England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE
(MR JUSTICE BLACKBURNE)

		Royal Courts of Justice Strand London WC2A 2LL Thursday 11 July 2002

1. LORD JUSTICE CHADWICK: This is an application to vary an interlocutory order which I made on 9 May 2002 in a pending appeal from an order made on 19 December 2001 by Blackburne J in proceedings brought by Mr Martin Carr, a solicitor now in practice in New South Wales, against Bower Cotton, a firm of solicitors then in practice in London. In that judgment I set out the circumstances and the reasons which led make that order. This judgment should be read in conjunction with the earlier judgment.
2. It is convenient to rehearse the following matters: (1) the proceedings are brought by Mr Carr to recover the some of US$4 million, said to have been paid away by the defendants without authority; (2) of that sum US$200,000 represents Mr Carr's own monies; the balance of US$3.8 million represents monies which he held for other investors in respect of which he claims as nominee or trustee; (3) Blackburne J dismissed the claim, with costs against Mr Carr; (4) the judge ordered an interim payment in the amount of £250,000 to be made by Mr Carr on account of the costs which he was to pay to the defendants; (5) £90,000 with interest was already in court as security for costs, so the balance of £155,000 was to be paid by 16 January 2002; (6) Mr Carr lodged an appellant's notice on 2 January 2002; (7) no payment of the balance was made by 16 January, or at all; (8) permission to appeal from the order of Blackburne J was granted by this court (Arden LJ) on 8 March 2002.
3. It was in those circumstances that Bower Cotton, as respondents to the pending appeal, applied, by notice of 26 March 2002, for an order under CPR 52.9 that the appellant's notice be struck out unless within 21 days Mr Carr paid, or gave satisfactory security for, the £155,000 payable under Blackburne J's order of 19 December 2001.
4. The basis of that application was that the interim payment order made by Blackburne J was effectively unenforceable; in that Mr Carr has, on his own evidence, no assets here and no assets in Australia. True, Mr Carr could be sued for bankruptcy in New South Wales and the trustee in bankruptcy might be in a position to enforce against the other investors of the benefit of the bankrupt's estate whatever rights of contribution Mr Carr might have against them. The outcome of that course was, at best, speculative. Mr Carr, and those who stood behind him - and for whose benefit those proceedings are brought - should not, it is submitted, be permitted to take advantage of the appeal process if they were unwilling to comply with the orders already made against him. Reliance was placed on the judgments in this court in Hammond Suddard Solicitors v Agrichem International Holdings Limited [2001] EWCA Civ 1905.
5. I took the view on that occasion that it would not be right to make an order for payment of costs which would have the effect of stifling an appeal for which permission had been granted by this court. On the evidence which Mr Carr put before me I was satisfied that he, himself, was not in a position to pay the £155,000 ordered by Blackburne J, or any significant part of that sum out of his own monies. That was not seriously in dispute. I took the view that, in so far as the proceedings were brought for his own benefit, he should be allowed to proceed with the appeal for which he had obtained permission; notwithstanding his failure to comply with the order for interim payment on account of costs already incurred below. Any other order would have been open to the criticism that it was stifling an appeal in respect of which this court had held that there was a real prospect of success by requiring an impecunious appellant to make a payment which he could not fund.
6. However, in my view, it did not follow that Mr Carr should be allowed to proceed with the appeal for the benefit of the other investors. Prima facie, as nominee or trustee, he would have a right to a contribution or indemnity from those for whose benefit those proceedings were brought. If those persons were able, but were not willing, to put Mr Carr in funds to make the interim payment ordered in respect of costs already incurred by the defendants in resisting successfully a claim brought for their benefit, they should be in no better position in relation to this appeal than they would have been if the proceedings had been brought in their own names. I was not satisfied on the evidence that those investors interested in the US$3.8 million were unable to put Mr Carr in funds should they choose to do so.
7. The order which I made on 9 May 2002 was intended to reflect those views. The appeal was to be struck out without further order unless either (a) Mr Carr applied to amend his appellant's notice so as to restrict the relief which he claimed to the US$200,000 in which he was personally interested, expressly abandoning his claim to relief in relation to the other US$3.8 million in respect of which he claims to be trustee; or (b) that he paid or provided security for the £155,000 with interest which he had been ordered to pay on account of the defendants' costs of the trial. I also ordered that he pay the respondent's costs of the application with which I was concerned. Those costs were assessed at £14,000 and were to be paid by 23 May 2002. I am told they have been paid. The £155,000 with interest was to be paid or secured by 21 June 2002, that being the date by which, as I was told by counsel for Mr Carr on that occasion, funds would be available if they could be obtained at all.
8. Events have moved on since 9 May 2002. No payment of £155,000 was made by 21 June and no security for that sum was provided. Instead, following a pattern which has become familiar in this litigation, Mr Carr applied at the last minute, on 21 June, 2002, for an order varying the order which I made on 9 May 2002. It is that application which is now before me. The variation sought is to extend to 12 July 2002 (tomorrow) the time for complying with paragraph 1 of my order of 9 May 2002. If persuaded that there were a real prospect that my order would be complied with if time were extended, I would think it right to accede to that application. The appeal is not to be heard, if at all, until the end of October. I can see no prejudice to the respondents if Mr Carr complies with the order in the next few days, rather than, as he should have done, some three weeks ago.
9. I was also asked to vary the order:

"By permitting the appeal to be advanced so as to claim a sum which is pro rata to the proportion of the sum of £155,000 paid into court or for which security is provided, together with the further sum of $200,000, or a sum which is such sum as the court thinks fit having regard to the amount of the £155,000 which has been paid or secured."

10. If I do not accede to that application, then Mr Carr seeks permission to amend the appellant's notice so as to limit the amount claimed on the appeal to the $200,000 in which he is beneficially interested. That is the application to which I would have thought it right to accede, given the terms of my existing order and the reasons which underlie it.
11. The application is supported by a fourth witness statement signed by Mr Carr on 24 June 2002 - although in the endorsement on the first page it purports to be a statement of 12 June. In paragraph 6 of that witness statement, he states that:

"One great difficulties that I have in raising the money is that each investor believes that he/it should only be liable for a proportion of the costs relative to the amount of his original investment. For obvious reasons each individual set of investors does not expect to have to carry the appeal on behalf of others so that I have not been able to raise all of the funds required from one source. However I believe that it will be possible for me to persuade those investors who can afford to pay the balance of the costs to do so but they will only do so once they are satisfied that other investors whilst fully understanding the seriousness of the position are totally unable to put up their share of the funds. The investors also find it difficult to understand why it should be the case that I am able to appeal in relation to my claim although I am not able to contribute towards the costs but that this principle does not apply to other investors who are also not able to pay so that they need to be subsidised by those who can."

12. Mr Carr then sets out the difficulties which he has experienced with specific individual investors. It is not necessary to refer to that evidence in detail. Mr Carr portrays them as persons who either could not, or would not, make the contribution to his existing liability for costs that he was entitled to expect. He put in evidence a letter which he had written on 21 June 2002 to the solicitor for one of those investors which contains the following passages:

"Whilst the Leave to Appeal Judge discloses excellent prospects for the appeal the orders that the Defendant's costs be paid are characteristically harsh.

Danny may not wish to make the effort to recover his own share of the fund but I cannot allow his failure to pay his share of the costs jeopardise the claims of the rest of the fund members.

Therefore it comes down to this, if Danny does not pay the funds by 12 July 2002 that are required to satisfy the costs order his share of the fund will be forfeited and taken over by those fund members who have satisfied the costs order."

13. That is one solution to the problem. Whether it is open to Mr Carr to forfeit the share of one investor and transfer it to other investors is not a matter with which this court is in a position to decide.
14. In paragraph 8 of his witness statement Mr Carr concludes:

"I currently hold a further £80,000 towards the defendant/respondent's costs. I have also paid the £14,000.00 in respect of the costs of the hearing on 7th May. I ask the court for a further 21 days in order to comply with the orders of 9th May ie until 12 July, by which time I believe I will have been able to collect the full amount owing."

15. That was the position as it appeared to be on the material which had, until today, been put before the Court. But, the position has been brought up to date by a witness statement made today by Mr Carr's English solicitor, Miss Joanna Kennedy, a partner in Collyer Bristow. She says:

"(a) £124,560 is under Mr Carr's control and in my firm's client account and available for immediate transfer if the Court makes an order extending time so that the appeal can go ahead.

(b) As to the balance, $50,000 has been expected to arrive in my firm's client account for a couple of days but it has not yet arrived."

16. She says that that sum, the equivalent to £33,000 or thereabouts, would make up the balance of £155,000 and would cover the interest on that sum from 9 May 2002 at the judgment rate as required by my order of 9 May 2002; and she says that she has received confirmation from the transmitting bank that the money is in course of transmission and can be expected to be in her client's account within two to four days of the date from which it was sent.
17. On the basis of Miss Kennedy's statement, which (as I have said) was received very shortly before this hearing, I accept that there is a real possibility that the full amount of £155,000, with interest, will be paid or secured within the next few days. In those circumstances, I am satisfied that the proper order to make at this stage is to extend time for compliance with my order of 9 May 2002 from 21 June 2002 until the end of next week, 19 July 2002.
18. It was urged upon me by Mr Phillips, on behalf of the respondent, that the effect of my order of 9 May 2002 was that the appeal has already been struck out. So, it is said, I am faced, not with an application to vary the order, but with an application to reinstate an appeal which has been struck out. That, it is said, is an application to which different considerations should apply.
19. I am not persuaded that that is a correct analysis of my order of 9 May 2002. The condition was that the claimant should apply to amend his appeal notice so as to restrict the relief he claims. That is what he did, albeit in the alternative under paragraph (c) of the application notice of 21 June. It is, of course, plain that the applicant wished to keep open his options. He hoped to persuade the court to give him either further time to make the payments that he had to make or to reduce the amount of the payments. If he were not successful in persuading the court to make either of those orders, then he would wish to amend his appeal notice so as to restrict the relief that he claimed. Notwithstanding the applicant's evident desire not to commit himself to an amendment of his appellant's notice unless and until he had exhausted other possible alternatives, I take the view that the condition imposed under my order of 9 May 2002 was satisfied. There was a relevant application just within time; and, accordingly, there was no automatic strike out under that order.
20. In those circumstances, the question is what order should now be made to further the overriding objective under the Civil Procedure Rules. It is accepted that there is no identifiable prejudice in extending time for payment of the £155,000 to the end of next week. It seems to me that, if the respondents have confidence in their opposition to this appeal, they are likely to be considerably better off if I do extend time than if I refuse to do so. Extending the time will at least produce a possibility of £155,000 against which ultimately orders for costs can be enforced. I have in mind that, if Mr Carr proceeds with his appeal only in relation to his $200,000 (as he will, if he has to), the costs of the appeal are unlikely to be reduced by any significant amount from that which they would be if the full $4 million is in play.
21. I am invited by Mr Mann to give conditional permission to amend the appellant's notice. That does not seem to me appropriate at this stage. I am extending the time because I am persuaded that there is a real prospect that £155,000 will be paid within the next few days. Unless some event occurs to frustrate that, there will be no need for an amendment to the appellant's notice. The sensible course, in my view, is to adjourn the application under paragraph (c) in the application notice, with a direction that it can either be withdrawn or pursued on paper in the week beginning 22 July 2002. If the application is to be pursued on paper, it is to be made to me and I shall expect to see cogent reasons to explain why the prospects of payment now put before me have not now been realised. A copy of any such application is to be sent to the respondents. If the payment of £155,000 and interest is made, then the application can simply be withdrawn by notice to the Civil Appeals Office.
22. I should not leave this matter without saying this. In his letter of 21 June 2002, Mr Carr expressed the view to the solicitor acting for one of the investors, from whom he was soliciting funds, that, on giving permission to appeal, this court had indicated a view that there were excellent prospects for the appeal. As might be expected, Arden LJ did no more than use the usual formula, that is to say, that she was satisfied that there was a real prospect of success. In my judgment of 9 May 2002 at paragraph 11, I explained that where permission had been granted on the grounds that an appeal had a real prospect of success, that was not to be taken as an indication that the appeal will, or is likely to, succeed. It is no more than a decision that prospects of success are real, as distinct from fanciful.
23. I can appreciate that to a non-lawyer - or to one unfamiliar with the test applied in t his court when granting permission to appeal - the phrase "real prospect of success" may be thought to offer some encouragement. That is why the court not infrequently uses the formula "real as distinct from fanciful" - which, on the authorities, is the true test. But, it is a matter of concern that these investors may have been encouraged to support the appeal by the provision of further funds which they can ill afford in the belief that this court has expressed a view that the prospects of success are excellent. It is plain that Arden LJ did not express that view. I, myself, have formed no view whatever about the prospects of success. To attempt to do so would be outside the scope of anything I have to consider.
24. Accordingly the order I make is to vary the order of 9 May 2002 by extending the time under paragraph 1 from 4pm on 21 June 2002 to 4pm on 19 July 2002.
Order: Extension of time granted for payment of £155,000 plus interest by 4pm on 19 July 2002. Respondents to pay applicant's costs summarily assessed in the sum of £6,000 to be paid by 31 July 2002. Time for filing respondent's notice extended to 6 September 2002.