Abraham and Another v Thompson and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE POTTER,LORD JUSTICE MILLETT |
| Judgment Date | 24 July 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0724-7 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | CHANI 97/0720/B |
| Date | 24 July 1997 |
[1997] EWCA Civ J0724-7
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Justice Lloyd)
Royal Courts of Justice
Strand
London WC2
Lord Justice Millett
Lord Justice Potter
CHANI 97/0720/B
MR S BURTON QC and MR K MacLEAN (Instructed by Clifford Chance, London EC1A 4JJ) appeared on behalf of the Appellant
MR BLOCH and MISS C BINGHAM (Instructed by Messrs DJ Freeman, London EC4A 1NA) appeared on behalf of the Respondent
Thursday 24th July, 1997
INTRODUCTION.
This is an appeal by the plaintiffs against an order of Mr. Justice Lloyd made on 12th May 1997 that the first plaintiff disclose to the 5th and 6th defendants on affidavit whether any, and if so what, third party or parties had provided all or any substantial part or parts of the money used to fund this action as regards costs incurred by him from the date when they were added as parties. When the matter came before us on 22nd May 1997, it was one of some urgency because the trial was fixed for 3rd June 1997 with a hearing estimated to last four weeks. On 22nd May 1997 we indicated to the parties our decision to allow the appeal, stating that we would give our reasons later. We do so now.
The first plaintiff is a former stockbroker and retired businessman who has lived in Portugual since 1988. The second plaintiff is a company incorporated in Panama, the formation of British Virgin Islands trust of which the plaintiff is a discretionary beneficiary.
They sue a number of defendants for wide ranging relief including very substantial sums alleged to be due pursuant to, and as damages for breach of, various agreements arising out of a joint venture between the first plaintiff and the first and second defendants in relation to development of golf and leisure complexes in Portugual.
The 5th and 6th defendants (to whom I shall refer simply as "the defendants") are both Portuguese nationals and residents and are the two executive directors (but not shareholders) of a Portuguese company known as Planal which is not a party in the action but is the subject of some of major allegations in it.
The action was started in 1995 but the defendants were not joined as parties until 1st April 1996. They were joined and served at a time when they came to England to attend a board meeting of Planal convened in order to pass resolutions for the sale of certain of its major assets which the first plaintiff says was at a substantial undervalue and therefore involved breaches of contractual obligations of which they were well aware. The second plaintiff is not concerned with the claim against the defendants. I shall therefore refer to the first plaintiff hereafter simply as "the plaintiff".
The plaintiff obtained an ex-parte injunction restraining the holding of the Planal board meeting. However, this was not continued because, at the inter partes hearing, Evans-Lombe J. took the view that damages would be an adequate remedy and that it was questionable whether the plaintiff would be good for his liability under the cross-undertaking in damages. The defendants became parties to the action upon being served with the ex-parte injunction.
The original version of the Statement of Claim served on the defendants was the subject of a striking out application which was not in fact proceeded with. In September 1996, a revised pleading was put forward claiming damages from the defendants for the tort of assisting or procuring various breaches of the contract. There was a brief hiatus after service of the claim and, in December 1996, after some prompting, the plaintiff stated his intention of proceeding against the defendants. Directions were agreed and a defence served on behalf of the defendants on 22nd January 1997. In February the defendants served a request for further and better particulars and, on 25th February 1997, a witness statement of the plaintiff was served. That statement, together with an affidavit sworn by the plaintiff in opposition to an application by other defendants in 1996 for security for costs which was unsuccessful, gave rise to concern on the defendant's part as to whether the plaintiff was paying his own costs of the action from his own resources and whether he would be good for the defendants' costs if he were ordered to pay them at trial.
THE DEFENDANTS' APPLICATION.
Because the plaintiff is resident in Portugual, the above mentioned application for security had failed on the grounds of his being resident within the European Union and hence subject to similar considerations in respect of security as a plaintiff resident in the United Kingdom: see Fitzgerald v Williams [1996] 2 WLR 447. The defendants were themselves the beneficiaries of an indemnity in respect of their costs by Planal which is a company of substance. However, motivated by their concern as to whether, if they were successful, an inter partes order for costs would be met by the plaintiff (as opposed to having to resort to their indemnity), the defendants' solicitors wrote to the plaintiffs' solicitors on 26th March 1997 setting out chapter and verse for their concern and asking for disclosure of the identity of the person or persons who they assumed were providing the funds for the plaintiff's legal costs, stating that if the funder were not resident in the European Union, an application would be made against the plaintiff for security for costs. On 8th April 1997, the plaintiff's solicitors replied saying that all their costs and disbursements to date had been funded by the plaintiff. They also stated their view that the possibility of a claim for security against the plaintiff was hopeless on the basis of the modern authorities and concluded by declining to accede to the request.
On 21st April 1996 the defendants applied on motion for an order that within 7 days the plaintiff disclose on affidavit whether any third party has provided the monies or any substantial part of the monies used to fund the action and, if so, the identity of the funder. By way of evidence, the defendants relied on an affidavit from their solicitors. In that affidavit the application was put on the basis that:
"…it [is] probable that the action [is] being funded by one or other of the offshore trusts in which Mr. Abraham seems to have an interest or expectation. Mr. Abraham maintains that, for tax purposes, these trusts are wholly separate from him and in my submission they should therefore be regarded as independent third parties who should be treated as maintainers if they were funding the action. If the action were being funded by an offshore entity it would be [the defendants'] intention to apply for security for their and Planal's costs".
It was later stated that:
"… no direct claim is made by Eramon against the [defendants] … Even if successful in an application against Eramon, it is unlikely that the Court would order any very significant sum. I do not believe, however, that should prevent the proper securing of the [defendants'] and Planal's costs if this action is in fact being funded by a third party on Mr. Abraham's
behalf".
The plaintiff chose not to put in any evidence dealing with the substance of the matters raised, but to take his stand upon the argument that the court lacked any jurisdiction to make the order sought, alternatively that the deficiencies in the defendants' case were such that the court should, as a matter of discretion, refuse to make such an order.
THE JUDGMENT OF LLOYD J.
The judge gave an admirably clear judgment in which he recited the arguments of counsel and the authorities to which he had been referred. He rejected the argument for the plaintiff that, since the plaintiff was not a person against whom an award of security of costs could be made subject to a stay under RSC Order 23, the Court lacked jurisdiction to do so. In reliance in particular upon the decision at first instance in Broxton v McClelland [unreported] 6th November 1992 and dicta of the Court of Appeal in the recent case of Condliffe v Hislop [1996] 1 WLR 753 and by analogy with previous decisions relating to champerty, he rested his decision upon the inherent jurisdiction of the court. In the key passage of his judgment he stated as follows:
"In my judgment the court does have power to stay proceedings on grounds concerned with the way in which they are being brought or prosecuted. This is clearly the case if the plaintiff is being funded in circumstances which amount to champerty which is illegal as a matter of public policy (see Grovewood Holdings Ltd v James Capel & Co Ltd [1995] Ch. 80). But I do not think it is necessarily limited to a case where the support is champertous. There are of course cases where the court has recognised that it is legitimate for a third party to support one party to the litigation without incurring liability for the other's costs if the supported party is ordered to pay those costs: Condliffe v Hislop is one, where the supporter was the Plaintiff's mother, and another is Murphy v Young [1997] 1 All ER 518, where the supporter was a company paying under a legal expenses insurance policy with limited cover. However, it seems to me that there are circumstances, including but not limited to champerty, in which the court might stay the Plaintiff's action because of the way it is being financed. I therefore reject Mr. MacLean'ssubmission that the court has no power, before trial, to make an order staying the action if it were apparent that the Plaintiff was being funded by a third party who would not or could not accept (in a satisfactory manner) liability...
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