England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Moore-Bick)

		Royal Courts of Justice Strand London WC2 Wednesday, 31st July 2002

1. LORD JUSTICE TUCKEY: This is an application by Glencore for security for costs of the cross-appeal of Metro Trading International Inc ("MTI"). It is unopposed today.
2. Glencore's appeal and MTI's cross-appeal are from judgments of Mr Justice Moore-Bick in this complex litigation. The litigation results from the misappropriation by MTI of large quantities of oil stored by it to the order of various oil claimants, chiefly Glencore, in floating storage off Fujairah. In February 1998 it was discovered that there was a very substantial shortfall between the oil which should have been stored to Glencore's order and the oil that was still remaining, which was itself the subject of competing claims from other oil claimants. MTI soon collapsed.
3. The ensuing litigation (which I think started by an order which I made) is complex both substantively and procedurally. Glencore have, among other claims, propriety claims against MTI arising out of the fact that the oil still remaining in storage in February 1998 has been sold by receivers appointed by the English court under an order made on 3rd March 1998.
4. Two lengthy trials have taken place. The first was designed to deal with conflict of law issues, issues of substantive Fujairah law (as the lex situs) and issues of substantive English law on the passing of title. The second dealt with all issues as to the terms, nature and effect of the contractual relationships and arrangements between Glencore and MTI.
5. In short, on Glencore's proprietary claims against MTI the judge held that Fujairah law applied and that under that law title did not pass to MTI in oil which was simply co-mingled with other oil but did pass where it was blended. As a matter of English law, title would not have passed in either case. Glencore appeal, with the judge's permission, his finding that Fujairah law applied and that title in blended oil passed to MTI. MTI were given permission to cross-appeal the judge's decision about co-mingled oil and related issues.
6. MTI is hopelessly insolvent. Until recently their costs of the litigation have been funded by Credit Lyonnais, but that is no longer the case and their English solicitors have come off the record. The application for security is made on the basis that the cross-appeal and the appeal raise discrete issues. Glencore estimate their costs of resisting the cross-appeal at more than £100,000 and have provided a detailed statement to substantiate that. They say that the issue will take several days to prepare, that the Fujairah law issue is complex and involves consideration of substantial expert reports and many days of transcript evidence during the first trial.
7. The application for security is put on the basis of CPR 25.13(2)(c): that there is reason to believe that MTI will be unable to pay Glencore's costs of the cross-appeal if ordered to do so. There is no doubt, in my judgment, that this condition is met. The only question is whether in all the circumstances it would be just to make the order.
8. In a letter of 17th July 2002 MTI's Greek lawyer, a Mr Timagenis, has asked the court to consider two points. First, he says that Glencore knows that his clients do not have counsel. The letter proceeds:

"Due to the extremely high cost of proceedings in London and the unavailability, as we understand, of legal aid for companies our clients are unable to defend themselves and consequently they strongly feel that they do not have a fair trial in London (which is something unfortunately casting doubts to the whole system)."

9. MTI obviously had a fair trial. What we are talking about today is their appeal. Companies are not entitled to legal aid in this and many other countries. This does not mean that their opponents should have to take the risk of not being able to recover costs if their appeal is unsuccessful.
10. The lawyer's second point is:

"The additional irony is that although more than 60 million US dollars are deposited in London with the receivers, our clients cannot use even a small part to have a fair trial (themselves, for the exclusive benefit of their other creditors)."

11. No such application has been made by MTI to the receivers for funding of this litigation at any stage; nor do I think it would be justified. The assets held by the receiver, a substantial part of which have recently been distributed, are assets in which Glencore asserts a propriety interest. But even assuming that some of those assets could be said to belong to MTI, there are already claims to those assets vastly in excess of their value. If Glencore had to enforce a costs order against those assets, all that Glencore would be able to do would be to add the costs of such an order to its outstanding unsatisfied claim, which is very substantial; so that would give them very little in the way of recovery of their costs in the event that the cross-appeal fails.
12. In these circumstances I am satisfied that it would be just to make an order in this case. I am concerned about the amount to be ordered because it seems to me that, although I accept that the co-mingling and blending issues are discrete, there must be a degree of overlap and it would be very difficult to draw a line between the work which is involved on the one and the work which is involved on the other. Taking that into account (and with, perhaps, a jealous reaction to the sums involved), I think that it would be appropriate to limit the order to one of £80,000. This security should be given by 4.00pm on Friday, 30th August 2002, because the appeal is listed to start in the second week in October. I will make that order in the usual terms, which is that if security is not provided, upon Glencore notifying the Civil Appeals Office in writing of this fact, MTI's cross-appeal should stand dismissed with costs without further order.
Order: security for costs order made in terms set out above.