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 Tuesday, 5th June 2001

1. LORD JUSTICE ROBERT WALKER: This is an application for security for costs of an appeal. The application is made under rules 25.12, 13 and 15 of the Civil Procedure Rules. The appeal is due to be heard in November 2001. It is an appeal with the permission of Lord Justice Kay from an order of Mr Justice Blofeld made in the Queen's Bench Division on 23rd February 2001. Mr Justice Blofeld refused permission to the claimants to make extensive amendments to their particulars of claim in an action started as long ago as 1995.
2. The claimants and appellants in this court are Zappia Middle East Construction Co Ltd ("the Construction Company") and Mr Joseph Zappia. The Construction Company is incorporated in the British Virgin Islands and has an issued and paid up capital of $US2. Mr Zappia's ordinary residence is in dispute. The defendants and respondents to the main appeal are Clifford Chance, the well-known London solicitors.
3. The claim against Clifford Chance is for breach of professional duty. Clifford Chance have accepted that they are under some liability (in consequence, on their case, of an inadvertent failure to note a conflict of interest which led to their having to terminate a retainer by one or both of the claimants). It is no secret that Clifford Chance have paid into court £125,000 in satisfaction - if it were to be accepted - of the claim. Clifford Chance say the claim is greatly exaggerated, and that it would have become still more exaggerated and involved unjustifiable accusations of serious breaches of professional duty had Mr Justice Blofeld allowed the proposed amendments. All that is for the future.
4. After the action was commenced in 1995, and after pleadings had been exchanged, very little happened for several years. In 2000 (apparently under the spur of the new Civil Procedure Rules) there was a flurry of activity and various interlocutory hearings which resulted in some costs orders (payable in any event) against the claimants. I should also mention that at an early stage, in 1995, there was an unsuccessful strike out application by Clifford Chance which failed and resulted in an order for indemnity costs against that firm.
5. There is a good deal of material in the witness statements and skeleton arguments going to the merits of the action. Such material is seldom helpful and hardly ever decisive on an application for security for costs unless it makes out an exceptionally strong case that a meritorious claim is likely to be stifled if security for costs is ordered. Although Mr Sarosh Zaiwalla (in his fifth witness statement made on 25th May 2001)) contends that the application is "oppressive", Mr Edward Colquhoun (an associate solicitor with Mr Zaiwalla's firm) says in his witness statement made on 24th May 2001 that the claimants do have assets and both sides have accepted that the application should be dealt with on that basis. Mr Hossain QC, appearing for the claimants, has explained that it is not contended that the claim would be stifled, and that the oppression alleged lies in the size of the legal bills which have been run up on various interlocutory applications.
6. Although it is common ground that I should approach the application on the basis that the claimants do have assets, no detail of those assets has been supplied apart from a reference to Mr Zaiwalla's fourth witness statement made on 11th April 2001 to ownership of real estate in Canada.
7. By rule 25.13 (1) and (2) (a) as applied by paragraph 15 there is a discretion to order security for costs against Mr Zappia if he is an individual -

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

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

8. It is common ground that there is discretion to make an order against the Construction Company under paragraph 13 (2) (b). It is common ground that paragraph 13 (2) (c) is not relied on. Paragraph 13 (2) (g) is formally relied on though it seems to me that the evidence is insufficient for the application to be decided on that ground alone.
9. It is also common ground that Mr Zappia is ordinarily resident out of the United Kingdom: the question is whether he is a person against whom a claim can be enforced under the Brussels Convention.
10. This provision of the Civil Procedure Rules is not entirely clear, but it is to be noted that paragraph 13 (2) (a) (ii) says "claim", not "judgment". Mr Philip Jones (appearing for Clifford Chance) has realistically accepted that the purpose of this provision is to avoid the potential breach of the Treaty of Rome identified by this court in Fitzgerald v Williams [1996] QB 658. The essential question is therefore not whether Mr Zappia has assets in Italy, but whether he is domiciled there for the purpose of the Brussels Convention, which means (see Article 52 of the Convention)domiciled according to rules of Italian law. Unsurprisingly, there is no evidence of Italian law before me. Mr Jones submits that I should obtain guidance from Section 41 (2) of the Civil Jurisdiction and Judgments Act 1982 which, in effect, defines "domiciled in the United Kingdom" for these purposes in a way familiar in continental jurisdictions.
11. The evidence on this point is less than wholly satisfactory especially as it has for some weeks (if not months) been predictable that it was a point of potential importance. When Mr Zappia issued his writ in 1995 he gave his address as Via Bruxelles 4, Rome. But in his first and second witness statements (made on 23rd January 2001 and 7th February 2001) he gave his address as 1979 Cardinal Street, Montreal, Quebec "and presently in Rome". Mr Zaiwalla said in his third witness statement (made on 11th December 2000) that Mr Zappia "is a resident of Canada". Mr Zaiwalla's firm had in a letter dated 10th October 2000 described Mr Zappia as active in Canadian public life and had provided some supporting detail of that. Moreover, I am told that Mr Zappia has in a new claim form issued in February 2001 given an address in Canada.
12. However, in Mr Colquhoun's witness statement made about ten days ago there is a brief paragraph without further explanation:

"Mr Zappia informs me and I believe that he is an Italian citizen, domiciled in Italy, a convention country. This should have been well known to Mr Robin Neil, the partner of the Defendants at the material time."

13. I interpose that, as I understand it, that refers to a time about six years ago.

"Mr Zappia further informs me and I believe that he is ordinarily resident in Rome, Italy."

14. In his most recent fifth witness statement Mr Zaiwalla said:

"Mr Zappia has also asked me to confirm to this Honourable Court that he holds Italian nationality and has a home in Rome ..... although he also has a residence in Canada. He has asked me to point out that he had recently unsuccessfully contested for the Italian Senate election as a national of Italy."

15. The words "has a home in Rome" are repeated in brackets in the signed witness statement suggesting some possible unexplained drafting error.
16. That is the state of the written evidence. I must resolve the conflict as best I can in a summary way. Down to a fortnight ago all the evidence, including that of Mr Zappia, pointed to his being ordinarily resident and therefore domiciled in the continental sense in the Province of Quebec. If that was wrong it was, it seems to me, for Mr Zappia to put in further evidence of his own with adequate explanations and supporting detail, including the address of any residence which he claims to have in Rome and an account of how much time he spends there. I am not prepared to accept that the unparticularised and secondhand evidence which has been put in at the last moment by his solicitors should be treated as sufficient to change the whole picture. In saying that I am not casting the slightest doubt on Mr Zappia's solicitor's account of the instructions which Mr Zappia has given to them but I have to judge the evidence and weigh it up as best I can.
17. I am satisfied that there is a jurisdictional basis giving me discretion to make an order for security for costs against both appellants if it is proper to do so. I am not bound to make an order but I am by no means satisfied that this application is oppressive and it is not suggested that it would stifle a meritorious claim. Mr Jones has referred me to the recent decision of this court in Nasser v United Bank of Kuwait decided on 11th April 2001. That decision show that any order for security for costs must be objectively justified and must not be discriminatory even in a case of a claimant resident outside the areas covered by the Brussels Convention and the Lugano Convention. That decision appears to me to reflect not only the new Civil Procedure Rules but also the attitude of the European Court of Human Rights, as indicated in Count Tolstoy v United Kingdom (1995) 20 EHHR 442.
18. I am prepared to accept for present purposes that the claim, although described Clifford Chance as "greatly exaggerated", is one made in good faith. However, the appellant's own evidence is that there are resources available for security if necessary. On the other hand, those resources may not be easy to track down for enforcement purposes. Indeed, all the evidence placed before me shows that Mr Zappia operates through a British Virgin Islands company whose two issued shares are held by companies which may well be trust companies and the underlying structure is wholly unexplained. Furthermore, no particulars are given of Mr Zappia's own wealth or of the resouces of the Construction Company apart from the reference which I have already mentioned to real estate in Canada.
19. I am not impressed by argument that the respondents already have de facto security, either because of the sum paid into court (which is after all, if the claim fails, the solicitors' own money) or by the costs orders that have been made. In my view this is a case where in all the circumstances it is right to order some freestanding security for costs of the appeal.
20. I see some force in the appellant's submission that costs are being run up in this case on a grand scale. The fact that that process seems to be occurring on both sides is not to my mind a reason for encouraging it. Almost £84,000 is sought for the costs of the appeal, even if it is of three days' duration, that seems to me a very large sum, at least in the context of security for costs.
21. I propose to order security for costs in the sum of £50,000 to be provided within 28 days. The appeal will be stayed in the meantime and automatically dismissed if security is not provided within 28 days.
Order: Application allowed with a detailed assessment of costs. POST JUDGMENT DISCUSSION

1. MR HOSSAIN: Your Lordship has said 28 days. We have put in our evidence and skeleton argument - there might be a difficulty. We would ask for 42 days.

2. LORD JUSTICE ROBERT WALKER: You have known that this was coming for some time, or your clients have known.

3. MR HOSSAIN: I accept that.

4. LORD JUSTICE ROBERT WALKER: No; 28 days is the usual, and it is that.

5. MR JONES: I ask for the costs of the application. The grounds of opposition were, with respect, hopeless.

6. LORD JUSTICE ROBERT WALKER: I have looked at your summary of costs and I look at the time, and I guess if you get your costs the assessment of them may take some time.

7. MR JONES: They are, on their face, large.

8. LORD JUSTICE ROBERT WALKER: Do you resist costs?

9. MR HOSSAIN: I do not think I can.

10. LORD JUSTICE ROBERT WALKER: That is very realistic. What about quantum?

11. MR HOSSAIN: I have not seen the schedule.

12. MR JONES: May I say as to detailed assessment, the time for detailed assessment to take place is to be determined at the end of the appeal. It will be for the court to determine then when the detailed assessment takes place.

13. LORD JUSTICE ROBERT WALKER: I am inclined to order a detailed assessment because your bill is quite big and I think there could be quite a lot of argument about it. Would you oppose detailed assessment after the main appeal?

14. MR HOSSAIN: No.

15. LORD JUSTICE ROBERT WALKER: That is the order I make. Thank you both very much for your help.