Jersey Unreported Judgments

Debt - costs judgment.

[2014]JRC131

Royal Court

(Samedi)

16 June 2014

Before     :

Advocate Matthew John Thompson, Master of the Royal Court, sitting alone.

 

Mr S Holmes appeared for the Plaintiffs.

Advocate M. H. D. Taylor appeared for the Defendant.

judgment

the master:

1.        This is an application brought by the defendant seeking security for costs in respect the plaintiffs' appeal against my judgment of 2^nd March, 2014, ([2014] JRC 079).  The amount of security sought is £34,000 comprising £24,000 in respect of costs incurred up to and including the strike out application ("the application costs") and £10,000 for the costs of the appeal including the costs of the application for security for costs ("the appeal costs"). 

2.        The background of the case is set out in my earlier judgment at paragraphs 5 to 27.  My decision is at paragraphs 30-45.  I also dealt with other arguments at paragraphs 46 to 55.  In summary, I struck out the plaintiffs' claims on the basis that they were compromised by an agreement dated 31^st May, 2012, and it would be vexatious and an abuse of process to allow the claim to proceed to trial.  I was also satisfied that there was no other alternative claim available to the plaintiffs which could be dealt with by allowing an opportunity to amend rather than striking out the order of justice. 

3.        The defendant was also awarded his costs on the standard basis against each of the plaintiffs jointly and severally.  

The issues

4.        In relation to the arguments presented before me the following are the issues I consider I need to determine:-

(i)        Do I have jurisdiction to order security for costs for an appeal to the Royal Court?

(ii)       If I do have jurisdiction, can I order security for costs against the third plaintiff as a Jersey resident as a matter of principle?

(iii)      How should I exercise any discretion vested in me against the first and second plaintiffs?

(iv)      How should I exercise any discretion vested in me against the third plaintiff?

(v)       If I should I exercise my discretion to require the plaintiffs or any of them to provide security, what amount of security should they provide?

5.        I will deal with each of these arguments in turn.

Jurisdiction

6.        Advocate Taylor contended that I can order security as a matter of jurisdiction by reference to Rule 6/13 of the Royal Court Rules 2004, as amended, (the "Rules") because in striking out a claim I "may make such consequential orders as the justice of the case may require".  Having struck out the present action on the grounds that the case brought was vexatious or alternatively was an abuse of process, the ordering of security for an appeal is a consequential order.  If the third plaintiff had indicated his intention to appeal at the time judgment was delivered, then I could have ordered security for costs at that stage.  He therefore contended that it should make no difference to the jurisdiction to order security if the notice of appeal was filed later (albeit within the time frame permitted by the Rule Court Rules 2004, as amended). 

7.        He further referred me to the case of Gheewala v Compendium Trust Co [1999] JLR 74.  Although that case concerned the question of security for costs for an appeal from the Royal Court to the Court of Appeal, Advocate Taylor contended that it would be an injustice to allow the plaintiff to proceed without security, just as in Gheewala, where the appeal was an appeal against an exercise of discretion.  A similar approach was taken in AP Black (Jersey) Limited, AP Black, EA Black & AP Black Limited (UK) v Jersey Financial Services Commission [2008] JLR N4.  Advocate Taylor also referred to paragraph 20 of Café de Lecq Limited v R.A. Rossborough (Insurance Brokers) Limited [2011] JLR 31 wherethe court noted "its wide discretion to order security where justice so requires." 

8.        Mr Holmes in response contended that I did not have a discretion and only the Royal Court could order security for costs for an appeal to the Royal Court.  He referred me to Rule 20/2 and Schedule 1 of the Rules which made it clear that any appeal against a decision of the Judicial Greffier, which includes decisions of the Master, is a matter for the Royal Court only excluding the Judicial Greffier.  He also contended that an application for security for costs was not an order consequential upon a claim being struck out.  By analogy, he indicated that the matter should be dealt with on the same basis as appeals from the Royal Court to the Court of Appeal where it was only the Court of Appeal which could order security for costs.  He referred to the Gheewala case as an example of a single judge of the Court of Appeal ordering such security. 

9.        The view I have reached is that I do have jurisdiction to order security for costs albeit not for the reasons advanced by Advocate Taylor.  In my view there is a difference between an appeal against my decision to the Royal Court and an appeal from the Royal Court to the Court of Appeal. 

10.      In the Gheewala case, it is clear that the power to order security for costs arises from Rule 12(4) the Court of Appeal (Civil)(Jersey) Rules 1964.  Rule 12(4) makes it clear that only the Court of Appeal can order security for costs in respect of an appeal to the Court of Appeal.  There is no equivalent provision to Rule12(4) in the Rules. 

11.      The power to order security for costs arises from Rule 4/1(4) of the Rules which provides that:-

" 4/1

(4) Any plaintiff may be ordered to give security for costs."

12.      Rule 4/1 is not one of the Rules listed in Schedule 1 to the Rules.  While it is quite understandable why Rule 20/2 must be construed as a reference to the Royal Court only, this does not mean that other applications ancillary to an appeal always have to be heard by the Royal Court and cannot be dealt with by the Judicial Greffier or the Master on his behalf, if permitted by the Rules.  The Royal Court is still seized of the matter because a notice of appeal has been filed and will exercise the power of the Royal Court to determine the appeal.  The issue of what other powers the Judicial Greffier may exercise is a matter of construction of the relevant provisions of the Rules.  In relation to security for costs there is nothing in Rule 20/2 or any other provision of the Rules excluding the jurisdiction of the Judicial Greffier to order security for costs ancillary to an appeal to the Royal Court.  Rule 4/1(4) is unqualified in its scope and is not limited to the Royal Court only.  

13.      I accept that the conduct of the appeal itself or directions relating to how the appeal is to be conducted are matters for the Royal Court.  This is because under the Rules, the Judicial Greffier can give directions for summonses before him and can make interim orders - see Rule 20/1(6).  Directions can also be given for trial under Rule 6/26.  However, directions for the conduct of the appeal itself either arise from Rule 20/1(7) which is a matter for the Royal Curt only or the Royal Court's inherent jurisdiction which the Judicial Greffier does not possess - (see Vieira v Kordas [2013] JRC 251).  This does not mean that I do not have jurisdiction to order security for costs in respect of an appeal against the Judicial Greffier's decision to the Royal Court. 

Jurisdiction to order security for costs against a Jersey resident individual

14.      I next consider whether security for costs can be ordered against a Jersey resident individual.  I raise this issue because more recent cases on security for costs, in particular, Leeds United Association Football Club & The Phone-In-Trading-Post v Admatch [2009] JLR 186, Café de Lecq Limited v R A Rossborough (Insurance Brokers) Limited [2011] JLR 31 and Orange Capital (Proprietary) Limited & Ors v Standard Bank (Jersey) Limited [2013] JRC 221A have all focused on corporate plaintiffs or entities that are non-resident. 

15.      Advocate Taylor contended that I could order security for costs against a resident plaintiff as a matter of principle.  He firstly relied on the breadth of Rule 4/1(4) which was not limited in any way and covered any plaintiff.  Secondly, he referred me to paragraph 20 of Café de Lecq where the court stated as follows:-

"The protection hitherto given to resident plaintiffs must now be extended to all plaintiffs so that the practice following Leeds should be as follows, namely that consistent with the policy that there should be access to the courts for all, rich or poor, and without detracting from its wide discretion to order security where justice so requires, it will be the general practice of the court not to require plaintiffs (wherever resident) to provide security because there is reason to believe that they will be unable to meet orders for costs against them save in the case of:

(i) Corporate plaintiffs (wherever resident), where security may be ordered on such grounds following the principles set out by the Court of Appeal in A.E. Smith (9); and

(ii) Non-resident plaintiffs, who may be required to provide security to meet the legitimate objective of protecting the ability of defendants to enforce costs judgments outside the jurisdiction, such applications to be assessed on an individual basis." (emphasis added)

16.      Advocate Taylor indicated that, while security for costs would not ordinarily be ordered against a resident plaintiff, the court still retained a discretion to do so where justice required it to depart from its general practice. 

17.      Advocate Taylor also referred me to paragraph 22 of the decision in Leeds United Association Football Club & The Phone-In-Trading-Post v Admatch where the Court of Appeal stated:-

"Like the Deputy Bailiff, we are perfectly prepared to accept that some plaintiffs may have no assets or may hide them. If this is established as a probability on the application for security, then, unless the effect would be to stifle the claim, the application will probably succeed."

18.      Advocate Taylor observed that this quotation was not limited to corporate plaintiffs or non-resident plaintiffs but extended to any plaintiff.  He accepted that the circumstances when security might be ordered against a resident plaintiff would be relatively rare because of the general practice of the court not to require plaintiffs wherever resident to provide security.  He contended however that did not mean that a resident plaintiff in appropriate circumstances could not be required to provide security. 

19.      In relation to this issue, Mr Holmes did not really disagree with the principle that I could order security for costs but rather focused on the fact that any discretion should not be exercised against him.  In advancing his arguments he indicated that there were no exceptional circumstances which would justify making a security for costs order against him as a resident plaintiff.  I deal with his contentions later. 

20.      In my view, for the reasons advanced by Advocate Taylor I do possess as a matter of jurisdiction a discretion to make a security for costs order against a resident plaintiff.  However, it is a jurisdiction that should be rarely exercised and which would require some special or unusual circumstances.  The mere fact of impecuniosity is not enough.  Something else taking the case out of the ordinary and into the arena of special or unusual circumstances is required. 

Should the first and second plaintiffs be required to provide security for costs?

21.      Advocate Taylor contended that the present case, as far as the first and second plaintiffs are concerned, falls within the first exception set out at paragraph 20 of Café de Lecq cited above where the court can order security for costs.  The first plaintiff was set up as a special purpose vehicle to develop the property known as Home Farm.  That development has now been completed and there is no evidence that the first plaintiff is carrying on any other business.  No affidavit was produced showing the financial position of the first plaintiff or its assets and liabilities.  The sole director and owner of the first plaintiff is Mr Holmes the third plaintiff. 

22.      In relation to the second plaintiff, Strata Developments Limited, as I noted in my earlier judgment, this is a company that has been dissolved.  Subject to the right of the third plaintiff to have it reinstated, the second plaintiff does not otherwise exist.  It is also clear that there are creditors of the second plaintiff (see for example paragraph 44 of my previous judgment).  No evidence was produced to show that the second plaintiff has any assets or the extent of its liabilities. 

23.      Advocate Taylor therefore contended that both the first and second plaintiffs are empty shells and in reality they are one and the same as Mr Holmes, although he was not seeking to pierce the corporate veil of the first and second plaintiffs.  Just like the plaintiffs in Orange Capital (Proprietary) Limited & Ors v Standard Bank, nothing is known about the financial position of the first and second plaintiffs and they have not produced any evidence to show they are willing or able to meet any adverse costs order. 

24.      Mr Holmes argued that I should not require the first and second plaintiffs to provide security for costs.  He contended that, because he was a co-plaintiff and therefore equally subject to adverse costs orders, he had given up the protection of limited liability.  As a consequence, security for costs should not be ordered.  In particular he argued, by reference to the case of Pearson v Naydler cited at paragraph 30 of Café de Lecq, that where a non-resident is co-plaintiff with a person who resides within the jurisdiction, generally security for costs was not ordered against an individual outside the jurisdiction.  He argued that the same principle applied where corporate plaintiffs were co-plaintiffs with an individual resident within the jurisdiction.  

25.      The view I have reached that is that the presence of an individual co-plaintiff within the jurisdiction is a factor that I am entitled to take into account in deciding whether or not to order security for costs.  The well-known factors set out in L'Eau des Iles v A E Smith & Son Limited [1999] JLR 319 include the court having a complete discretion whether or not to order security at all.  The court may also order security of any amount and need not order substantial security.  The court has to balance injustice to the plaintiff company by ordering security against injustice to the defendant if no security is ordered.  The presence of a resident individual co-plaintiff is weighed in the balance along with the other matters the court may take into account. 

26.      Without in any way limiting the discretion vested in the court, particular factors of the resident plaintiff that are likely to be looked at are the individual's financial position, whether he or she owns real property and its location, the nature of the relationship between the resident individual and the companies, the nature of the claims brought by the resident plaintiff and what assurances may have been given about meeting costs orders. 

27.      I therefore do not agree that the mere fact that the co-plaintiff is resident in Jersey is of itself sufficient not to require corporate plaintiffs to provide security.  Rather it is a factor that should be taken into account in deciding whether or not to order security as a matter of discretion.  In some case it will be a powerful and even a conclusive factor; in others it will not. 

28.      Applying this analysis to the present action, the first and second plaintiffs are owned by the third plaintiff exclusively and as far as I am aware he is the sole director.  They were operated solely for his benefit.  The third plaintiff has no real property in his name and has chosen not to put forward any information about his own financial position.  He has also not argued that any order for security would stifle his claim.  His argument is that because he is liable for the costs order, along with the first and second plaintiffs', security should not be required.  He has not indicated that he will meet any costs ordered to be paid.  Indeed, although he has received a bill of costs from the defendant in respect of my previous judgment, he has neither responded to that bill and nor has he made any offer in response; he also has not explained what benefit he received from the Home Farm development.  There is therefore no guarantee whatsoever that the existing costs order I have made or any costs order against the plaintiffs by the Royal Court will be met by the third plaintiff even if he is liable to do so.  

29.      All these matters lead me to conclude that I am not persuaded not to exercise my discretion to require the first and second plaintiffs to provide security merely because of the third plaintiff's residence in Jersey.  I also agree with Advocate Taylor that the first and second plaintiffs have the appearance of empty shells with no apparent ability to pay costs for the reasons he gave.  In relation to the second plaintiff, given it was dissolved for non-payment of fees, the inference I have drawn in addition is that it has no assets and for this reason also will not be able to pay. 

30.      In reaching my decision I have also considered the plaintiffs' grounds of appeal.  Although the plaintiffs are entitled to a complete re-hearing before the Royal Court, and the Royal Court is only required to have regard to my decision, at best the plaintiffs have an arguable appeal.  There is nothing in the notice of appeal which persuades me, that there is a strong prospect of the Royal Court overturning my decision. 

Security for Costs against the third plaintiff

31.      As I have found that I can, in principle, order the third plaintiff to provide security for costs personally, I now turn to consider whether I should do so.  It is right to observe, having decided that the first and second plaintiffs should provide security for costs, that this part of my decision may be academic, given that the third plaintiff is sole shareholder and director of the first and second plaintiffs.  For those entities to provide security, absent a third party being willing to put up funds for the first and second plaintiffs, the amount of any security may well have to come from the third plaintiff.  Nevertheless, as it is possible others might be funding the first and second plaintiffs, I will deal with whether the third plaintiff can be required to provide security personally. 

32.      In relation to the third plaintiff's residence, Advocate Taylor argued that the third plaintiff had no real connection with the Island as he does not own any real property in Jersey.  The first plaintiff appears not to be carrying on business and the second plaintiff has been dissolved.  Advocate Taylor therefore invited me to conclude that the third plaintiff's connection with the Island was tenuous.  

33.      Mr Holmes, in the course of the hearing, attempted to give evidence about his residence despite not filing an affidavit in advance as he should have done.  He indicated that he was born in Jersey and lives here with his partner and they have a child who attends school in Jersey.  His adult stepson also resides in Jersey as do many other relatives. 

34.      The views I have reached in relation to these statements made are that they suggest a greater degree of connection with Jersey than Advocate Taylor contended for.  However I am not able to make any definitive findings as to the quality of the third plaintiff's connection with Jersey as the statements made to me were not put in evidence and there was no opportunity for them to be tested by the defendant.  The third plaintiff also did not make any statements or produce any evidence about his financial position.  He indicated he was carrying on another business but no information was produced about that business.  Likewise no information was produced about the first or second plaintiffs or any benefit the third plaintiff has received from the first and second plaintiffs. 

35.      What I have to decide is whether I should require the third plaintiff to provide security for costs.  I have reminded myself that a mere inability to pay is not of itself enough to require an individual, whether resident in Jersey or not to provide security.  Rather special or unusual circumstances are required. 

36.      In this case, the matters I have referred to above about the lack of information concerning the first and second plaintiffs are matters which can be laid at the door of the third plaintiff as the shareholder and director.  He could have provided information about the position of the first and plaintiffs but has chosen not to do so.  He has not indicated any willingness to put up security on behalf of the first and second plaintiffs or to meet the costs order I made against the plaintiffs following my earlier judgment.  Indeed, when sent an itemised bill of costs, he did not respond to it, and did not make any counter proposal.  Instead, he seems to have ignored it. 

37.      The claim he has brought is also one that I regard as vexatious.  As was noted in the cases of Gheewala and AP Black, this is an issue that has already been determined.  I consider it is an injustice for a successful party to allow an appeal to proceed without any security if that party would not be able to enforce against the other, any order for costs made by the Royal Court.  That is the position the defendant finds himself in. 

38.      I should also add that the third plaintiff's claim against the defendant appears to be weak.  In addition to the main basis on which I struck out the plaintiffs' claim, at paragraph 48 of my earlier judgment, I concluded that there was no contract between the third plaintiff and the defendant or any of the defendant's companies, Manor Homes and Tower.  I was also not persuaded by the argument that the defendant had breached a shareholders' agreement with the third plaintiff for the reasons given at paragraphs 50 and 51 of my earlier judgment.  I regard the arguments personal to the third plaintiff as being weak which militates in favour of exercising the discretion vested in me to require the third plaintiff to provide security. 

39.      Taking into account the lack of financial information about the first and second plaintiffs which is in possession of the third plaintiff, the lack of any financial information about the third plaintiff, the lack of any real property in the Island in the name of the third plaintiff, the ignoring of the costs order already made, the fact that the plaintiffs' claim has already been struck out as vexatious and an abuse of process, and the weakness of the third plaintiff's claim, these factors in my view taken together are sufficiently unusual circumstances to require in this case  the third plaintiff in the interests of justice to provide security for costs. 

The amount of security

40.      Having decided it is right for all the plaintiffs to provide security for costs as a matter of principle, I now consider what amount of security the plaintiffs should be required to provide.  In relation to the costs of the application before me, Mr Holmes contended that the position is analogous with my decision in Orange Capital at paragraph 48.  In Orange Capital the defendants already had the benefit of a costs order which could be assessed and enforced by the court if not paid.  The amount of these costs was therefore deducted from the amount of security sought by the defendants in that action. 

41.      I do not agree that the present case is analogous.  The Orange Capital case was an ongoing matter because only part of the claim had been struck out.  There were still significant matters to be determined at trial.  If the defendants' costs were not paid then it was open to them to come back to court to seek an order for payment as a condition of the plaintiffs being permitted to pursue matters to trial or similar relief. 

42.      Such an option does not exist in the present case.  Here the entirety of the plaintiffs' claim has been struck out.  There is no ongoing process which might be used to compel a plaintiff to meet a costs order previously made. 

43.      However, it is right to note that the defendant has not exercised other options available to him.  When the application was made to strike out the plaintiffs' claim the defendant did not apply for a summary assessment of costs, as he could have done (see Practice Direction RC09/03).  The defendant could also have asked for a payment on account of costs (see the recent analysis of the Court of Appeal in Crocriani v Crocriani [2014] JCA 095).  The defendant has also not requested a taxation of his costs.  I also gave my costs decision on 18^th February, 2014.  The defendant has therefore had three months to progress his claim for costs and has not done so. 

44.      The amount of the application costs claimed by the defendant is £24,000.  The vast majority of the time claimed is that of Advocate Taylor comprising 63.5 hours.  In relation to the hearing, two affidavits were prepared as well as an answer and a skeleton argument.  There is also the preparation for the hearing itself which hearing lasted half a day.  In my judgment, if a taxation were to occur I do not consider that all the time incurred by the defendant would be recoverable.  I consider a significant reduction would be applied to the amounts claimed.  In my view a more realistic amount of time for the steps taken is 40 hours which in round terms produces a figure of £15,000. 

45.      In relation to this sum, had a payment on account been requested such an application would have been granted.  At this stage the best estimate I can make is that I would have ordered a payment on account of £10,000.  The fact that the defendant has not received this sum is because the defendant did not make such an application.  The plaintiffs have therefore appealed without having being required to make such a payment. 

46.      In relation to the appeal costs, which I was informed during the hearing included the costs of dealing with this application, the defendant claims the sum of £10,000.  As this figure includes time spent on the present application, I do not regard this figure as unreasonable.  The application for appeal costs was also issued promptly on a notice of appeal being filed. 

47.      In the exercise of the discretion vested in me, the amount I consider that the plaintiffs should provide by way of security is £15,000, being £5,000 in respect of the previous application before me and £10,000 in respect of the costs of the appeal including the present application.  I have therefore deducted from the amount of security the amount the plaintiffs would have been required to pay, had I been asked to make a payment on account when I awarded costs against the plaintiffs.  I do not regard it as fair to require the plaintiffs to provide security for this sum when the defendant did not ask for a payment on account when costs were awarded in its favour.  For the avoidance of doubt I wish to make it clear that the defendant is still free to continue to proceed to taxation with the costs order I made on 18^th February, 2014.  

48.      Subject to being addressed by the parties on this issue, as the appeal is due to be heard on Tuesday, 19^th August, 2014, I am minded to allow the plaintiffs until Friday, 27^th June, 2014, to provide such security.  If security of £15,000 is not paid into court by this date, then the appeal will be struck out. 

Authorities

Home Farm Developments-v-Le Sueur [2014] JRC 079.

Royal Court Rules 2004.

Gheewala v Compendium Trust Co [1999] JLR 74.

AP Black (Jersey) Limited, AP Black, EA Black & AP Black Limited (UK) v Jersey Financial Services Commission [2008] JLR N4.

Café de Lecq Limited v R.A. Rossborough (Insurance Brokers) Limited [2011] JLR 31.

Court of Appeal (Civil)(Jersey) Rules 1964.

Vieira v Kordas [2013] JRC 251.

Leeds United Association Football Club & The Phone-In-Trading-Post v Admatch [2009] JLR 186.

Orange Capital (Proprietary) Limited & Ors v Standard Bank (Jersey) Limited [2013] JRC 221A.

L'Eau des Iles v A E Smith & Son Limited [1999] JLR 319.

Crocriani v Crocriani [2014] JCA 095.