England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SHEFFIELD COUNTY COURT
His Honour Judge Bullimore
7SE07302

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/12/2010

Lord Justice Moore-Bick :

1. This is a second appeal by permission of Rimer L.J. against the order of District Judge Babbington made on 20^th February 2009 by which he ordered the appellant, Mr. Bryan Huscroft, to pay £5,000 into court as security for the respondent's costs by 17^th April 2009, in default of which his claim was to be struck out forthwith. By the same order the District Judge gave various directions for the trial of the action. They included giving Mr. Huscroft leave to file an addendum expert's report and further evidence relating to the issues of causation and quantum.
2. In these proceedings Mr. Huscroft is seeking to recover from his former employer, the respondent, P&O Ferries Ltd ("P&O"), damages for injury sustained in May 2005 while he was attempting to push a trolley up a ramp on to the vessel 'Pride of Hull'. He says that the trolley became stuck and then toppled forward and struck him on the right shin.
3. The claim form was issued on 22^nd May 2007 but was not served until 18^th September, just before the four-month time limit expired. A defence was filed on 5^th November 2007 and on 6^th February 2008 the matter came before District Judge Babbington for a case management conference. At the case management conference directions were given for trial and a trial window was fixed of 8^th December 2008 to 9^th January 2009. Thereafter, on two occasions during 2008 the directions were amended and the matter came back before District Judge Babbington on 10^th September 2008 on a telephone hearing after another District Judge had declined to approve a third attempt to vary the directions by consent. He adjourned the case management conference to 13^th October, but at some point it must have become apparent that insufficient time had been allowed, because the date was vacated and both parties were ordered to submit a realistic estimate of the time needed for the hearing by 6^th November. On 7^th November 2008 Deputy District Judge Furniss extended the time for compliance to 14^th November. On 16^th December District Judge Babbington vacated the trial window and directed that the matter be considered at the resumed hearing of the case management conference which he fixed for 13^th February 2009.
4. As early as September 2008 P&O's solicitors had drafted and served an application notice supported by a witness statement seeking an order under CPR Part 3.1(3) and 3.1(5) that Mr. Huscroft "pay the sum of £20,000 into court as security for costs with conditions." In the event, however, a second application notice in the same terms appears to have been filed on 5^th February which was supported by a witness statement made a day earlier. The application was made on the grounds that Mr. Huscroft's claim did not have a reasonable prospect of success, that he had failed to comply with orders of the court and did not have the financial resources to meet a judgment for costs in favour of their client. The witness statement supporting the application was made by a paralegal, Mr. Gordon Sewell, and included the following passages:

"Given the weakness of the claimant's case and the way in which he has conducted the proceedings we can only conclude that the claimant has continued pursuing his claim in this way because he sees himself as having nothing to lose if unsuccessful. We submit that the defendant should have security for costs to protect against this.

. . .

. . . the claimant's solicitor is conducting this case on a conditional fee agreement which does not include any liabilities in respect of 'after the event' insurance. After the hearing before District Judge Babbington on 13^th March Mr. Clarke [the claimant's solicitor] informed us that if our defence was successful we would be enforcing it against a man of straw.

. . . we suspect that [the claimant] has been using the income from his state benefits to pay for the disbursements and travel to and from the UK."

5. One can see that the real complaint was that Mr. Huscroft did not have the means to satisfy a judgment for costs. The reference to his residence in Portugal was little more than a veiled suggestion that he might actively seek to avoid enforcement of a judgment against him.
6. Rule 3.1(3) provides as follows:

"(3) 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 condition."

7. Rule 3.1(5), on which the defendant also sought to rely, provides as follows:

"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."

8. District Judge Babbington held that, since Mr. Huscroft had not failed to comply with any rule, practice direction or pre-action protocol, he could not act under rule 3.1(5). However, he was persuaded to make the order in the exercise of his powers under rule 3.1(3), but only in the amount of £5,000. The relevant parts of his order read as follows:

"1. The claimant do pay the sum of £5,000.00 into the Court Funds Office as security for costs by 4pm on 17 April 2009;

2. Should the claimant fail to pay the sum of £5,000.00 into the Court Funds Office by 17 April 2009, then the claimant's case shall be struck out forthwith."

9. Mr. Huscroft appealed against that order and in support of his appeal sought to rely on evidence of his means that had not been put before the District Judge. On the hearing of the appeal His Honour Judge Bullimore, applying the principles laid down in the well-known case of Ladd v Marshall [1954] 1 WLR 1489, refused to allow Mr. Huscroft to rely on that evidence on the grounds that it could and should have been adduced at the hearing below and proceeded to dismiss the appeal. Permission to make a second appeal was refused on paper by Sir Richard Buxton, but when the application for permission was renewed at an oral hearing Rimer L.J. granted it to a limited extent. He was concerned whether the rather general criticism of Mr. Huscroft's conduct of the litigation was sufficient to justify the exercise of the court's jurisdiction under rule 3.1(3) and gave permission in order to enable that question to be determined. He also gave Mr. Huscroft permission to argue that in any event the District Judge was wrong in the circumstances of this case to set the amount to be paid into court at £5,000.
10. Both District Judge Babbington and Judge Bullimore appear to have approached the matter on the basis that under rule 3.1(3) the court has the power when making an order of any kind to impose conditions on one or both parties, whether related to specific paragraphs of the order or not. That seems to follow from District Judge Babbington's observation that he was going to make various orders on that occasion because he was conducting a case management conference. Similarly, Judge Bullimore, in rejecting Mr. Crouch's argument that the condition ought to be attached to a specific provision of the order, appears to have accepted that it was sufficient that District Judge Babbington had made an order of some kind to entitle him to impose a requirement on Mr. Huscroft to pay money into court. However, Mr. Myerson Q.C. submitted on behalf of Mr. Huscroft that that involves a misunderstanding of rule 3.1(3), which allows the court to attach a condition to a specific order granting relief as the price of doing so. The purpose of such a condition, in his submission, is to control the future conduct of the proceedings, not to punish previous misconduct, although previous misconduct may well point up the need for the exercise of firmer control in the future which the imposition of a condition may provide.
11. In Olatawura v Abiloye [2002] EWCA Civ 998, [2003] 1 WLR 275 the defendant had applied under Part 24 of the Civil Procedure Rules for summary judgment dismissing the claim. A "signpost" in the rules stated that rule 3.1(3) provides that the court may attach conditions when it makes an order and paragraphs 4 and 5 of the Practice Direction supplementing Part 24 referred to the power of the court to make a conditional order. The District Judge made no order on the application other than that the claimant give security for the defendant's costs, failing which the action was to be dismissed. Her reason for doing so was that, although she was not satisfied that the claimant had no real prospect of succeeding on the claim, she considered that his prospects of success were limited and that he had been conducting the litigation in an unreasonable manner and was likely to continue doing so. She was also concerned that the defendant would not be able to enforce a judgment for costs in his favour because the claimant was not permanently resident within the jurisdiction and concluded that an order for security was necessary to ensure that the case was dealt with proportionately as well as both expeditiously and fairly.
12. On a second appeal to this court Simon Brown L.J. (with whom Dyson L.J. agreed) pointed out that paragraphs 4 and 5 of the Practice Direction to Part 24 necessarily contemplate an order akin to an order for security for costs by virtue of the fact that they allow the court to order a payment into court where it appears improbable that the claim will succeed. Having reached that conclusion, the only remaining question was how the power should be exercised. He said this:

"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 The Times, 6 July 1999, to which reference is made in paragraph 3.1.5 of Civil Procedure, Spring 2002, vol 1— 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 accordance with the overriding 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."

13. To those comments may be added the observation that the power to make a conditional order given by rule 3.1(3) is couched in general terms; an unqualified condition that a sum of money be paid into court is only one kind of condition that may be imposed. Moreover, there can, I think, be no doubt that, if the court imposes a condition that a sum of money be paid in, it is entitled to order that it stand as security for the defendant's costs, if it considers it appropriate to do so. Although the court no longer gives a party who successfully opposes an application for summary judgment leave to defend (or proceed), an order dismissing the application is in practical terms an order in his favour to which conditions may be attached.
14. It is clear from paragraph 26 of the judgment in Olatawura v Abiloye that the court was viewing the matter though the prism of an unsuccessful application for summary judgment, but the warning against making exorbitant applications in misguided attempts to obtaining a conditional order for security for costs is of more general application. It would be wrong, in my view, to encourage litigants to regard rule 3.1(3) as providing a convenient means of circumventing the requirements of Part 25 and thereby of providing a less demanding route to obtaining security for costs. In my view, when the court is asked to consider making an order under rule 3.1(3) or 3.1(5) which is, or amounts to, an order for security for costs, or when it considers doing so of its own motion, it should bear in mind the principles underlying rules 25.12 and 25.13. These include the principle that a personal claimant who is resident within the jurisdiction or in one of the other member states of the European Union cannot be required to provide security for costs just because he is impecunious, even though his conduct of the proceedings may be open to criticism. Although it might be argued that the defendant in such a case should be entitled to obtain protection against the risk of being unable to enforce a judgment for costs, a policy decision has been taken to the contrary. This suggests that an order of that kind should not be made in the exercise of the power under rule 3.1(3) unless one or more additional factors are present which make it appropriate to impose a burden of that kind on one party and a corresponding benefit on the other.
15. In Ali v Hudson [2003] EWCA Civ 1793, [2004] C.P. Rep. 15 Clarke L.J. sounded a note of caution in relation to the exercise of the court's power to order security for costs under rule 3.1. Having referred to the judgment of Simon Brown L.J. in Olatawura v Abiloye he said:

"Those principles show that the power to order security for costs in a case of this kind should be exercised with great caution. The correct general approach may be summarised as follows:

(i) it would only be in an exceptional case (if ever) that a court would order security for costs if the order would stifle a claim or an appeal;

(ii) in any event

(a) an order should not ordinarily be made unless the party concerned can be shown to be regularly flouting proper court procedures or otherwise to be demonstrating a want of good faith; good faith being understood to consist (as Simon Brown LJ put it) of a will to litigate a genuine claim or defence (or appeal) as economically and expeditiously as reasonably possible in accordance with the overriding objective; and

(b) an order will not be appropriate in every case where a party has a weak case. The weakness of a party's case will ordinarily be relevant only where he has no real prospect of succeeding."

16. In Halabi v Fieldmore Holdings Ltd [2006] EWHC 1965 (Ch) Rimer J. (as he then was) took the view that the court could properly exercise its jurisdiction to impose a condition of making a payment into court under rule 3.1(3) in a case where there had been a history of repeated failures to comply with orders of the court or the party in question was not conducting the litigation in good faith. However, he was not satisfied that the claimant's conduct in that case justified his making an order of that kind. In the present case, however, Judge Bullimore questioned whether the exercise of the power given by the rule should be confined quite so narrowly in view of the terms of rule 3.1(5). It was partly in order to clarify that question that Rimer L.J. gave permission to appeal in this case.
17. In both Olatawura v Abiloye and Ali v Hudson the court appears to have been concentrating primarily on the court's power to order a payment into court under rule 3.1(5), although it may be fair to say that in neither case was it at pains to draw a clear distinction between the two rules. However, they are distinct and directed to different situations. In particular, rule 3.1(3) is deliberately drafted in quite general terms and I think that this court should be reluctant to lay down any hard and fast rules about the circumstances or manner in which the power can be exercised. Experience shows that cases are infinitely variable and the rule does not place any limit on the nature of the conditions that may be imposed or the circumstances in which the power may be invoked, other than providing that a condition may be imposed as an adjunct to an order. However, two matters seem to me to provide support for the view that the power to attach conditions to an order is intended, as Mr. Myerson submitted, to enable the court to exercise a degree of control over the future conduct of the litigation. The first is the existence of rule 3.1(5), which is clearly intended to give the court power to punish a party who without good reason fails to comply with the established procedural code, including the pre-action protocols. Although such an order may well have a beneficial influence on the future conduct of the litigation, it is directed more to what has gone on in the past than what will go on in the future. To that extent it is quite different in nature from a condition of the kind contemplated by rule 3.1(3) which, combined with a sanction for failure to comply, usually of a stringent nature, is designed to control the future conduct of the party on whom it is imposed. The second is the language of the rule itself. The very fact that it allows the court to make an order subject to conditions is sufficient to show that the rule is concerned with the basis on which the proceedings will be conducted in the future, and that remains the case even when the condition is imposed in order to make good the consequences of some kind of previous misconduct.
18. Having said that, I think it is also necessary to recognise that rule 3.1(3) does not give the court a general power to impose conditions on one or other party whenever it happens to be making an order and if District Judge Babbington thought that it did, he was in my view wrong. When the rule speaks about the court's making an order it is referring to a direction that a party act in a certain way or that a certain state of affairs should exist, not to the instrument used to give effect to one or more such directions. The court has ample powers under rules 3.1(2)(m) and 3.3 to make whatever orders are needed for the proper management of the proceedings. The purpose of rule 3.1(3) is to enable the court to grant relief on terms and when the power is exercised the condition ought properly to be expressed as part of the order granting the specific relief to which it relates. The order in the present case did not do that. Paragraph 1 was framed as a free-standing order that Mr. Huscroft pay money into court as security for costs; it was not expressed as a condition of obtaining any relief that he was seeking. Paragraph 2 imposed the sanction of striking out his claim in default of compliance. Those were orders of a kind that one might expect to see following an application for security for costs under Part 25 or even an unsuccessful application by one or other party for judgment under Part 24, but not as conditions attaching to a wide-ranging group of relatively routine procedural directions given at a case management conference. I accept that, as Rimer L.J. pointed out when refusing permission to appeal on this point, it would be wrong to elevate form over substance, but it seems to me that expressing the relevant order as subject to the condition in question is the right way to exercise the power. It also has the advantage of requiring the court to focus attention on whether the condition (and any supporting sanction) is a proper price for the party to pay for the relief being granted. That being so, I think it is unfortunate that in this case the District Judge started by considering P&O's application for security for costs rather than by considering what directions the parties were seeking for the future conduct of the proceedings, because it tended to mask the fact that he could only make such an order as a condition of granting some other relief. I do not think that he can be strongly criticised for doing so, given that he was faced with what was in effect a straightforward (if inappropriate) application by P&O for an order for security for costs, but nonetheless it led him to approach the matter from what I consider to be the wrong direction.
19. I come then to the first of the grounds on which Rimer L.J. granted permission to appeal, namely, whether District Judge Babbington's rather general criticisms of Mr. Huscroft's conduct of the litigation provided sufficient grounds for exercising the jurisdiction in the way he did. It will be apparent from what I have already said that, contrary to the views expressed in Halabi v Fieldmore Holdings, I do not think that the power to attach a condition to an order can be exercised only if there is a history of repeated failures to comply with orders of the court or the party in question is not conducting the litigation in good faith. I do think, however, that before exercising the power given by rule 3.1(3) the court should identify the purpose of imposing a condition and satisfy itself that the condition it has in mind represents a proportionate and effective means of achieving that purpose having regard to the order to which it is to be attached.
20. Although in the present case P&O made many criticisms of the way in which Mr. Huscroft had conducted the proceedings, District Judge Babbington clearly thought that there was fault on both sides, because he observed that the proceedings had the look of 'old fashioned litigation' and that both parties from almost the word go "had litigated in a way that failed to further the overriding object or assist the court". Each side accused the other of causing what the judge described as a huge period of delay. He accepted, however, that the claimant had adopted what he called a "scattergun" approach which had increased the costs and that Mr. Huscroft's conduct of the case left much to be desired. He noted that there was no application by P&O for summary judgment, but expressed the view that Mr. Huscroft had limited prospects of success, although he appears not to have allowed that to colour his decision. In the end he appears to have made an order for a payment into court simply on the grounds that Mr. Huscroft had played fast and loose with orders in the past and was generally critical of his conduct of the case. Although he noted that Mr. Huscroft's manner of conducting the litigation had led to an increase in costs, no one seems to have made any attempt to determine the extent to which that was so.
21. In my view the findings made by District Judge Babbington did not justify attaching to a wide-ranging order for directions of the kind routinely made at a case management conference a condition that Mr. Huscroft pay a sum of money into court as security for P&O's costs. It is clear from the exchanges which followed his judgment that the directions themselves gave rise to very little controversy and it is difficult to believe, therefore, that in the ordinary way it would have been appropriate to impose a requirement of that kind as a condition of giving any of the case management directions being sought. If the court were concerned about timely compliance (as it might well have been), it could have attached sanctions (most obviously by making "unless" orders), but a payment into court was unlikely to do much to ensure prompt compliance. The judge did not find that Mr. Huscroft's conduct had led to a significant waste of costs, nor was it suggested that any of the orders sought by him on that occasion would be likely to result in costs already incurred being thrown away or costs being incurred unnecessarily in future. Although there was reason to doubt Mr. Huscroft's ability to meet a substantial liability for costs if he lost, this was not a case like Olatawura v Abiloye in which there was reason to think that he would take active steps to avoid doing so. In reality the effect of the District Judge's order, therefore, was to enable P&O to obtain on the back of an order for case management directions an order for security for costs against Mr. Huscroft which it could not have obtained under rule 25 and which was unrelated to the orders being made in his favour. In my view it was inappropriate to make an order of that kind in this case.
22. The second ground on which Rimer L.J. gave permission to appeal was whether, if the District Judge was entitled to impose a condition that Mr. Huscroft make a payment into court by way of security for costs, he was wrong to set the amount at £5,000 having regard to the limited amount of evidence before him of Mr. Huscroft's means.
23. It is well established that when dealing with security for costs the court must not make an order which will prevent the claimant pursuing his case to trial. P&O was seeking an order in the sum of £20,000 and given Mr. Huscroft's general circumstances, it is not surprising that the District Judge needed no persuading that he would be unable to find a sum of that magnitude. It is also well-established, however, that a respondent to such an application who says that he has no or very few assets is expected to explain his position to the court. It is not enough simply to make an unsubstantiated assertion.
24. In the present case Mr. Huscroft through his solicitors told the court that he had lost his job and was living on state benefits, but he was living in Portugal and was apparently able to travel to and from this country several times a year. He also said that he was funding the disbursements incurred in connection with the proceedings himself, but he did not provide any information about his savings or other assets at his disposal, despite the fact that he had plenty of notice of the application and every opportunity to do so.
25. In my view a sum of £5,000, although not trivial, is relatively modest in the context of litigation of this kind and is the kind of amount that someone who is willing to fund his own case in part could be expected to have at his disposal. In the absence of evidence from Mr. Huscroft to the contrary, I think the judge was entitled to make an order in that amount. However, for the reasons given earlier, I would allow the appeal.

Lord Justice Elias:

26. I agree.

Lord Justice Sedley:

27. I also agree.