England and Wales Court of Appeal (Civil Division) Decisions

		Neutral Citation Number: [2002] EWCA Civ 998
		Case No: 2002/0213

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(His Honour Judge Peter Cowell)

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th July 2002

B e f o r e :

LORD JUSTICE SIMON BROWN
and
LORD JUSTICE DYSON
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Between:


	OLAKUNLE O OLATAWURA	Appellant
	- and -
	ALEXANDER O ABILOYE	Respondent

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(Transcript of the Handed Down Judgment of
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____________________

Mr Olakunle Olatawura appeared in person
Mr David Cook (instructed by Abiloye & Co) for the Respondent
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HTML VERSION OF JUDGMENT
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Lord Justice Simon Brown:

1. This is a second-tier appeal. It raises in stark form an issue of some general importance: the question when, if at all, the court should make orders for security for costs outside the provisions of CPR part 25(II), the rule which expressly provides for such orders.
2. The particular circumstances in which the issue now arises are somewhat complicated and not entirely satisfactory. I shall relate them as shortly as possible.
3. The appellant is a well-qualified Nigerian lawyer who has been in this country since about 1995. His precise immigration status is unclear, but apparently he has had the benefit of a series of student leaves, the present one expiring in late September. In about November 1998 he began working for the respondent, the sole proprietor of a firm of solicitors bearing his own name, Abiloye & Co. A number of payments were made to the appellant during the earlier period of his employment but eventually disagreement arose between the parties as to the term on which remuneration was due. On 22 March 2001 the appellant issued proceedings in the Central London County Court claiming some £35,000, a claim denied by the respondent. It is quite unnecessary for present purposes to explain the nature of the dispute in any detail. Suffice it to say that the appellant’s case is essentially that the respondent agreed to pay him at the rate of £120 per hour; the respondent contends that the agreement was rather that the appellant should be paid 50% of the profit costs ultimately received by the firm for the casework which the appellant himself had undertaken. There was nothing agreed in writing.
4. On 26 September 2001 the respondent applied to the court under CPR 24.1 for the summary dismissal of the appellant’s claim. The application came before District Judge Langley initially on 20 November 2001 and (because it had not been possible to complete the hearing within the 1½ hours then available) part heard on 11 December 2001 when there were a further three hours of argument. The order made (for the reasons given in a full judgment extending to some eight pages of transcript) was that “on the defendant’s application for summary judgment there be no order save that the claimant do give security for costs in the sum of £5,000”. The appellant was required to pay that sum into court by 8 January 2002 (failing which his action was to be dismissed and the 14 February hearing date vacated), his claim to be stayed meanwhile. The order then made provision, in the event that security was given and the stay lifted, for the hearing of the appellant’s outstanding applications: (a) for summary judgment (which he had made in response to the respondent’s application) and (b) for the defendant’s committal for contempt of court (for allegedly making false statements), and for the future conduct of the appellant’s action. The District Judge refused permission to appeal.
5. Rule 24.2 provides:

“The court may give summary judgment against a claimant or defendant on the whole or a claim or on a particular issue if:

(a) it considers that:

(i) that claimant has no real prospect of succeeding on the claim or issue; or

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”

6. Rule 24.6 provides:

“When the court determines a summary judgment application it may

(a) give directions as to the filing and service of the defence;

(b) give further directions about the management of the case.

(Rule 3.1(3) provides that the court may attach conditions when it makes an order.)”

7. Rule 3.1(3) provides:

“When the court makes an order, it may

(a) make it subject to conditions, including a condition to pay a sum of money into court; and

(b) specify the consequence of failure to comply with the order or a condition.”

8. District Judge Langley felt unable to hold that the appellant “has no real prospect of succeeding on the claim” within the meaning of rule 24.2(a)(i) but concluded nevertheless:

“… I take the view that this is an appropriate case where I should not allow the matter to proceed unhindered but that the claimant should give some security for the case proceeding because I do consider on the basis of the evidence before me that the prospects of the claimant succeeding are limited. I am unfortunately, because it is an oral contract, not in a position to conclude that there is no real prospect of success. There may be a very small or shadowy prospect of success. But in those circumstances I do consider it appropriate to give the claimant some security for costs for the matter to proceed.”

9. The District Judge then expressed the view that whilst the respondent had sought to conduct the application sensibly the appellant had not. The prolonged argument, she said:

“… was caused almost entirely by the way that the claimant persisted in dealing with the application. He has persisted in addressing me at inordinate length about matters which are not pertinent to the summary judgment application and refused to accept any guidance as to what was relevant to that. If he were an uneducated man or were not a trained lawyer, I would have understood this but as he is (as he told me and I accept) a highly educated man as well as being a qualified solicitor, he is clearly capable of dealing with the litigation in a reasonable manner. … I have formed the clear view that the history of this case and the way in which it has been conducted by the claimant is wholly unreasonable and that this is set to continue. This necessitates the provision of security to the defendant. I am concerned that if a final costs order is made against the claimant, the defendant will not be able to enforce it. The claimant told me that he is living in England and Wales at present but he is unable to say how long he will be here. He has not suggested that he was permanently resident here. … He has told me that if I order and he pays the security for costs he will not be able to pay barristers. He asks me to limit the security for costs order to £2,000. He has not suggested that he could not pay the costs if ordered. I have asked the claimant about payment as I realise that to make an order that the claimant would be unable to pay might amount to a breach of his human rights. … I consider that the order for security is necessary to ensure that the case is dealt with proportionately as well as both expeditiously and fairly.”

10. In making the order she did for security for costs the District Judge referred in particular to paragraph 5.2 of the Practice Direction supplementing rule 24, rule 44.3(4) and (5), rule 3.1(2)(m) and rule 1.3. It is convenient at this point to set out these various provisions (except for rule 44.3, the rule concerning the circumstances to be taken into account when the court exercises its discretion as to costs, which the respondent rightly recognises has no relevance at the earlier stage of considering an order for security):

The Practice Direction supplementing rule 24

“4 The court’s approach

Where it appears to the court possible that a claim or defence may succeed but improbable that it will do so, the court may make a conditional order, as described below.

5 Orders the court may make

5.1 The orders the court may make on an application under Part 24 include:

1 judgment on the claim,

2 the striking out or dismissal of the claim,

3 the dismissal of the application,

4 a conditional order.

5.2 A conditional order is a sum which requires a party:

1 to pay a sum of money into court, or

2 to take a specified step in relation to his claim or defence, as the case may be,

and provides that that party’s claim will be dismissed or his statement of case will be struck out if he does not comply.”

Rule 3.1

11. Although the District Judge referred only to paragraph (2)(m) of this rule, it is convenient at this stage to refer to certain other parts of the rule too:

“3.1(1) The list of powers in this rule is in addition to any powers given to the court by any other rule or practice direction or by any other enactment or any powers it may otherwise have.

(2) Except where these Rules provide otherwise, the court may …

(m) take any other step or make any other order for the purpose of managing the case and furthering the overriding objective.

[I have already set out rule 3.1(3) in paragraph 7 above]

…

(5) The court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre-action protocol.

(6) When exercising its power under paragraph (5) the court must have regard to

(a) the amount in dispute; and

(b) the costs which the parties have incurred or which they may incur.

(6A) Where a party pays money into court following an order under paragraph (3) or (5), the money shall be security for any sum payable by that party to any other party in the proceedings …”

Rule 1.3

“The parties are required to help the court to further the over-riding objective.”

12. The District Judge expressly found the appellant to be in breach of his duty under rule 1.3.
13. The appellant sought to challenge the District Judge’s order but did so inappropriately by way of an application to set it aside, without obtaining a transcript of the judgment, instead of by way of appeal. The Circuit Judge, Judge Peter Cowell, heard the application on 3 January 2002 and, recognising that the case concerned “what is in effect a new jurisdiction under the CPR”, gave the appellant leave to appeal from the District Judge’s order. Without the benefit of a transcript or even a note of the District Judge’s judgment, however, Judge Cowell indicated that he would himself enquire of the District Judge on what basis her order had been made and would then give judgment on 18 January. On 9 January the District Judge wrote to Judge Cowell enclosing a note of her judgment (in very substantially the same form as the final transcript which was obtained much later). On 18 January 2002 Judge Cowell gave judgment dismissing the appellant’s appeal. He observed that the District Judge had taken “a dim view of the claimant’s chances of success”, noted that the appellant was withdrawing his own application for summary judgment, accepted the appellant’s argument that under the previous rules the security for costs order was “a complete and exhaustive code”, but pointed to the new provisions of the CPR which “confer upon the court a jurisdiction to order security for costs which it did not have before”. Although he described the District Judge’s order as “rather unusual”, he commented that “having seen the reasons which the judge has given, it seems to me that she was seeking to protect the defendant against the way in which the claimant approaches every matter”, and concluded:

“It seems to me that I would be quite wrong in interfering with her discretion in choosing the sum of £5,000. What small experience I have had or seen from the papers of the way that the claimant conducts this litigation, if anything goes to confirm the conclusions which she reached.”

On 8 February 2002, the appellant duly paid the £5,000 into court.

14. At an oral hearing on 14 March 2002 the Court of Appeal gave the appellant permission to bring this second appeal. The leading judgment was given by Pill LJ (who had initially refused the application on the papers). I need refer to only one passage in his judgment:

“What in substance the District Judge was doing, it appears to me, was to have a sum of money in court which would give the defendant security, but it has to be said that the provisions relied on are provisions other than those provided in the CPR for security for costs. There was no money claim against the applicant, so that it is difficult to see how the payment required can be justified under Part 24 as a condition of being allowed to proceed with the action upon an application against him for summary judgment. It may be that the most likely part of the CPR to give jurisdiction is Part 3.1(2)(m) but in my judgment it is arguable that the rule does not cover the present situation; though I add that in my view it is also arguable that it does.”

15. I should observe at this stage that the court granting permission appears to have been under a substantial misapprehension as to the course of the trial itself. Pill LJ’s judgment noted in paragraph 5 that although the money had been paid into court “the trial date was vacated and a fresh date has been fixed: that is 19 April 2002”, and further noted in paragraph 6 the appellant’s contention: “it is only if he is able to have the £5,000 out of court, he tells us, that he will be able to afford legal representation at the County Court trial”. Having then stated in paragraph 17 of the judgment that he proposed to grant permission to appeal, Pill LJ continued:

“I have pointed out more than once to the applicant that the consequences of the grant include the fact that the hearing in the County Court will not be able to proceed on 19 April. It is his claim and the result of the present application and its success is that the claim will inevitably be deferred.”

16. The actual position is in fact very different. The substantive trial began in the County Court as a two-day fixture before Judge Levy QC on 14 February 2002 (the date originally fixed). On the morning of the second day, 15 February, it was adjourned at the appellant’s request on the ground of his feeling unwell and fixed for further hearing on 19 April (the date referred to in Pill LJ’s judgment). So far from it being “inevitably … deferred” from that latter date, the hearing duly continued before Judge Levy. Once again, however, it was not completed, and in the event was further adjourned, this time until 6 and 7 January 2003 with an estimate of two more days. The appellant has been representing himself throughout and it is surely inconceivable that counsel could now be introduced into the case for the first time. There is this additional curiosity: by letter addressed to the defendant dated 12 March 2002 (albeit not in fact handed to the defendant until the hearing on 19 April), a solicitor named Mr Stockinger stated that a conditional fee agreement was now in place between his practice and the appellant which specifically includes the present action and provides for a success fee.
17. Let me, however, put aside what I have already described as the “not entirely satisfactory” circumstances of this case and look at the real questions of principle which arise under the new rules.
18. The first is clearly this: is there indeed now jurisdiction under CPR to make orders which are tantamount to orders for security for costs outside the provisions of part 25(section II)?
19. In my judgment the answer to this question is a clear yes. The individual rules which I have already set out above admit of no other possible conclusion and, indeed, as Judge Cowell below observed, this too is the stated view of the editors of the Annual Practice. As to the editors’ views, let me quote from just two footnotes:

“3.1.5 In the case of claimants, an order under r 3.1.5 significantly broadens the court’s powers to order security for costs (as to which, see generally CPR Pt 25, Section II).

25.13.20 The discretions and conditions set out in r 25.13 relate to applications for security for costs under r 25.12. There are also several other rules and provisions under which security for costs may be ordered; r 3.1(5) (sanction for failure to comply with a rule, practice direction or pre-action protocol), Practice direction supplementing Pt 24 paras 4 and 5 (a conditional order on a summary judgment application where the Court considers that the respondent’s case may succeed but it is improbable that it will do so) …”

20. As to the rules themselves, let me make just a few obvious points. Paragraphs 4 and 5 of PD 24 to my mind necessarily contemplate an order akin to that for security for costs, providing as they do for the making of an order requiring a sum of money to be paid into court where it appears to the court improbably that a claim (and not merely a defence) will succeed. Rule 3(3) in terms allows the court to make any order conditional on (amongst other things) the payment of money into court. Yet more specifically rule 3(5) empowers the court to order a non-compliant party to pay money into court and rule 3(6) requires the court in exercising that power to have regard to the costs incurred or to be incurred.
21. I pass, therefore, to the more difficult second question which arises on this appeal: what should be the court’s approach to the exercise of its wider new jurisdiction to order security for costs and, more narrowly, was such an order properly made in the particular circumstances of this case?
22. The first point to be made is I think this. Before ordering security for costs in any case (ie whether or not within rule 25) the court should be alert and sensitive to the risk that by making such an order it may be denying the party concerned the right to access to the court. Whether or not the person concerned has (or can raise) the money will always be a prime consideration, not least since article 6 of ECHR became incorporated into domestic law. Paradoxically, of course, the more difficult it appears to be for the person concerned to raise the money, the more obvious becomes the need for an order for security to protect the other party against the risk of incurring irrecoverable costs. The court will have to resolve that conundrum as best it may.
23. Assume, then, that in a given case the court concludes that an order for security would not unfairly deprive the party concerned of his ability to litigate the dispute. Should such an order then be made? In addressing this question it is right to bear in mind that under the new rules it is not just the claimant against whom an order for security for costs can be made; it can also be made against the defendant. Under the old rules, of course, it was only the defendant who could be ordered to pay money into court, principally in proceedings for summary judgment, as a condition of his being allowed to defend the claim. That payment in was not, of course, in respect of costs, but rather to provide some security for the claim. But if, as a condition of pursuing an unpromising defence, it is appropriate to secure the claim, why not also the claimant’s costs of advancing the claim? And if that, why is it not at least as appropriate to require someone advancing an unpromising claim to secure the defendant’s costs. He, after all, has chosen to involve the defendant in litigation and the defendant has no option but to concede the claim or incur costs in resisting it. Such no doubt was the thinking underlying the new rule 24.
24. Now, it is clear, the court has an altogether wider discretion to ensure that justice can be done in any particular case. Obviously relevant considerations, besides the ability of the person concerned to pay, will be (a) his conduct of the proceedings (including in particular his compliance or otherwise with any applicable rule, practice direction or protocol), and (b) the apparent strength of his case (be it claim or defence). And these considerations, of course, are expressly reflected in the new rules governing the court’s power to order payment into court: rule 3.1(5) dealing expressly with compliance, rule 24 with the probabilities or otherwise of success.
25. That, however, is by no means to say that the court should ordinarily penalise breaches of the rules and the like by making orders for payment into court under rule 3.1(5). Quite the contrary. The one case drawn to our attention in which this question has been considered - Buckley J’s judgment in Mealey Horgan plc -v- Horgan (transcript 24 May 1999, briefly reported in The Times, 6 July 1999), to which reference is made in paragraph 3.1.5 of the Annual Practice - held that it would be inappropriate to order a defendant to give security as a penalty for failure to serve witness statements in time when that had prejudiced neither the trial nor the claimant. Buckley J suggested, however, that such an order might be appropriate if “there is a history of repeated breach of timetables or of court orders or if there is something in the conduct of the party which gives rise to suspicion that they may not be bona fide and the court thinks the other side should have some financial security or protection”. That seems to me to point the way admirably: a party only becomes amenable to an adverse order for security under rule 3.1(5) (or perhaps 3.1(2)(m)) once he can be seen either to be regularly flouting proper court procedures (which must inevitably inflate the costs of the proceedings) or otherwise to be demonstrating a want of good faith - good faith for this purpose consisting of a will to litigate a genuine claim or defence as economically and expeditiously as reasonably possible in according with the over-riding objective.
26. Similarly it is not to be thought that an order for security for costs will be appropriate in every case where a party appears to have a somewhat weak claim or defence. The last thing this judgment should be seen as encouraging is the making by either side of exorbitant applications for summary judgment under rule 24.2 in a misguided attempt to obtain conditional orders providing security for costs. On the contrary, the court will be reluctant to be drawn into an assessment of the merits beyond what is necessary to establish whether the person concerned has “no real prospect of succeeding” and the occasions when security for costs is ordered solely because the case appears weak may be expected to be few and far between.
27. I return finally to the District Judge’s judgment in the instant case. From this it will be seen that there were four principal factors bearing on her decision to order security. First, and essentially as a pre-condition to making any such order, was her view that it would not prevent the appellant from continuing to litigate this claim (as indeed it has not). That being so, she thought security appropriate for three particular reasons: first, because she perceived the appellant’s claim to have only “limited” (she appeared also to be finding “very small or shadowy”) prospects of success (as to which see paragraph 4 of the Practice Direction set out in paragraph 10); secondly, because the appellant had been conducting the case in a “wholly unreasonable” way and was set to continue doing so (see rules 1.3, 3.1(2)(m) and 3.1(5) set out in paragraph 11 above); thirdly, because (even assuming the appellant is not to be regarded as “ordinarily resident out of the jurisdiction” and thus in any event subject to an order for security for costs, if otherwise just, under rule 25.13(2)(i)) he is certainly not permanently resident here so that enforcement of any adverse costs order is likely to prove more than usually difficult.
28. In my judgment these considerations in combination amply justified and supported the order which the District Judge made here and for my part I am no more inclined than was Judge Cowell below to interfere with it.
29. Essentially by way of footnote I add just this. The appellant sought to argue that no order of the kind made here by the District Judge should ever be made without giving the person concerned at least three days notice under rule 3.3(3). A comparable argument was advanced and rejected by this court in the Anglo Eastern Trust Limited -v- Alliance & Kermanshahchi [2002] EWCA Civ 198, a case concerned not with security for costs but rather with an order that the defendant pay £1 million into court to secure the claim; provided only that the person concerned is given a proper opportunity to deal with his means and that the order made does not improperly stifle his cause on that account, he cannot complain at the making, as here, of a conditional order - see in particular Brooke LJ’s judgment.
30. In the result I would dismiss this appeal.

Lord Justice Dyson:

31. I agree.

ORDER: Appeal dismissed with costs, to be subject to detailed assessment if not agreed. Permission to appeal to the House of Lords refused.

(Order not part of approved judgment)