr Chambers' approach to interpretation should be preferred. He has reminded me that the old security for costs provision under RSC Ord.23, although not unlawful, was held to be discriminatory under Article 6 of the European treaty if applied to nationals and residents of other Convention countries. Against this background I would interpret the rule as being confined to persons who are nationals of or residents of other Convention countries. This decision goes to jurisdiction, and there may be, when it comes to the exercise of discretion, formidable reasons for declining to order security if, on the facts before the court in any particular case, it is not just to make an order. I have been shown a transcript of an unreported judgment of Mr Justice Lightman in Leyvand v Barasch and Others (15th February 2000) in which he says at paragraph 6:

"Security cannot now be ordered as a matter of course from a foreign claimant; to avoid the making of such an order he does not have the burden of establishing the ownership of fixed and permanent property here or indeed any property at all; the simple and single criterion for ordering security is what is just in the circumstances of the particular case. The authorities relied on by the Defendants are not longer of any relevance or assistance: they are a distraction and should no longer be cited. The common sense principle applies that the existence of assets within the jurisdiction, their fixity and permanence, are among a number of potentially relevant factors, their importance depending on the particular facts of the case."

14. When it comes to the exercise of my discretion I have to be satisfied, having regard to all the circumstances in the case, that it is just to make such an order. The other condition CPR 25.13 (1) is satisfied, given that the condition in CPR 25.13 (2) (b) is satisfied.
15. When it comes to the exercise of discretion, bearing in mind the undisputed evidence of Mr Sleightholme, it appears to me that it would not be just to make an order against a foreign company whose ships come so regularly not only to the ports of this country but also to the ports of Convention countries. Mr Lord has reminded me of the ease with which a judgment of this court can be executed by fi. fa. if a vessel owned by the defendant comes to this country. I have evidence from lawyers of 3 other jurisdictions giving similar evidence in relation to the practice in their jurisdictions. I make it clear that I am strongly influenced in exercising my discretion in this way by what Mr Sleightholme tells me about the ease of tracking the whereabouts of vessels in paragraph 8 of his witness statement. If, on the facts of any similar application, evidence of that kind were in dispute it might be that a court might reach a different conclusion. Given the scale on which the claimant's ships visit ports of Convention countries, the assertion (which was not disputed) that all of them are free of mortgage and bearing in mind the likely size of any costs award as against the value asserted for these ships, in my judgment, this is not a case where it would be appropriate to order security.
Order: Application allowed (Order does not form part of approved Judgment)