England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
MR JUSTICE BURTON
IN THE MATTER OF THE ARBITRATION ACT 1996
IN AN ARBITRATION CLAIM

		The Royal Courts of Justice The Strand London WC2A 2LL
		19 January 2012

1. LORD JUSTICE STANLEY BURNTON: The remaining issue before us is whether the court should subject the permission to appeal, which it has provisionally decided should be granted in this case, to a condition requiring all or part of the amount of the judgment debt entered under section 66 to be brought into court. There is an undoubted jurisdiction and discretion, which is accepted, and the Court of Appeal in the well-known case of Hammond Suddards v Agrichem International Holdings Limited set out the considerations relating to the exercise of that discretion.

1. The reasons given in that case are set out essentially in paragraph 41 of the judgment. It is said on behalf of the respondent that those factors are equally applicable in this case and, therefore, a condition should be imposed and there is a compelling reason to do so. What is said essentially is the following.
2. The appellant is effectively a company with one asset. That asset is the indebtedness due from its parent company, a company of very considerable size and means, resulting from the on-lending by the appellant of monies borrowed in Luxembourg by way of loan notes. Those loan notes are shortly repayable.
3. On the face of it once execution can be obtained against the appellant, if there were no other considerations there could be enforcement by the liquidator of the subsidiary as against the parent of that indebtedness, although of course the company would be insolvent because an equal amount would be due on the loan notes.
4. Since this award has been obtained and since judgment was given by Mr Justice Burton, there have been patently steps taken to avoid the satisfaction of the judgment debt. Those steps clearly have been taken, on the evidence, at the instance of the parent company, and by the parent company. What they consist of is the reduction of the indebtedness due from the parent to the subsidiary by the parent directly paying the holders of loan notes. That, assuming that there is a set-off, reduces the liability of the parent to the subsidiary by an equal amount.
5. It is also apparent that the subsidiary, the appellant, has no intention of meeting the award or the judgment debt, having regard to the proceedings that have been taken and the way in which proceedings have been taken, not only in this jurisdiction but also elsewhere.
6. In those circumstances it seems to me that the respondent is justified in saying that this is an attempt by the appellant, in pursuing this appeal, to have it both ways. If it succeeds in the appeal of course there will be no enforcement. If it fails in the appeal the position will be the same as at present, where there is an ongoing refusal to meet the judgment of the court.
7. It is said on behalf of the appellant that the appeal would be stifled. Therefore, no order by imposition of a condition should be made and reference is made to article 6, quite apart from article 6 if it were right that the appeal would be stifled by imposition of a condition, it would be wrong to impose one.
8. However, the stifling in this case would result not from any impecuniosity of the group or unavailability of the money within the group to pay the judgment debt. It would result from the decision of the parent not to put the subsidiary into funds to meet the judgment debt. In my judgment that is not the kind of stifling to which the authorities refer. The group, in particular the parent, is fully able to finance the subsidiary appellant to meet the judgment debt, but it chooses not to do so.
9. In those circumstances it seems to me that the jurisdiction of the court as envisaged in Hammond Suddards should be exercised, and I would require the appellant, if it is to have the benefit of the discretion exercisable by the court in granting permission to appeal, to bring into court the amount of the judgment debt.
10. LORD JUSTICE WARD: I agree. When granting permission to appeal we endeavour to follow the authorities and to give the proper meaning to the words, "A real prospect of success." Now it seems to me we must follow the authorities on this question of requiring the judgment sum to be brought if court as a condition of allowing that appeal to proceed. The leading authority is Hammond Suddards, although that case was different in that there the defendant may have been hiding assets and there is no suggestion that this appellant is, nonetheless, the observations of the court, in the last sentence of subparagraph 4 of paragraph 41, seems equally applicable:

"It has wealthy owners and there is no evidence that if they were minded to do so they could not pay the judgment debt, including outstanding orders for costs."

11. Paragraph 6 which emphasises that orders of the court should be obeyed and here the judgment debt, which there is at the moment by virtue of Mr Justice Burton's order, has not been paid. I can see no reason not to follow Hammond Suddards and I too would therefore require as a condition of proceeding with the appeal that the arbitration award now confirmed by the judgment of Mr Justice Burton be paid into court.