QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| SUMMIT NAVIGATION LTD
MARIN TAKNIK DENIZCILIK VE DANISMANLIK SAN. TIC. LTD STI
|- and -
|GENERALI ROMANIA ASIGURARE REASIGURARE SA
ARDAF SA INSURANCE & REINSURANCE CO
Jason Evans-Tovey (instructed by Cubism Law) for the Defendants
Hearing date: 14 February 2014
Crown Copyright ©
Mr Justice Leggatt :
"It is not usually convenient or appropriate to order an automatic stay of the proceedings pending the provision of the security. It leads to delay and may disrupt the preparation of the case for trial, or other hearing. Experience has shown that it is usually better to give the claimant (or other relevant party) a reasonable time within which to provide security and the other party liberty to apply to the court in the event of default. This enables the court to put the claimant to his election and then, if appropriate, to dismiss the case."
The wisdom of the experience referred to in the Guide is demonstrated by the history of the present case.
"IT IS ORDERED that:
1. By 4pm on 5 December 2013, the Claimants provide further security for the Defendants' costs of the claim in the sum of £100,000 by one of the following methods:
1.1 Payment into Court or
1.2 Delivery to the Defendants' solicitors of a bond in the sum of £125,000 in terms identical save as to amount to that of Amtrust Europe Ltd dated 11 March 2013 ("the Existing Bond") whereupon the Existing Bond will cease to have effect and the Defendants' solicitors will return it to the Claimants' solicitors.
2. In the event that such security is not provided by the said date the action be stayed."
"The action is stayed. If you wish to have the stay lifted, you will no doubt take your own advice on how, if at all, this can be achieved. For our part, we can tell you now that, should your client make an application for relief from sanctions pursuant to CPR 3.9, that application will be resisted. No doubt you will be aware of the recent Court of Appeal decision in Mitchell v News Group Newspapers."
"We do not intend to exchange the bond unless and until the stay on proceedings has been lifted."
The defendants' arguments
i) The failure of the claimants to provide security in compliance with paragraph 1 of the order had the consequence that, pursuant to paragraph 2, the action became automatically stayed.
ii) To lift the stay would require an order of the court.
iii) The claimants' application for such an order is an application for relief from a sanction falling under CPR 3.9.
iv) Accordingly, the Mitchell principles must be applied.
v) Applying those principles, the claimants' default was not trivial and there was no good reason for it.
vi) In these circumstances, the claimants' application should be refused and the action should remain permanently stayed.
vii) Alternatively, if the court would otherwise be prepared to lift the stay, it should not do so and an order should be made staying the proceedings under CPR 58.14 on account of the claimants' alleged failure to comply with the order for disclosure of the ship's papers.
Is an application to lift the stay necessary?
Is the application one for relief from sanctions?
"Sanctions have effect unless defaulting party obtains relief.
3.8(1) Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction.
(Rule 3.9 sets out the circumstances which the court may consider on an application to grant relief from a sanction.)
(3) Where a rule, practice direction or court order
(a) requires a party to do something within a specified time, and
(b) specifies the consequence of failure to comply,
the time for doing the act in question may not be extended by agreement between the parties."
"the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders."
Do the Mitchell principles apply?
"The obtaining of an order for security for costs is a rather special form of order. It is intended, if it is right to make an order at all, to give a claimant a choice as to whether he puts up security and continues with his action or withdraws his claim. That choice is meant to be a proper choice. I actually find it somewhat strange that, whereas with most forms of interlocutory order it would be unlikely that a court would make an unless order as its first order, it seems to be quite common to make an unless order in relation to security for costs. I note from the Annual Practice that there seems to be a difference between the practice in the Masters' corridor and in the Commercial Court as to the making of an unless order at all as a term of the first order for security [see CPR r.25.12]. The reason for that difference, I suspect, is the attitude in the Commercial Court that an order for very large sums should not be made subject to the "unless" sanction until a real opportunity has been given to the claimant to find the money. I would have thought that, even if an unless order is made as part of the first order, the period for complying should on any view be generous. The making of an order for security is not intended to be a weapon by which a defendant can obtain a speedy summary judgment without a trial."
i) making an order on 7 June 2013 for security of costs to be provided within 28 days;
ii) then, when security had still not been provided by 4 September 2013, extending the time for providing the required security until 17 October 2013, with a stay of proceedings in the meantime; and
iii) ordering at the same time that, unless the security was provided or a further extension of time granted before 17 October 2013, the claim would be struck out on that date.
"Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees."
Absent a further order from the court, the specified consequence of failing to file a costs budget on time is clearly intended to be permanent. The same applies to other common forms of "unless" order: for example, an order debarring a party from relying on witness evidence unless it is served by a specified date or an order striking out a party's claim or defence and allowing the other party to enter judgment unless a step in the litigation is taken within a specified time.
Applying the Mitchell principles
i) On an application for relief from a sanction under CPR 3.9, it is usually appropriate to start by considering the nature of the non-compliance. If the non-compliance can be regarded as trivial or insignificant, the court will usually grant relief provided that an application is made promptly .
ii) If the non-compliance cannot be so regarded, the court should consider why it occurred and will still be likely to grant relief if there is a good reason for it .
iii) Good reasons are likely to arise from circumstances outside the control of the party in default ; by contrast, inefficiency or incompetence of a party's solicitors for example, where a deadline is simply overlooked is unlikely to amount to a good reason .
iv) Where the non-compliance is not trivial and there is no good reason for it, the court is still required by CPR 3.9 to consider "all the circumstances of the case, so as to enable it to deal justly with the application"  + . However, relief should not usually be granted in such cases because the circumstances which should generally be given greatest weight are the two factors specifically mentioned in the rules  + .
Nature of the non-compliance
Reason for the non-compliance
The just result
The defendants' application for a stay
"Disclosure ship's papers
58.14(1) If, in proceedings relating to a marine insurance policy, the underwriters apply for specific disclosure under rule 31.12, the court may
(a) order a party to produce all the ship's papers; and
(b) require that party to use his best endeavours to obtain the disclosed documents which are not or have not been in his control.
(2) An order under this rule may be made at any stage of the proceedings and on such terms, if any, as to staying the proceedings or otherwise, as the court think fit."