B.J. Crabtree (Insulations) Ltd (Plaintiffs) Appellants) v GPT Communication Systems Ltd Respondents)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PARKER,LORD JUSTICE BINGHAM |
| Judgment Date | 23 October 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J1023-4 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 90/0939 |
| Date | 23 October 1990 |
[1990] EWCA Civ J1023-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(SIR GERVAIS SHELDON, sitting as a Deputy High Court Judge)
Royal Courts of Justice.
Lord Justice Parker
Lord Justice Bingham
90/0939
MR. ROBERT SHERMAN (instructed by Messrs. Forsdike & Co. of Epping) appeared on behalf of the Appellants.
MR. STEPHEN PHILLIPS (instructed by Messrs. Slaughter & May) appeared on behalf of the Respondents.
I will ask Lord Justice Bingham to give the first judgment.
This is an appeal by the plaintiffs in this action against an order for security for costs made by Sir Gervase Sheldon on 22nd February of this year. The plaintiffs are a small private company. The company was incorporated in February 1985 and it has a share capital of £100, of which two £1 shares were issued, one to Mr. Crabtree and the other to his wife. The company trades as a remover of asbestos. The defendants occupy premises in the Clerkenwell Road. The dispute between the parties concerns work which the plaintiffs did or, as the defendants would say, did not do at these premises. The upshot is that the plaintiffs claim a sum of £78,000-odd against the defendants, and the defendants in turn counterclaim a sum of £105,000-odd against the plaintiffs.
Very briefly, the plaintiffs' claim arises out of work which they carried out between May and August 1988. Originally they gave estimates that the work would cost in total about £27,000, involving the removal and encapsulation of asbestos at the defendants' premises in Clerkenwell Road, that work to be carried out in accordance with requirements imposed by the London Borough of Islington.
The plaintiffs' case is that after the work had started and at about the end of May 1988 the London Borough of Islington required further works which very substantially increased the amount of work to be done and, consequently, the cost of doing it. The plaintiffs contend that the defendants then agreed that the work should go ahead without formal acceptance of an estimate but on the basis that a price would be submitted in due course which they would be asked to agree. The plaintiffs say that they did continue with the works on that basis, and in due course submitted an estimate amounting to some £68,000 plus VAT which included the works already in progress. They say that the defendants failed to respond to that estimate until a date in August when they said that they would not accept it.
The defendants' case in a nutshell is that at the end of May the London Borough of Islington did not require additional works to be done, but merely insisted on the work which was to be done in the first place being done properly. They further say that they have been put to very considerable additional expense both in curing defects in the work that the plaintiffs did and in carrying out additional works. They challenge that there was ever any agreement for additional works to be done at an enhanced price. Furthermore, they say that the plaintiffs failed to complete the works and, as a result of damage which they caused, have put the defendants to the total expenditure that I have mentioned, amounting to something over £105,000.
That being the dispute between the parties, the plaintiffs issued a writ on 15th December 1988. At that time, as Mr. Phillips for the defendants has fairly told us, the defendants were themselves considering a claim against the plaintiffs but had not yet decided whether they should pursue it or not. On 15th May 1989 the defendants served a detailed defence and counterclaim, and a reply and defence to counterclaim was served just over a month later.
The issue now before the court arose at the end of 1989 when the defendants applied for security for costs under section 726 of the Companies Act 1985. At the time of making that application they wrote a letter in which they said:
"We wish to make it clear for the avoidance of doubt that we will be seeking an order which provides that pending the provision of any security ordered by the Master only your clients'"—i.e. the plaintiffs—"action against our clients will be stayed since our clients will of course be pursuing their counterclaim."
On 1st February the application for security came before Master Grant, and he declined to make any order for the payment of security by the plaintiffs on the undertaking of the directors of the plaintiffs, through counsel, that they would not seek repayment of or draw upon their current accounts with the plaintiffs for the sums recorded in the plaintiffs' account as remuneration voted but unpaid, until the conclusion of the trial of the action or further order. It should be recorded that it was not submitted to the master that the court had no jurisdiction to order security for costs.
The defendants appealed against that order, and the matter came before the learned judge in chambers on 22nd February of this year. The order then made was that the appeal be allowed, that the order of the master be set aside save as to the order for costs, and that the plaintiffs do within fourteen days pay into court the sum of £30,000 as security for the defendants' costs, and in the meantime the plaintiffs' action be stayed. It is that order which the plaintiffs now challenge.
It appears that the main argument before the learned judge was whether the undertakings which the directors of the plaintiffs had proffered below should be accepted or whether there should an order for payment into court. It is plain, however, that the matter was argued before the learned judge a good deal more broadly than that, since he was referred to the case of Sir Lindsay Parkinson & Co. Ltd. v. Triplan Ltd [1973] Q.B. 609. In particular his attention was drawn to the considerations which Lord Denning M.R. thought appropriate on an application of this kind. The Master of the Rolls said:
"Mr. Levy helpfully suggests some of the matters which the court might take into account, such as whether the company's claim is bona fide and not a sham and whether the company has a reasonably good prospect of success. Again it will consider whether there is an admission by the defendants on the pleading or elsewhere that money is due. If there was a payment into court of a substantial sum of money (not merely a payment into court to get rid of a nuisance claim), that, too, would count. The court might also consider whether the application for security was being used oppressively—so as to try to stifle a genuine claim. It would also consider whether the company's want of means has been brought about by any conduct by the defendants, such as delay in payment or delay in doing their part of the work."
The plaintiffs, being dissatisfied with the learned judge's order, have appealed to this court. At the outset Mr. Sherman, on the plaintiffs' behalf, sought leave to amend his notice of appeal so as to raise a new point, which was that on the material before the court it was not shown that the court had jurisdiction to make any order for security under section 726. His application to amend to raise that point was not objected to, and leave to argue the point was granted. I should make reference to section 726 of the Companies Act, which is in these terms:
"Where in England and Wales a limited company is plaintiff in an action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the defendant's costs if successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given."
In seeking to contend that the requirements of that section were not satisfied, Mr. Sherman drew our attention to paragraph 2 of Mr. Crabtree's affidavit, in which he said on oath:
"I do not accept that my company would be unable to pay the Defendants' costs in the event of my company's claim not succeeding, and will seek to justify that contention as set out below."
And below in paragraph 4(c) he said:
"I am satisfied from a my knowledge of the trading of the company that the company is in a position to meet its debts and can meet costs should they be awarded against the company."
Mr. Sherman submitted that that evidence was uncontradicted and, furthermore, that there was no finding by the learned judge that there was reasonable ground for believing that the company would be unable to pay costs if unsuccessful.
So far as the lack of a finding is concerned, I attach no significance to that since, as counsel is constrained to admit, the point was not put in those terms to the learned judge.
Mr. Phillips, for the defendants, in seeking to show that section 726 is satisfied, relies first on the accounts which are before us. They show a small loss for the year ending 28th February 1989 and a slight excess of current liabilities over current assets for that year. He submits, on the evidence of those accounts, that the inference to be drawn is that the company would be unable to pay the defendants' costs if the defendants were successful in the action. I have to confess that for my part the position is not entirely clear. We have no detailed commentary on the latest accounts. There are various figures in those accounts which are not self-explanatory, at any rate to me. I am not entirely satisfied that the court is shown to have jurisdiction, but I am unwilling to...
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