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
(Her Honour Judge Alton)

		Royal Courts of Justice Strand, London, WC2A 2LL
		10th May 2007

Lord Justice Moore-Bick:

1. This is an application by the respondent under CPR Rule 52.9(1)(c) for an order that the appellant be required to pay into court the amount of the judgment debt together with a sum of money on account of the costs of the action as a condition of pursuing the appeal. The respondent is an English company which manufactures and supplies industrial equipment. The appellant is a Swiss company which has holdings in a number of English companies, some of which are engaged in the motor manufacturing business, among which was a company called Latimer Automotive Group Limited. Latimer had a subsidiary called Automold Limited which entered into a contract with the respondent for the supply of certain equipment.
2. The appellant, as the ultimate parent company of Automold Limited, was persuaded to guarantee the payment of sums due to the respondent for the supply of that equipment. Automold failed to pay the amounts due to the respondent and went into administration, whereupon the respondent brought a claim against the appellant under its guarantee. In those proceedings the appellant admitted the existence of the guarantee but said that it was limited to monies due on specific dates in respect of the supply of specific equipment and did not apply to the outstanding sums in respect of which the claim was made. It also said that the contract to which the guarantee related had been altered without its consent, with the result that it was discharged from its obligations. At a late stage the claimant obtained permission to amend its reply to allege that the appellant had consented to any changes in the underlying contract.
3. The trial was fixed to begin on 19 January 2006 and was called on for hearing on that day, but unfortunately the judge was taken ill and it had to be adjourned to the next day. On 20 January the respondent applied for permission to amend its particulars of claim and in the event the judge gave that permission, but decided that as a result the trial would have to be adjourned. One consequence of the amendment was that allegations were made for the first time involving the managing director of the appellant company, Mr Corpataux.
4. As a result of allegations being made against him personally, Mr Corpataux provided a witness statement and in due course was called as a witness at the trial. The trial resumed on 15 May and lasted for three days. Judgment was reserved and delivered on 18 August. The judge found in favour of the respondent and gave judgment for the sum of £405,255, plus interest at a daily rate of £88.82 until payment, and for costs to be assessed. A formal order was drawn up on 16 October and a notice of appeal was lodged by the appellant on 6 November. On 17 November Sir Henry Brooke gave permission to appeal and also granted a stay of execution pending appeal.
5. Since the present application is made under rule 52.91(c) it is convenient to refer briefly to the terms of that rule which provides as follows:

"(1) The appeal court may-

(a) strike out the whole or part of an appeal notice;

(b) set aside permission to appeal in whole or in part;

(c) impose or vary conditions upon which an appeal may be brought.

(2) The court will only exercise its powers under paragraph (1) where there is a compelling reason for doing so."

6. It is clear from the terms of the rule and from the decided cases that the court has a discretion to order an appellant to pay into court the amount of the judgment debt as a condition of pursuing his appeal, but it is equally clear that it will only make such an order where there are compelling reasons for doing so. That is all the more so when an application is made, as it has been in this case, many weeks after permission to appeal was granted and only a short time before the appeal itself is due to be heard. The appeal in the present case is listed for hearing on 11 June.
7. My attention has been drawn to the case of Hammond Suddards v Agrichem [2001] EWCA Civ 2065 in which Clarke LJ identified a number of features of the case then before him which in the view of the court justified the making of an order of this kind. They included:

(1) the fact that the appellant was an entity against whom it would be difficult to exercise the normal mechanisms of enforcement because it was registered in the British Virgin Islands and had no assets in the United Kingdom;

(2) the fact that the appellant plainly either had the resources, or had access to resources, sufficient to enable it to instruct both solicitors and leading and junior counsel on the appeal;

(3) the fact that there was no convincing evidence that the appellant did not either have the resources, or have access to resources, sufficient to enable it to pay the judgment debt as ordered and that it had failed to do so;

(4) the fact that the appellant had failed to give adequate disclosure of its financial affairs, despite having been ordered by the court to do so on an earlier occasion;

(5) the fact that the appellant had wealthy owners and there was no evidence that, if they were minded to do so, they could not pay the judgment debt; and

(6) the fact that the court was not persuaded that the appeal would be stifled if it made the order sought.

Clarke LJ concluded that it was unacceptable in those circumstances for the appellant to prosecute the appeal while at the same time continuing to disobey the order of the court to pay the judgment debt.

8. The factors identified in Hammond Suddards v Agrichem do not, of course, represent an exhaustive set of criteria by which applications of this kind are to be judged, but they do provide some indication of the kind of matters that are likely to weigh with the court, at least in cases of this general kind. The appellant submits that the present case is broadly similar to Hammond Suddards v Agrichem and puts forward a number of arguments in support of that conclusion with which I will deal individually.
9. The first is that the judgment debt is substantial and that enforcement is likely to be difficult. It is quite true that the judgment debt in this case is substantial, but there is no reason to think that enforcement is likely to prove especially difficult if the appeal fails. The appellant is a Swiss company, but that fact in itself cannot provide sufficient grounds for an order of this kind, and Mr Sugar does not seek to suggest otherwise. It is, of course, amenable to the jurisdiction of the Swiss courts and arrangements exist under the Lugano Convention for enforcing a judgment of the English courts against individuals and companies domiciled in Switzerland.
10. The respondent admits that it does not know whether the appellant will be able to meet the judgment debt, but such enquiries as have been made suggest that the appellant has assets in the form of shareholdings in other countries which may well turn out to have considerable value. Investigations have not been made in relation to those of its subsidiaries which are incorporated in this country from which it is possible to tell one way or the other. In any event, however, mere impecuniosity is not sufficient for these purposes. Nor, in my view, is it sufficient that the ultimate beneficial ownership of the appellant company is uncertain. It is a private company and the investigations which have been conducted in Switzerland suggest that its shares may be beneficially owned by the Corpataux family. The judge's findings suggest that the company is controlled by Mr Keech, but it is the appellant against whom the judgment will have to be enforced if the appeal fails, not its shareholders or others who may have a beneficial interest in it.
11. The next point made on behalf of the respondent is that the appellant has not suggested that it cannot pay the judgment debt. That is true, but I fail to see how it is relevant to the present application. Having obtained a stay of execution, the appellant is not obliged to pay the judgment debt and no adverse inference can therefore be drawn from the fact that it has not done so.
12. The third point made by Mr Sugar is that the appellant's case at trial was based on a lie. I have already mentioned that Mr Corpataux was a witness at the trial as a result of an amendment of the pleadings which resulted in allegations being made against him personally. He made a witness statement in which he appears to have described himself as the managing director of the company with all the powers and authority which a person holding that office would normally exercise. He made his witness statement at a time when the respondent's case was that the company knew of and consented to any variation of the underlying contract to which the guarantee related.
13. The judge found that although Mr Corpataux did hold the office of managing director, he was, in her words, "essentially a cipher" because he was acting under the direction and control of Mr Keech. That was not something that Mr Corpataux had referred to in his witness statement, and the judge described "the lie at the root of his witness statement" as being not his denial of knowledge of any variation (which she accepted) but the impression he sought to give that he was the directing mind of the appellant rather than Mr Keech. However, it is fair to say that the question whether Mr Keech or anyone other than Mr Corpataux was the directing mind and will of the company for those purposes was not one that had been raised in the statements of case. This is not a case, therefore, of Mr Corpataux saying in effect "You should not be looking at Mr Keech but at me, since I am the managing director of the company". Nonetheless, the judge was entitled to make the finding that, in effect, the way in which Mr Corpataux's statement was framed tended to give an impression that was not true. In my judgment this is probably the respondent's best point in support of the application, since it casts doubt on the probity of those who are responsible for managing the appellant's affairs. It is also a point which did not arise in Hammond Suddards.
14. The question then is: where does this matter lead? To proceed from a finding by the judge that in the course of his evidence the managing director of the company gave a misleading impression about the extent of his real control to the conclusion that the company, whose assets appear mainly to comprise shares in other companies, will seek to make itself judgment proof if its appeal fails, and will be able to do so, is a significant leap which in my view is not justified.
15. Mr Sugar submitted that the very fact that Mr Corpataux was found to have told a lie was itself a compelling reason for the court to make the order which he seeks, essentially as a means of indicating its disapproval of a party which had sought to rely on false evidence. However, one of the factors that I have to bear in mind is that the respondent did not raise this matter at the time when the appellant applied for a stay of execution. That was the stage at which, it seems to me, the respondent should have been saying to the court that the appellant ought not to be relieved of having to pay the judgment debt altogether but ought to pay it into court, if not to the respondent itself. Mr Sugar correctly reminded me that the application for the stay was made on paper and that at that stage the respondent had no opportunity to contest it, but the respondent was notified of the order shortly after it had been made and, insofar as it seeks to rely on this particular ground, could have made the present application within a short time after that.
16. Not surprisingly, Mr Sugar's submissions are founded to a large measure on the proposition that the way in which the appellant conducted itself at the trial is a strong indication that it will not co-operate in any future enforcement procedure. I can understand that may be the case, but it is not in my view a question with which the court should be concerned. What matters for this purpose is whether there are grounds for thinking that if the order is not made the appellant may not merely refuse to co-operate but may seek to take steps to put its assets beyond reach of the normal enforcement process. In my view there is little evidence to support that conclusion. Moreover, I am not persuaded that, in this case at any rate, an order of this kind should be made for disciplinary purposes to mark the court's displeasure at the way in which the appellant behaved at the trial.
17. The next point made by Mr Sugar is that the appellant is what is described as a "nominee litigant". However, I am not quite sure what that submission is intended to convey. In one sense any private company owned and controlled by a small number of persons is a nominee litigant, in the sense that the fruits of the litigation can be expected to enure to the benefit of those persons, but the company nonetheless retains it legal personality and continues to own its assets. The fact that there are individuals who stand to benefit if the company is successful and who may themselves exercise considerable informal control over its affairs is no ground, in my view, for requiring them to fund a payment into court if the appellant itself does not have the means to do so.
18. In my view this case is very different from that of Hammond Suddards v Agrichem in which there had been an unexplained failure to discharge the judgment debt and in which there were positive grounds for thinking that if the appellant lost its appeal it would seek to avoid meeting the judgment debt by whatever means might be necessary. That is not this case.
19. Finally, I need to say something about the question of delay on which I have touched already. The respondent accepts that an application of this kind must be made promptly. What is meant by "promptly" will no doubt vary from case to case, but in this case the application was not made until nearly three months after permission to appeal had been granted and comes on for hearing at a time when the appeal is now only a month away. An explanation for this delay is provided in the respondent's skeleton argument which, although not supported by evidence, I am content to accept at face value. I am told that there was a period during which the respondent's managing director was unable to give instructions because of illness, and that further time was required in order to make investigations in Switzerland into the appellant's financial position. In my judgment, however, the unfortunate illness of the respondent's managing director need not have prevented the company from giving instructions to pursue a matter of this kind more promptly. Nor am I persuaded that the kind of enquiries into the appellant's financial position that have in fact been made through agents in Switzerland could not have been pursued with greater speed. Nonetheless, I would not regard the delay itself as necessarily leading to the conclusion that the court should not make the order sought. It is necessary to have some regard to the consequences of that delay as far as the appellant is concerned. The appeal is to be heard only a month from now and therefore any order of the kind that I am being asked to make would serve no purpose unless the appellant were required to pay the money into court or provide some alternative form of security within three weeks at the most. Although there is no evidence to support what is said in the appellant's skeleton argument in this respect, I accept that there would be difficulties for the appellant in raising assets to make a payment into court within such a short period of time.
20. Mr Sugar submitted that there are alternative ways in which the appellant could provide security, for example, by means of a bank guarantee secured on its assets, but I think it by no means clear that arrangements of that kind could be put in place within the sort of time that I have indicated. The result of this application being made at this stage, therefore, is that, if it were acceded to, it would place the appellant in some considerable difficulty.
21. In all the circumstances, I am satisfied that the respondent has failed to make out sufficient grounds for making the order which it seeks and the application must therefore be refused.

Order: Application refused.